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The U.S. dollar was seen trading rather flat on Monday. Lack of economic data and a modest recovery in the equity markets saw most of the currencies trading in a range. Earlier today, BJ Governor Kuroda said that the central bank must maintain its QE program as it takes time for inflation to reach the BoJ's 2% inflation target rate. Kuroda was addressing the Lower House Budget Committee.

Looking ahead, the economic data today will focus on the annual CPI data from the UK and will cover the period of January. Economists forecast that headline CPI in the UK rose 2.9% on the year. This marks a slower pace of increase in inflation for the second month. Core CPI is however expected to rise 2.6% on the year.

In the U.S. trading session, FOMC member Loretta Mester will be speaking while later in the evening, Japan will be releasing its preliminary GDP data. Economists forecast that GDP advanced 0.2% on the quarter, down from 0.6% previously.

We can see silver turning up, out of a downward channel, which can be the first sign of a temporary trend reversal. This reversal should be structured by minimum three waves to the upside. All said, the Relative strength index also shows divergence and indicates a three-wave rally.

Silver, 1h

10 year US notes made a sharp and strong reversal recently, which we labelled as corrective wave 4, that found resistance at 122'20 level and reversed lower. The current drop can now be part of sub-wave 5 of III.

10 Year US notes, 4H

Cable remains positive in early Tuesday's trading and pressures Monday's high at 1.3875, but recovery attempts from Friday's low at 1.3764 so far did not show stronger gains and remain capped by broken ascending 30SMA (currently at 1.3873).

Lack of clearer direction signals comes from mixed daily indicators as slow stochastic is emerging from oversold zone and pointing higher, while 14-d momentum continues to trend lower, deeply in negative territory.

Traders are cautious ahead of today's key event for sterling, release of UK CPI data. Inflation is forecasted at 2.9% in January vs 3.0% in Dec and under six-year high at 3.1%, posted in Nov.

Stronger than expected release would inflate pound as strong inflation would support hawks advocating scenario for rate hike in May.

Disappointing numbers, on the other side, would increase pressure and risk extension of pullback from 1.4344 peak.

Bulls need break above 30SMA (1.3873) and daily Kijun-sen (1.3901) to generate fresh bullish signal for extension towards psychological 1.4000 barrier (20SMA) and 1.4020 (daily Tenkan-sen).

Res: 1.3873, 1.3901, 1.3960, 1.4000
Sup: 1.6832, 1.3796, 1.3764, 1.3700

The Euro remains constructive on Tuesday and cracked pivotal barrier at 1.2326 (Fibo 38.2% of 1.2522/1.2205 bear-leg), signaling stronger upside after completion of Doji reversal pattern on daily chart.

Recovery needs to break above converged 20/10SMA’s at 1.2335/49 for fresh bullish signal and extension towards next pivots at 1.2363 (daily Tenkan-sen) and 1.2400 (Fibo 61.8% of 1.2522/1.2205 pullback.

North-heading daily RSI and slow stochastic are supportive, however, bearish momentum is building and requires caution.

Rising 30SMA continues to underpin (currently at 1.2247) and only break here would weaken near-term structure.

Res: 1.2349, 1.2363, 1.2400, 1.2447
Sup: 1.2284, 1.2247, 1.2205, 1.2161

The euro has moved sharply higher against the U.S dollar, with price-action moving well above the key 1.2290 resistance area in early Tuesday trading. The EURUSD pair now trades around the 1.2320 region, with broad-based weakness in the U.S dollar index underpinning intraday strength in the single currency. With a lack of Eurozone macroeconomic data, traders will look to the 1.2332 level as the next upside barrier for the euro, and the key 89.00 handle on the U.S dollar index.

The EURUSD pair remains intraday bullish whilst trading above the 1.2290 level, further upside towards 1.2332 and 1.2364 now appears likely.

Should EURUSD price-action slip back below the 1.2290 level, we may see a downside correction back towards the 1.2255 and 1.2205 support levels.

The USDJPY pair has moved back towards the price-lows of 2018, following U.S dollar index weakness, with the greenback dropping back below the 89.00 support level. The USDJPY pair currently trades around the 108.20 level after earlier breaking under the key 108.45 support level. Sellers are now looking to the 108.00 level as the next major technical region, with downside pressures likely to remain on the pair whilst the U.S dollar index trades well below the 89.00 technical level.

The USDJPY pair remains intraday bearish while price-action trades below the 108.29 level, further downside towards 108.00 and 107.84 levels may occur.

Should the USDJPY pair start to trade above the 108.29 level for an extended period, we may see a upside correction back towards the 108.45 and 108.98 levels.

Yesterday, Ripple rose to a two-week high after the company announced a new partnership with UAE Exchange, a company that provides remittance services. It is a major company present in more than 21 countries, providing its service to more than 21 million people.

According to a statement, the company will use Ripple’s Ripplenet product to process cross-border transaction with the aim of reducing friction and costs.

This is a major deal for Ripple, which has in the past announced partnerships with other remittance companies like Western Union, MoneyGram, MercuryFX, and IDT Corporation.

