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USD/JPY is consolidating its January spike above the 110.00 handle and the main simple moving averages (SMAs). The market is trading near its highest since mid
  • USD/JPY is evolving in a rising wedge formation. 
  • Resistance is at 110.35 while support is seen at the 110.05 level. 
 

USD/JPY daily chart

 
USD/JPY is consolidating its January spike above the 110.00 handle and the main simple moving averages (SMAs). The market is trading near its highest since mid-May 2019. 
 

USD/JPY four-hour chart

 
 
USD/JPY is trading in a wedge-shaped pattern while above the main SMAs. If the bulls fail to regain the 110.35 level, the market can remain sideways with increasing odds for a potential down move. If the bears breach 110.05 support, the spot could decline towards the 109.85 and 109.55 levels, according to the Technical Confluences Indicator. On the flip side, a break above 110.35 can open the gates to 110.52 and 110.69. 
 
 

Additional key levels 

 

The Danske Bank Research Team highlights key macroeconomic events of note in the week ahead, with the central bank likely to hog the limelight. Key Qu

The Danske Bank Research Team highlights key macroeconomic events of note in the week ahead, with the central bank likely to hog the limelight.

Key Quotes:

“Central banks will take centre stage this week with the meetings at Norges Bank and the ECB (both Thursday) and Bank of Japan (Tuesday); see previews of the former two in box.

We will also get more news on the pace of the global recovery with the release of flash PMIs for the euro area, the US, Japan and the UK (all Friday).

Equity markets will continue to focus on the earnings season, which is off to an encouraging start.

Today looks set to be a quiet start to the week calendar-wise with only Norwegian industrial confidence for Q4 due for release.”

The AUD/USD pair regained some positive traction on the first day of a new trading week and recovered a part of the previous session's slide to one-we
  • AUD/USD witnessed some follow-through selling on Friday amid broad-based USD strength.
  • The prevailing risk-on mood trade optimism helped regain some positive traction on Monday.
  • The upside seems more likely to remain limited on the back of a holiday in the US markets.

The AUD/USD pair regained some positive traction on the first day of a new trading week and recovered a part of the previous session's slide to one-week lows.

The pair extended the previous session's pullback from the 0.6935 region and witnessed some follow-through selling for the second consecutive session on Friday amid broad-based US dollar strength to fresh monthly tops.

The greenback remained supported by the incoming positive economic data, which added to expectations that the US economy will continue to expand and reduced odds of any further rate cuts by the Fed.

The risk-on mood helped limit the downside

The pair weakened back below the very important 200-day SMA and settled near the lower end of its weekly trading range, around the 0.6870 level, albeit the prevalent risk-on mood helped limit further losses.

The recent optimism over US-China phase one trade deal remained supportive of the bullish sentiment across the global equity markets and extended some support to perceived riskier currencies – like the aussie.

Further gains, however, are likely to remain limited amid relatively lighter turnover on the back of a holiday in the US – in observance of Martin Luther King Day – and absent relevant market-moving economic data.

Hence, it will be prudent to wait for a sustained move back above the 0.6900 round-figure mark before traders again start placing any fresh bullish bets and positioning for any further near-term appreciating move for the major.

Technical levels to watch

 

Germany Producer Price Index (MoM) meets forecasts (0.1%) in December
Germany Producer Price Index (YoY) above expectations (-0.6%) in December: Actual (-0.2%)
GBP/USD has been on the back foot after weak UK data and concerns about Brexit. Where next? The Technical Confluences Indicator is showing that cable

GBP/USD has been on the back foot after weak UK data and concerns about Brexit. Where next?

The Technical Confluences Indicator is showing that cable is struggling around the 1.2998 area, which is the convergence of the Bollinger Band 15min-Lower, the Simple Moving Average 5-15m, and the SMA 10-15m.

Looking down, significant support awaits at 1.2943, which is where the Pivot Point one-day Support 2, and the PP one-week S1 meet. 

Looking up, robust resistance is at 1.3019, which is the confluence of the Fibonacci 38.2% one-week, the BB 1h-Middle, the previous daily low and the SMA 5-4h. 

