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Daily Pivots: (S1) 108.27; (P) 108.44; (R1) 108.73; More..

Intraday bias in USD/JPY remains neutral at this point. Outlook is unchanged as we'd expect upside to be limited by 109.46 resistance to complete the rebound from 104.69 short term bottom. On the downside, below 107.77 will turn bias to the downside for retesting 104.69 low. Overall, larger downtrend from 118.65 (2016 high) is expected to resume finally through 104.62 after current consolidation from 104.69 completes.

In the bigger picture, price actions from 125.85 (2015 high) are seen as a long term corrective pattern, no change in this view. Apparently, such corrective pattern is not completed yet. Fall from 114.54 is seen as part of the falling leg from 118.65 (2016 high). Break of 104.62 will target 100% projection of 118.65 to 104.62 from 114.54 at 100.51, which is close to 100 psychological level. But in that case, we'd expect strong support from 98.97 to contain downside to bring reversal. Also, this bearish case will remain the preferred one as long as 114.54 resistance holds.

Daily Pivots: (S1) 0.9757; (P) 0.9803; (R1) 0.9891; More....

Intraday bias in USD/CHF remains neutral for now. As noted before, fall from 1.0128 is seen as correcting whole rise from 0.9186. Deeper fall is in favor. ON the downside, break of 0.9716 will target 0.9541 cluster support (61.8% retracement of 0.9186 to 1.0128 at 0.9546). Nevertheless, firm break of 0.9963 will suggest that the pull back is completed. Near term outlook will be turned bullish for 1.0128 .

In the bigger picture, current development suggests that rise from 0.9186 has possibly completed with three waves up to 1.0128 already. Decline from 1.0128 could either be correcting this move, or reversing the trend. As long as 0.9541 support holds, we'd slightly favor the former scenario, and expect another rise through 1.0128 at a later stage. However, sustained break of 0.9541 will confirm trend reversal and bring deeper fall back to 0.9186 low.

Daily Pivots: (S1) 1.1438; (P) 1.1490; (R1) 1.1521; More.....

Intraday bias in EUR/USD remains neutral at this point and outlook is unchanged. Further rise is expected with 1.1422 minor support intact. Rebound from 1.1215 is seen as correcting whole down trend from 1.2555. On the upside, above 1.1569 will extend the rebound through 1.1621 resistance to 38.2% retracement of 1.2555 to 1.1215 at 1.1727 next. On the downside, however, break of 1.1422 support will bring retest of 1.1214 low instead.

In the bigger picture, as long as 1.1814 resistance holds, down trend down trend from 1.2555 medium term top is still in progress and should target 61.8% retracement of 1.0339 (2017 low) to 1.2555 at 1.1186 next. Sustained break there will pave the way to retest 1.0339. However, break of 1.1814 will confirm completion of such down trend and turn medium term outlook bullish.

The Canadian dollar is showing limited movement on Monday. In the North American session, the pair is trading at 1.3269, up 0.02% on the day. On the release front, there are no Canadian or U.S. events on Monday, so USD/CAD is unlikely to so much movement during the day. On Tuesday, the U.S. releases PPI reports and the Empire State Manufacturing Index.

It’s been an excellent start to 2o19 for the Canadian dollar, which is up 2.7 percent in January. The currency has fully recovered the losses from December. An important catalyst for the Canadian dollar’s rally is the Federal Reserve’s dovish turn, which has reduced enthusiasm for the U.S dollar. The minutes from the Fed’s December meeting, released Wednesday, noted that low inflation levels meant that the Fed could “afford to be patient about further policy firming”. Even more striking, the minutes revealed that at the December meeting, some policymakers opposed a rate hike, arguing that inflation was too low to warrant higher rates. On Thursday, Fed Chair Jerome Powell said he was “very worried” about the massive U.S. debt and reiterated that the Fed would remain patient on monetary policy. Given that further interest rate hikes would hurt the debt burden of corporate borrowers, Powell’s remarks on the debt could be a sign that the Fed will take a pause on rate hikes in the near future, and perhaps even entertain a rate cut this year. The sharp U-turn on monetary policy by the Fed could continue to weigh on the U.S dollar for the near future.

