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The World Indices have seen the biggest decline since the lows at 2009. However, despite the size of the decline, it does not affect the overall trend. We always say at www.elliottwave-forecast.com that knowing the cycles and Market sequences are the key to become a successful trader. Many people believe the Market works in a straight line and of course that is not the case.

We track most of World Indices and over 100 instrument across the World. We correlate them to get the edge of the Market. The following chart show FTSE ($UKX-FTSE) the Grand Super cycle since the all time low. We can see how we have not reached the 100% Blue Box at 10296.34 – 11913.27 which will be a moment when 2 Super cycle degree will reach equal length in price. The first super cycle degree goes from all-time low to 1999, whereas the other one started at 2009.

This suggests that until these two cycles reach 100%, we should keep buying the World Indices. We look at other instrument within the Indices group to discover the next entry levels and the best timing. The $UKX-FTSE chart is showing the Monthly path and it shows an incomplete sequence price wise in red. In addition, it also shows 5 swing incomplete sequence in black from 2009 low which is also a bullish event. The combination of both bullish sequences from two degrees suggest that the Index will likely remain above the 2009 low.

This also means that the Index will continue higher when swing 6 black or swing 2 Blue ends. As we are saying to members, this decline in World Indices is another chance to buy stocks and Indices at very good levels. As always, the social media’s bias of a big market crash will again become another trap. Nothing big will happen at minimum until year 2020-2022 and it can even pass those times. Until then, keep buying the dips in World Indices in 3-7-11, The ruling trend is still higher.

FTSE Elliott Wave Sequence Monthly Chart

In a speech titled "20th anniversary of the euro", ECB President Mario Draghi hailed that with the Single Market, " we have a powerful engine of sustainable growth to underpin our living standards". And the Euro has "safeguarded the integrity of the Single Market."

In addition, he said euro has "produced two decades of price stability also in countries where this was a long lost memory." And that "fostered people's confidence", with such " firms invest and create new jobs."

Draghi also said "today most challenges are global and can be addressed only together". Such  "togetherness" magnifies the ability of individual countries to retain the sovereignty over the relevant matters. And, together "we have a voice in the regulation of international financial market".

Draghi's full speech.

Australian Dollar has seen a surge in volatility at start of the year which started with a sharp decline followed by a quick recovery and AUDCAD is no different. Traders know that volatility brings along trading opportunities so in this video blog, we take a look at the Swing Sequence and Elliott Wave Forecast of AUDCAD forex pair to highlight the next high probability trading area.

AUDCAD Elliott Wave Swing Sequence from 2012 peak

Chart below shows Elliott wave swing sequence down from 2.2012 peak. Numbers on the chart represent swings and not waves. Currently we can see 5 swings down from 2.2012 peak when 1st swing ended at 0.9175, 2nd swing ended at 1.0349, 3rd swing ended at 0.9151, 4th swing ended at 1.039 and 5th swing ended at 0.9105, 6th swing is proposed to be still in progress and is expected to stay below 4th swing high (1.039) and below the descending trend line (currently at 1.0165) for another swing lower to complete 7 swings Elliott wave sequence between 0.8739 – 0.7711.

AUDCAD Daily Chart Highlights High Probability Trading Area

AUDCAD daily chart below shows the Elliott Wave structure of the decline from 2016 peak (1.0410). Decline from 1.0410 unfolded in 7 swings and since then pair is proposed to be in a bounce to correct the decline from 1.0410 peak. While above 1/3/2019 (0.9154) low, expect the pair to continue higher toward 0.9826 – 1.0242 area to complete wave ((X)) from where it can resume the decline for new lows toward 0.8739 area or pull back in 3 waves at least to allow sellers to get into a risk free position. As there is no bullish sequence so we don’t like the buying and expect sellers to appear in 0.9826 – 1.0242 area to push prices lower.

Stocks higher as MPs prepare for Brexit vote

Profit taking over the last couple of days doesn't appear to have taken its toll on investors, with futures back in the green on Tuesday as attention temporarily shifts across the pond.

