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The euro has started the week with gains. In the Monday session, EUR/USD is trading at 1.2342, up 0.38% on the day. There are on data releases in the eurozone. Later in the day, ECB President Mario Draghi testifies before the European Parliament Economic and Monetary Affairs Committee. In the US, New Home Sales is expected to jump to 655 thousand. On Tuesday, Germany releases Preliminary CPI. The US will release durable goods and consumer confidence reports. As well, Federal Chair Jerome Powell will testify before the House Financial Services Committee.

On Thursday, the ECB released the minutes of its January meeting. The markets were looking for some hints regarding future monetary policy, and policymakers indicated that they could take re-examine the Bank’s monetary policy “early this year”. The ECB is keeping a close eye on inflation, which has been moving upwards. Still, with inflation below the ECB target of just below 2%, there is little talk about raising interest rates. Policymakers also indicated concern with exchange rates, a theme which has been addressed by Mario Draghi in recent weeks, given the appreciation of the euro – EUR/USD has climbed 2.8% since the start of the year. The minutes voiced “concerns about the recent volatility in the euro exchange rate, which represented a source of uncertainty that had to be monitored with respect to its implications for the medium-term outlook for price stability”. The euro has seen plenty of volatility in February, and currency volatility will likely be high on the agenda of the next policy meeting in March.

Jerome Powell will be on center stage this week, when he testifies before the House of Representatives and the Senate this week. After the recent stock markets volatility, Powell may opt to play it safe and keep away from any splashy headlines, which could lead to more fluctuation in the markets. Powell could choose to focus on the strong US economy and the Fed trimming its balance sheet, and steer away from a discussion of accelerating rate policy in order to head off higher inflation.

Spot Gold rallied on Monday, extending recovery from $1320 (22 Feb low), driven by fresh weakness of US dollar at the beginning of week.

Bullish acceleration improved near-term structure as metal's price gains fresh bullish momentum and the price broke above a cluster of daily MA's (10/20/30), laying between $1334 and S1338, hitting session high at $1341 (Fibo 50% of $1361/$1320 bear-leg).

Bullishly-aligned daily techs are supportive for further advance, as rising daily cloud continues to underpin, but traders are cautious ahead of tomorrow's congressional testimony of Fed Chairman Powell, who could bring more light on central bank's next steps regarding monetary policy, minutes of the last FOMC meeting, released last week, showed hawkish tone which could result in increasing pace of rate hikes this year.

Broken 20SMA marks solid support at $1334 which should contain dips and keep fresh bulls in play for extension towards pivots at $1346/48 (Fibo 61.8% of $1361/$1320 bear-leg / 20Feb high).

Conversely, loss of 20SMA handle would soften near-term tone and keep the downside vulnerable.

Res: 1341, 1346, 1348, 1351
Sup: 1336, 1334, 1330, 1326

Notes/Observations

Possible appointment of Lui He as PBoC Gov might be a further signal of the Chinese government’s resolve in addressing financial and economic imbalances

New Fed Chair Powell’s inaugural testimony before the House Financial Services and Senate Banking Committees on Tuesday and Thursday

Asia:

Communist Party had moved to repeal language from the constitution that stated the head of state “shall serve no more than two consecutive terms”, which would allow China President Xi to stay in power indefinitely (**Note: Xi’s second term was due to end in 2023)

China Politburo statement reiterated China to continue proactive fiscal policy and prudent monetary policy in 2018

China President Xi top economic advisor Liu He said to be a front runner to be next PBOC Gov (**Note: would assume both the role of PBoC Governor as well as vice-premier in charge of overseeing economic and financial matters, including regulatory bodies. Should this be confirmed, it would be the first time in over two decades hat a Chinese official has held both offices simultaneously)

China Jan Home Prices: rose in 52 out of 70 cities m/m (compared to 57 in Dec)

China CIRC orders three insurers to fix overseas investment rule breaches

PBOC Advisor Huang Yiping: China still faces systemic risks as implicit guarantees from Govt become unsustainable; “bad leveraging" is on the rise while “good leveraging" is falling

BoJ Gov Kuroda reiterated stance to persistently continue powerful monetary easing to achieve price goal

Europe:

EU said to be prepared publish a draft Brexit withdrawal agreement that leaves out key compromise language secured by UK PM May. Draft omitted language to say no new regulatory barriers would be introduced between the UK mainland and Northern Ireland

Labour Leader Corbyn expected to confirm in a speech his support for permanent membership of a customs union after the UK leaves the EU next March

BOE Dep Gov Ramsden reiterated MPC view that interest rates might need to be raised sooner than previously thought due to signs of accelerating wage growth

ECB's Coeure (France): Not eager to engage in early normalization

Americas:

