• US-China trade optimism dampens demand for safe-haven currencies.
• Positive US bond yields help revive USD demand and remain supportive.
The USD/CHF pair finally broke out of its Asian/early European session consolidation phase and spiked to over one-month tops, around the 0.9975-80 region in the last hour.
The pair built on last week’s strong gains and continued gaining positive traction for the fifth consecutive session. The up-move seemed unaffected by the latest signs of a slowdown in China, rather took cues from fading safe-haven demand amid the latest optimism over the US-China trade talks.
Reports on Friday revealed that China has offered a six-year path to eliminate trade surplus with the US. The news added to the recent optimism that the US Treasury Secretary Steven Mnuchin suggested easing tariffs on China, though denied by the Treasury Department, and fueled hopes for a resolution in the US-China trade tensions.
Meanwhile, the latest leg of a sudden spike could further be attributed to a modest US Dollar uptick, which now seemed to have found some fresh buying interest and held near two week tops on the back of a follow-through pickup in the US Treasury bond yields, despite dovish Fed expectations.
It would now be interesting to see if bulls are able to maintain their dominant position or opt to take some profits off the table near the key 1.00 psychological mark amid absent relevant market moving economic release and a bank holiday in the US.
Technical levels to watch
Momentum beyond the 0.9980 level could lift the pair beyond the parity mark towards challenging the next hurdle near the 1.0020-25 region. On the flip side, the 0.9955-50 region now seems to act as immediate support, which if broken might accelerate the fall back towards the very important 200-day SMA support, currently near the 0.9900 handle.
- Prices of WTI inch higher and surpass the $54.00 mark.
- OPEC+ cuts sustaining the bullish sentiment.
- US oil rig count down by 21 rigs during last week.
Prices of the barrel of the West Texas Intermediate have started the week on a positive fashion, advancing to fresh YTD peaks beyond the $54.00 mark albeit losing some impetus afterwards.
WTI upside bolstered by China data
Prices of the WTI area inching higher on Monday in response to rising optimism following recent Chinese data releases.
In fact, the Chinese economy expanded at an annualized 6.4% during the fourth quarter 2018, while Industrial Production expanded 5.7% from a year earlier in December and Retail Sales grew 8.2% YoY.
In addition, recent data also noted a higher oil demand in China, which is somewhat offsetting the slowdown in the economy, all rendering in a better mood around traders.
Furthermore, OPEC+ planned cuts continue to support the upside momentum in prices while a sharp drop in US oil rig count (21) during last week is also adding to the broad-based optimism.
WTI significant levels
At the moment the barrel of WTI is losing 0.03% at $53.67 facing the next support at $52.11 (55-day SMA) seconded by $50.34 (low Jan.14) and then $48.85 (21-day SMA). On the flip side, a breakout of $54.11 (2019 high Jan.21) would aim for $54.48 (monthly high Dec.4) and finally $58.00 (high Nov.18 2018).
Karen Jones, analyst at Commerzbank, notes that the EUR/GBP cross has sold off to and recovered from the .8754/78.6% retracement and is seen as the last defence for the .8655 November low.
“Near term the market is bouncing higher from this support and rallies should find that the 55 and 200 day moving averages at .8864, .8907 will offer decent initial resistance. We look for the October .8941 high to contain the topside.”
“Above .9101/20 would target the top of the 2016-2019 channel at .9165.”
• The pair remained under some selling pressure for the second straight session on Monday and was seen extending last week’s rejection slide from the key 1.3000 psychological mark.
• The mentioned handle coincides with a four-month-old descending trend-line, which has been acting as a key hurdle and capped attempted bullish move on several occasions.
GBP/USD daily chart
• The intraday downtick has now dragged the pair below 200-hour SMA, though slightly oversold conditions on the 1-hourly chart might help limit further downside, at least for now.
• Meanwhile, oscillators on the 4-hourly chart have been gaining negative momentum but maintained their bullish stance on the daily chart, further warranting some caution.
• The set-up suggests some dip-buying at lower levels and hence, it would be prudent to wait for a sustained break below the 1.2800 handle before positioning for any further downside.
Today Last Price: 1.2837
Today Daily change: -0.0028 pips
Today Daily change %: -0.22%
Today Daily Open: 1.2865
Daily SMA20: 1.2762
Daily SMA50: 1.275
Daily SMA100: 1.2891
Daily SMA200: 1.3092
Previous Daily High: 1.2994
Previous Daily Low: 1.2857
Previous Weekly High: 1.3002
Previous Weekly Low: 1.2668
Previous Monthly High: 1.284
Previous Monthly Low: 1.2477
Daily Fibonacci 38.2%: 1.2909
Daily Fibonacci 61.8%: 1.2942
Daily Pivot Point S1: 1.2816
Daily Pivot Point S2: 1.2768
Daily Pivot Point S3: 1.2679
Daily Pivot Point R1: 1.2954
Daily Pivot Point R2: 1.3043
Daily Pivot Point R3: 1.3092
The AUD/JPY pair is trading largely unchanged on the day at 78.60, having recovered from the session low of 78.28 a few minutes before press time, possibly on the back of an above-forecast China industrial production number.