Higher, pound/dollar faces several hurdles, with the most important juncture waiting at 1.3056, which is where the BB 1h-Upper, the Fibonacci 38.2% one-day, and the Fibonacci 61.8% one-week all hit the price.  

This is how it looks on the tool:

GBP USD technical confluence January 20 2020

Confluence Detector

The Confluence Detector finds exciting opportunities using Technical Confluences. The TC is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc. Knowing where these congestion points are located is very useful for the trader, and can be used as a basis for different strategies.

This tool assigns a certain amount of “weight” to each indicator, and this “weight” can influence adjacents price levels. This means that one price level without any indicator or moving average but under the influence of two “strongly weighted” levels accumulate more resistance than their neighbors. In these cases, the tool signals resistance in apparently empty areas.

Learn more about Technical Confluence

In opinion of Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, the pair could attempt a move to the 0.9710 region. Key Quotes ?

In opinion of Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, the pair could attempt a move to the 0.9710 region.

Key Quotes

USD/CHF is seeing a short-term bounce off its current January low at .9613 with positive divergence being seen on the daily RSI. This reflects a loss of downside momentum. It looks capable of challenging the two

month downtrend line at .9710. A break above here will target the .9762 10th January peak.”

“Were the .9613 recent low to be slipped through in the days ahead, however, the September 2018 low at .9543 would be in focus. Slightly longer term we look for a fall back to the 2018 low at .9188, this is also the 38.2% retracement of the same move from 2015.”

Preliminary figures for JPY futures markets saw open interest shrinking by just 171 contracts on Friday according to CME Group. In the same direction,

Preliminary figures for JPY futures markets saw open interest shrinking by just 171 contracts on Friday according to CME Group. In the same direction, volume extended the downtrend and drop by around 1.9K contracts.

USD/JPY now eyes the 110.70 region

USD/JPY has eased a tad on Friday on the back of renewed JPY-buying. However, declining open interest and volume should leave bouts of JPY-strength limited and therefore favour the continuation of the rally in the pair to, initially, the 110.65/70 band.

Here is what you need to know on Monday, January 20: GBP/USD is under pressure after the UK Chancellor of the Exchequer Sajid Javid said that the UK m

Here is what you need to know on Monday, January 20:

GBP/USD is under pressure after the UK Chancellor of the Exchequer Sajid Javid said that the UK may stray away from EU rules after Brexit. Concerns about fraught EU-UK trade talks have been weighing on investors' mood.

Oil prices have advanced with WTI nearing $60 once again. In Libya, warlord Khalifa Haftar has blocked oil exports from the part of the country he controls, knocking down 800,000 barrels out of global supply. Protests in Iraq have also limited output. 

The US dollar is holding onto its gains against majors from late last week, as upbeat US retail sales and consumer confidence kept the greenback bid. See US consumer sentiment flourishes in January.

US markets are closed on Monday, limiting liquidity. Ahead of the Chinese New Year holiday, authorities pumped around 200 billion yuan into the financial system. AUD/USD and NZD/USD are bid.

President Donald Trump and other politicians and business leaders are descending on Davos, Switzerland, for the World Economic Forum.

Cryptocurrencies have fallen off the highs with Bitcoin trading below $8,700 after topping $9,000 over the weekend. Other digital coins made the same round trips.

FX option expiries for Jan 20 NY cut at 10:00 Eastern Time, via DTCC, can be found below. - EUR/USD: EUR amounts 1.1015 979m 1.1100 756m 1.1105 692m 1

FX option expiries for Jan 20 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts

  • 1.1015 979m
  • 1.1100 756m
  • 1.1105 692m
  • 1.1200 796m

- GBP/USD: GBP amounts

  • 1.3000 320m

- USD/JPY: USD amounts

  • 108.75 500m
  • 109.40 1.1bn
  • 110.00 431m

- AUD/USD: AUD amounts

  • 0.6920 962m 

- NZD/USD: NZD amounts

  •  0.6625 374m
CME Group?s advanced figures for GBP futures markets noted investors added just 241 contracts to their open interest position at the end of last week,

CME Group’s advanced figures for GBP futures markets noted investors added just 241 contracts to their open interest position at the end of last week, reversing two pullbacks in a row. In the same line, volume rose by around 13K contracts following three consecutive drops.