Fed's Williams (moderate, voter): economy in US is improving broadly across sectors. Fed's guidance was for gradual rate hikes, and he expected that to happen; would have to reanalyze view if inflation came in stronger than expected

Energy:

Saudi Oil Min al-Falih: Cuts by OPEC and its allies may be phased out in 2019 in a way that won’t disturb the market

Economic Data:

(FI) Finland Jan PPI M/M: 0.7% v 0.2% prior; Y/Y: 2.4% v 3.0% prior

(FI) Finland Jan Preliminary Retail Sales Volume Y/Y: 4.0% v 3.0% prior

(TW) Taiwan Jan Unemployment Rate: 3.7% v 3.7%e

(CZ) Czech Feb Business Confidence: 17.1 v 16.4 prior, Consumer Confidence: 9.5 v 9.8 prior,

(AT) Austria Feb Manufacturing PMI: 59.2 v 61.3 prior (25th month of expansion)

(UK) Jan BBA Loans for House Purchases: 40.1K v 37.0Ke

Fixed Income Issuance:

(BE) Belgium Debt Agency (BDA) opened its book to sell EUR-denominated Apr 2033 green bond; guidance seen -13bps to mid-swaps

(UK) Bank of England (BOE) to sell $2.0B in 3-year notes; guidance seen 0bps (flat) to mid-swaps

(IT ) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in 6-month Bills; Avg Yield: -0.407% v -0.417% prior; Bid-to-cover: 1.57x v 1.39x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.5% at 383.0, FTSE +0.5% at 7268, DAX +0.6% at 12554, CAC-40 +0.6% at 5348 , IBEX-35 +0.4% at 9861, FTSE MIB +0.3% at 22739 , SMI +0.3% at 8976, S&P 500 Futures +0.4%]

Market Focal Points/Key Themes:

European Indices trade higher across the board tracking a strong close on Wallstreet on Friday, stronger futures this morning as well as strong gains in Asia overnight.
Corporate news flow has been relatively muted with notable downside in shares of PostNL after earnings and cut outlook, while shares of Associated British Foods trades higher after their trading update, and upbeat outlook for Primark.
Elsewhere share of SES rebounds after their results on Friday, with shares of VW also trading higher after preliminary results on Friday.

Looking ahead notable earners include Dean Foods, Boise Cascade and Intelsat.

Movers

Consumer Discretionary [Bunzl [BNZL.UK] +0.5% (Earnings), ABF [ABF.UK] +1.7% (Trading update, Primark outlook)]

Industrials [ PostNL [PNL.NL] -1% (Earnings), Volkswagen [VOW3.DE] +1.4% (Earnings)]

Telecom [SES [SESG.FR] +9.3% (Rebound), Nokia [NOKIA.FI] +2.7% (5G commentary)]

Financial [ Provident Finl -12.4% (Mulls rights issue)]

Speakers

China FX Regulator SAFE reiterated its view that two-way price action for the CNY currency (Yuan) would be the norm. Reiterated Yuan to keep its basic stability at a balance level

North Korea said to be open to dialogue with US

Currencies

USD was softer as US yields drifted lower. Dealers were focusing on the new Fed Chair Powell’s inaugural testimony before the House Financial Services and Senate Banking Committees on Tuesday and Thursday this week.

The GBP was firmer aided by weekend commentary by BOE Dep Gov Ramsden (dove) who reiterated MPC overall view that that interest rates might need to be raised sooner than previously thought due to signs of accelerating wage growth. Market currently saw almost 85% change of a rate hike in May. Focus was on UK Labour leader Corbyn (opposition) speech on Brexit where he was expected to seek a bespoke deal with the EUthat would include a customs union

EUR/USD higher by 0.5% at 1.2350 while USD/JPY was off by 0.3% at 106.55 just ahead of the NY morning.

Fixed Income

Bund Futures trades down 13 ticks at 159.40 ahead of Draghi's testimony on monetary policy and the inflation outlook before the European Parliament Economic and Monetary Affairs Committee, in Brussels. Upside targets 159.75, while a return lower targets the157.75 level.

Gilt futures trade at 121.93 down 12 ticks as Gilts drop from open after BOE's Ramsden. Support continues to stand at 120.75 then 120.15, with upside resistance at 122.00-122.25 zone then 122.85.

Monday's liquidity report showed Friday's excess liquidity rose to €1.834T from €1.831T prior. Use of the marginal lending facility rose to €37M from €0M prior.

Corporate issuance saw the primary market finish last week with ~$18.3B sold.

