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The euro has continued to advance higher against the US dollar currency during the European trading session, with price now trading around the 1.1440 level. The 1.1470 level is the key technical zone traders will be watching if the EURUSD pair continue to press higher. Sellers will likely look for a risk-reward entry from the 1.1470 area, while bulls will look to trigger technical buying up to the 1.1550 level from this area.

The EURUSD pair is strongly intraday bullish while trading above the 1.1470 level, key technical resistance is found at 1.1500 and 1.1550 levels.

If the EURUSD pair moves back under the 1.1430 level, sellers may test towards the 1.1410 and 1.1360 support levels.

The US dollar has given back earlier gains against the Japanese yen currency, with price now testing towards the pivotal 108.10 level. Buyers need to break above the 108.60 resistance level to encourage further buying, while sellers need a higher-time-frame price close below the 108.10 level. The MACD indicator on the four-hour time frame has yet to reach overbought trading conditions.

The USDJPY pair is only bearish while trading below the 108.10 level, key technical support is found at the 107.50 and 107.00 levels.

If the USDJPY pair trades above the 108.60 level, a further technical correction towards the 109.10 and 109.60 levels remains possible.

The Australian dollar maintains positive tone on Monday and extends recovery, following Friday's strong rally (up 1.6%) which completed reversal pattern on daily chart.

Fresh advance probes through pivotal barrier at 0.7131 (Fibo 61.8% of 0.7393/0.6706 descend), clear break of which would generate bullish signal for extension towards strong resistance zone daily between 0.7170 and 0.7222 (30/55/100SMA/daily cloud).

Positive sentiment is supported by improving daily techs, however, overbought conditions warn.

Focus turns towards US/China trade talks and fresh news are expected to trigger stronger action.

Broken daily 10SMA/Kijun-sen mark pivotal support at 0.7050, loss of which would be bearish signal.

Res: 0.7141, 0.7176, 0.7186, 0.7222
Sup: 0.7108, 0.7050, 0.7000, 0.6969

Recovery from last-week's sharp fall is losing traction despite Friday's bullish candle (the first after five straight days in red) and close above Fibo barrier at 108.07 (38.2% of 113.70/104.59 bear-leg).

The dollar was weaker across the board on Monday, following comments from Fed chief Powell, who signaled that rate hike cycle might be over, as growing signs that the US economy is losing momentum suggest that the central bank would be more cautious.

Stronger that expected US jobs data, released on Friday, provided little help to the greenback, depressed by growing negative sentiment.

Weak daily techs signal further weakness, after Thursday's quick recovery after flash crash and Friday's extension higher, were seen as positioning for fresh downside.

Selling upticks remains favored for test of 107.24/00 (Fibo 38.2% of Thursday's 108.88/104.59 fall/psychological support), with break here needed to generate bearish signal for extension towards 106.50 (Fibo 61.8% of 2016 98.99/118.66 rally) and 104.60 (last Thu/26 Mar 2018 lows).

Alternative scenario requires extension and close above 110.26 (50% of 113.70/104.59) to sideline bears, while return above falling 10SMA (109.70) is needed to signal reversal.

Res: 108.60, 109.15, 108.88, 109.15
Sup: 108.02, 107.51, 107.24, 107.00

Notes/Observations

• US and China mid-level trade delegates meet in Beijing with focus on technical matters
• UK Parliament back from recess and to resume debate on the Brexit Withdrawal Bill from Wednesday
• China Gold Reserves rise for 1st time since Oct 2016
• FOMC minutes on Wednesday, a US CPI report on Friday and plenty of Fedspeak including Powell once again

Asia:

• China has room for additional cut to RRR as current ratio is still relatively high. More room for China to ease monetary policy as the US was slowing pace of rate hikes. China was likely to lower rates in OMOs instead of cutting key 1-year deposit and lending rates
• Japan Dec PMI Services: 51.0 v 52.3 prior (3-month low)

Europe:

• PM May reiterated view that Britain would be in 'uncharted territory' if her Brexit deal was rejected by parliament - Northern Ireland DUP Dep Leader Dodds: the fundamental problems which made the PM's Brexit agreement a bad deal appeared not to have changed

Energy:

