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Empire State manufacturing index dropped sharply to 3.9 in January, down from 10.9, and missed expectation of 11.6. That's also the lowest level in "well over a year" since mid-2017. Also, the headline index has already fallen a cumulative 18 pts since November. Additionally, firms were "less optimistic about the six-month outlook than in recent months."The index for future business conditions fell thirteen points to 17.8, and the indexes for future new orders and shipments also declined.

Full release here.

Also from the US, in December, headline PPI dropped -0.2% mom rose 2.5% yoy, versus expectation of 0.0% mom, 2.5% yoy. PPI core dropped -0.1% om, rose 2.7%, versus expectation of 0.2% mom, 2.7% yoy.

Full PPI release here.

WTI oil edged higher on Tuesday and holding above $51 handle as two-day pullback from new recovery high at $53.29 stalled on approach to psychological $50 support.

Near-term picture remains bullish but recovery leg from $42.36 low was so far capped by falling 55SMA (currently at $53.06) and also facing strong headwinds from falling thick daily cloud (clod base lays at $54.37).

Daily 10/20/30 SMA's in bullish setup (created double bull-cross) and strong bullish momentum underpin the action, but neutral daily RSI and heavy daily cloud partially offset positive signals. Fundamentals are also mixed as OPEC club supply cut generates positive signal while rising fears about global growth slowdown continue to weigh. API crude stocks report, due later today, is expected to provide fresh signal, along with Wednesday's EIA crude stocks report.

Initial supports lay at $50/$49.80 (psychological/10SMA), followed by $49.28 (30SMA) and lower pivot at $47.89 (20SMA) break of which will be bearish.

Bullish scenario requires lift above 55SMA as initial signal which would get confirmation on penetration of daily cloud.

Res: 51.35; 52.08; 53.06; 53.29
Sup: 50.38; 50.00; 49.80; 49.28

Risk appetite had a brief come back in Asia earlier today, after China pledges to strive to have a good start in 2019. But sentiments turned cautious in European session, ahead of the Brexit meaningful vote in UK commons. Sterling is clearly paring some gains because of that. On the other hand, Euro is weighed down by recession worries on Germany. The country reported annual growth of 1.5% in 2018, slowest since 2013. And there is risk of technical recession in Q3 and Q4 of last year.

For now, Canadian Dollar is the strongest one for today so far, followed by Dollar. Swiss Franc is the weakest one, followed by Euro. Markets could turn more cautious ahead of the Brexit vote. There is no exact time set, but it's believed to be somewhere between 1900-2100 GMT.

In Europe, at the time of writing:

• FTSE is down -0.05%
• DAX is down -0.30%
• CAC is down -0.07%
• German 10-year yield is down -0.0223 at 0.209

Earlier in Asia:

• Nikkei rose 0.96%
• Hong Kong HSI rose 2.02%
• China Shanghai SSE rose 1.36%
• Singapore Strati Times rose 1.22%
• Japan 10 year JGB yield dropped -0.0123 to 0.013

UK Prime Minister Theresa May's spokesman reiterated the stance that "the prime minister said the government is the servant of the people and she believes passionately that we must deliver on the result of the 2016 referendum"

And, "she added that after the vote has taken place, she would respond quickly to the result."

Eurogroup head Mario Centeno tries to sound softer on EU stance on Brexit agreement today. He indicated that should the deal is voted down by UK Parliament today, there are room for more talks and adjustments to avoid a no-deal Brexit.

He said "we will see the result (of the vote) today and we can adjust our trajectory". And, "we can open all the dossiers ... We need to take informed decisions with total calm and avoid a no-deal exit. Practically anything is better than a no-deal exit."

West Texas Intermediate (WTI) crude oil futures are finding strong support level on the 23.6% Fibonacci retracement level of the sharp downward movement from 76.90 to 42.50, around 50.65. The technical indicators suggest that there are still some investors that could hold the market on the downside; the MACD is moving lower below its red signal line, while the RSI has turned slightly to the downside below 50 level.

Should the price retreat, the 40-simple moving average (SMA) in the 4-hour chart, which coincides with the 23.6% Fibonacci could be the next immediate level to watch. Below that, the area near 49.80, taken from the inside swing high on January 7 could be another significant barrier. More losses could see the 48.30 support region.

On the other side, if the oil heads higher it could find nearby resistance at 53.25. Further up, the price could rest around the 54.40 resistance, reached by the high on December 5. A decisive close above the latter could push oil prices until the 38.2% Fibonacci of 55.64.

To summarize, oil futures currently stand in a bullish correction mode in the very short term, while looking at the bigger picture the market could shift the outlook to a more positive one if there is a successful close above 38.2% Fibonacci.

GBPUSD sets up to weaken further corrective pressure following its rejection of upside pressure. Support is seen at 1.2800 level. Further down, support comes in at the 1.2750 level where a break will turn focus to the 1.2700 level. Further down, support lies at the 1.2650 level. Below here will set the stage for more weakness towards the 1.2600 level. On the upside, resistance stands at the 1.2850 with a turn above here allowing for additional strength to build up towards the 1.2900 level. Further out, resistance stands at the 1.2950 level followed by the 1.3000 level. On the whole, GBPUSD faces further downside pressure but with caution.

The DAX index has posted sharp losses in the Tuesday session. Currently, the index is at 10,861, down 0.85% on the day. On the release front, eurozone trade surplus jumped to EUR 15.1 billion, a 3-month high. This easily beat the estimate of EUR 13.2 billion. Later in the day, ECB President Draghi testifies about the ECB Annual Report. On Wednesday, Germany publishes Final CPI.

Germany’s economic data is closely watched, as the economy is a bellwether not just for the eurozone, but for the global economy as well. Germany has not yet released GDP data for the fourth quarter, but officials have reported that it will be a ‘slight gain’. The German economy grew 1.5% in 2018, the lowest level of growth since 2013. A key reason for the weak expansion is the ongoing global trade war, which has taken a bite out the export sector and dampened manufacturing activity. German Industrial production has fallen for three successive months, and eurozone industrial production is also pointing downwards.

On the bright side, German unemployment is at record lows and domestic demand has remained strong. The ECB winded up its stimulus program last month and had expressed plans to raise rates later this year. However, this is unlikely to happen unless economic conditions improve the eurozone.

With investors showing stronger risk appetite, the DAX has enjoyed a strong January, with gains of 3.7 percent. This is a far cry from the December meltdown of 8.4 percent, as equity markets try to shake off an awful 2018. Still, there are dark clouds on the horizon. The eurozone economy has slowed down, and weaker economic activity in China could spook investors. On Monday, China released dismal economic numbers, with exports down 4.4 percent from a year earlier and imports plunging 7.6 percent. The slowdown in China has taken a toll on corporate profits, with Apple and Jaguar Land Rover posting revenue warnings.

EUR/USD has edged lower in the Tuesday session. Currently, the pair is trading at 1.1435, down 0.28% on the day. On the release front, French Final CPI improved to 0.0%, matching the forecast. The eurozone trade surplus jumped to EUR 15.1 billion, a 3-month high. This easily beat the estimate of EUR 13.2 billion. Later in the day, ECB President Draghi testifies about the ECB Annual Report. On Wednesday, Germany publishes Final CPI.

Germany’s economic data is closely watched, as the economy is a bellwether not just for the eurozone, but for the global economy as well. Germany has not yet released GDP data for the fourth quarter, but officials have reported that it will be a ‘slight gain’. The German economy grew 1.5% in 2018, the lowest level of growth since 2013. A key reason for the weak expansion is the ongoing global trade war, which has taken a bite out the export sector and dampened manufacturing activity. German Industrial production has fallen for three successive months, and eurozone industrial production is also pointing downwards.

On the bright side, German unemployment is at record lows and domestic demand has remained strong. The ECB winded up its stimulus program last month and had expressed plans to raise rates later this year. However, this is unlikely to happen unless economic conditions improve the eurozone.

The Federal Reserve has made a U-turn on monetary policy, but by how much? There is a large discrepancy between Fed forecasts and market expectations, which could result in volatility in the currency markets, as traders try to figure out what the Fed will do in 2019. The most recent projections from individual policymakers in the Federal Open Market Committee (FOMC) stands at two rate hikes this year, but the markets are expecting the Fed to hold pat and not raise rates in 2019. Moreover, the markets have priced in a rate cut before the end of the year at 28 percent. On Monday, former Fed Chair Janet Yellen said that she expected the Fed to take a breather, saying that it’s ‘very possible’ that the Fed has made its last hike of this cycle.

The USD/JPY bearish bounce however could indicate a deeper bearish retracement within wave 2 (purple), as long as price stays above the previous bottom (green line).

The USD/JPY has been moving sideways for a while, which could be explained by several ABC corrections (blue). The key levels at the moment are the Fibs of wave B (purple).