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Daily Pivots: (S1) 1.3814; (P) 1.3940; (R1) 1.4035; More.....

At this point, intraday bias remains on the downside. The decline from 1.4345 is still in progress for 1.3651 resistance turned support. It's still unsure whether decline from 1.4345 is correcting rise from 1.3038, or that from 1.1946, or it's reversing the trend. Break of 1.3651 will turn focus to key fibonacci level at 1.3429. For the moment, further decline will remain expected as long as 1.4066 minor resistance holds.

In the bigger picture, as long as 1.3038 support holds, medium term outlook in GBP/USD will remains bullish. Rise from 1.1946 is at least correcting the long term down from 2007 high at 2.1161. Further rally would be seen back to 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466. However, GBP/USD fails to sustain above 55 month EMA (now at 1.4279 so far. Break of 1.3038 support, will suggests that rise from 1.1946 has completed and will turn outlook bearish for retesting this low.

Global markets are generally in recovery mode today. European indices are all in black at the time of writing. US futures also point to higher open as markets await Trump's infrastructure plan. Major forex pairs and crosses are staying gin Friday's range, except AUD/NZD. But it should be noted that the retreats in Dollar and Yen are shallow and weak so far. There could be renew interests in these two currencies if risk sentiments turn sour again later in US session.

Trump to unveil USD 1.5T infrastructure plan

In the US, President Donald Trump is set to unveil an infrastructure plan today. Under the proposal, the government will spend USD 200b over 10 years, inform of grants to encourage states and cities to start their projects on infrastructure, including rebuild of highways, bridges, railroads, airports etc. . And, the White House estimated that would eventually results in USD 1.5T in new investments. However, it's believed that the plan itself will start facing big hurdles. Thee two main problems are firstly, it's not as much as the Democrats want, and secondly, there is not clear information on how to pay for the funding.

BoE Haldane in no rush to hike

Over the weekend, BoE chief economist Andy Haldane said that the central bank is in no rush to rate hikes. Haldane did acknowledge that inflation developments are "currently ahead of our target" and "on the balance of probabilities, it seems likely that some further tightening of policy might be needed over the period ahead." Nonetheless, he added that "we're in no rush, rates won't remotely go back to levels we've seen in the past, but nonetheless keeping the cost of living under control is, we think, the single best and most important thing we can do to help the economy."

BoE MPC member Gertjan Vlieghe sounded upbeat today and said there was "increased evidence that tight labour markets are finally starting to have some upward effect on wages". Also, "if there is less credit headwind to UK economy, then maybe ready for higher rates.,"

ECB concerned with US political influence on exchange rate

ECB Governing Council member Ewald Nowotny said the central bank is "certainly concerned about attempts by the United States to politically influence the exchange rate." And he added "that was a theme of economic discussions in Davos, where the ECB addressed this, and it will certainly be a theme at the upcoming G20 summit." Regarding the US economy, Nowotny said that President Donald Trump "started with a good inheritance" from the pervious government. And the current low unemployment, robust growth and tame inflation stem from Trump's predecessor, not his own policies.

BoJ Kuroda will get a second term

In Japan, it's reported that Prime Minister Shinzo Abe has finally made up his mind to give BoJ Governor Haruhiko Kuroda a second five-year term. And if that happens, Kuroda will be the first BoJ Governor to server two consecutive terms since Masamichi Yamagiwa, back in 1956 to 1964. Recent global stock market crash could be the trigger for Abe as stability is all that important for him to continue with his Abenomics. And this would be a strong message that BoJ will continue with it's massive stimulus, and more importantly, in a cautious way. Barring another disastrous day from US, Tokyo will likely open with a positive note in the upcoming Asian session, back from holiday.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3814; (P) 1.3940; (R1) 1.4035; More.....

At this point, intraday bias remains on the downside. The decline from 1.4345 is still in progress for 1.3651 resistance turned support. It's still unsure whether decline from 1.4345 is correcting rise from 1.3038, or that from 1.1946, or it's reversing the trend. Break of 1.3651 will turn focus to key fibonacci level at 1.3429. For the moment, further decline will remain expected as long as 1.4066 minor resistance holds.