The Bank of Canada stayed on the sidelines last week, leaving the benchmark rate of 1.75% last week untouched. The bank’s policy statement was somewhat on the dovish side, as policymakers highlighted their concerns for the economy. These included low oil prices, an overpriced housing market and the global trade war. The Canadian economy is highly dependent on exports, and a weaker global economy has put a crimp in the export sector. The Canadian dollar had a dismal The loonie is sensitive to the movement in equity markets, and improved risk appetite in January has boosted the currency. The BoC remains cautious, and is likely to hold off on interest rate hikes until the current turmoil in the equity markets eases.

Daily Pivots: (S1) 1.2743; (P) 1.2805; (R1) 1.2900; More....

Intraday bias in GBP/USD remains on the upside and rise from 1.2391 is in progress. Such rebound is seen as correcting whole down trend from 1.4376. Further rally would be seen to 1.3174 resistance, which is close to 38.2% retracement of 1.4376 to 1.2391 at 1.3149. We'd expect strong resistance from there to limit upside, at least on first attempt. On the downside, break of 1.2709 minor support will argue that such rebound is completed and turn bias back to the downside for retesting 1.2391 low.

In the bigger picture, whole medium term rebound from 1.1946 (2016 low) should have completed at 1.4376 already, after rejection from 55 month EMA. The structure and momentum of the fall from 1.4376 argues that it's resuming long term down trend from 2.1161 (2007 high). And this will now remain the preferred case as long as 1.3174 structural resistance holds. GBP/USD should target a test on 1.1946 first. Decisive break there will confirm our bearish view. However, sustained break of 1.3174 will invalidate this case and turn outlook bullish.

Brexit and China are the two main themes in the markets today. For now Yen is the strongest one so far followed by Swiss Franc. Risk aversion is triggered by terrible trade data from China which intensified worries over slow down. Both imports and expects contracted in the fastest pace since 2016 in December. It's rather clearly that the Chinese economy is heavily affected by trade war with the US. Nevertheless, there is no panic selling in the global stock markets. Investor seem to be hopeful on some goods news from Chinese Vice Premier Liu He's visit to Washington later in the month.

Sterling is the third strongest on increasing chance of no Brexit at all. Ahead of tomorrow's vote in the parliament, UK Prime Minister Theresa May stepped her rhetorics. She warned that there are some MPs who wish to delay or even stop Brexit. And she urged MPs to vote to deliver what people decided in the referendum back in 2016. EU sent a "reassurance" letter to May today, pledging to work on a post-Brexit agreement by end of 2020 deadline to avoid triggering the backstop "in the most solemn manner". But it's unsure how such assurances could change the mind of those who already got a position. That is, those who believed no-deal Brexit is closest to what people want, and those who want no Brexit at all.

Staying in the currency markets, Australian Dollar lead commodity currencies lower on risk aversion. Dollar is mixed as the record US government shutdown drags into the fourth week with no end in sight. In other markets, FTSE is currently down -0.95%, DAX is down -0.52%, CAC is down -0.64%. German 10 year yield is down -0.0211 at 0.219. Earlier today, Hong Kong HSI dropped -1.38%, China Shanghai SSE dropped -0.71%, Singapore Strait Times dropped -0.79%. Japan was on holiday.

Juncker and Tusk: EU commits in solemn manner to avoid triggering Irish backstop

European Commission President Jean-Claude Juncker and European Council President Donald Tusk sent a joint letter to UK Prime Minister Theresa May. That's for hoping to provide the "assurances" to help May get the agreed Brexit deal through the UK Parliament tomorrow.

In short, Juncker and Tusk pledged to try to reach the agreement regarding post-Brexit EU-UK relationship by the end of next year so as to avoid using the Irish backstop. They also emphasized that a commitment to speedy trade deal made by EU leaders had "legal value" which committed the Union "in the most solemn manner".

If the target date couldn't be met, UK will have an option to extend a status-quo transition period, also for avoiding to trigger the backstop. They also pledged that "If the backstop were nevertheless to be triggered, it would only apply temporarily, unless and until it is superseded by a subsequent agreement that ensures that a hard border is avoided."

Full letter here.

May warned some want to delay or even stop Brexit

UK Prime Minister Theresa May warned today "there are some in Westminster who would wish to delay or even stop Brexit and who will use every device available to them to do so." And, "while no-deal remains a serious risk, having observed the events at Westminster over the last seven days, it's now my judgment that the more likely outcome is a paralysis in parliament that risks there being no Brexit."