The daily chart, however, shows the pair lacks a clear direction, having created a doji candle on Friday.
- A close today above 79.11 (high of Friday’s doji) would confirm bull doji continuation or continuation of the rally from recent lows below 72.00 and open up upside toward 80.00.
- A close below 78.38 (Friday’s low), however, would imply bearish doji reversal.
Today Last Price: 78.62
Today Daily change: -0.05 pips
Today Daily change %: -0.06%
Today Daily Open: 78.67
Daily SMA20: 77.69
Daily SMA50: 80.13
Daily SMA100: 80.38
Daily SMA200: 81.34
Previous Daily High: 79.11
Previous Daily Low: 78.38
Previous Weekly High: 79.11
Previous Weekly Low: 77.56
Previous Monthly High: 84.05
Previous Monthly Low: 77.15
Daily Fibonacci 38.2%: 78.83
Daily Fibonacci 61.8%: 78.66
Daily Pivot Point S1: 78.33
Daily Pivot Point S2: 77.99
Daily Pivot Point S3: 77.6
Daily Pivot Point R1: 79.06
Daily Pivot Point R2: 79.45
Daily Pivot Point R3: 79.78
- AUD/USD jumped 23 pips from session lows, possibly on the back of an above-forecast China industrial production data.
- The recovery could be short-lived, as China’s Q4 GDP printed at the lowest level since early 2009.
The AUD/USD pair jumped 23 pips to 0.7177 soon before press time, courtesy of a better-than-expected China data.
China’s industrial production rose to 5.7 percent year-on-year in December, beating the forecast of 5.3 percent by a big margin. The above-forecast reading could be taken a sign the global demand may not be as weak as previously thought. Meanwhile, retail sales ticked higher to 8.2 percent in December as expected.
Still, the AUD risks falling back to session lows near 0.7150 as China’s growth rate in the fourth quarter slowed to 6.4 percent year-on-year – the lowest since early 2009 – more so because both the PBOC and the Chinese government are unlikely to introduce a flood-like stimulus to support the ailing economy.
As of writing, the AUD/USD is trading at 0.7166. Thursday’s low of 0.7147 is the level to beat for the bears. On the higher side, 0.7235 (Jan. 11 high) is the key resistance.
AUD/USD Technical Levels
Today Last Price: 0.7155
Today Daily change: -0.0013 pips
Today Daily change %: -0.18%
Today Daily Open: 0.7168
Daily SMA20: 0.7112
Daily SMA50: 0.7183
Daily SMA100: 0.7172
Daily SMA200: 0.7317
Previous Daily High: 0.7215
Previous Daily Low: 0.7161
Previous Weekly High: 0.7226
Previous Weekly Low: 0.7146
Previous Monthly High: 0.7394
Previous Monthly Low: 0.7014
Daily Fibonacci 38.2%: 0.7182
Daily Fibonacci 61.8%: 0.7194
Daily Pivot Point S1: 0.7148
Daily Pivot Point S2: 0.7128
Daily Pivot Point S3: 0.7095
Daily Pivot Point R1: 0.7202
Daily Pivot Point R2: 0.7235
Daily Pivot Point R3: 0.7255
The USD/JPY pair is currently trading at 109.56 – down 0.18 percent on the day – and could drop further toward the ascending (bullish) 5-day moving average (MA), currently at 109.26, courtesy of the bearish divergence of the 14-hour relative strength index (RSI).
- The RSI is threatening to drop below 50.00 (in the bearish territory), having charted on Friday a lower high as opposed to a higher high on price.
- The major averages (50, 100 and 200) are trending north and located one above the other, signaling that the path of least resistance is on the higher side.
- The dollar, therefore, could find bids at the ascending 5-day MA of 109.26.
Trend: pullback underway
Today Last Price: 109.56
Today Daily change: -0.19 pips
Today Daily change %: -0.17%
Today Daily Open: 109.75
Daily SMA20: 109.25
Daily SMA50: 111.54
Daily SMA100: 112.06
Daily SMA200: 111.19
Previous Daily High: 109.9
Previous Daily Low: 109.06
Previous Weekly High: 109.9
Previous Weekly Low: 107.99
Previous Monthly High: 113.83
Previous Monthly Low: 109.55
Daily Fibonacci 38.2%: 109.57
Daily Fibonacci 61.8%: 109.38
Daily Pivot Point S1: 109.24
Daily Pivot Point S2: 108.73
Daily Pivot Point S3: 108.4
Daily Pivot Point R1: 110.08
Daily Pivot Point R2: 110.41
Daily Pivot Point R3: 110.92
- EUR/JPY is enroute for a break of key support at 124.45/50 as the consolidation of recent correction wears thin.
