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EUR/USD is trading sideways, heading toward resistance at 1.2356 (24/01/2018 high). Support is located at 1.2165 (17/01/2018 low). The technical structure suggests further sideways downside moves.

In the longer term, the momentum is turning largely positive. We favor a continued bullish bias. Key resistance is holding at 1.2886 (15/10/2014 high) while strong support lies at 1.1554 (08/11/2017 low).

WTI oil trades higher on Monday, bouncing above daily cloud which was penetrated on Friday, in extension of last week's steep fall. Oil price regained ground as global stocks showed signs of stabilizing, following last week's roller-coaster ride. Recovery was signaled by oversold daily studies after steep descend from $66.28 (02 Feb lower top) showed signs of fatigue and profit-taking boosted the price. However, growing pressure on crude price on rising US oil production which could further undermine efforts from main oil producers to tighten oil market by reducing global production, keeps the downside vulnerable. Return above ascending daily cloud which offers significant support (the cloud is spanned between $59.63 and $57.03) was so far limited by the base of thick hourly cloud and broken 55SMA ($60.82/91). Stronger bullish signal could be expected on firm break above 55SMA and $61.20 barrier (Fibo 38.2% of $66.28/$58.06 bear-leg) which would neutralize persisting bearish threats and signal stronger recovery. Conversely, failure to hold above psychological $60.00 level (also broken Fibo 61.8% of $55.81/$66.64 rally) would risk fresh weakness and renewed probes into daily cloud.

Res: 60.91, 61.20, 62.07, 62.35
Sup: 60.00, 59.51, 59.08, 58.37

Notes/Observations

Global equities find some interim support while volatility remains elevated

Inflation data key focus in week with UK CPI on Tuesday and US CPI on Wed

Asia:

Japan government said to consider promoting current BoJ Exec Dir Amamiya to the position of Deputy Gov (**Note: currently the Executive Director of the BoJ’s Monetary Affairs Dept)

On Feb 9th reports circulated that Japan govt was set to reappoint Kuroda as Gov of BOJ to a new 5-year term (as expected)

China PBoC: Skips Open Market Operation (OMO) for the 13th straight session

Europe:

ECB's Nowotny (Austria) reiterated concern about attempts by the US to politically influence the exchange rate as it was a theme addressed at Davos and to be discussed again at the upcoming G20 summit. There would be a need for the ECB to hike rates in the foreseeable future

ECB’s Visco (Italy): ECB to be patient in pursuit of its inflation target; it has been difficult to push up inflation expectations. FX volatility was a major risk to the inflation outlook

BoE Chief Economist Haldane reiterated BoE is in ‘no rush’ to raise interest rates

PM May will deliver a major speech within the next three weeks outlining the future relationship Britain wants to have with the EU

Fitch affirmed Germany sovereign rating at AAA; outlook stable

Fitch affirmed Finland sovereign rating at AA+; outlook stable

Fitch affirmed Czech Republic sovereign rating at A+; outlook positive

Canadian rating agency DBRS affirms Netherlands sovereign rating at AAA, stable trend

Americas:

White House Budget said to project return to 3% growth with low inflation and borrowing costs in 2018 with growth rising to 3.2% in 2019

OMB Head Mulvaney commented ahead of US budget release: Budget to seek $3.0T cut in deficit over 10 years. Sought $18B for 'border wall and $17B to deal with opioid epidemic.

New York Fed Nowcast: raised Q1 GDP from 3.2% to 3.3% with positive surprises from imports and exports data accounted for most of the increase.