In the bigger picture, as long as 1.3038 support holds, medium term outlook in GBP/USD will remains bullish. Rise from 1.1946 is at least correcting the long term down from 2007 high at 2.1161. Further rally would be seen back to 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466. However, GBP/USD fails to sustain above 55 month EMA (now at 1.4279 so far. Break of 1.3038 support, will suggests that rise from 1.1946 has completed and will turn outlook bearish for retesting this low.

Economic Indicators Update

Here are the latest developments in global markets:

FOREX: The US currency remained lower on the day, with its broader gauge, the dollar index, being down by 0.3% around midday. The euro and sterling were advancing versus the greenback, after declining notably in the preceding week and recording multi-week lows. Specifically, euro/dollar shed 1.6% during the week ending February 9, experiencing its worst weekly performance since November 2016. Euro/dollar and pound/dollar were up by 0.3% and 0.2% at 1.2269 and 1.3869 respectively. Dollar/yen was 0.15% down at 108.62. This compares to Friday's five-month low of 108.03.

STOCKS: European equities were in the green, with every single major blue-chip index being comfortably in positive territory. The UK's FTSE 100, German DAX and French CAC 40 were up by 1.2%, 1.8% and 1.45% respectively after last week's sell-off that saw them post multi-month lows. Even the Italian FTSE MIB, which underperformed, was up by a hefty 0.8%. The pan-European Stoxx 600 was up by 1.5% at 374.04 and at a relative distance to Friday's five-month low of 367.50, with all sectors comprising the index being in the green. Meanwhile, the blue-chip Euro Stoxx 50 traded higher by 1.5% as well. Also, the eurozone volatility index declined from the peaks hit last week. Futures on the Dow, S&P 500 and Nasdaq 100 traded higher by 1.1%, 1.1% and 1.0% respectively, pointing to a higher open on Wall Street. It remains to be seen whether positive momentum will be maintained or whether this is a knee-jerk "buy the dip" reaction, with more weakness following in the days to come.

COMMODITIES: WTI and Brent crude were up by 1.75% and 1.3% respectively. The notable gains for the two benchmarks come after considerable declines in previous days that saw them touch a one-and-a-half-month and a two-month low of $58.07 and $61.77 per barrel respectively on Friday. The fall in preceding days came on the back of increasing expectations of US production strongly reentering the market, curbing efforts by OPEC as well as some non-OPEC members to tackle oversupply issues that acted as a drag on prices in the past. Monday's rise saw WTI recapture the $60/barrel level. Gold traded higher by 0.3%, at $1,320.76 an ounce. Last week, the precious metal touched a one-month low of $1,306.81.

Day ahead: Stocks remain in focus; US Federal Budget balance and OPEC monthly report due

Equities are gathering the lion's share of attention during Monday's trading, following last week's unrest that saw US stocks recording their worst weekly performance in around two years. The absence of significant releases out of major economies as well as the earnings season which remains underway, are additional factors keeping investor focus in stock markets.

The US's Federal Budget balance for the month of January is due at 1900 GMT. A budget surplus of $51 billion is anticipated during the month after a $23bn deficit in December. Discussions on the budget balance and debt sustainability are receiving renewed interest in the world's largest economy, especially after the Trump administration ratified a package of tax cuts that will add $1.4 trillion over 10 years to the national debt which currently stands around $20tr. According to some forecasters, general gross government debt to GDP is estimated to stand around 120% in 2018.

Policymakers' appearances as the day unfolds include Bank of England Monetary Policy Committee (MPC) member Ian McCafferty, who is scheduled to speak at 1630 GMT, and Reserve Bank of Australia Assistant Governor Luci Ellis who will be giving a speech at a forecasting conference at 2150 GMT.

In energy markets, OPEC's monthly report due later on Monday could attract some interest. The release covers major issues affecting international oil markets, looking at key developments as well as supply and demand considerations, and providing an outlook for the coming year. The report lacks a fixed time of release.

The British pound is struggling to find upside traction against the greenback, after being swiftly rejected from the 1.3870 region during the European trading session. The GBPUSD pair has broadened its daily trading range, with price-action now moving between the 1.3830 to 1.3870 technical regions. Financial markets are increasingly looking towards ongoing Brexit negotiations on Monday, with downside pressures prevailing while the pair trades clearly below the 1.3892 resistance level.