GBP/USD seen holding on around 1.30

Cable is adding to Friday’s decline amidst rising open interest and volume. That said, while further downside remains on the cards, the 1.30 region is expected to remain a key magnet in the near-term.

Kaushik Das, Deutsche Bank India Chief Economist, said in his latest client note on Monday, any change in stance by the Reserve Bank of India (RBI) in

Kaushik Das, Deutsche Bank India Chief Economist, said in his latest client note on Monday, any change in stance by the Reserve Bank of India (RBI) in February would be seen as premature, with price pressure likely to ease ahead.

Key Quotes:

“The MPC should wait for more evidence related to the evolving food price trend before making any change to the current monetary policy stance.

It could well be that the MPC decides to change the stance to neutral on 6th Feb, only to be followed by sharp disinflation in vegetable and overall food prices from that month onward.

India's retail inflation jumped to 7.35% on year in December, highest in over five years, leading to speculation of prolonged pause from MPC and change in policy stance to neutral from accommodative. April policy would be ideal to consider need to change stance.”

  • USD/INR: Mildly positive near 71.00 with eyes on macros
XAU/USD is trading in a bull trend above the main simple moving averages (SMAs). After a rejection of the 1600 mark earlier in January, the market is now grind
  • Gold is starting the new week with bulls attempting to take the lead. 
  • There is a strong resistance near 1563 which needs to be broken. 
 

Gold daily chart

 
XAU/USD is trading in a bull trend above the main simple moving averages (SMAs). After a rejection of the 1600 mark earlier in January, the market is now grinding to the upside again. 
 

Gold four-hour chart

 
Gold is challenging the 1563 resistance as the market is trading in a rising channel above the main SMAs. A break above this level can see the metal appreciating towards the 1570 and 1580 resistance levels. On the flip side, failure at the 1563 level, can lead to a tight range just below the level and a potential deeper pullback towards the 1555 and 1550 levels.
 

Additional key levels 

 

Ho Woei Chen, CFA, Economist at UOB Group, expects the Bank of Korea (BoK) to leave the policy rate unchanged throughout the current year. Key Quotes

Ho Woei Chen, CFA, Economist at UOB Group, expects the Bank of Korea (BoK) to leave the policy rate unchanged throughout the current year.

Key Quotes

“Bank of Korea (BOK) left its benchmark interest rate unchanged at a record low of 1.25% [on Friday], in line with consensus and our expectation. The rate decision was again not unanimous with 2 out of 7 board members supporting a rate cut. Despite having one more dissenting member this month, BOK’s assessment of economic growth has improved as it judged that “the sluggishness in the domestic economy has eased somewhat” while uncertainties remain. It said that the current growth and inflation trajectory is still in line with projections made in November.”

“The statement suggests that BOK’s monetary policy stance has turned more neutral. The central bank had cut interest rate twice in 2019, at the July and October meetings. With the stabilization in the global trade environment, the BOK is unlikely to rush into further easing.”

“Barring an unexpected downturn in growth this year, we maintain our forecast for the BOK to be on hold at 1.25% through 2020. Expected changes to the make-up of the monetary policy board in April as tenures of four members would be expiring, may have some bearing on the rate decisions going forth.”

According to flash data for EUR futures markets from CME Group, open interest rose by nearly 3.8K contracts on Friday. Volume, instead, reversed to co

According to flash data for EUR futures markets from CME Group, open interest rose by nearly 3.8K contracts on Friday. Volume, instead, reversed to consecutive daily pullbacks and shrunk by around 5.3K contracts.

EUR/USD looks supported by the 55-day SMA

Friday’s moderate pullback in EUR/USD was on the back of rising open interest and declining volume, favouring some consolidation in the near-term. That said, while the 55-day SMA in the 1.1090 area is expected to offer solid contention, a move below this level should not be ruled out.

Economist How Woei Chen, CFA, at UOB Group assesses the recent GDP figures in China and prospects for this year. Key Quotes ?In line with our forecast

Economist Ho Woei Chen, CFA, at UOB Group assesses the recent GDP figures in China and prospects for this year.

