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The US dollar continues to probe the 108.40 level against the Japanese yen, with this key technical area so far proving to be formidable resistance for bulls. The USDJPY pair is currently trading with a slightly cautious tone, as traders await the release of important inflation data from the United States economy later today. Buyers face a cluster of technical barriers above the 108.40 level, while sellers need a definitive price close below the 108.10 support region.

The USDJPY pair is only bullish while trading above the 108.40 level, key technical resistance is found at the 108.60 and 108.80 levels.

If the USDJPY pair continues to trade below the 108.40 level, sellers may soon test towards the 108.10 and 107.75 support levels.

The British pound is starting to drift lower against the US dollar, following the release of mixed UK economic and negative sentiment towards sterling ahead of Tuesday’s crucial Brexit vote. A clear breach of the 1.2700 level exposes further downside towards at least the 1.2660 support zone. To the upside, GBPUSD bulls need to break above the 1.2800 level to trigger technical buying.

The GBPUSD pair is intraday bearish while trading below the 1.2740 level, key technical support is found at the 1.2700 and 1.2660 levels.

If the GBPUSD pair trades above the 1.2740 level, buyers may test towards the 1.2780 and 1.2820 levels.

EUR/USD has posted slight gains in the Friday session. Currently, the pair is trading at 1.1524, up 0.21% on the day. On the release front, there are no major eurozone indicators. Italian industrial production declined by 1.6%, well short of the estimate of -0.3%. Investors are bracing for weak inflation numbers out of the United States. CPI is expected to drop to -0.1%, while Core CPI is forecast to remain steady at 0.1%

Manufacturing sectors across the eurozone continue to struggle. Industrial production in Italy fell by 1.6% in November and in France the drop was 1.3%. The biggest worry is over Germany, where industrial production has slipped for three straight month. With the three largest economies in the eurozone in trouble, 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.

Investor optimism is higher this week, as hopes are high that trade tensions between the U.S. and China could ease. The world’s two largest economies have been engaged in a nasty tariff spat, which has rocked the markets in recent weeks and threatens to put a chill on global growth. Chinese and U.S. officials met in China this week and the talks reportedly produced “minor progress”, raising hopes that the sides will reach an agreement and ease global trade tensions. The stakes are high, as President Trump has threatened to impose higher tariffs on $250 billion worth of Chinese products if there is no deal by March 1.

During the previous trading session, the rate was trading sideways stayed between the weekly R1 and the weekly R2 as it was expected! On Friday, the European Single Currency was trading near the support levels of the 55-hour SMA and the bottom boundary of the ascending pattern line at 1.1529.

In regards to the near-term future, most likely, the currency exchange rate will try to break the resistance level of the medium pattern line at 1.1550 to trade towards the weekly R2 at 1.1588.

On the other hand, the rate could be resisted by the medium pattern line at 1.1550 to pass the 55-hour and the 100-hour SMAs to trade at the 50.00% Fibo at 1.1462!

During Thursday's trading session, the currency exchange rate traded along the 55-hour and the 100-hour simple moving averages. However, during Friday morning hours, the resistance levels retraced the rate to depreciate the British Pound against the US dollar to the 1.2710 mark.

In regards to the near-term future, it is expected that the British Pound will continue recovering itself against the US Dollar to break the resistance levels. Most likely, the rate will end the trading session near the pattern line at the 1.2800 level.

On the other hand, during today's US CPI and Core CPI data releases at 13:30 GMT the rate could pass the support level of the monthly PP to trade at the 1.2660 level.

During the previous trading session, the US Dollar passed the resistance of the 38.20% Fibonacci retracement level to end the trading session at 108.48. During Friday morning hours, the currency exchange rate was resisted by the 100-hour simple moving averages to the 108.30 mark.

It is expected that the currency exchange rate will be trading sideways between the 38.20% Fibo at 108.43 and the weekly pivot point at 107.96.

On the other hand, the US Dollar could be depreciated against the Japanese Yen during today's US CPI and Core CPI data releases at 13:30 GMT to trade below the weekly pivot point at the 107.60 level.

During the previous trading session, the gold passed through the support level of the 23.60% Fibo to depreciate to the 1,286.00 level. However, during Friday's morning hours, the yellow metal recovered itself to appreciate against the US Dollar to 1,293.29.

Most likely, the yellow metal will try to break through the resistance of the upper boundary of the descending pattern line at 1,297.00 to trade near the upper boundary of the dominant pattern line at 1,300.00.

