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The Australian dollar moved higher in early Monday's trading, backed by weaker US dollar, on repeated probe above rising daily cloud (cloud top lies at 0.7859) and hit levels near 0.79 barrier (round-figure resistance, reinforced by falling 20SMA).

Firm break above daily cloud will be bullish signal, however, mixed setup of daily MA's suggests no clear direction signal.

The pair gained momentum but needs close above 20SMA to generate firmer signal for extension of recovery leg from 0.7803, where bears stalled on approach to key support at 0.7776, provided by converged 100/200SMA's.

Broken cloud top now acts as support which should contain dips to keep fresh bulls in play, otherwise near-term outlook could turn bearish again if the pair fails to close above daily cloud.

Res: 0.7880, 0.7900, 0.7913, 0.7947
Sup: 0.7859, 0.7828, 0.7803, 0.7790

The pair holds in red at the beginning of European session and cracked pivotal support at 106.44 (Fibo 61.8% of 105.54/107.90 upleg), after short-lived probe above 107 barrier in early Asian trading.

Fresh weakness probes below the base of thick 4-hr cloud (106.54), weighed by thickening falling hourly cloud (spanned between 106.95 and 107.24) and falling 10SMA (106.90).

Bears need close below Fibo support at 106.44 to confirm continuation of bear-leg from 107.90 (last week’s strong upside rejection) towards key support at 105.54 (16 Feb low, reinforced by 20-d Bollinger band), as daily studies in full bearish setup support the notion.

Immediate bears could be delayed on bounce and close above falling 10SMA, but stronger bullish signal could be expected on sustained lift above 108 resistance zone (last week’s rejection, reinforced by falling 20SMA).

Res: 106.90, 107.00, 107.24, 107.66
Sup: 106.37, 106.10, 105.54, 105.00

Cable maintains bullish tone at the beginning of the week and rallied to new one-week high at 1.4046 after taking out psychological 1.40 barrier.

Strong bullish acceleration in early Monday’s trading improved technical picture as the pair broke above 1.4034 pivot (Fibo 61.8% of 1.4144/1.3856 bear-leg), while daily MA’s (10;20;30) turned in bullish setup and 14-d momentum broke into positive territory, supporting the advance.

Bulls pressure barrier at 1.4054 (daily Kijun-sen) and eye 1.4076 (Fibo 76.4%), break of which would open way towards key near-term resistance at 1.4144 (16 Feb high).

Broken 1.40 hurdle now offers initial support ahead of 1.3972/66 (broken daily Tenkan-sen/broken Fibo 38.2% of 1.4144/1.3856 bear-leg) which should keep the downside protected.

Fundamentals are also working in favor of sterling as BoE’s deputy governor Ramsden showed hawkish steer towards possible rate hike in May, in his newspaper interview on Sunday.

Hopes for softer Brexit also support pound, as opposition Labour Party backs custom union with EU.

Res: 1.4054, 1.4076, 1.4100, 1.4144
Sup: 1.4034, 1.4000, 1.3966, 1.3904

The Euro ticked higher in early Monday's trading, testing levels above 1.23 handle, but without clear near-term direction, as the pair holds within 1.2260/1.2360 congestion and extends range-trading into fourth consecutive day.

Some recovery was seen in Asia on Monday as dollar slipped, but the action remains within the limits on cautious trading ahead of key events, speech of ECB President Mario Draghi today and the first congressional testimony on new Fed Chairman Jerome Powell, due on Tuesday.

Mario Draghi is widely expected to maintain neutral tone in order not to push the Euro too high, as the central bank is moving towards stabilizing monetary policy on cautious steps, suggesting that Draghi's speech today wouldn't make stronger impact on markets.

On the other side, markets are awaiting to hear an ideas about new Fed chief's view about the monetary policy, whether Powell will stay in line with his predecessor or would take more radical steps.

Markets expect Powell not to make too much noise at his first testimony and likely stay in neutral mode, looking for more evidence from economic data to signal further steps regarding monetary policy.

From the technical point of view, bearishly aligned studies maintain negative near-term outlook.

The action remains capped by 30SMA (1.2344) for the fourth day and keeps negative bias, with 14-d momentum in negative zone supporting the notion.

The downside is expected to remain vulnerable while 30SMA caps, with range floor at 1.2260 marking initial support and guarding key points at 1.2205 (09 Feb low) and 1.2173 (Fibo 38.2% of 1.1553/1.2555 ascend), loss of which would generate stronger bearish signal.

At the upside, 30SMA barrier guards upper pivots at 1.2370 zone (converged 10/20 SMA's / Fibo 38.2% of 1.2555/1.2260 downleg), close above which will be strong bullish signal for stronger recovery towards the mid-zone of larger 1.2205/1.2555 range.