Key Quotes

“In line with our forecast, China’s 4Q19 GDP growth stabilized at 6.0% y/y (3Q19: 6.0%) while q/q SA growth edged higher to 1.5% from 1.4% in 3Q19. For the full year, the Chinese economy expanded by 6.1% in 2019, down from 6.6% in 2018. China’s GDP growth has remained in line with the government’s target of 6%-6.5% through 2019.”

“While secondary industry growth rebounded to 5.8% y/y in 4Q19 from 5.2% in 3Q19, the slowdown in tertiary industry growth to 6.6% (3Q19: 7.2%) which is the lowest on record (data series from 1992) has cast a pall on the outlook.”

“We continue to expect China’s economic growth to slow further in 2020 due to the structural reforms and ongoing supply chain diversification. We are maintaining our growth forecast for 2020 GDP growth at 5.9% (1Q20F and 2Q20F: 5.9%y/y). This would be the slowest growth pace since the low of 3.9% in 1990.”

“Against this backdrop of growth moderation, we expect counter-cyclical measures including accommodative monetary policy, acceleration in infrastructure spending and potential reductions in government tax and fees to be maintained.”

Following Wall Street?s notable gains on Friday, Asian stocks extend their northward trajectory ahead of Monday?s European session.
  • MSCI’s index of Asia-Pacific shares nears the 20-month top, Japan’s NIKKEI rises to the highest since September 2018.
  • The US-led optimism pleases equity traders in Asia.
  • Geopolitical tensions emanating from the Middle East gain a little attention as the US markets are off.

Following Wall Street’s notable gains on Friday, Asian stocks extend their northward trajectory ahead of Monday’s European session. In doing so, MSCI’s gauge of leading Asia-Pacific equities, except for Japan, near 714.00 to revisit the early 2018 tops whereas Japan’s NIKKEI gains 0.20% to 24,095 to mark 15-month high.

Traders seem to shrug off early-day advances in oil prices that benefited from the likely supply outage in Libya and Iraq due to geopolitical reasons. This could be attributed to the absence of the US traders as well as a lack of major data/events during the Asian session. The People’s Bank of China (PBOC) announced no change in its Loan Prime Rate (LPR) while Japan’s November month Industrial Production also marked fewer changes.

With this, Chinese equities remain mildly bid while Hong Kong’s HANG SENG declines on fresh news of violence. Further, Australia’s ASX 200 rushed to record highs, +0.22% to 7,080, but New Zealand’s NZX 50 fails to lure buyers amid a close in markets at Wellington.

Markets in India portray worries of a likely decline in tax revenue collection, with the headlines BSE SENSEX losing 0.5% to 41,740, whereas South Korea’s KOSPI benefits from leadership changes into the industry heavyweight Samsung Electronics.

Bond markets are showing no major changes as the US traders are off due to the Martin Luther King’s Birthday whereas S&P 500 Futures mark 0.03% gains while flashing 3,325 as a quote. Investors will have little clues looking forward except for the German Buba monthly report and PPI data. However, headlines from the World Economic Forum (WEF) gathering in Davos could offer intermediate moves to the markets.

Amid increased government support from both China and Australia to support the economy, investors ignored the latest Mid East flare-up concerning Liby

Amid increased government support from both China and Australia to boost the economy, investors ignored the latest Mid East flare-up concerning Libya, as the risk-on sentiment extended into Asia this Monday.

Oil prices rallied to more than a week’s high after Libya’s state-run National Oil Corporation (NOC) said on Sunday that two big oilfields in the southwest had begun shutting down after forces loyal to the Libyan National Army closed a pipeline. Gold prices, on the other hand, failed to benefit from geopolitical tensions and remained on the back foot below $1560.

In reaction to the weekend headlines, the market mood was somber starting out the week but improved gradually after China said the government will be able to “ensure the smooth operation of the industrial economy” by providing big tax cuts and policy efforts. Meanwhile, the Australian government announced a support package for small businesses affected by bushfires.