• Goldman Sachs analyst cuts 2019 WTI and Brent oil outlook citing oil surplus and resilient US shale production. Cuts 2019 WTI forecast from $64.50 to $55.50 and 2019 Brent forecast from $70.00 to $62.50

Macro

• (DE) Germany: November factory orders dropped -4.3% y/y adding to concerns that the manufacturing sector is increasingly being impacted by global trade tensions and the risk of a hard Brexit, especially as export orders fell -3.2% m/m. Most of the drop in export orders was as a result of a -11.6% m/m decline in orders from other Eurozone countries, which suggests that the protests France disrupted not just French output, but also had knock on effects for companies in Germany. The overriding scenario looks to be one of slowing production and weakening economic growth.
• (DE) Germany: November retail sales were stronger than expected, with internet sales contributing to the headline, and suggests that Black Friday sales is having an increasing impact and distorting seasonal comparisons.
• (UK) United Kingdom: It has been widely reported that Parliament will vote in the Withdrawal Agreement on January 15th. This comes as Germany and Ireland have reportedly been trying to come up with a solution for the Irish border backstop with German foreign affairs minister, Heiko Mass in Dublin today. The fix is likely yo be further details in the political declaration on the future relationship, as opposed to changes to the actual Withdrawal Agreement, which suggests that the Irish border backstop will remain in place.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.31% at 342.32, FTSE -0.43% at 6,808.25, DAX -0.26% at 10,739.49, CAC-40 -0.42% at 4,717.34, IBEX-35 -0.10% 8,725.00, FTSE MIB +0.19% at 18,867.50, SMI -0.74% at 8,548.60, S&P 500 Futures -0.05%]
• Market Focal Points/Key Themes: European Indices trading slightly lower across the board fading slightly after strong gains seen on Friday tracking slightly lower US futures. On the corporate front, US retailer Dunelm trades higher following a positive trading update, with Biocartis, MJ Gleeson, PGS and Addex Therapeutics among other names highers on positive trading updates. To the downside Trigano and EOS Imaging trading lower on Sales updates. Elsewhere shares of Siemens and Alstom trade lower on talk the EU Commission could oppose tie up; Mithra Pharma is a notable riser on the expansion of the Estetrol program, Staffline also rises on a contract win while Bowleven is a notable riser on the proposal of a special dividend.
• Consumer discretionary: Adidas [ADS.DE] -1% (continues buyback program), Dunelm Group [DNLM.UK] +16% (trading update), Vertu Motors [VTU.UK] -4% (acquisition)
• Energy: Sound Energy [SOU.UK] +31% (operational update), Bowleven [BLVN.UK] +20% (special dividend)
• Healthcare: Sanofi-Aventis [SAN.FR] -1.5% (agreement with Regeneron amended), Biocartis NV [BCART.BE] -11% (trading update), EOS Imaging [EOSI.FR] -11% (earnings)
• Industrials: M.J. Gleeson Group plc [GLE.UK] +3% (trading update), Volkswagen [VOW3.DE] +0.5% (CEO comments on sales and activities)
• Technology: Siemens [SIE.DE] -1%, Alstom [ALO.FR] -3% (reportedly EU Commission could oppose the Siemens-Alstom tie-up)
• Telecom: BT Group plc [BT.A.UK] +1% (said to be working with takeover advisors on possible Deutsche Telecom bid)

Speakers

• UK Govt said to hold 'meaningful vote' on Brexit deal on Tuesday, Jan 15
• China FX Regulator SAFE reiterated stance that expected overall FX Reserves to remain stable in 2019
• India Central Bank (RBI) Gov Das: Have meet with MSME Associations; will examine issues. Restructuring only after examining viability. RBI has a sense of current liquidity situation; have taken steps to increase liquidity

Currencies/Fixed Income

• USD remained on soft footing for a third straight session after Fed Chair Powell on Friday signaled a change in the policy reaction function of the Fed to being more nimble and ?exible. There was a growing bet that the Fed could soon pause in the current tightening cycle. The resumption of US-China trade talks also aiding risk-on appetite and shedding of some safe-haven bets.
• EUR/USD higher by almost 0.5% as the pair approached the mid 1.14 neighborhood. A move above 1.15 would trigger buy-stops and likely to cause technical damage to the USD bull run.
• GBP/USD was marginally higher as focused returned to the UK Parliament after its return from the Christmas recess. The highly anticipated meaningful vote appeared to be set for next Tuesday 9Jan 15th). The market will be looking for clarity whether PM May's Brexit deal would pass to avoid a potential hard Brexit for Britain.