The GBPUSD pair remains bearish while trading below the 1.3892 level, further losses towards 1.3830 and 1.3775 seem possible.

Should the GBPUSD pair move above the key 1.3892 level, buyers may push price-action back towards the 1.3938 and 1.4000 levels.

The U.S dollar remains on the back foot against the Japanese yen in early week trading, despite a return to risk-on trading sentiment in the broader market. The USDJPY pair is currently range-bound between the 108.50-70 region, as traders remain cautious ahead of the release of preliminary fourth quarter GDP numbers from the Japanese economy. Heading into today’s U.S trading session, downside pressures are likely to prevail whilst the pair trades below the key 108.98 level.

The USDJPY pair remains intraday bearish while trading below the 108.98 level, key downside support is located at the 108.28 and 107.80 levels.

Should the USDJPY pair start to trade above the 108.98 level for an extended period, we may see a correction back towards the 109.30 and 109.78 resistance areas.

Monday February 12: Five things the markets are talking about

Investors are bracing for another bumpy ride this week after market volatility has returned with a vengeance, delivering the biggest rout in global stocks in a number of years.

Despite stocks getting a reprieve overnight, investor fears of interest rate hikes that started the market correction continues to persist.

Last week, the CBOE volatility index ended almost three times higher than its Jan. 26 level. The ten-year Treasury yield finished last week atop of where they started at +2.85%.

Stateside, this week's inflation report – U.S consumer-price data on Wednesday – could be the catalyst for a major struggle between equities and bonds that triggered the initial market turbulence.

Elsewhere, while the coming week is absent of G10 central bank meetings, there are a number of important economic indicators to be released. In the U.K, consumer and producer price indexes and retail sales for last month should be a challenge for the pound (£1.3560). While in Japan, its first estimate of Q4 growth along with last month's producer price index and December's machinery orders (a proxy for capital spending) should be capable of moving the yen (¥108.70).

Later today, President Trump will deliver his 2019 budget blueprint.

1. Stocks breath a 'sigh of relief'

Global equities overnight have found some temporary support while volatility remains elevated.

Note: In Japan, equity markets were closed due to a bank holiday Feb. 12, while Chinese New-Year celebrations for the 'Year of the Dog' begin (Feb 15-21) and follow across much of Asia, including Hong Kong, Taiwan, Singapore, Malaysia and Indonesia.

Down-under, the Aussie S&P/ASX 200 was down -0.6%, weighed down by a fresh -1.6% drop in the energy sector, while in S. Korea, the Kospi rallied +0.4%.

China and Hong Kong stocks rebounded after last week's aggressive sell-off. In China, the Shanghai Composite index was up +0.8%, while China's blue-chip CSI300 index was up +1.3%. In Hong Kong, the Hang Seng Index was up +0.71%.

In Europe, regional indices are trading sharply higher across the board following on from a sharp rebound on Wall Street Friday and positive Asian markets.

U.S stocks are set to open deep in the 'black (+1.2%).

Indices: Stoxx600 +1.5% at 374.1, FTSE +1.2% at 7181, DAX +1.9% at 12336, CAC-40 +1.5% at 5153, IBEX-35 +1.5% at 9785, FTSE MIB +1.1% at 22404, SMI +1.8% at 8831, S&P 500 Futures +1.2%

2. Oil prices rally +1%, gold higher

Oil prices start the week better bid, recovering some of this month's steep losses as global equities find some firm footing after last week sea of red.

Brent crude futures are at +$63.54 per barrel, up +75c, or +1.2% from Friday's close. U.S West Texas Intermediate (WTI) crude futures are at +$60.04 a barrel – that's up +84c, or +1.4% from the close.

The stronger prices came after crude registered its biggest loss in two years last week as global stock markets slumped.

Nonetheless, rising U.S production continues to undermine the efforts led by the OPEC and Russia to tighten markets and prop up prices.

Note: U.S oil production has rallied above +10m bpd, overtaking top exporter Saudi Arabia and coming within reach of top producer Russia.

There are also strong signals the output will rally further. Data on Friday showed that U.S energy companies added 26 oilrigs looking for new production, boosting the count to +791, the highest since April 2015.

Ahead of the U.S open, gold prices have edged a tad higher as the dollar eased against G7 currency pairs after last week's rally. Expect investors to take their cues from this weeks U.S inflation data. Spot gold is up +0.3% percent at +$1,320.19 an ounce.

Note: Prices touched their lowest since Jan. 4 at +$1,306.81 last week.

3. Sovereign yields creep higher

U.S and eurozone government bond yields have edged higher overnight, heading back towards multi-year highs on unease that a pick up in inflationary pressures globally and a strong domestic economy will encourage the ECB and the Fed to signal to be more aggressive than originally priced in at the beginning of the year.

In Europe, bond yields across the bloc were +1-2 bps higher in early trade, while in the U.S the 10-year note trades atop of its four-year highs.

In Germany, the 10-year Bund yield is up almost +2 bps at +0.77% and within sight of its nearly three-year high hit last week at around +0.81%. The yield on the U.S 10-year note has rallied +4 bps to +2.90%, the highest in more than four years, while in the U.K, the 10-year Gilt yield has gained +4 bps to +1.605%.

4. The U.S dollar's quiet trading session

A broad-based flight to safe haven, such as U.S treasuries or the Japanese yen (¥108.70), has not happened to date despite the recent turmoil on equity markets.

The dollar 'bulls' are looking for the USD to rally this week, despite financial market volatility to remain high near-term as looser U.S fiscal policy and upside risk to U.S. inflation raises concerns.

Overnight, FX saw a quiet session ahead of some key inflation data this week (U.K Jan CPI Feb 13 and U.S Jan CPI on Feb 14).

Note: The recent pick up in global bond yields has been led stateside, while capital market wait for more details from President Trump's budget and his infrastructure plan.

EUR/USD (€1.2272) is little changed, but holding below the psychological €1.23 handle. On the weekend, ECB's Nowotny (Austria) reiterated the concerns about attempts by the U.S to politically influence the exchange rate.

GBP/USD (£1.3860) trades atop of Friday's close despite the BoE having turned more rates 'bullish' last week. Dealers are now putting more weight on Brexit concerns as the U.K previously admitted that the growth potential of the economy had declined.

USD/JPY (¥108.70) is steady as Japanese markets were closed for a bank holiday.

5. Swiss inflation still super low

Data this morning showed that Swiss consumer prices slid -0.1% in January from December leaving the annual inflation rate at +0.7% and slightly below expectations.

Digging deeper, the decrease compared with the previous month is due in particular to the decrease in prices for outpatient hospital medical services. Prices for air transport also declined, along with prices for clothing and footwear, in particular because of sales. In contrast, prices for overnight stays in hotels, heating oil and electricity increased.

Inflation is still low despite the Swiss National Bank's (SNB) efforts to raise it through negative interest rates and a willingness to intervene in currency markets.

The euro has posted small gains in the Monday session. Currently, the pair is trading at 1.2266, up 0.12% on the day. It’s a light economic calendar to start the week, with only one release on the schedule. The US federal budget is expected to rebound and show a large surplus of $50.2 billion. This would mark the first surplus since September. There are no major indicators until Wednesday, when Germany releases Preliminary GDP and Final CPI, and the eurozone releases Flash GDP.

A rebound in the global economy has been a boon for eurozone exports, and this has boosted the bloc’s manufacturing sector. This was underscored by strong manufacturing reports out of France and Italy in December, which were released on Friday. Industrial production in both countries improved compared to November, beating the estimates. The Italian reading of 1.6% marked the strongest gain since August 2016. We’ll get a look at Eurozone Industrial Production on Wednesday. The November reading surged to 1.0%, marking a 3-month high. However, the markets are expecting a small gain of 0.1% in December.