In lieu of these measures, the Chinese yuan above 6.8500 levels vs. the greenback while the Aussie bounced-off lows and held onto the recovery gains near 0.6885 region. The Kiwi tracked its OZ peer higher and traded firmer on the 0.6600 level.  Markets paid little attention to the PBOC’s status quo on the loan prime rate (LPR). The Canadian dollar ignored the rally in oil prices and traded almost unchanged against its American rival around 1.3060 region. Meanwhile, USD/JPY recovered to near 110.20 region but lacked follow-through despite positive Asian equities and Treasury yields.

Among the European currencies, EUR/USD remained below the 1.11 handle but found support from the rise in the yuan while GBP/USD posted small losses near 1.3000, pressured by broad US dollar strength amid UK/US macro divergence.

Main Topics in Asia

Oil exports slashed by half in Libya ahead of the summit in Germany

UK Finance Minister, Sajid Javid, has admitted businesses will be hit by Brexit – Reuters

Pompeo sees progress towards ceasefire in Libya at Berlin summit - Reuters

PBOC keeps one-year loan prime rate steady at 4.15%

China needs time to consider impact of tradedeal - Global Times

Europe can benefit from China-US phase one trade deal - Global Times

BOJ's next move likely to be withdrawal of stimulus - Reuters poll

Australia's Frydenberg: Full economic impact of bushfires remains uncertain

Key Focus Ahead       

Looking at the EUR macro calendar this Monday, there is nothing of relevance except for the second-tier German Producer Price Index (PPI) and Bundesbank’s (Buba) Monthly Economic Assessment Report. The UK docket is absolutely data-empty and therefore developments surrounding the EU-UK post-Brexit trade deal and UK politics will take the center stage.

The NA session is also a quiet one, as the US markets closed in observance of Martin L. King's Birthday while there is no macro news from Canada. Markets will pay close attention to the Mid-East geopolitical tensions, especially pertaining to Libya and its impact on the market sentiment as well as on oil prices.

EUR/USD: On the defensive after Friday's drop

EUR/USD is looking weak, having registered its biggest single-day decline in over two weeks on Friday. The pair, therefore, risks falling to the support at 1.1063 – the support of the trendline connecting lows seen on Oct, 1 and Nov. 29. 

GBP/USD: Brexit woes, calls for BOE’s rate cut depress traders around 1.3000

GBP/USD holds steady around the 1.30 handle while heading into the London open on Monday. The pair came under pressure on Friday amid increasing odds of the BOE’s rate cut and Brexit-negative headlines.

Forex Weekly Outlook – The BOJ will likely keep its powder dry for some time

While Mid-East tensions calmed down, trade and the US consumer rocked the dollar. What’s next? Rate decisions in the Eurozone, Japan and Canada stand out. Here the highlights for the upcoming week.

The conflict in Libya will be a focus for oil traders this week

Turkey, Russia and Libya will be a focus for the week ahead as tensions escalate with the closure of Eastern Libya ports.

 

The euro is trading in a weak bear trend below the 200-day simple moving average (SMA). EUR/USD is starting the new week just below the 1.1100 level and the 50
  • EUR/USD is starting the new trading week near January lows.
  • A bounce from current price levels can lead to 1.1125 and 1.1150.
 

EUR/USD daily chart

 
The euro is trading in a weak bear trend below the 200-day simple moving average (SMA). EUR/USD is starting the new week just below the 1.1100 level and the 50 SMA.
 

EUR/USD four-hour chart

 
The spot is trading below its main SMAs, suggesting an underlying bearish bias. However, the market is challenging the January lows in the 1.1100/1.1090 support zone. At the start of the new week, if the bulls defend this area EUR/USD is more likely to bounce in the London session. Potential targets to the upside can be seen near 1.1125 and 1.1150. 
 
On the flip side, if the market decides to breach 1.1100/1.1090 support zone, EUR/USD could continue to drop towards the 1.1067, 1.1033 and 1.1000 levels; according to the Technical Confluences Indicator.
 

Additional key levels 

 

The greenback, in terms of the US Dollar Index (DXY), is trading without a clear direction at the beginning of the week in the 97.60 region. US Dollar
  • DXY stays close to the key 200-day SMA.
  • The dollar trades in multi-week highs.
  • US docket is empty on Monday.

The greenback, in terms of the US Dollar Index (DXY), is trading without a clear direction at the beginning of the week in the 97.60 region.