Economic Data

• (DE) Germany Nov Retail Sales M/M: 1.4% v 0.4%e ;Y/Y: +1.1% v -0.4%e
• (DE) Germany Nov Factory Orders M/M: -1.0% v -0.1%e; Y/Y: -4.3% v -2.7%e
• (TW) Taiwan Dec Trade Balance: $4.7B v $4.7Be; Exports Y/Y: -3.0% v -5.1%e; Imports Y/Y: +2.2% v -0.3%e
• (AT) Austria Dec Wholesale Price Index M/M: -2.2 % v -0.2% prior; Y/Y: 2.2% v 4.4% prior
• (HU) Hungary Nov Retail Sales Y/Y: 5.2% v 5.5% prior
• (CN) China Dec Foreign Reserves: $3.073T v $3.072Te ; Gold reserves (in troy oz) rose for 1st time in 26 months) 59.56M v 59.24M troy oz prior
• (HK) Hong Kong Dec Foreign Reserves: $424.6B v $423.2B prior
• (PH) Philippines Dec Foreign Reserves: $78.5B v $75.5B prior
• (DE) Germany Dec Construction PMI: 53.3 v 51.3 prior
• (UK) Dec New Car Registrations Y/Y: -5.5% v -3.0% prior
• (CH) Swiss weekly Total Sight Deposits (CHF): 574.0B v 574.2B prior; Domestic Sight Deposits: 480.0B v 479.0B prior
• (IS) Iceland Nov Final Trade Balance (ISK): -18.8B v -17.7B prelim
• (IT) Italy Q3 YTD Budget Deficit to GDP: 1.9% v 2.0% prior
• (SG) Singapore Dec Foreign Reserves: $287.7B v $289.5B prior
• (EU) Euro Zone Jan Sentix Investor Confidence: -1.5 v -2.0e (lowest reading since Dec 2014)
• (ID) Indonesia Dec Consumer Confidence: 127.0 v 122.7 prior
• (EU) Euro Zone Nov Retail Sales M/M: 0.6% v 0.2%e; Y/Y: 1.1% v 0.4%e

Fixed Income Issuance

• (EU) EFSF to sell €3.0B in 7-year notes via syndicate; guidance seen +2bps to mid-swaps
• (SI) Slovenia Debt Agency to sell EUR-denominated 10-year note via syndicate; guidance seen high 40 bps area to mid-swaps
• (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 3-month bills; Avg Yield: 0.85% v 0.78% prior; Bid-to-cover: 1.89x v 2.94x prior

Looking Ahead

• (IL) Israel Dec Foreign Currency Balance: No est v $115.1B prior
• (MX) Mexico Citibanamex Survey of Economists
• (EG) Egypt Dec Net Reserves: No est v $44.5B prior; Gross Official Reserves: No est v $44.5B prior
• 05:25 (BR) Brazil Central Bank Weekly Economists Survey
• 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 6-month bills;
• 06:00 (IL) Israel to sell Bonds
• 06:00 (RO) Romania to sell RON400M in 4% 2021 bonds
• 06:30 (CL) Chile Nov Economic Activity Index (Monthly GDP) M/M: 0.1%e v 0.2% prior; Y/Y: 2.0%e v 4.2% prior; Economic Activity (Ex-Mining) Y/Y: No est v 5.1% prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (CL) Chile Nov Nominal Wage M/M: No est v -0.1% prior; Y/Y: No est v 4.1% prior
• 07:00 (IN) India 2019 GDP Annual Estimate Y/Y: 7.2%e v 6.7% prior
• 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 07:45 (ES) ECB's De Guindos (Spain)
• 08:00 (PL) Poland Dec Official Reserves: No est v $113.8B prior
• 08:00 (UK) Baltic Dry Bulk Index
• 08:50 (FR) France Debt Agency (AFT) to sell combined €4.2-5.4B in 3-month, 4-month, 6-month and 12-month BTF Bills
• 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.25%
• 09:30 (EU) ECB announces Covered-Bond Purchases (**Note: program ended on Dec 31st)
• 10:00 (US) Nov Final Factory orders/durables data postponed by government shutdown
• 10:00 (US) Dec ISM Non-Manufacturing Index: 59.0e v 60.7 prior
• 10:00 (CA) Canada Dec Ivey Purchasing Managers Index (Seasonally Adj): No est v 57.2 prior; PMI (unadj): No est v 57.3 prior
• 11:30 (US) Treasury to sell 13-week and 26-week bills
• 12:40 (US) Fed's Bostic (dove, voter)