Res: 1.2344, 1.2370, 1.2407, 1.2442
Sup: 1.2279, 1.2260, 1.2235, 1.2205

Here are the latest developments in global markets:

FOREX: The dollar index which tracks the strength of the dollar against a basket of six major currencies opened lower in Asia, touching a session-low of 81.67 (-0.25%). Dollar/yen slipped to a one-week low of 106.43, while aussie/dollar and kiwi/dollar were the best performers, with the former peaking at 0.7880 and the latter surging to 0.7336. Pound/dollar bounced back up to 1.4015 and euro/dollar managed to pare Friday's losses, returning to 1.2327.

STOCKS: Asian stock markets advanced on Monday following Friday's Wall Street rally and news that the Chinese President Xi Jinping was planning to remove a constitutional clause limiting presidential service to two terms. This would allow him to stay in office indefinitely. Japan's Topix and Nikkei 225 closed 0.80% and 70% higher respectively, while Hong Kong's Hang Seng rose by 0.74%. Shanghai's SE composite index was up by 1.25%. In Europe, equities were also in the green.

COMMODITIES: Oil prices headed towards three-week highs after the Saudi Arabian Energy Minister said on Saturday that Saudi Arabia will manage to hold its crude oil production well below its output caps in the first quarter of the year, while he also mentioned that OPEC members would be able to relax their production curbs next year when the deal expires, under a permanent framework that would stabilize oil markets. Meanwhile in Libya, the El feel oil field was shut after guards of the field protested to demand higher payments, giving further support to oil prices. WTI crude and Brent were last seen at $63.65/ounce (+0.14%) and $67.35/ounce (+0.07%) respectively. In precious metals, gold posted significant gains, jumping to $1340.90/ounce (+0.79%) on the back of a weaker dollar.

Major Movers: Dollar weakens but all eyes on Powell

The dollar started the week on the backfoot as the US Treasury yields extended their losses from a 4-year high of 2.975 percent reached on Wednesday, falling to 2.866 percent on Monday. Investors, however, held a cautious on the currency as all eyes are now on the new Federal Reserve chief, Jerome Powell, who is expected to make his first major appearance before the House Financial Services Committee on Tuesday.

Discussing the Fed's Semi-Annual Monetary Policy Report and making comments on the state of the economy, Powell is anticipated to have similar views with his predecessor Janet Yellen, signaling that further monetary tightening is on the way this year, but any rate hikes would come on a gradual pace. Besides, on Friday the Fed's Washington-based Board of Governors stated in its semiannual report to Congress on monetary policy that despite the recent stock sell-off and the subdued inflationary pressures, it sees “steady growth continuing and no serious risks on the horizon that might pause its planned pace of rate rises”. Note that Fed policymakers project three rate rises this year. Powell will also testify in front of the Senate committee on Thursday.

Meanwhile, the Bank of Japan's Governor, Haruhiko Kuroda, speaking in Parliament on Monday, dismissed any plans to review monetary policy amid elusive inflationary pressures, saying that the central bank will maintain its current ultra-easy monetary policy as “Japan's economy is no longer in a state that can be described as deflation”.

In other news, the Bank of England's Deputy Governor, David Ramsden, argued that interest rates might have to rise faster than previously thought if wage growth rises sooner this year according to the Sunday Times newspaper. This comes in contrast to his stance in November, when he held a dovish stance, opposing the BOE's decision to raise rates for the first time in a decade.

Day Ahead: Numerous speeches could dominate attention in absence of data

Monday's calendar is a light one, with the focus possibly remaining in several speeches during the day, while the US dollar started the week with steep losses. Investors are waiting the New Fed chair Jerome Powell's testimony that will take place tomorrow.

In other data releases, in the UK, gross mortgage approvals will be available at 0930 GMT. Analysts anticipate the figure to stand at 37.2K in January compared to 36.1K in the preceding month. Also, later in the day, January's new home sales will be released out of the US.

At 1000 GMT the ECB Executive Board member Benoit Coeure will deliver a welcome address at the first meeting of the Working Group on Euro Risk-Free Rates. Later, at 1300 GMT St. Louis Fed President James Bullard will give a presentation on the US economy and monetary policy before the National Association for Business Economics conference titled “Promoting Sustained Growth: Policy Tensions and Risks”. At the same event, Fed Vice Chair for Supervision Randal Quarles will give a speech on “A View From the Federal Reserve Board”. ECB President Mario Draghi is scheduled to give a speech to the European Parliament's ECON committee at 1400 GMT. In the afternoon, at 1800 GMT BOE Deputy Governor Jon Cunliffe is expected to speak at Warwick University.

In politics, the leader of Britain's opposition Labour Party, Jeremy Corbyn, will clarify the party's position on Brexit today, in a move that could lead to a major parliamentary defeat for Prime Minister Theresa May.