US Dollar Index targets the 200-day SMA

The index managed to clinch fresh multi-week highs in the boundaries of 97.70 on Friday, where sits the critical 200-day SMA, always on the back of auspicious data releases in the US calendar and a broad-based improvement in the risk appetite trends.

In fact, the better mood in the risk complex during the second half of last week – particularly since the US and China signed the ‘Phase 1’ trade deal - sent US yields and stocks higher, accompanying the positive performance of the buck.

There are no publications/events in the US docket on Monday, leaving the broader risk appetite trends as the exclusive driver of the price action in the global markets.

What to look for around USD

DXY regained upside momentum during last week and managed to record fresh 2020 highs in the proximity of 97.70, always sustained by positive results and the prevailing risk-on trade. In the meantime, investors are now looking to domestic data releases for direction in the near-term and further bullish attempt in the buck should keep targeting the key 200-day SMA in the 97.70 region. Above this level, DXY should regain the constructive view, always underpinned by the current ‘wait-and-see’ stance from the Fed (confirmed once again at the latest FOMC minutes) vs. the broad-based dovish view from its G10 peers, the dollar’s safe haven appeal and its status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the index is losing 0.02% at 97.62 and a breakout of 97.66 (2020 high Jan.17) would open the door to 97.70 (200-day SMA) and finally 97.87 (61.8% Fibo of the 2017-2018 drop). On the other hand, initial contention emerges at 97.09 (weekly low Jan.16) followed by 96.36 (monthly low Dec.31) and finally 96.04 (50% Fibo of the 2017-2018 drop).

 

EUR/GBP takes the bids to 0.8540 while heading into the European session on Monday. The pair recently took a U-turn from 21-day EMA, amid bullish MACD.
  • EUR/GBP extends recovery gains amid bullish MACD.
  • 100-day EMA adds to resistance.
  • Five-week-old rising trend line could question sellers below 21-day EMA.

EUR/GBP takes the bids to 0.8540 while heading into the European session on Monday. The pair recently took a U-turn from 21-day EMA, amid bullish MACD, which in-turn shifts market focus to the near-term key resistance.

As a result, a downward sloping trend line since November 22, at 0.8600 now, will be important to watch. Given the pair’s daily closing beyond 0.8600, a 100-day EMA level of 0.8630 can lure the buyers.

It’s worth mentioning the 0.8570 can offer intermediate halt to the pair while November top surrounding 0.8660 and 0.8700 may please the bulls afterward.

On the flip side, pair’s declines below 21-day EMA level of 0.8520 can fetch it to the immediate support line, at 0.8450.

It should, however, be noted that the pair’s fall under 0.8450 will highlight a monthly low near 0.8365 for the bears.

EUR/GBP daily chart

Trend: Recovery expected

 

Reuters reports the latest comments from the Australian treasurer, Josh Frydenberg, as he speaks about the impact of the Australian bushfire on the ec

Reuters reports the latest comments from the Australian treasurer, Josh Frydenberg, as he speaks about the impact of the Australian bushfire on the economy.

Frydenberg said that the full economic impact of bushfires remains uncertain.

Further Details:

The Australian government has announced a support package for small businesses affected by bushfires.

The support package includes low-interest loans of up to 500,000 Australian dollars (343,751 US dollars) to businesses that lost significant assets in fires that have devastated much of the country since September.

Businesses and organizations damaged by fires will also be eligible to receive grants of up to 50,000 AUD (34,375 U.S. dollars) tax-free.

"This comprehensive package will make it easier for those who have suffered direct fire damage, or have been indirectly economically impacted following the bushfires, to get back on their feet," the statement read.

Despite pulling back from the intra-day high of 71.30, USD/INR stays positive while taking rounds to 71.07 during the pre-European session on Monday.
  • USD/INR awaits fresh clues to extend the recent recovery.
  • Expectations of downbeat tax collection and strong oil prices weigh on the Indian rupee (INR).
  • The absence of the US traders and major catalysts on the economic calendar will keep news headlines in the spotlight.