Brexit may be more of a domestic issue for the UK, with the potential consequences for the rest of the EU less severe, but it's safe to say that today it will be taking the lion's share of the attention, as far as markets are concerned. The vote, which follows five days of debates in parliament, is scheduled to take place around 7pm in the UK and will likely be a source of significant volatility for the pound in particular.

Theresa May would appear to stand little chance of getting her deal through at the first time of asking which makes the margin of her defeat the key determinant in how the markets will respond. I think it's safe to say that a shock victory for May and her deal would be very positive for the pound, both because of the softer Brexit it would ensure and the uncertainty and risk of no deal Brexit that would be removed. They chances of that happening appear very slim though today.

We've seen some decent gains in the pound over the last 48 hours or so on the back of the assurances provided by the EU and suggestions that some eurosceptics are planning to back her deal. This leaves the pound potentially vulnerable to buy the rumour, sell the fact moves, if the vote goes roughly as expected. This would likely involve defeat but not the devastating and humiliating kind that May fears.

Ultimately, defeat today doesn't really matter and doesn't kill May's deal. Rather, it's a box ticking process that begins puts in motion other options being considered, including a no confidence vote and second referendum. Only once these options have been exhausted will we get a real idea of whether May's deal will pass, but that will take time, which could mean an extension to exit date.

Oil higher alongside improvement in risk appetite

Oil is making steady moves higher again on Tuesday as an improvement in overall risk appetite takes further pressure off prices. The output cut agreed between OPEC+ is expected to support prices in longer term but they came under further pressure at the back end of last year as markets tumbled and global growth fears became heightened.

The sell-off was likely exacerbated by the time of year on which it fell which would explain why we're seeing a bounce, alongside that in equity markets. Over the coming weeks and months, I expect downside in oil will be limited unless we see a surprising lack of compliance among participating producers, which was not the case previously.

The US dollar is trading to the upside against the Japanese yen currency on Tuesday after the PBOC announced a Reserve Ratio Requirement cut during the Asian session. Bulls now need to build on earlier gains above the pivotal 108.40 level and eventually surpass the former weekly trading high, at 109.08. A loss of the 108.40 loss will likely encourage technical selling back towards 108.10 support level.

The USDJPY pair is only bullish while trading above the 108.40 level, key technical resistance is found at the 108.75 and 109.08 levels.

If the USDJPY pair falls below the 108.40 sellers, key technical support is found at the 108.10 and 107.75 levels.

The euro has moved sharply lower against the US dollar during the European trading session after the German economy posted its weakest growth rate in five years. The EURUSD pair has finally broken its previously established trading range from the 1.1460 to 1.1490 levels and tumbled towards the 1.1430 support zone. The 1.1410 and 1.1360 support levels are the key downside areas to watch if the EURUSD pair continues to decline.

The EURUSD pair is intraday bearish while trading below the 1.1460 level, key technical support is found at the 1.1410 and 1.1360 levels.

If the EURUSD pair recovers above the 1.1460 level, buyers may test towards the 1.1390 and 1.1530 resistance levels.

The GBP got some support yesterday ahead of today’s Brexit vote as the EU sent its letter of reassurances about the Irish backstop issue. Despite the issue being a key point of friction in the UK parliament, analysts point out that the vote could be another defeat for Theresa May. The question raised by some analysts is not if Theresa May will lose the vote, but by what margin and should the UK PM lose by a margin wider than 100 votes, it would mark the biggest defeat in almost a century. Many UK politicians seem to be eyeing already the next phase and the Labour party seems to be targeting a general election and/or a possible new referendum about Brexit in case general elections are not possible. The vote is expected to take place in the late UK afternoon, however volatility for the pound could start earlier as Brexit headlines reel in and linger on after the vote as repercussions of the vote are to be absorbed by the markets. Cable got some support yesterday, breaking the 1.2880 (S1) resistance line (now turned to support). We could see the pound remaining under pressure as the UK parliament’s vote on Brexit is nearing and uncertainty grows. Should the pair find fresh buying orders along its path we could see the pair rising and breaking the 1.2960 (R1) aiming for the 1.3070 (R2) resistance level. Should on the other hand the pair come under the selling interest of the market, we could see it breaking the 1.2880 (S1) support line and aiming for the 1.2795 (S2) support area.