- EUR/JPY is currently trading at 124.50, from a high of 124.88 and up from a low of 124.45.
EUR/JPY is tracking price action in global stocks and risk appetite with the greenback taking the lead, pressuring the euro as investors move away from risk associated with German’s poor run of economic performance of late and warnings from the ECB.
We have the ECB this week, which will likely do nothing although as Europe edges closer to a recession and the risks of a hard Brexit on the horizon should be detailed and worth a listen. “Inflation lies sharply below the ECB’s implied December forecast and growth in the final quarter of 2018 likely came in at half the ECB’s projected pace. However, we expect the ECB to look through lower energy prices and treat recent activity disruptions as temporary, and therefore leave both the balance of risks and its forward guidance unchanged from December,” analysts at TD Securities explained.
US government shutdown and Sino/US trade risks
Elsewhere, the US government shutdown is going to become more of a concern as it moves into the 29th day on Tuesday after Martin Luther King Jr. Day and s expected to hinder US growth by 0.1% every two weeks that the shutdown continues. This should start to impact US stocks and potentially support the yen. Another supporting factor could be the prolonged dispute between Beijing and the US over trade. With no concrete progress being reported, and so long as headlines remain conflicting, the yen can also collect a safe haven bid when stocks correct lower until a breakthrough is sighted. However, for the meantime, investors are clutching at straws and remain optimistic about promising headlines, despite their lack of credibility. For instance, markets rallied on reports that U.S. Treasury Secretary Steven Mnuchin discussed lifting some or all tariffs imposed on Chinese imports and suggested offering a tariff rollback during trade discussions scheduled for Jan. 30.
However, the news was met with conflicting headlines where Trade Representative Robert Lighthizer had resisted the idea, one which had reportedly not yet been introduced to President Donald Trump. U.S. stocks advanced on the news even as a Treasury spokesman working with the administration’s trade team denied the report: “Neither Secretary Mnuchin nor Ambassador Lighthizer have made any recommendations to anyone with respect to tariffs or other parts of the negotiation with China,” the spokesman said. “This an ongoing process with the Chinese that is nowhere near completion.”
A correction of stocks and sentiment could spell havoc for bulls protecting the 200 hr SMA which guards a breakdown to S3 at 123.72 and before the 23.6% fino retracement located at 123.09.. Analysts at Commerzbank explained that EUR/JPY faces tough resistance offered by a double Fibo at 125.50 and we would allow for some further near term weakness:
“The market recently saw a major spike lower that eroded the 2012-2019 support line at 119.31 – the low was 117.845. The move looks exhaustive but should struggle at tougher resistance at 124.91/25.50, the August low and double Fibo. We favour near term failure and some near term consolidation. We suspect that price action here will prove pivotal and while capped here a negative bias will remain.”
- Firmer Treasury yields, US dollar keeping the recovery capped
- Awaits China macro data for fresh trading impetus.
Gold (futures on Comex) stalled its minor recovery from weekly lows of 1280.10 levels and now trades flat near 1282 levels, as the bulls await the Chinese GDP release for further trading impetus.
The yellow metal attempted recovery in early trades in anticipation that disappointing Chinese growth numbers would re-ignite China slowdown concerns and eventually risk-aversion across the markets, boosting the safe-haven bids for gold.
However, the recent gains in the US Treasury yields combined with broad-based US dollar strength keeps a check on the renewed upside. On Friday, gold prices fell sharply after the US equities and the greenback was lifted by improved risk appetite amid hopes for a resolution in the China-US trade war.
The immediate focus now remains on the Chinese GDP, retail sales and industrial production data for fresh trading incentives while the risk trend will continue to remain the main driver amid holiday-thinned trading.
Gold Technical Levels
Today Last Price: 1283.02
Today Daily change: 2.22 pips
Today Daily change %: 0.17%
Today Daily Open: 1280.8
Daily SMA20: 1283.9
Daily SMA50: 1252.63
Daily SMA100: 1233
Daily SMA200: 1228.8
Previous Daily High: 1292.56
Previous Daily Low: 1280.65
Previous Weekly High: 1295.9
Previous Weekly Low: 1276.2
Previous Monthly High: 1284.7
Previous Monthly Low: 1221.39
Daily Fibonacci 38.2%: 1285.2
Daily Fibonacci 61.8%: 1288.01
Daily Pivot Point S1: 1276.78
Daily Pivot Point S2: 1272.76
Daily Pivot Point S3: 1264.88
Daily Pivot Point R1: 1288.69
Daily Pivot Point R2: 1296.57
Daily Pivot Point R3: 1300.59