German President Angela Merkel has reached an agreement with the socialist SDP to form a new government, but the price was steep, as the SDP extracted major concessions from Merkel, notably control of the powerful finance ministry. This will likely mark a shift in Germany’s eurozone policy, which had been marked by a conservative stance under former finance minister Wolfgang Schaeuble. The weaker members of the eurozone, such as Greece, will likely find a more sympathetic ear for financial help from the SDP than they did from Schauble. Many conservatives fear that the Olaf Scholz, who is expected to become finance minster, will not be as fiscally responsible as Schaeuble. On the weekend Scholz said that Germany should not dictate economic policies to other eurozone members. The coalition agreement still requires the consent of a majority of the 464,000 members of the SDP, and if the deal is rejected, Germany will likely be headed to new elections.

Investors around the globe will closely monitor how the stock markets perform throughout trading today, following the rollercoaster ride that the financial markets experienced last week.

Although it would not be an understatement to suggest that volatility in global stock markets has reached intense levels, I don’t think there is a reason to be overly concerned by the recent market fluctuations. Similar levels of volatility were not seen in other asset classes such as the currency markets, suggesting that this is a stock market story and not a sign of concern over global economic health.

It has been warned for quite some time that stock market valuations were over-stretched, therefore the sell-off was quite likely just a market correction.

USD looking at risk to slipping lower

The Dollar is appearing at risk to withdrawing some of its gains over the past week, as investors eagerly await the upcoming inflation data release due from the United States on Wednesday.

Investors are already expecting a probable US interest rate increase from the Federal Reserve over the next couple of months, meaning that a positive inflation reading on Wednesday would likely provide investors with assurances that another increase in US interest rates is around the corner.

Whether more assurances that the Federal Reserve will resume its commitment towards higher US interest rates is enough to convince investors to re-purchase the Dollar at these lower levels remains to be seen, because I feel that investors will be paying more attention towards whether a possible rise in global inflation expectations accelerates the motives of other developed central banks to raise their own interest rates.

Increased US interest rates were priced into the Dollar a very long time ago, and I feel that investors are instead more enthusiastic about the prospect of higher interest rates from the Bank of England and European Central Bank.

Gold attempting to recover momentum

One of the main reasons why I am not concerned that the stock market sell-off from last week was a sign of mass panic from investors is because of the limited buying interest in Gold, in spite of the heightened stock market volatility. Gold usually benefits from an increase in interest as a safe haven instrument during uncertain times in the market, but the lack of interest in Gold over the past week has surprised a few in the market.

I personally think that the losses in Gold last week can be seen as a positive factor, because it provides more confidence to investors that the sell-off in the markets was a correction, and not a sign of panic over the global economy.

WTI Oil finding support at $60

With the global financial market headlines over the past week focusing on stock market volatility, it has slipped under the radar that increased volatility in Oil saw the commodity suffer its worst decline in two years. Rising concerns over an increase in US production and a recovering Dollar have weighed heavily on the price of Oil.

Anxiety that OPEC members might soon announce an intention to consider increasing production output following optimism that the market oversupply has rebalanced could now come under question, following the recent indications of increased production from the United States. This could leave to the price of Oil finding support somewhere around $60 for the time being.

Spot Gold is in recovery mode at the beginning of the week and attempting to break above two-day congestion on Thu/Fri which was shaped in double-Doji.

Weaker dollar on signs of stabilization in global stocks inflated the yellow metal, but recovery attempts were so far limited.

Mixed studies on daily chart show lack of clearer near-term direction signal, as slow stochastic reverses from oversold territory, generating bullish signal, while 10/55SMA is forming above and increasing pressure.

Gold will be looking for further signals which could be provided from a number of economic indicators from the US which will be released this week.

US inflation numbers are in focus (due on Wednesday), as it is expected to provide further clues about the pace of raising US interest rates this year.

Stronger than expected CPI numbers would be an additional support to the Fed to accelerate rate hikes in 2018 and would put the yellow metal’s price under fresh pressure, while gold price could rise if inflation remains low.

Res: 1326, 1330, 1334, 1337
Sup: 1316, 1314, 1311, 1307

Crude oil slowly continues its fall, heading below the 60 range. Hourly resistance at 64.77 (11/01/2017) is distanced while supports stand at 55.82 (07/12/2017 low) and 53.89 (01/11/2017). Strong support is located at 55.82 (06/12/2017 low). Expected to keep increasing as demand remains strong.

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.