Despite pulling back from the intra-day high of 71.30, USD/INR stays positive while taking rounds to 71.07 during the pre-European session on Monday. The pair initially benefited from the optimism surrounding Asian economies, led by China, but fails to conquer the broad US dollar strength amid domestic challenges to India.

India’s former finance secretary Subhash Chandra Garg recently showed concerns while saying that the government's tax collection is likely to fall short of its estimate by Rs 2.5 lakh crore or 1.2% of GDP in 2019-20. Time to junk DDT (dividend distribution tax) and reform personal income tax.”

While the government’s efforts to open gates for the Foreign Portfolio Investors (FPI) have helped the Asian economy, investments in equity-oriented mutual fund schemes in 2019 saw a sharp drop of 41% in 2019 as per the Money Control.

Recent data from India have been mixed and the same push the Australia and New Zealand Banking Group (ANZ) to anticipate a rate cut from the Reserve Bank of India (RBI) in June. The ANZ bank said, “the pick-up in consumption indicators, which we highlighted last month, has now expanded to some activity indicators. While noteworthy, we do not envisage a robust recovery in the near term. Financial sector problems and excess capacity preclude a strong rebound. There is room for the RBI to deliver one more rate cut in June, but fiscal space is limited.”

Markets in Asia reached the highest in 20-month during the early-day but seem to fade the momentum strength amid a lack of major catalysts and strong prices of crude, mainly due to geopolitical tension in Libya and Iraq.

The US markets are off due to Martin Luther King’s Birthday while no major data/event is up from India and hence the qualitative catalysts will be the key to watch.

Technical Analysis

FXStreet Analysis Omkar Godbole highlights 10-day MA as the key immediate upside barrier while saying:

USD/INR jumped 0.17% on Friday, confirming a sideways channel breakout on the hourly chart. The breakout indicates the sell-off from the monthly high of 72.12 has ended. The pair, however, needs to close above the descending or bearish 10-day moving average (MA) to confirm a reversal higher.  Currently, the 10-day MA is located at 71.23. A failure to hold above the key hurdle would invalidate the breakout on the hourly chart and shift risk in favor of a re-test of 70.90.  A move through that support could bring additional losses toward 70.6990 (Jan. 14 low). 

 

Analysts at Australia and New Zealand Banking Group (ANZ) provide their afterthoughts on the US economic data released last Friday. Key Quotes: ?Housi

Analysts at Australia and New Zealand Banking Group (ANZ) provide their afterthoughts on the US economic data released last Friday.

Key Quotes:

“Housing starts surged 16.9% m/m in December with the residential sector benefitting from low interest rates, rising wealth, rising real incomes and a healthy jobs market. The last time they were rising at the current rate of 1,608k saar was 2003. It is way above the long-run average of 1,428k. Residential construction is set to be a significant contributor to growth this year. That said, building permits fell 3.9% in December, more than twice the fall expected.

December manufacturing output rose 0.2% m/m, despite the 0.3% fall in industrial production, which was led by a sharp fall in utilities (-5.6% m/m). The manufacturing index is now back at its strongest level since August, and the monthly lift in manufacturing came about despite a 4.6% m/m fall in auto parts production. Excluding the auto sector, manufacturing output rose 0.5% m/m. Output of non-durable goods rose 0.6% m/m.

Finally, University of Michigan consumer sentiment was stable in early January at 99.1 vs 99.3 at the end of December. At the same time, inflation expectations rose, and, while that is welcome news, those expectations are influenced by the oil price and could have been influenced by Middle East tension.”

Following its brief dip beneath 1.3000, to the intra-day low of 1.2994, GBP/USD seesaws near 1.3000 while heading into the London open on Monday.
  • GBP/USD bears the burden of downbeat data, worries concerning Brexit.
  • The UK Chancellor Sajid Javid signaled harsh Brexit, challenges to the businesses.
  • A slew of downbeat data favors the BOE’s recently dovish tone.

Following its brief dip beneath 1.3000, to the intra-day low of 1.2994, GBP/USD seesaws near 1.3000 while heading into the London open on Monday. The pair came under pressure on Friday amid increasing odds of the BOE’s rate cut whereas the recent Brexit-negative headlines offered fresh downside to the quote.