After the announcement, the price of ripple rose to a high of $1.0507, which is its two-week high. The price is however significantly lower from Ripple’s all-time price of $3.299.

Ripple’s rise was not in isolation. It happened at a day when the prices of other cryptocurrencies were moving up.

As shown below, the pair is trading slightly lower than the 50 and 14-day SMA, with its RSI at 39.8. There are two potential scenarios. In the first, the price could correct slightly as traders move to lock in profits. This would see the pair drop to the $0.9178. Alternatively, traders can ride the momentum which would see the pair move higher.

Investors can expect a steady pick-up in economic data on Tuesday following a slow start to the week, with reports on UK inflation set to dominate the headlines.

Action Begins at 07:45 GMT with France's quarterly nonfarm payrolls report. The data are expected to show a 0.2% increase in nonfarm jobs in October-December, following a 0.3% increase the previous quarter.

Switzerland will release headline producer inflation figures at 08:15 GMT. The producer price index (PPI) for January is forecast to climb 0.3% month-on-month, which translates into an annualized rate of 0.9%.

The UK Office for National Statistics will release a deluge of inflation data at 09:30 GMT, including the retail price index, producer price index and consumer price index. Consumer inflation in the UK is forecast to fall 0.6% in January, following a 0.4% increase the month before. In annualized terms, CPI is forecast to dip to 2.9% from 3%.

Core inflation, which strips away volatile goods such as food and energy, is projected to rise 2.6% year-over-year, up from 2.5%.

The Bank of England (BOE) risked over-inflated the economy when it decided to slash interest rates in the wake of the June 2016 Brexit vote. Central bankers voted to raise interest rates in November for the first time in more than a decade.

Shifting gears to North America, the National Federation of Independent Business (NFIB) will release its monthly US business optimism index at 11:00 GMT. The monthly report is not considered a major mover of financial markets but is used to gauge short-term trends in the active small business sector.

The American Petroleum Institute (API) will release its weekly crude inventory report at 21:30 GMT, which is a precursor to the official data provided by the US Energy Information Administration (EIA) the following morning.

In terms of monetary policy, Federal Open Market Committee (FOMC) member Loretta Mester will deliver a speech at 13:00 GMT.

EUR/USD

Europe's common currency bounced back on Monday, as the dollar drifted lower against a basket of world currencies. The EUR/USD briefly traded above 1.2300 but was last seen trading at 1.2286. The pair remains rangebound, with the 1.2200 handle providing the bottom.

GBP/USD

Pound sterling was confined to a narrow range on Monday, as investors turned their attention to UK inflation data. Cable was last seen trading at 1.3837, with the bulls eyeing a re-test of the psychological 1.4000 level.

US OIL

Crude prices are fresh off their worst week in two years, as prices crashed more than 10% in the wake of fresh inventory data and signs of surging US shale output. Markets flatlined at the start of the week but have since rallied amid renewed dollar weakness. US oil prices were last seen trading around $59.68 a barrel for a gain of 0.7%

Here are the latest developments in global markets:

FOREX: The dollar index traded nearly 0.4% lower on Tuesday, as concerns over rising US deficits and the nation's long-term debt sustainability continued to pressure the world's reserve currency.

STOCKS: US stock indices advanced yesterday, recovering some of their recent losses. The Dow Jones led the pack, climbing 1.7%. The Nasdaq Composite rose by 1.6%, while the S&P 500 finished 1.4% higher. Despite the two consecutive days of recovery, markets still appear to be on shaky ground, as futures tracking the Dow, S&P, and Nasdaq 100 are all in the red, suggesting that these indices could open lower today. Investors will probably keep their eyes locked on the US inflation data that are due on Wedensday, as they could go a long way in determining whether the recent turmoil will intensify or subside. In Japan, the Nikkei 225 and the Topix closed lower by 0.65% and 0.9% respectively, possibly weighed on by the latest gains in the yen, as a stronger currency curbs the profits of Japanese exporting firms. In Hong Kong, the Hang Seng advanced by 1.5%, though in Europe, futures tracking the Euro STOXX 50 are in negative territory.

COMMODITIES: Oil prices gained somewhat, with WTI and Brent crude both being up 0.6% today, possibly supported by the recovery in risk sentiment and energy stocks. Despite this modest recovery though, the precious liquid has tumbled notably in recent days, weighed on by signs that US production is rising rapidly. In this respect, the IEA monthly oil report that is due out today will be closely watched. Any potential upward revisions in the US production forecasts could amplify the recent over-supply concerns and thereby, keep oil prices under pressure. In precious metals, dollar-denominated gold was nearly 0.4% higher, potentially boosted by the broader flight to safe assets as well as the tumble in the greenback.

Major movers: Trump proposes higher deficits; yen gains amid flight to safety

The Japanese yen surged during the early European morning Tuesday, with dollar/yen and euro/yen falling by 0.8% and 0.6% respectively, with no clear fundamental catalyst behind the move. A possible explanation is that investors are moving into safe haven assets like the yen, given that the stock market turbulence does not appear to be over yet. This view is amplified by the fact that other safe haven assets, such as the swiss franc and gold, are higher today as well. It is important to note that the aforementioned safe havens did not react much to the equity turbulence in recent days, perhaps because investors viewed the selloff as a “healthy” correction in overvalued stocks. However, the longer the uncertainty and the volatility last, the more likely it becomes that investors will seek the safety of these assets.

