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Eurozone Sentix Investor Confidence dropped to -1.5 in January, down from -0.3 but beat expectation of -2.0. Still, that's the fifth decline in a row and situation and expectation fell slightly once again. Sentix noted that "What is worrying about the current loss of momentum is the policy's unwillingness to react, which is obviously unaware of the possible implications. Investors do not expect a quick reaction from the central banks either."

Also, Sentix added that "The US President, too, is becoming increasingly entangled in a secondary war theatre, and the US shutdown is strengthening the downward momentum in the USA as well. The US overall index falls for the third time to only 6.6 points. Eastern Europe and, above all, Latin America are viewed somewhat more positively."

On Eurozone, Sentix warned that "the eurozone is dangerously close to stagnation". And, "Neither politicians nor central banks seem to have really grasped the extent of this loss of momentum. The EU Commission's agreement with Italy in the trade dispute is on the credit side. But the continuing protest of the yellow vests in France could weigh more heavily. The possible "hard Brexit" and the lack of support from the global economy remain negative factors."

Full release here.

NZDUSD is nicely turning to the upside, up from 0.658 area where the complex decline looks to have found a base. In such case, more upside may be expected ideally in a five-wave rally. That said a break above the 0.679 level would confirm more upside. Also be aware of temporary pullbacks which may join the downtrend.

NZDUSD, 4h

Despite the USD getting some support at the release of a strong NFP figure on Friday. It later was weakened by a series of dovish comments made by Fed Chairman Powell. Fed’s Chairman, stated that the bank will be patient as to watch and see how the US economy will evolve. Powell also mentioned that the Fed is not on a pre-set path of rate hikes and implied that it could pause its policy tightening. We see the case for the bank to be more data driven in the foreseeable future and financial releases driven volatility could rise for USD pairs. Analysts point out that the comments could weigh on the USD, as the tone was cautious and could contribute to USD softness. Cable rose on Powell’s comment on Friday, reflecting a weakness of the USD and Broke the 1.2700 (S1) resistance line, now turned to support. We see the case for the pair to continue to trade with bullish tendencies, as the financial releases today could be against the USD. Please be advised that should there be negative headlines about Brexit, the pair may reverse its upward movement. Should the pair rise further, we could see it breaking the 1.2795 (R1) resistance line and aim for the 1.2880 (R2) resistance barrier. Should on the other hand the pair come under the selling interest of the market, we could see it breaking the 1.2700 (S1) support line and aim for the 1.2630 (S2) support barrier.

Chinese authorities cut bank reserve requirements

Chinese authorities cut reserve requirements for all banks by 100 basis points according to media. The move was made after a number of weaker than expected manufacturing data, could free about 116 B USD for new lending and is expected to partially counter the possible slowdown of economic growth. We see the case, for the reserve cut to boost the liquidity of the Chinese financial market, which in turn could provide more investing opportunities. On other news, the US-Sino negotiations are to be held this week, which if they bear fruit, could provide also some boost to the Chinese economy. Analysts point out that both news could provide some support for the AUD. AUD/USD continued its rise since Thursday’s mini crash and broke the 0.7065 (S1) resistance line, now turned to support. We maintain a bullish outlook for the pair as the upward trendline seems to remain intact for the present. On the other hand, please note that the RSI indicator in the 4 hour chart, has reached the reading of 70, implying a rather overcrowded long position. Should the bulls continue to dictate the pair’s direction we could see it breaking the 0.7150 (R1) resistance line and aim for the 0.7235 (R2) resistance hurdle. Should on the other hand the bears take over, we could see the pair, breaking the 0.7065 (S1) support line and aim for the 0.6930 (S2) support barrier.

In today’s other economic highlights:

In today’s European session, we get Germany’s factory orders and retail sales growth rates for November as well as Eurozone’s retail sales growth rates for November. In the American session, we get from the US, the factory orders growth rate for November and the ISM Non-Manufacturing PMI for December. From Canada, we get the Ivey PMI for December. As for speakers please note that Atlanta Fed President Raphael Bostic speaks.

As for the week ahead:

On Tuesday, we get Australia’s trade balance figure, Germany’s industrial output and the US trade balance figure, all for November. On Wednesday, we get Germany’s trade balance figure and Eurozone’s unemployment rate, both for November and from the Americas, BOC’s interest rate decision will be announced along with the release of the Fed’s last meeting minutes. On Thursday, we get from China the CPI and PPI rates for December while the ECB releases its account of monetary policy. On Friday, from Australia we get the Retail Sales growth rate for November and from the UK the GDP and manufacturing output growth rates for November. From the US we get the CPI rates for December.

AUD/USD H4

Support: 0.7065 (S1), 0.6930 (S2), 0.6820 (S3)
Resistance: 0.7150 (R1), 0.7235 (R2), 0.7330 (R3)

GBP/USD H4

Support: 1.2700 (S1), 1.2630 (S2), 1.2555 (S3)
Resistance: 1.2795 (R1), 1.2880 (R2), 1.2960 (R3)

• US Jobs report impress, Powell backs flexible policy
• China cuts reserve requirements amid slowing economic activity
• Loonie jumps to 3-week highs

Nonfarm payrolls impress but Powell sounds cautious; China takes further monetary easing steps

The US Jobs report beat expectations on Friday, brushing away fears of a cooling labour market and a slowing economy. Nonfarm payrolls jumped by 312k in December, while November's print was revised upwards by 22k. Average hourly earnings also picked up speed to reach a new decade high of 3.2% y/y compared to 3.1% registered previously, while the unemployment rate increased by 0.2 points to 3.9%, though it remained near historic lows.