Energy:

Weekly Baker Hughes US Rig Count: 975 v 946 w/w (+3.1%) (most rigs added in a week since Jan 2017)

Economic Data:

(DK) Denmark Jan CPI M/M: -0.3% v -0.1%e; Y/Y: 0.7% v 0.9%e

(DK) Denmark Jan CPI EU Harmonized M/M: -0.3% v -0.1%e; Y/Y: 0.6% v 0.9%e

(SE) Sweden Jan PES Unemployment Rate: 4.0% v 4.1% prior

(SE) Sweden Feb Housing Price Indicator: -7 v -13 prior

(CH) Swiss Jan CPI M/M: -0.1% v -0.2%e; Y/Y: 0.7% v 0.8%e

(CH) Swiss Jan CPI EU Harmonized M/M: -0.5% v +0.2% prior; Y/Y: 0.8% v 1.1% prior

(CN) China Jan Aggregate Financing (CNY): 3.060T v 3.150Te

(CN) China Jan New Yuan Loans (CNY): 2.900T v 2.050Te

(CN) China Jan M2 Money Supply YoY: 8.6% v 8.2%e; M1 Money Supply YoY: 15.0% v 13.5%e, M0 Money Supply YoY: -13.8% v +4.2%e

Fixed Income Issuance:

(IT) Italy Debt Agency (Tesoro) sold €6.5B vs. €6.5B indicated in 12-month Bills; Avg yield: -0.401% v -0.420% prior; Bid-to-cover: 1.49x v 1.41x prior

(NO) Norway sold NOK4.0B vs. NOK4.0B in 3-month bills; Avg Yield: 0.50% v 0.43% prior; Bid-to-cover: 2.02x v 2.43x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

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%]

Market Focal Points/Key Themes: European Indices trade sharply higher across the board following on from a sharp rebound on Wall Street Friday, positive Asian markets as well as higher US futures this morning. Corporate news was headlined by earnings from Heineken which trades lower after missing sales forecasts with other notable earners including Comet Group, Puma and Carl Zeiss. On the M&A front potential bid interest for TDC has pushed shares higher while Faroe Petroleum trades highers after selling an interest in Fenja Development. Looking ahead to the US morning notable earners include Loews Corp and First Data.

Movers

Consumer Discretionary [ Heineken [HEIA.NL] -3.3% (Earnings)]

Consumer Staples [Carl Zeiss Meditec [AFX.DE] -0.1% (Earnings), Sixt [SIX2.DE] +4.2% (Outlook), Ladbrokes Coral [LCL.UK] +1.1% (Trading update)]

Materials [ Acacia Mining [ACA.UK] -9.0% (Earnings)]

Healthcare [ SES [SESG.FR] -5.6% (CEO and CFO change), Comet Group [COTN.CH] +1.6% (Prelim results)]

Energy [Faroe Petroleum [FPM.UK] +6.8% (Sells 17.5% working interest in Fenja Dev)]

Financials [Icade [ICAD.FR] +1.9% (Earnings)]

Telecom [TDC [TDC.DK] +6% (Approached by potential bidder)]

Speakers

BOE’s Vlieghe (dove):Domestic economy ready for slightly higher interest rates (in-line with Feb MPC statement)

Currencies

A quiet FX session ahead of some key inflation data later in the week (UK Jan CPI on Tuesday and US Jan CPI data on Wed). The recent pick up in global bond yields has been led from the US side. Market also anticipating President Trump’s budget and details on his infrastructure plan. Dealers noted that the US fiscal deterioration comes at a time when the labor market was near full employment and signs of wage inflation were emerging

EUR/USD was higher by 0.3% in the session but holding below the 1.23 handle. ECB's Nowotny (Austria) reiterated the concern about attempts by the US to politically influence the exchange rate.

GBP/USD was marginally higher but only in the mid-1.38 area despite that the BOE had turned more rate bullish last week. Dealers putting more weight on Brexit concerns as UK previously admitted that the growth potential of the economy had declined

USD/JPY steady as Japanese participants were off for holiday.

Fixed Income

Bund Futures trades down 35 ticks at 157.66 as the bearish trend remains intact. Upside targets 158.85, while a continued move lower targets the157.25 level.

Gilt futures trade at 120.88 down 55 ticks, ahead of tomorrow’s UK CPI data. Support continues to stand at 120.75 then 120.15, with upside resistance at 122.75 then 123.25.