Yesterday, the US administration unveiled its budget proposal for the fiscal year 2019. This budget seeks to increase spending on infrastructure and the military, while it would cut the funding of popular health care programs like Medicare. Overall, the proposal would widen the federal budget deficit even further, making the long-term debt trajectory of the US economy even more unsustainable. It should be noted though, that this is simply an initial proposal that lays the foundation for a budget discussion between the White House and Congress, and thus is highly unlikely to pass Congress in its current form. Still, it shows that the already-large US budget deficit could widen further, a factor that is likely to keep bond investors on edge and the yields on US Treasuries elevated.

Elsewhere, Reserve Bank of Australia Assistant Governor Luci Ellis said overnight that policymakers are a little more confident that wages and inflation will eventually pick up some speed. However, she also noted that the up-to-now weak income growth is very risky given the high debt levels of Australian households. Nonetheless, the aussie reacted little to her comments.

Day ahead: All eyes on UK inflation

UK data and specifically inflation figures for the month of January are dominating attention in Tuesday's economic calendar. Those are due at 0930 GMT and undoubtedly have the capacity to lead to positioning on sterling, by among others shifting market expectations as regards the timing at which the Bank of England will deliver additional interest rate increases.

On a monthly basis, headline CPI is projected to contract by 0.6% – with the fall being attributed to seasonal factors – and on a yearly basis to expand by 2.9%, continuing to ease after hitting a near six-year high of 3.1% in November and lending support to those saying that it will start to gradually slow, moving towards the BoE's target for annual inflation of 2%; though it might be early to conclusively state that a gradual slowdown is taking place. Core inflation, which excludes prices of energy, food, alcohol and tobacco, will also be attracting interest. Annually, it is expected to grow by 2.6% versus 2.5% in December.

Data on January's producer prices and retail price inflation – a measure used to calculate payments on instruments such as index-linked government bonds and other contracts such as indexed-pensions – will also be released alongside CPI figures; another important release out of the UK later in the week (Friday) are retail sales for the month of January.

Cleveland Fed President Loretta Mester will be speaking on the US economic outlook at 1300 GMT. She holds voting rights within the FOMC in 2018.

In oil markets, the API report including information on crude oil stocks is due at 2135 GMT, while the IEA monthly report that cover issues affecting the world oil market is scheduled for release at 0900 GMT.

In equities, the earnings season continues to gather attention, having the potential to affect market sentiment.

Technical Analysis: GBPUSD further distances itself from 1½-year high; bullish signal by stochastics in very short-term

GBPUSD has lost ground after hitting a more than one-and-a-half-year high of 1.4344 on January 25, eventually recording a one-month low of 1.3764 last week.

The Tenkan- and Kijun-sen lines are negatively aligned on the four-hour chart, projecting a negative picture in the short-term. However, the Tenkan-sen has started heading higher and the Kijun-sen has flatlined. These could be early signs of a change in momentum. Moreover, the stochastics are giving a bullish signal in the very short-term, as the %K line has moved above the slow %D one, and both are advancing higher.

Should UK data on inflation support the case for a rate hike by the BoE sooner rather than later, then the pair is anticipated to post gains. The area around the Kijun-sen at 1.3915 could act as a barrier to the upside in this case, with stronger bullish movement shifting the focus to 50-period moving average at 1.3983 – the range around this point also encapsulates the lower Ichimoku cloud (1.3997) and the 1.40 handle, a potential psychological level.

If, on the other hand, the figures push expectations for additional BoE tightening back in time, then GBPUSD is likely to decline. In this scenario, immediate support might come around the Tenkan-sen at 1.3835 – price action is currently taking place not far above this level – while further below the attention would fall on last week's one-month low of 1.3764.

The pair accelerated lower in late Asian/early European trading and eventually broke below strong 108.28/00 support zone. Fresh weakness of the dollar comes on signs of stabilization in global equity market which prompted investors into riskier assets. Broader bears resume after being interrupted by 108.28/110.48 correction and pressuring key m/t support at 107.31 (08 Sep low/bull-trendline drawn off Sep 2012 low at 77.12. Break and close below 107.31 will be strong bearish signal for extension of larger downtrend from 118.66 (15 Dec 2016 peak) towards next significant point at 106.51 (Fibo 61.8% of 98.99/118.66, June/Dec 2016 rally). Overall structure is bearish and favors further weakness, however, bears may show stronger signs of hesitation at 107.31 support as daily RSI and slow stochastic are about to enter oversold territory while 14-d momentum is moving sideways in deep negative zone. Former pivotal supports now act as initial barriers at 108.00/28, followed by session high at 108.77 and falling 10SMA (109.05) which is expected to keep the upside protected.

Res: 108.00, 108.28, 108.77, 109.05
Sup: 107.31, 107.00, 106.51, 106.00