On the other side, the gold might be depreciated against the US Dollar during today's US CPI and Core CPI data releases at 13:30 GMT to trade at 1,290.00.

Notes/Observations

• Brexit debate continues ahead of planned meaningful vote scheduled for next Tuesday (Jan 15th); chances of a no-deal Brexit diminishing as PM loses control of post meaningful vote timeline
• UK Monthly GDP data registered a slight beat while Trade and production data miss expectations

Asia:

• China to reportedly to set lower 2019 GDP growth target to between 6.0-6.5% and would keep CPI target at 3.0% in with the budget deficit target below 3%. (Note: China 2018 official GDP target is ~6.5% (2017 GDP growth was 6.9%)
• China Vice Premier Liu scheduled to visit the US for further trade talks between Jan 30-31st. Concerns that US partial government shutdown could delay planned trip .Some speculation that another extension of planned US tariff increases on Chinese imports could occur following the current 90-day delay that lasts through early March
• Japan Nov Preliminary Current Account balance: ¥757.2B v ¥560.2Be; Trade Balance: -¥559.1B v -¥614.3Be - Japan Nov Household Spending Y/Y: -0.6% v -0.3% prior
• Japan Labor Minister Nemoto: Polling discrepancies caused regular pay to be understated from 2004 to 2017 (Note: Reports have circulated that Nikkei reported the Japanese government may owe billions of yen in unemployment benefits due to a monthly labor survey being conducted improperly)
• Australia Nov Retail sales M/M: 0.4% v 0.3%e

Europe:

• EU Trade Min Malmstrom: optimism over trade integration had eroded; 'closing up' on trade not option for Europe
• Confederation of British Industry (CBI): no-deal Brexit will shrink UK GDP by up to 8% with thousands of jobs being put at risk

Americas:

• President Trump had been reportedly briefed on plan to use Army Corps of Engineers and a portion of $13.9 billion of Army Corps funding to build 315 miles of barrier along the U.S.-Mexico border" . Money had been set aside to rebuild Puerto Rico and fund other projects in the US
• Fed Chair Powell: We have ability to be patient, flexible, and watch patiently at this time; Fed balance sheet would end up "substantially smaller"
• Fed Vice Chair Clarida (moderate, voter): If economic crosswinds were sustained, Fed policy should respond to offset them. Fed could afford to be 'patient' and wait to see how the 2019 data evolved
• Fed's Bullard (dove, voter): concerned Fed was on the precipice of a policy mistake; Dec hike was an overreach. We've come to the end of the road on rate hikes; policy was probably in the right place right now
• Fed's Evans (dove, voter in 2019): Fed could easily look at data for six months before hiking rates

Macro:

• (EU) Eurozone: ECB's Villeroy highlighted downside risks and suggests the governing board's message won't change until spring. Mounting risks made the December decision to phase out QE a "heavy" one and the ECB doesn't "need to give new indications on the timetable or the size between now and the spring, when we will refine the sequence depending on economic data". Villeory stressed that the ECB needs to keep its "options open faced with uncertainty", adding that the ECB will be "predictable", but with no "need to be precommitted". It all suggests that the next ECB meeting on January 24th will be a quiet one, with no real change to the overriding message. The March meeting will see a new set of forecasts and by then the outlook may well have changed completely.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.25% at 349.76, FTSE +0.68% at 6,990.28, DAX +0.03% at 10,925.14, CAC-40 +0.18% at 10,925.14, IBEX-35 +0.31% at 8,883.95, FTSE MIB +0.13% at 19,326.50, SMI +0.41% at 8,847.50, S&P 500 Futures +0.02%]
• Market Focal Points/Key Themes: European Indices trade higher across the board following on from positive Asian Indices and higher US futures. On the corporate front low cost Airliner Flybe trades over 70% lower after a group including Virgin Atlantic bid 1p/shr for the company; Altice Europe trades higher on vague M&A chatter. In Italy UniCredit is reportedly open to a deal with Banca Carige if it gets support. On the earnings front, Richemont trades higher on Q3 Revenues, Hella trades higher on an earnings beat, while online electronic retailer AO World trades higher on a positive trading update. Kuka trades sharply lower after cutting its outlook; Orexo trades higher after a US district judge ruled Actavis infringes Orexos long term Zubsolv® US patent '330. Looking ahead notable earners include Aphria, Infosys and ShiftPixy.

Equities

• Consumer discretionary: Flybe [FLYB.UK] -79%, Stobart [STOB.UK] +7% (Flybe to be acquired by Stobart with large discount), Richemont SA [CFR.CH] +3%, Swatch Group [UHR.CH] +1.5% (Richemont earnings), Grafton Group [GFTU.UK] +2.5% (earnings), AO World [AO.UK] +4.5% (trading update), Straumann Holding AG [STMN.CH] +2.5% (Chairman press interview), Hermes [RMS.FR] +2% (analyst action), Moss Bros [MOSB.UK] +2.5% (trading update), Ei Group [ETI.UK] +2.5% (disposal)
• Industrials: Daimler [DAI.DE] -1% (Geely said to have cut its Daimler stake by more than half), Hella [HLE.DE] +3% (earnings), Ferrovial [FER.ES] +2.5% (airport stats), Kuka AG [KU2.DE] -6.5% (profit warning)
• Telecom: Iliad [ILD.FR] +1.5%, Altice [ATC.NL] +1% (companies said to potentially renew merger talks; decline to comment)

Speakers

• EU's Juncker reiterated view that UK to leave EU at the end of March. In contact with Downing Street and that all efforts were needed to ensure that Brexit deal was approved
• Sweden Social Democrats said to have reached an political agreement with other parties **Note: On Monday Jan 14th Sweden Parliamentary Speaker Norlen to present a final PM candidate with a Parliamentary vote expected on Wed, Jan 16th
• Turkey President Erdogan: 2018 GDP growth could be above expectations
• Hungary Fin Min Varga reiterated that 2018 GDP growth was seen at 4.6%
• Russia Finance Ministry: To buy RUB265.8B of Forex between Jan 15th thru Feb 6th period (**Reminder: Russia halted its FX purchases back on Aug 23rd)
• Ukraine Central Bank Dep Gov Sologub: Inflation pressure was slowly easing

Currencies/Fixed Income

• USD slightly softer against the bulk of the major pairs but dealers noted that the greenback's action was impressive given the recent wave of dovish Fed speak. Dealers noted that interest rate differentials remained well in favor of the USD.
• EUR/USD was holding above the 1.15 level for the time being and pised to have its best week in four months. Dealers noted of an €2.5B option strike at 1.1500 due later today could keep price action pinned down
• GBP/USD was slightly lower with focus on continued debate on the EU Withdrawal Agreement in the House of Commons.
• EUR/SEK was lower after reports circulated that Sweden Social Democrats reached an political agreement with other Greens, Liberals and Center parties to form a govt, thus reducing political uncertainty for the Krona. Cross at 10.22

Economic Data

• (DK) Denmark Nov Industrial Production M/M: -0.5% v +1.0% prior
• (RO) Romania Q3 Final GDP (3rd reading) Q/Q: 1.9% v 1.9%e; Y/Y: 4.4% v 4.3%e
• (TR) Turkey Nov Current Account Balance: $1.0B v $0.9Be
• (FR) Bank of France Dec Industrial Sentiment: 103 v 100e
• (CN) Weekly Shanghai copper inventories (SHFE): 98.0K v 108.9K prior
• (ES) Spain Nov Industrial Output NSA Y/Y: -2.8% v +3.7% prior; Industrial Output SA Y/Y: -2.6% v +0.3%e; Industrial Production M/M: -1.5% v +0.4%e
• (ES) Spain Nov House transactions Y/Y: 2.8% v 15.8% prior
• (CZ) Czech Nov Retail Sales Y/Y: 3.3% v 1.8%e; Retail Sales (ex-auto) Y/Y: 6.1% v 4.5%e
• (CZ) Czech Q3 Final GDP Q/Q: 0.6% v 0.6%e; Y/Y: 2.4% v 2.4%e
• (RU) Russia Narrow Money Supply w/e Jan 1st (RUB): 10.75T v 10.48T prior
• (SE) Sweden Dec Average House Prices (SEK): 2.686M v 2.884M prior
• (IT) Italy Nov Industrial Production M/M: -1.6% v -0.3%e; Y/Y: -2.6% v +4.2% prior; Industrial Production WDA Y/Y: -2.6% v +0.4%e
• (UK) Nov GDP M/M: 0.2% v 0.1%e; GDP 3M/3M Change: 0.3% v 0.3%e
• (UK) Nov Visible Trade Balance: -£12.0B v -£11.4Be; Overall Trade Balance: -£2.9B v -£2.8Be; Trade Balance Non EU: -£3.9B v -£3.8Be
• (UK) Nov Industrial Production M/M: -0.4%% v +0.2%e; Y/Y: -1.5% v -0.7%e
• (UK) Nov Manufacturing Production M/M: -0.3% v +0.4%e; Y/Y: -1.1% v -0.7%e
• (UK) Nov Construction Output M/M: 0.6% v 0.3%e; Y/Y: 3.0% v 2.7%e
• (UK) Nov Index of Services M/M: 0.3% v 0.1%e; 3M/3M: 0.3% v 0.2%e
• (GR) Greece Dec CPI Y/Y: 0.6% v 1.0% prior; CPI EU Harmonized Y/Y: 0.6% v 1.1% prior

Fixed Income Issuance

• (IN) India sold total INR vs. INR120B indicated in 2023, 2029, 2033 and 2044 bonds
• (ZA) South Africa sold total ZAR vs. ZAR650M indicated in I/ L 2029, 2033 and 2046 bonds
• (IT) Italy Debt Agency (Tesoro) sold total €6.5B vs. €5.0-6.5B indicated range in 2021, 2025 and 2038 BTP Bonds
• Sold €3.0B vs. €2.5-3.0B indicated range in 2.30% Oct 2021 BTP; Avg Yield: 1.07% v 1.98% prior; Bid-to-cover: 1.49x v 1.52x prior
• Sold €2.25B vs.€1.75-2.25B indicated range in 2.50% Nov 2025 BTP; Avg Yield: 2.35% v 3.12% prior; Bid-to-cover: 1.64x v 1.52x prior
• Sold €1.25B vs. €0.75-1.25B indicated range in 2.95% Sept 2038 BTP; Avg Yield: 3.68% v 3.90% prior; Bid-to-cover: 1.35x v 1.41x prior

Looking Ahead

• (UK) House of Commons continued debate on EU Withdrawal agreement
• 06:00 (PT) Portugal Dec Final CPI M/M: No est v -0.2% prelim; Y/Y: No est v 0.7% prelim
• 06:00 (PT) Portugal Dec Final CPI EU Harmonized M/M: No est v -0.4% prelim; Y/Y: No est v 0.6% prelim
• 06:00 (BR) Brazil Dec IBGE Inflation IPCA M/M: +0.1%e v -0.2% prior; Y/Y: 3.7%e v 4.1% prior
• 06:00 (UK) DMO to sell €4.0B in 1-month, 3-month and 6-month bills (£0.5B, £2.0B and £1.5B respectively)
• 06:30 (IN) India Weekly Forex Reserves
• 06:30 (TR) Turkey CBRT Survey: Expected Inflation Next 12 Months: No est v 16.5% prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (IN) India Nov Industrial Production Y/Y: 3.6%e v 8.1% prior
• 08:00 (UK) Baltic Dry Bulk Index
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:00 (ES) Spain Debt Agency (Tesoro) announcement on upcoming bond issuance
• 08:30 (US) Dec CPI M/M: -0.1%e v 0.0% prior; Y/Y: 1.9%e v 2.2% prior
• 08:30 (US) Dec CPI Ex Food and Energy M/M: 0.2%e v 0.2% prior; Y/Y: 2.2%e v 2.2% prior
• 08:30 (US) Dec CPI Index NSA: 251.074e v 252.038 prior; CPI Core Index: 259.987e v 259.481 prior
• 08:30 (US) Dec Real Avg Weekly Earnings Y/Y: No est v 0.6% prior (revised from 0.5%); Real Avg Hourly Earning Y/Y: No est v 0.8% prior
• 09:00 (MX) Mexico Nov Industrial Production M/M: +0.1%e v -1.6% prior; Y/Y: 0.1%e v 1.0% prior; Manufacturing Production Y/Y: 2.1%e v 2.5% prior
• 09:00 (BR) Brazil to sells LTN Bills LTN
• 11:00 (IT) ECB's Visco (Italy)
• 13:00 (US) Weekly Baker Hughes Rig Count data
• 14:00 (US) Postponed Dec Monthly Budget Statement (due to partial govt shutdown)

Spot gold regained traction and moved higher in early Friday’s trading, as the dollar slipped on rising expectations that the Fed would pause its rate hike cycle this year.

The yellow metal remains congested between $1298 and $1276 for the second week after larger uptrend ran out of steam on approach to psychological $1300 barrier.

Consolidation was so far held by rising 10SMA which helped to keep overall bullish structure intact.

Friday’s close above 10SMA would add to positive outlook for renewed attack at $1300 barrier, break of which would unmask targets at $1309/16 (14 June lower high / Fibo 76.4% of $1365/$1160 fall).

Conversely, initial negative signal could be expected on close below 10SMA which would signal deeper correction and expose rising 10SMA ($1270).

Res: 1295, 1298, 1300, 1309
Sup: 1286, 1276, 1273, 1270

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.15413
Open: 1.14993
% chg. over the last day: -0.30
Day's range: 1.14964 – 1.15321
52 wk range: 1.1214 – 1.2557

EUR retreated from the local maximums. Yesterday the quotes fell by 40 points. Right now they are consolidating around 1.15100-1.15350, you should open positions from these levels. USD remains under pressure, since some representatives of the Federal Reserve do not want to increase the key interest rate in 2019. Today the attention will be on the US inflation report. Positions should be opened from the key levels.

The Economic News Feed for 11.01.2019:

Basic Consumer Price Index (US) – 15:30 (GMT+2:00);

The indicators do not provide precise signals, the price is testing 50 MA.

The MACD histogram is close to 0.

The Stochastic Oscillator is in the neutral zone, the %K line is below the %D line, which points toward a bearish mood.

Trading recommendations

Support levels: 1.15100, 1.14850, 1.14500
Resistance levels: 1.15350, 1.15700, 1.16000

If the price fixes above 1.15350 expect growth toward 1.15700-1.16000.

Alternatively the quotes can correct toward 1.14850-1.14500.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.27889
Open: 1.27372
% chg. over the last day: -0.29
Day's range: 1.27157 – 1.27678
52 wk range: 1.2438 – 1.4378

GBP/USD remains in a long flat. There is no single well-defined trend. Right now the quotes are testing the local support and resistance levels of 1.27100 and 1.27650. The pound has a tendency to descend. The investors are waiting for important reports from the UK. Positions should be opened from the key levels.

The Economic News Feed for 11.01.2019:

GDP Report (UK) – 11:30 (GMT+2:00);

Production Volume in the Processing Industry Report (UK) – 11:30 (GMT+2:00);

The indicators do not provide precise signals, the price has fixed between 50 MA and 200 MA.

The MACD histogram started to descend, which points toward a bearish mood.

The Stochastic Oscillator is in the neutral zone, the %K line is below the %D line, which points toward the sale of GBP/USD.

Trading recommendations

Support levels: 1.27100, 1.26500, 1.26000
Resistance levels: 1.27650, 1.28000

If the price fixes below the local support 1.27100 expect the quotes to dall toward 1.26600-1.26400.

Alternatively the quotes can grow toward 1.27750-1.28000.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.32061
Open: 1.32311
% chg. over the last day: +0.24
Day's range: 1.31839 – 1.32447
52 wk range: 1.2248 – 1.3664

The USD/CAD keeps showing a negative trend. At the moment CAD is testing the local support of 1.31800. 1.32200 is a mirror resistance. The demand for the USD is weakened after the FOMC minutes. The CAD is supported by the bullish mood on the oil quotes. USD/CAD can descend further, positions should be opened from the key levels.

The Economic News Feed for 11.01.2019 is calm.

Economic Event (CAD) – 00:00 (GMT+2:00);

Economic Event (CAD) – 00:00 (GMT+2:00);

Economic Event (CAD) – 00:00 (GMT+2:00);

The price fixed below 50 MA and 200 MA, which points toward the power of the sellers.

The MACD histogram is in the negative zone and below the signal line, which points to a descend of the USD/CAD quotes.

The Stochastic Oscillator is in the oversold zone, the %K line is below the %D line which gives a weak signal to sell USD/CAD.

Trading recommendations

Support levels: 1.31800, 1.31500
Resistance levels: 1.32200, 1.32700, 1.33100

If the price fixes below the local support 1.31800 expect the quotes to descend toward 1.31500-1.31200.

Alternatively the quotes can correct toward 1.32500-1.33000.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 108.132
Open: 108.425
% chg. over the last day: +0.11
Day's range: 108.230 – 108.472
52 wk range: 104.56 – 114.56

The USD/JPY is showing an ambiguous technical picture. Right now the quotes are consolidating around 108.000-108.500 and can descend further. Keep an eye on the US News Feed. You should open positions from the key levels.

The Economic News Feed for 11.01.2019 is calm.

The indicators do not provide precise signals, the price has crossed 50 MA and 200 MA.

The MACD histogram is close to 0.

The Stochastic Oscillator is in the neutral zone, the %K line is crossing the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 108.000, 107.500, 107.200
Resistance levels: 108.500, 109.000, 109.500

If the price fixes below the round 108.000, expect the quotes to descend toward 107.500-107.200.

Alternatively the quotes can recover toward 109.000-109.250.