UK Fox: No-deal Brexit is not suicide, but no Brexit is unrecoverable political disaster

International Trade Minister Liam Fox emphasis today that 'the government will want to leave with a deal but the government will want to prepare for no deal if it's impossible to get any agreement through the House of Commons. That would be the default policy." He added that "I don't regard no deal as national suicide. I think that no deal would damage our economy but I think it's survivable. I think no Brexit, politically, is a disaster from which we might not recover."

Conservative Whip Johnson quits for his objection to May's Brexit deal

Conservative Whip Gareth Johnson announced to resign from this role of discipline enforcer just ahead of tomorrow's crucial Brexit deal vote. Johnson said "over the last few weeks, I have tried to reconcile my duties as a Whip to assist the Government to implement the European Withdrawal Agreement, with my own personal objection to the agreement". He added that "I have concluded that I cannot, in all conscience, support the Government's position when it is clear this deal would be detrimental to our nation's interests."

China Dec trade balance: Massive -35.8% yoy fall in US imports; exports and imports contracted most since 2016

China posted a set of very disappointing trade data today. Exports and imports posted biggest contraction since 2016. More importantly, imports from the US dropped a massive -35.8% yoy in the month. But for the year, trade surplus with the US hit a record high.

In USD terms in December,

• Trade surplus widened to USD 57.1B, above expectation of USD 51.6B.
• However, exports dropped -4.4% yoy to USD 221.3B.
• Imports dropped -7.6% yoy to USD 164.2B.
• Both imports and exports suffered the steepest decline since 2016.

Staying in December,

• With the US, export dropped -3.5% yoy to USD 40.3B, imports dropped a massive -35.8% yoy to USD 10.4B.
• With EU, exports dropped -0.3% yoy to USD 37.6B, imports dropped -2.7% yoy to USD 22.5B.
• With Australia, exports dropped -5.2% yoy to USD 4.0B, imports dropped -3.4% yoy to USD 7.3B.

For the year as a whole,

• With the US, exports rose 11.3% yoy to USD 478.3B, imports rose just 0.7% yoy to USD 155.1B.
• Trade surplus with the US jumped 17.2% yoy to USD 323.2B, highest on record.
• With EU, exports 9.8% yoy to USD 408.6B, imports rose 11.7% yoy to USD 273.4B.
• Trade surplus with EU rose 6.2% yoy to USD 135.1B.
• With Australia, exports rose 14.2% yoy to USD 47.3B, imports rose 11.2% to 105.45B.
• Trade deficit with Australia rose 8.9% yoy to USD 58.1B.

Elsewhere

Australia TD securities inflation rose 0.4% mom in December. Eurozone industrial production dropped -1.7% mom in November, way below expectation of 0.3% mom rise.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2743; (P) 1.2805; (R1) 1.2900; More....

Intraday bias in GBP/USD remains on the upside and rise from 1.2391 is in progress. Such rebound is seen as correcting whole down trend from 1.4376. Further rally would be seen to 1.3174 resistance, which is close to 38.2% retracement of 1.4376 to 1.2391 at 1.3149. We'd expect strong resistance from there to limit upside, at least on first attempt. On the downside, break of 1.2709 minor support will argue that such rebound is completed and turn bias back to the downside for retesting 1.2391 low.

In the bigger picture, whole medium term rebound from 1.1946 (2016 low) should have completed at 1.4376 already, after rejection from 55 month EMA. The structure and momentum of the fall from 1.4376 argues that it's resuming long term down trend from 2.1161 (2007 high). And this will now remain the preferred case as long as 1.3174 structural resistance holds. GBP/USD should target a test on 1.1946 first. Decisive break there will confirm our bearish view. However, sustained break of 1.3174 will invalidate this case and turn outlook bullish.

Economic Indicators Update

Conservative Whip Gareth Johnson announced to resign from this role of discipline enforcer just ahead of tomorrow's crucial Brexit deal vote.

Johnson said "over the last few weeks, I have tried to reconcile my duties as a Whip to assist the Government to implement the European Withdrawal Agreement, with my own personal objection to the agreement".

He added that "I have concluded that I cannot, in all conscience, support the Government's position when it is clear this deal would be detrimental to our nation's interests."

Sterling entered the trading week firmly gripped by caution as investors brace for a vote tomorrow on British Prime Minister May’s Brexit deal.