USD slips on worries of US economy losing steam

The USD slipped against some of its counterparts, as worries about the US economy losing steam increased and were fuelled by the substantial contraction in Chinese trade. Analysts point out that there seems to be a strong dislike given the Fed’s expectations, however there does not seem to be a convincing replacement and currently that could be keeping losses contained for the USD. Also it should be noted that the prolonged shutdown, seems to be also instigating a risk off sentiment for the markets which could have wider effects to the US equities markets as well as the USD. Overall, we could see the USD being sensitive to today’s financial releases and volatility emerging. EUR/USD maintained a rather sideways movement yesterday, remaining between the 1.1485 (S1) support line and the 1.1500 (R1) resistance line. Should the USD bearishness be enhanced today, we could see the pair experiencing some bullish tendencies. It should be noted that the pair may prove sensitive the US as well as the European financial releases today and today’s speakers. Should the bulls take over the pair’s direction we could see the pair breaking the 1.1500 (R1) resistance line and aim for the 1.1550 (R2) resistance hurdle. Should on the other hand the bears dictate the pair’s direction, we could see the pair breaking the 1.1485 (S1) support line and aim for the 1.1425 (S2) support barrier.

Today’s other economic highlights

In today’s European session, we get France’s final CPI (EU Norm.) reading for December, Germany’s GDP growth rate for 2018 and Eurozone’s trading balance figure for November. In the American session, we get from the US the NY Fed Mfg Index for January, the headline and core PPI rates for December and the API weekly crude oil inventories figure. As for speakers, ECB’s President Mario Draghi, Minneapolis Fed President Kashkari, Dallas Fed President Kaplan and Kansas Fed president George speak.

GBP/USD H4

Support: 1.2880 (S1), 1.2795 (S2), 1.2700 (S3)

Resistance: 1.2960 (R1), 1.3070 (R2), 1.3175 (R3)

EUR/USD H4

Support: 1.1485 (S1), 1.1425 (S2), 1.1387 (S3)

Resistance: 1.1500 (R1), 1.1550 (R2), 1.1610 (R3)

GBPUSD maintains a minor top below 1.2950, after its rejection from key resistance at 1.2920s. We think the risk is beginning to shift lower, warning an eventual move below 1.28. Below here and then 1.2750 would suggest a more sustained short-term bear trend can emerge, with support is seen at 1.2650 and 1.2580.

Resistance remains seen at 1.2920 initially, then 1.30 which we look to ideally cap. Above can reinforce a bullish wave, with resistance seen next at 1.3180, then 1.3250.

Will hard Brexit break the pound?

Tonight will see the UK House of Commons vote on Prime Minister Theresa May’s proposed Withdrawal Agreement at about 7 pm London time. We expect a refusal. If May is rebuffed enough, we could see vote of no confidence against the government or May’s resignation. However, we suspect a tighter outcome, which probably will lead to an extension the Brexit deadline to mid- or late-2019. GBP/USD is currently trading at 1.2857, approaching 1.2710 short-term.

China pumps the markets

Chinese officials confirmed further monetary easing to support economic growth, including tax stimuli and credits – and this pleased investors. The announcement comes after constructive trade talks between the US and China, and the Chinese central bank’s announcement to cut banks’ reserve requirements by 1%. Will the bank ease its policy rate this year? This remains to be seen, as official numbers on Chinese growth in 2019 will be published during the National People’s Congress in early March. Equities are set for a green day: although Chinese exports fell 4.4% in annual terms, news of the government interventions boosted markets.

During Monday's trading session, the weekly PP was resisting the currency exchange rate to keep the rate at 1.1480. However, during Tuesday's midnight hours, the rate was resisted by the 55-hour simple moving average to the 1.1431 mark.

In regards to the near-term future, most likely, the currency exchange rate will depreciate towards the monthly S1 at the 1.1330 mark.

On the other hand, the European Single Currency could appreciate against the US Dollar to 1.1450 during today's US PPI and Core PPI data releases at 13:30 GMT.