Friday's liquidity report showed Thursday's excess liquidity fell to €1.899T from €1.901T prior. Use of the marginal lending facility falls to €3M from €80M prior.

Corporate issuance saw the primary market finish last week with ~$19B sold.

Looking Ahead

(PE) Peru Dec Trade Balance: No est v $0.6B prior

(MX) Mexico Jan ANTAD Same-Store Sales Y/Y: No est v 5.4% prior - OPEC Monthly Report

(US) President Trump expected to release his 2019 budget proposal and infrastructure details

05:30 (DE) Germany to sell €3.0B in 6-Month BuBills

06:00 (PL) Portugal Jan CPI M/M: No est v 0.0% prior; Y/Y: No est v 1.5% prior

06:00 (PL) Portugal Jan CPI EU Harmonized M/M: No est v -0.2% prior; Y/Y: No est v 1.6% prior

06:00 (IL) Israel Jan Consumer Confidence: No est v 128 prior

06:00 (TR) Turkey to sell 2023 and 2028 bonds

06:30 (CL) Chile Central Bank Economists Survey

06:45 (US) Daily Libor Fixing

07:00 (IN) India Jan CPI Y/Y: 5.1%e v 5.2% prior

07:00 (IN) India Dec Industrial Production Y/Y: 6.1%e v 8.4% prior

08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week

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

08:05 (UK) Baltic Dry Bulk Index

08:55 (FR) France Debt Agency (AFT) to sell combined 4.9-6.1B in 3-month, 6-month and 12-month BTF Bills

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

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

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

11:00 (IS) Iceland Jan International Reserves (ISK): No est v 686B prior

12:30 (CO) Colombia Central Bank Quarterly Inflation Report

14:00 (US) Jan Monthly Budget Statement: $51.0Be v -$23.2B prior

Dollar headed down

Last week's volatility in equities spurred investors into safe-haven US treasuries, pushing the 10-yr yield from 2.8% down to 2.6%. This Wednesday's US consumer price data, we believe, will come in lower than expected, thanks to easing energy prices. The US economy is growing, but softly, and the bull market, while now wounded, still has room to run.

All told, risk aversion and a downturn in real yields suggest a higher greenback is unlikely near term.

Asian markets to recover

After last week's carnage, we foresee an Asian recovery this week. Hang Seng is now trading at 29'706 points (+0.70%), Shanghai Composite at 3'145 (+0.78%), Kospi at 2'385 (+0.91%) and S&P/ASX 200 at 5'820 (-0.30%), Japan's market is closed for a holiday. Three announcements this week are crucial for maintaining our optimism: US January Consumer Price Index (expected to remain below December's at 2%), Japan's 4Q GDP and Australia's January employment report.

Last week the Dow Jones Industrial Average endured its worst week in two years, decreasing two days by more than 1'000 points, ending the week at 24'190 (-5.50%). Hong Kong's Hang Seng Index lost -9.49%, its biggest decrease since 2008, weakened by energy (-5.21%), real estate (-4.07%), telcos (-3.95%) and financials (-3.87%). China's Shanghai Composite Index was down by -9.60%, its largest weekly loss in a year. Japan's Nikkei 225 Index fell by -8.13%, with losses in most sectors. Korean Kospi index fell by -6.40%, and Australia's S&P/ASX 200 declined 4.63%.

EUR/USD

Current level - 1.2268

The second failure at 1.2210 imposes a risk of another rise to 1.2330 resistance, but while the latter holds, the outlook will remain bearish, for a slide towards 1.2160.

Resistance		Support
intraday	intraweek	intraday	intraweek
1.2330	1.2540	1.2210	1.2160
1.2405	1.2870	1.2160	1.2090

USD/JPY

Current level - 108.60

The dip below 108.27 signals a negative bias, for another slide towards 107.30. Crucial on the upside is 109.30 high and a violation of the latter will signal a renewal of the consolidation trading.