Not only the pessimism spread through the comments of the UK’s Finance Minister, Sajid Javid, but news from the UK Express also threatened the Brexit optimists. The headlines relied on the report while saying that the UK PM Boris Johnson will impose restrictions on low-skilled migrants who wish to come to the UK on the first day after the Brexit transition period ends in December. This will increase the hardships of the EU-UK trade talks and increase the odds of a harsh Brexit.

The downbeat prints of the UK Retail Sales, published Friday, pleased the BOE doves ahead of the month-end monetary policy meeting. Earlier in the month, the BOE Governor Mark Carney highlighted fears of Brexit and renewed risks of a rate cut from the British central bank.

On the other hand, the US dollar remains positive after a slew of positive economics pushes the US Federal Reserve to rethink their “wait and watch” approach.

The market’s risk tone remains mostly sluggish amid the absence of US traders and a lack of major data/events on the economic calendar. The same could be witnessed in Asian stocks.

Looking forward, traders will keep eyes on the trade/Brexit headlines for fresh impulse while Tuesday’s headlines employment data from the UK will be the key to watch.

Technical Analysis

A daily closing below an upward sloping trend line since early-November, at 1.2985 now, can fetch the quote further down to 100-day SMA near 1.2800.

 

Japan Industrial Production (YoY) below expectations (-8.1%) in November: Actual (-8.2%)
Japan Industrial Production (MoM) came in at -1%, below expectations (-0.9%) in November
Japan Capacity Utilization came in at -0.3%, below expectations (0.7%) in November
The latest Reuters poll of economists revealed that the Bank of Japan?s (BOJ) next monetary policy move is likely to be the tapering of its massive st

The latest Reuters poll of economists revealed that the Bank of Japan’s (BOJ) next monetary policy move is likely to be the tapering of its massive stimulus.

Key Findings:

“Among the 41 economists polled by Reuters Jan. 6-17, 24 said the BOJ's negative rate policy did not help the economy and prices, while 17 said they did.

The poll also showed 28 of 42 economists, or 67%, expect the BOJ's next step to be a withdrawal of stimulus, up from 61% in the December poll. Those who predicted such action said it would happen sometime next year or later, the poll showed.

The ratio of those who predict the BOJ's next move to be an expansion of stimulus stood at 33%, down from the previous month's 39%.

The BOJ will keep monetary policy steady and nudge up its economic growth forecast at a two-day rate review ending on Tuesday.

Analysts polled expect core consumer inflation, which includes oil products but not fresh foods, to hit 0.6% in the current fiscal year ending in March and 0.5% the following year.

They also expect Japan's economy to have shrunk an annualised 3.6% in the October-December quarter.

Japan's economy will likely expand 0.5% in the fiscal year beginning in April and 0.8% the following year, thanks in part to an expected boost from the government's $122 billion fiscal stimulus package.”

EUR/USD is looking weak, having registered its biggest single-day decline in over two weeks on Friday. The pair fell 0.43%, its biggest single-day los
  • EUR/USD logged its biggest single-day loss in two weeks on Friday. 
  • The pair risks extending losses to key trendline support. 
  • With US markets closed, the pair may witness some moves on German PPI data. 

EUR/USD is looking weak, having registered its biggest single-day decline in over two weeks on Friday. 

The pair fell 0.43%, its biggest single-day loss since Jan. 2, signaling an end of the minor bounce from the Jan. 10 low of 1.1085 and a resumption of the sell-off from the Dec. 31 high of 1.1239. 

The single currency, therefore, risks falling to the support at 1.1063 – the support of the trendline connecting lows seen on Oct, 1 and Nov. 29. 

The drop to key support, however, may not happen if the German Producer Price Index (PPI), due at 07:00 GMT, betters estimates. 

Indeed, the PPI has rarely moved markets in the past. However, with the US closed on account of Martin Luther King's birthday, trading volumes are likely to be weak. The pair, therefore, could witness erratic moves on PPI figures. 

The German Bundesbank's monthly report is also scheduled for release on Monday and could influence the pair. At press time, EUR/USD is trading near 1.1095. 

  • EUR/USD under 1.11 is a clear buying opportunity - Scotiabank

Technical levels

 

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