The upbeat employment report suggests that the Fed could still raise interest rates in the new year, though the Fed chief Jerome Powell speaking on Friday messaged that monetary policy is flexible and hence monetary tightening is not predetermined. The latter development accompanied hopes that trade negotiations between the US and China could reach a deal, which soon pushed Dow and S&P 500 up by more than 3.0% on Friday. Asian stocks closed in the green as well on Monday, helped by Friday's news that China's central bank released $116 billion for new lending by cutting reserve requirements – a move at the upper end of market expectations. The action came a few days after a private survey showed a contraction in Chinese manufacturing activity and the tech-giant Apple slashed sales forecasts in the country. Note that this is the fifth time in a year that the PBOC reduces the amount of cash banks need to hold as reserves.

Dollar under pressure, antipodeans advance

In FX markets, the dollar index extended losses for the third day in a row, while dollar/yen was erasing Friday's rally at 108 as investors felt more comfortable to shift funds to riskier assets. On the other hand, the aussie and the kiwi which are sensitive to Chinese economic headlines were recovering, reaching two-week highs against the greenback. Safe-haven gold was also paring Friday's losses to touch 6 ½ -month highs again, a sign that that some risk aversion remains in the markets.

Loonie hits fresh 3-week highs as oil prices continue recovery

The Canadian labour market also registered a pleasant month in December, with the economy creating 9.3k jobs instead of 5.5k expected by analysts. While this was still well below the explosive 94.1k increase marked in November, the unemployment rate slipped to a fresh record low of 5.6%. Yet average hourly earnings remained subdued at 1.5%, reinforcing expectations that the BoC will keep rates unchanged this week.

The oil-linked loonie managed to attract some buying interest and hit fresh three-week highs versus the dollar , as crude prices stretched north for the fourth consecutive day amid trade optimism. The EIA oil report disappointed by showing a minimal increase in US crude inventories in the week ending December 28, whereas Baker Hughes reported a smaller number of active US oil drillings.

Other highlights

ISM non-manufacturing PMI readings and housing data could move the dollar in the remainder of the day, while earlier Eurozone retail sales and the Sentix investors confidence index might bring some volatility to the euro after flash core CPI figures for the month of December appeared soft on Friday.

Brexit headlines will be closely watched as markets are eagerly looking to see whether May can achieve the assurances British lawmakers ask to approve her Brexit plan. Note that a Parliamentary vote is anticipated to take place in the week beginning January 14. However, rumors have started to spread that May could postpone the vote once again.

Gold has rebounded on the 1276.56 support level in the preceding week after the downfall from the almost seven-month high of 1298.47. The rally brought the price above the 20- and 40-simple moving averages (SMAs) in the 4-hour chart, endorsing the outlook to a strongly positive one.

Technically, the RSI indicator is sloping marginally down while in positive territory and the MACD oscillator holds below the trigger line in the bullish area. Currently, the price action has turned negative despite the latest upside pullback.

Should the price edge higher, it would likely retest the seven-month high of 1298.47 and then the 1300 strong psychological barrier. Also, if the price jumps above this peak it could challenge the 1309 hurdle, taken from the high on June 14.

Alternatively, if the price slips lower and start a bearish retracement, immediate support is coming from the mid-level of the Bollinger band (20-simple moving average) around 1288. Should this fail to hold, subsequent declines could open the way for the lower Bollinger band around 1280, which stands near the 40-SMA.

Concluding, gold prices are still bullish in the short- and medium-term as they are holdingabove the five-month ascending trend line.

Pivot (invalidation): 47.60

Our preference Long positions above 47.60 with targets at 49.25 & 49.90 in extension.

Alternative scenario Below 47.60 look for further downside with 46.50 & 45.70 as targets.

Comment The RSI advocates for further advance.

Pivot (invalidation): 15.6500

Our preference Long positions above 15.6500 with targets at 15.8700 & 16.0100 in extension.

Alternative scenario Below 15.6500 look for further downside with 15.5500 & 15.4600 as targets.

Comment The RSI advocates for further advance.

Pivot (invalidation): 1284.50

Our preference Long positions above 1284.50 with targets at 1292.00 & 1296.50 in extension.

Alternative scenario Below 1284.50 look for further downside with 1281.50 & 1276.00 as targets.

Comment The RSI advocates for further upside.

Pivot (invalidation): 2490.00

Our preference Long positions above 2490.00 with targets at 2550.00 & 2583.00 in extension.

Alternative scenario Below 2490.00 look for further downside with 2440.00 & 2400.00 as targets.

Comment The RSI is bullish and calls for further upside.

Pivot (invalidation): 10650.00

Our preference Long positions above 10650.00 with targets at 10810.00 & 10900.00 in extension.

Alternative scenario Below 10650.00 look for further downside with 10533.00 & 10395.00 as targets.

Comment The RSI advocates for further upside.