Cable holds positive tone on Monday but so far holding within narrow consolidation, following Thursday's long-tailed Hammer and strong rally on Friday which completed reversal pattern on daily chart. Strong bullish momentum and 10/20/30SMA back to bullish setup, support scenario for attack at 1.2788 (falling 55SMA) and 31 Dec spike high at 1.2814, violation of which would generate fresh bullish signals. Broken 10 SMA (1.2673) is expected to hold and keep bulls in play.

Res: 1.2788, 1.2814, 1.2850, 1.2880
Sup: 1.2714, 1.2673, 1.2644, 1.2615

The Euro extends recovery in early Monday's trading after Friday's long-legged Doji, which signaled strong indecision but generated bullish signal on repeated close within thick daily cloud.

Fresh advance is supported by strong bullish momentum and daily MA's turning to positive setup and pressures pivotal barrier at 1.1444 (Fibo 38.2% of 1.1815/1.1215 descend).

The barrier was broken several times in past two weeks, but bulls were so far unable to register close above it.

Sustained break here is needed for fresh bullish signal for extension towards 100SMA (1.1478) and pivotal 1.1515 barrier (daily cloud top / 50% of 1.1815/1.1215).

Softer dollar after Fed Powell's speech last Friday, which revived concerns that the US economy is losing momentum and signals of continuation of US/China trade talks which offset positive impact from upbeat US jobs data in Dec, keep the Euro supported.

Cluster of daily MA's at 1.1400/1.1370 zone marks solid supports ahead of daily cloud base (1.1363) break of which will be bearish.

Res: 1.1444, 1.1478, 1.1496, 1.1515
Sup: 1.1400, 1.1381, 1.1370, 1.1363

Asian shares roared, after the People’s Bank of China (PBoC) announced on Friday plans to cut its reserve requirement ratio by 1%, with a reduction of 50 basis point on 15 and 25 January respectively, the first decrease since October 2018. The move will support smaller businesses by freeing liquidity (800 billion yuan or $116 billion) that banks should allocate into loans. Investors are monitoring whether the PBoC will take one step further by easing its policy rate, unchanged since October 2015. The impact of the reserve loosening will take up to three quarters to impact the real economy. Accordingly, Japan’s Nikkei 225 rose by +2.44% while Chinese blue-chip index CSI 300 closed +0.61% and South Korean Kospi index gained +1.34%. European shares are lagging, with the Euro Stoxx 50 -0.26% followed by US futures in slight negative territory.

Elsewhere, US Federal Reserve Chairman Jerome Powell dovish tone last Friday, followed by a strong American jobs report, plus resumption of US-China trade talks gave investors a boost. Risk appetite is growing, with the Stoxx Europe 600 up 2.83% on Friday, its best session rise since mid-2016. EUR/USD is currently given at 1.1445, approaching 1.1460 short-term

The New Zealand Dollar appreciated about 76 base points against the US Dollar on Friday. The currency pair breached both the 50-, 100-, and 200-hour SMAs during Friday's trading session.

As for the near future, it is likely that the currency exchange rate will continue gaining strength and potentially target a strong resistance level formed by the weekly and the monthly pivot points at 0.6798.

On the other hand, the NZD/USD exchange rate could reverse from current price level at 0.6762 and aim for a test of the three SMAs during the following trading session.

The common European currency traded with low volatility against the Japanese Yen on Friday. The currency pair was stranded between the 50-hour and 100-hour simple moving average during the previous session.

Everything being equal, it is likely that bearish sentiment will be introduced in the market today. Technical indicators suggest a southern movement during the following trading sessions.

However, the currency exchange rate needs to break out from a support cluster formed by the combination of the weekly, the monthly pivot points and the 50-hour SMA at 123.12.