Although market expectations remain elevated over May’s Brexit deal facing rejection by Members of Parliament, there will be a stronger focus on what happens after the “meaningful vote”. Will the government’s defeat on May’s deal result in Labour triggering a no-confidence vote? Will Theresa May rush back to Brussels to plead for further concessions from the EU? Amid the chaos and uncertainty, could the UK government be forced to extend Article 50 beyond the planned exit date? Are we going to witness a snap general election or even a second Brexit referendum? While the outcome of tomorrow’s Brexit vote remains open to question, it will certainly leave a lasting mark on the British Pound.

Theresa May is scheduled to make a statement to Parliament this afternoon in a bid to gather more support for her deal. Her speech runs of the risk of falling on deaf ears if nothing new is brought to the table.

Sterling’s outlook remains mired by endless uncertainty surrounding Brexit and ongoing political drama in the House of Commons. The volatile price action witnessed in recent days continues to highlight how the currency remains influenced by Brexit headlines. In regards to the technical perspective, the GBPUSD secured a weekly close above 1.2820, mostly due to Brexit noise. The 1.2820 level is seen acting as support that pushes prices towards 1.2920. Although the technicals are pointing to further upside in the near term, investors should keep in mind that the Pound’s fate hangs on what happens after the Brexit “meaningful vote” on Tuesday.

Are Dollar bulls running out of steam?

The Greenback weakened against a basket of major currencies this afternoon as a political impasse in Washington and expectations over the Fed taking a pause on rate hikes reduced investor attraction for the currency

Dollar Index bulls have been missing in action in recent weeks with the breakdown below 96.00 suggesting that bears are back in the driver’s seat. Appetite towards the Dollar is seen diminishing further if disappointing economic data threatens its safe-haven status. With the economic calendar in the United States void of Tier 1 economic reports today, the Dollar is poised to be driven by price action. Technical traders will continue observing how prices behave below 96.00. Sustained weakness under this level could open a path back towards 95.00 and 94.20, respectively.

Commodity spotlight – Gold

Gold not only remains supported by geopolitical risks but expectations over the Fed taking a break on rate hikes this year.

The yellow metal continues to shine brightly amid the uncertainty with weakness in both global equity markets and the Dollar fueling upside gains. Taking a look at the technical picture, Gold remains firmly bullish on the daily charts as there have been consistently higher highs and higher lows. A solid breakout and daily close above the psychological $1,300 level is seen opening a clean path towards $1,308 and $1,324.

Spot gold rebounds on Monday and heads towards the upper boundary of near-term congestion. Friday's action ended in inverted hammer candle and remained above rising 10SMA which continues to underpin. Overall structure remains bullish but near-term outlook is neutral while the price holds within $1298/76 congestion. Current action could be seen as consolidation before final push through psychological $1300 barrier and extension towards targets at $1309/16 (14 June lower high / Fibo 76.4% of $1365/$1160 fall). The scenario is expected to stay alive while 10SMA holds, while break below would generate initial bearish signal and risk deeper pullback on extension below $1276/73 (range floor / rising 20SMA).

Res: 1298; 1300; 1309; 1316
Sup: 1290; 1287; 1282; 1276

The DAX index lost ground over the weekend, but has steadied in the Monday session. Currently, the index is at 10,816, down 0.49% since the close on Friday. On the release front, German and eurozone data disappointed. German WPI surprised with a decline of 1.2%, its weakest reading since December 2008. Eurozone industrial production fell 1.6%, much worse than the forecast of a 0.3% gain. On Tuesday, ECB President Draghi will testify about the ECB Annual Report.

With investors showing stronger risk appetite, the DAX has enjoyed a strong January, with gains of 3.4 percent. This is a far cry from the December meltdown of 8.4 percent, as equity markets try to shake off a horrendous 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.

The ongoing global trade war continues to hamper manufacturing sectors across the eurozone. Last week, industrial production in Italy fell by 1.6% in November and in France the drop was 1.3%. The alarming trend continued on Monday, as eurozone industrial production declined 1.6%. Germany, the locomotive of the bloc, is also in trouble, in which industrial production has slipped for three straight months. With the three largest economies in the eurozone showing signs of weakness, conditions may not warrant any rate increases in the foreseeable future. The ECB winded up its stimulus program last month, and had expressed plans to raise rates later this year, but this will require stronger economic conditions in the eurozone.