Looking Ahead

(BR) Brazil Jan Total Federal Debt (BRL): No est v 3.559T prior

(DE) German Chancellor Merkel’s CDU party holds Party Convention to Vote on Coalition

05:30 (IL) Israel to sell Bonds

06:00 (RO) Romania to sell Bonds

06:25 (BR) Brazil Central Bank Weekly Economists Survey

06:45 (US) Daily Libor Fixing

08:05 (UK) Baltic Dry Bulk Index

08:00 (ES) Spain Debt Agency(Tesoro) announces size of upcoming auctions

08:00 (IN) India announces details of upcoming bond sale (held on Fridays)

08:00 (US) Fed's Bullard (dove, non-voter) speaks on US Economy and Monetary Policy

08:30 (US) Jan Chicago Fed National Activity Index: 0.20e v 0.27 prior

08:30 (BR) Brazil Jan Current Account: -$5.0Be v -$4.3B prior; Foreign Direct Investment (FDI): $3.8Be v $5.4B prior

08:55 (FR) France Debt Agency(AFT) to sell combined €5.2-6.4B in 3-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 0.10%

09:00 (MX) Mexico Dec Retail Sales M/M: -0.3%e v -0.3% prior; Y/Y: -0.4%e v -1.5% prior

09:00 (EU) ECB’s Draghi in EU Parliament

09:30 (EU) ECB announces Covered-Bond Purchases

09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

10:00 (US) Jan New Home Sales: 648Ke v 625K prior

10:30 (US) Feb Dallas Fed Manufacturing Activity: 30.0e v 33.4 prior

11:30 (US) Treasury to sell 3-Month and 6-Month Bills

13:00 (UK) BOE’s Cunliffe at event at Warwick University

15:15 (US) Fed’s Quarles (hawk, FOMC voter) on US economy

Crude oil upward trend is maintained and broke resistance given at 63.67 (10/01/2018 high). Heading for hourly resistance at 64.77 ( repproaching hourly resistance found at 63.67 (10/01/2018 high). Crude oil hourly support remains at 58.07 (09/02/2018 low). The technical structure suggests short-term upside moves.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness is very likely. For the time being, the pair lies in an upside trend since June 2017. Support lies at 42.20 (16/11/2016) while resistance is located at 77.83 (20/11/2014). Crude oil is trading largely above its 200 DMA.

Silver is showing sings of strength, approaching hourly resistance at 16.83 (28/12/2018 high). Hourly support is given at 16.27 (07/02/2018 low). The technical structure suggests further short-term upside moves.

In the long-term, the trend remains negative/ sideways. Further downside is very likely. The pair is trading below its 200 DMA. Resistance is located at 21.58 (10/07/2014 high). Strong support can be found at 11.75 (20/04/2009).

Gold is trading higher, approaching the range of 1340, though a short-term bearish pattern dominates. Hourly support and resistance are given at 1318 (14/02/2018 low) and 1351 (01/02/2018 high). The technical structure suggests further upside moves.

In the long-term, the technical structure suggests that there is a growing upside momentum. A break of 1'392 (17/03/2014) is required to confirm it. A major support can be found at 1'045 (05/02/2010 low).

Bitcoin starts its decline below 10000 and approaches hourly resistance at 9022 (30/11/2018 low). Hourly resistance at 12130 (18/01/2018 high) remains.

In the long-term, the digital currency has had an exponential growth but also presented important downturns. There is decent likelihood that the currency could stabilize between 7'000 - 12'000 in 2018. Bitcoin is trading above its 200 DMA (6'500 range).

EUR/CHF is consolidating at the 1.15 range. The pair is maintained at the range of hourly support given at 1.1487 (12/02/2018 low) while hourly resistance at 1.162 (07/02/2018 high) remains. The technical structure suggests further short-term sideway moves.

In the longer term, the technical structure has reversed. Strong resistance is given at 1.20 (level before the unpeg). Yet, the ECB's slowing QE program is likely to cause buying pressures on the euro, which should weigh in favour of the EUR/CHF. Support can be found at 1.0234 (20/04/2015 low).

EUR/GBP keeps losing ground, and broke hourly support at 0.877 (11/12/2017). New hourly support is now at 0.8756 (04/12/2017 low). Hourly resistance at 0.8873 (10/01/2018 high) is distanced. The technical structure suggests further short-term downside moves.

In the long-term, the pair has largely recovered from 2015 lows. The technical structure suggests further upside pressure. Strong resistance can be found at 0.9500 (psychological level) while support remains at 0.8304 (05/12/2016 low). The pair is trading below its 200 DMA.

AUD/USD recovery resumes, approaching 0.79 range. The pair is trading between hourly support and resistance at 0.7773 (14/02/2018 low) and 0.7999 (17/01/2018 high). The shortterm technical structure suggests further upside moves.

In the long-term, the upward trend slows down after failing to reach key resistance at 0.8164 (14/05/2015 low). Key support stands at 0.6009 (31/10/2008 low). A break of the key resistance at 0.8164 (14/05/2015 high) is needed to invalidate our long-term bearish view.