Resistance		Support
intraday	intraweek	intraday	intraweek
109.30	111.90	108.30	108.30
111.50	113.40	108.30	107.30

GBP/USD

Current level - 1.3851

The downtrend is intact, heading towards 1.3620 area. Initial intraday resistance lies at 1.3900 and crucial on the upside is 1.3985 high.

Resistance		Support
intraday	intraweek	intraday	intraweek
1.3900	1.4090	1.3730	1.3730
1.3985	1.4174	1.3620	1.3620

The Australian dollar trades higher in early Monday's trading after bears stalled above key 200SMA daily cloud top supports.

Subsequent bounce resulted in bullish close on Friday, sidelining immediate downside risk.

Return and close above 55SMA was bullish signal, as the indicators now acts as initial support (0.7797).

Bullish signal is developing on daily slow stochastic emerging from oversold territory, with 14-d momentum turning north in deep negative territory and rising daily cloud underpinning.

However, near-term action was so far unable to clearly break above falling hourly cloud (cloud top currently lies at 0.7823), obstructing recovery attempts, along with mixed signals from lower timeframes (1 & 4-hr).

Stronger recovery signal would be generated on regain of 0.7900 zone pivot (Fibo 38.2% of 0.8135/0.7758 downleg / double upside rejection), while the downside is expected to remain vulnerable while 0.7900 stays intact.

Renewed attempts at key 0.7750/40 zone (daily cloud top / 200SMA / Fibo 61.8% of 0.7500/0.8135 rally) would soften near-term structure, with strong bearish signal to be expected on firm break lower.

Res: 0.7843, 0.7910, 0.7937, 0.7947
Sup: 0.7797, 0.7772, 0.7750, 0.7740

The Euro has extended its gains against the Australian Dollar. The currency pair continued to trade in the same pattern after it touched the lower boundary of the dominant channel at the 1.3663 mark.

As it can be observed, the EUR/AUD pair has formed a flag and is likely to breakout from the rectangle to either direction.

Technical indicators suggest that the currency exchange rate could continue its movement north to test the resistance cluster of the weekly R2 and the monthly R3 near 1.5868.

The Canadian Dollar has extended its decline against other major currencies during the previous trading sessions. However, the decline can be observed notably in the CAD/JPY chart.

The Loonie is trading in a narrow channel against the Yen. The pair has re-tested the upper boundary of the junior channel.

As for the near future, the currency exchange rate could be a false breakout upwards to test the weekly and the monthly resistance near 86.91. Meanwhile, the overall market sentiment remains bearish.

The common European currency remained stable against the Greenback on Friday, as it was confined within the bounds of the 32.20% Fibo retracement and the monthly PP at 1.2225 and 1.2289, respectively.

The pair breaching the 55-hour SMA near 1.2250 could point to a soon period of appreciation. This is likewise supported by other indications, such as the slight two-day consolidation after a week of decline, as well as the Euro's reversal from the 38.20% Fibo and the bottom boundary of a three-month channel up. Thus, it could be assumed that the rate will try to push up to the 23.60% retracement line at 1.2345, at least.

This scenario, however, could be hindered by the combined resistance of the weekly and monthly PPs and the 100-hour SMA in the 1.2290/1.2312 area.

Friday's morning session was spent relatively calm for GBP/USD, as it was restricted from both sides by the 55– and 100-hour SMAs.

The bearish sentiment, reinforced by sluggish UK fundamentals, eventually took over the market, thus resulting in a 153-pip plunge in a couple of hours. This fall halted near the February low of 1.38. The pair's subsequent movement was tended north towards a resistance cluster formed by the 55– and 100-hour SMAs and the weekly PP circa 1.39.

This trading session should be quiet in terms of fundamentals; thus, the Sterling might lack the necessary bullish momentum to move past its nearest resistance. A successful breakout should be stopped near the monthly PP at 1.40.

Meanwhile, a potential southern barrier could be the weekly and monthly S1s at 1.3675.