One of the major events this week is the Fed Chair Jerome Powell's speech in his first outing to testify on the economic outlook before the House Financial Services Committee in Washington. The market is not expecting to say anything new, with inflation forecasted to hold around 2% for the rest of the year, although several rate hikes are on the agenda.

Technical Analysis: USDJPY remains under pressure; maintains bearish short-term bias

USDJPY retreated during today's European session, holding below the 23.6% Fibonacci retracement level of 107.45 of the downleg from 113.70 to 105.50.

From the technical point of view, in the daily chart, the stochastic oscillator seems to have halted its advance as well, lending support to a mostly bearish short-term picture. Also, the MACD oscillator is moving slightly lower in the negative territory after it posted a bearish crossover with its trigger line in the previous sessions, suggesting a downside tendency in the near-term.

In the absence of economic data, the pair is expected to remain negative and continues its previous tendency. The next level to have in mind is the 105.50 support barrier, taken from the inside swing high on October 2016.

On the flip side, in case of an upside retracement, the price could hit the 23.6% Fibonacci mark at 107.45. A jump above the aforementioned obstacle could open the door for the 107.90 – 108.00 resistance area.

EURUSD has been trading sideways over the last three days within the 20 and 40 simple moving averages in the daily timeframe. The price lost its strong momentum for a bearish correction below a 5-month high of 1.2554 reached last week. However, the short-term technical indicators seem to be in confusion.

From the technical point of view, the MACD oscillator is moving lower in the positive territory below its trigger line, signaling further downside potential moves. Also, the Relative Strength Index (RSI) is lacking positive momentum, remaining flat near the 50 level.

Should prices reverse lower and drop below the 40-day SMA immediate support could come at 1.2200 strong psychological level. Below that, the 1.2160 barrier is another major support. A penetration of the latter level could take the world’s most traded currency pair towards its ascending trend line, which overlaps with the 1.2080 level and the 23.6% Fibonacci retracement level of the up-leg from 1.0560 to 1.2540.

To the upside, the pair could meet the 20-day SMA before it reaches a significant resistance area within 1.2540 and 1.2570 obstacles, taken from the high in December 2014. A rally above those levels could drive the price further up, challenging the 1.2880 resistance level in the medium-term.

Daily Pivots: (S1) 130.93; (P) 131.38; (R1) 131.84; More....

Intraday bias in EUR/JPY remains on the downside. Current development indicate medium term topping at 137.49, on bearish divergence condition in daily MACD. Deeper fall should be seen to 126.61 medium term fibonacci level next. On the upside, break of 133.05 resistance is needed to confirm short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, current development argues that rise from 109.03 has completed at 137.49, on bearish divergence condition in weekly MACD. Deeper fall should be seen to 38.2% retracement of 109.03 to 137.49 at 126.61 first. On the upside, break of 137.49 is needed to confirm medium term rise resumption. Otherwise, risk will now stay on the downside even in case of strong rebound.

Daily Pivots: (S1) 148.75; (P) 149.13; (R1) 149.63; More...

In the bigger picture, the case for medium term reversal continues to build up on loss of medium term momentum as seen in weekly MACD. Also, firm break of 146.96 will indicate rejection by 55 month EMA (now at 154.60) and add to that case of reversal. In that case, deeper fall would be seen to 38.2% retracement of 122.36 to 156.59 at 143.51 and then 61.8% retracement at 135.43. Meanwhile, break of 156.59 will extend the rise from 122.36 to 61.8% retracement of 195.86 to 122.36 at 167.78.

USD index as we know is negatively correlated to the EURUSD, so as we think that price may unfold a flat pattern on EURUSD, then we also have to be prepared for a possible flat on the USD Index. Here we see a completed wave 3 at the 88.45 level, from where a three-wave rally unfolded as blue wave a. Afterwards, a drop followed, labelled as blue wave b and now a new bounce can be underway as wave c of 4. If price trades as expected, then we will see a retest of the 90.70 level, before final wave 5 of 5) takes over.

USD Index, 4H

Daily Pivots: (S1) 0.8778; (P) 0.8807; (R1) 0.8829; More...

EUR/GBP weakens today but after all it's still bounded in range of 0.8686/8928. Intraday bias remains neutral. Also, outlook stays mildly bearish with 0.8928 resistance intact. On the downside, firm break of 0.8686 will resume whole decline from 0.9305. As 61.8% retracement of 0.8312 to 0.9305 should then be taken out too, deeper decline would be seen to retest 0.8303/8312 support zone. Nonetheless, on the upside, break of 0.8928 will indicate near term reversal and turn outlook bullish for 0.9304 resistance.

In the bigger picture, there are various ways to interpret price actions from 0.9304 high. But after all, firm break of 0.9304/5 is needed to confirm up trend resumption. Otherwise, range trading will continue with risk of deeper fall. And in that case, EUR/GBP could have a retest on 0.8303. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside.