eFXplus DATA

• Strong push above 21 and 200DMA Tues puts 2019 1.3218 high into play
• Feb 25 1.2773 cloud twist also in play but having little influence so far
• Daily RSI has turned lower and momentum remains negative
• 200DMA at 1.3003 looks pivotal as bulls attempt to carve out a trend
• Expect the 1.3218 level to reject the advance on first test
• Likely to see a 1.2800 to 1.3200 range played out near term

• AUD/USD again tops out around the 50% retracement level at 0.7175
• Outlook still positive with s/t MAs and momentum studies heading higher
• But AUD/USD bulls need an acceleration above 100 DMA at 0.7160 soon
• Close above 0.7175 targets 61.8 Fibo at 0.7203, 200 DMA at 0.7267
• Initial support at 55 DMA at 0.7141, then 10 DMA at 0.7114
• Close back below 10 DMA would negate upside, suggest consolidation

Barclays Research discusses its expectations for tomorrow's FOMC minutes from the January meeting.

"We look to the minutes of the January FOMC meeting for insights as to whether FOMC participants see the rate hike cycle as essentially complete or whether members still expect further rate hikes as part of the baseline outlook. In other words, many FOMC participants have communicated a desire to remain “patient” or “pause” the rate hike cycle to evaluate the incoming data, while the language in the statement suggests that the tightening cycle is complete and the committee has no upward bias in its forward guidance," Barclays notes. 

"The minutes should also provide information about what caused the committee to assess that financial conditions had tightened and shift the balance of risks to the downside. We believe the January senior loan officer survey may have played a role in the former while a variety of factors likely drove the latter. In addition, we expect the minutes to signal that the committee is prepared to release its plan on how it will end runoff of its balance sheet “soon,” which we believe will come at the March meeting," Barclays adds. 

Corrected second line

• EUR/USD opened 0.26% higher at 1.1342, as USD broadly weakened
• It traded to 1.1334 early before drifting higher the rest of the morning
• Risk assets were bid - keeping the USD and JPY on the defensive
• EUR/JPY traded 0.25% higher to 110.93 while EUR/USD rose to 1.1356
• EUR/USD resistance at the 21-day MA at 1.1364 and 100-day MA at 1.1397
• The 61.8 of the 1.1514/1.1234 move comes in at 1.1407
• Support is at the 10-day MA at 1.1311 and break eases downward pressure

• Asia trading with risk on tone as AXJ Equity index up over 1.0%
• AUD/USD at session high around 0.7175 after hitting 0.7152 after Aus WPI
• The 50% of 0.7295/0.7054 move is at 0.7174 and break targets 61.8 at 0.7203
• AUD getting support from move higher in key commodities and CNH strength
• Move up in AXJ, Commodities and CNY offsets dovish shift in RBA expectations

• Aus Q4 Wage Price Index +0.5 Q/Q vs 0.6% Q/Q expected
• AUD/USD barely moved and is trading around 0.7160
• Private sector wage growth strongest since Dec 2014 offseting headline
• AUD/USD reacting more to external factors that have turned positive

AUD/USD may move higher despite the dovish shift in Reserve Bank of Australia expectations, as external factors are turning decidedly positive.
The RBA followed the Fed's lead and has placed greater emphasis on downside risks to the domestic and global economies.
The markets seem to be on another wavelength, as commodities, equities and emerging market assets are rallying and sentiment is positive.
New York copper clearly broke above $2.85 on Tuesday after six months of $2.55-$2.85 range trading.
Analysts note that 'Dr.
Copper' was the first risk asset to slump when it fell from $3.297 to $2.557 between June and August 2018 while other risk assets were still surging.
The dovish shift in RBA expectations has encouraged AUD/USD selling, but the dovish shift in global central bank expectations is the main factor behind the risk rally that will underpin AUD sentiment.
The AUD/USD completed a bullish outside day on Tuesday and the next level of resistance is at the 61.8 Fibo of the 0.7295-0.7054 decline at 0.7203.
A clear break above 0.7205 targets the 200-day moving average at 0.7268, which has held since March 15 last year.

Bank of America Merrill Lynch Research discusses its expectations for tomorrow's FOMC minutes from the January meeting.

"The minutes of the January FOMC meeting will be of particular interest given the extreme dovish pivot from the Fed. We will be looking to learn about the following: 1) why did the Fed go from signaling additional hikes in December to no further hikes just six weeks later in the January meeting? 2) What is the Fed watching to determine next steps? Is it global data? Financial markets? 3) How has the Fed's thought process evolved around the balance sheet normalizationprocess?," BofAML notes.

"On hikes, we think there will be a consensus that the best move is for the Fed to signal a pause...On risks, we expect a discussion about the global backdrop, with particular attention on the slowdown in China and the weakness in Europe....The balance sheet discussion may be the most notable. The Fed put out a statement with the last meeting which said that the Fed will embracean "abundant" reserve framework and will allow the balance sheet to adjust to economic conditions. However, we are still missing details. What is the timeline? Is there a target for the optimal level of reserves? Will the Fed taper? We think the Fed will drop some hints on these issues in the minutes as a way of testing the market reaction," BofAML adds. 

• GBP/USD firm into NY close, ends session 1.3360, NY range 1.3070-1.2915
• Pair higher on upbeat Brexit vibe ahead of Wednesday UK-EU meet nL1N20E0M6
• Juncker: Nobody will block Brexit extension nS8N1XG03T
• EUR/GBP dn 0.75% to 0.8690, Tuesday range 0.8760-0.8686
• German, EZ data misses nS8N1XG03T and Brexit deal optimism boosts GBP

AUD/USD bulls are pinning their hopes on a U.S.-China trade deal.
Longs were dealt a blow by the RBA minutes, which highlighted significant uncertainties on economic growth and potential weaker consumption and GDP due to housing price risks.
AUD/USD dived below the 10-DMA on the dovish minutes but bounced on hopes of U.S.-Sino trade progress and Chinese yuan sales.
Low level trade talks are resuming in Washington D.C. tomorrow while higher level negotiations including U.S. Trade Representative Lighthizer, Treasury Secretary Mnuchin and Chinese Vice Premier Liu He are set for Thursday and Friday. Market sentiment is gravitating toward the notion that both China and the U.S. are looking for "wins" in these negotiations and that some form of a deal that will avoid additional tariffs will result.
That view has boosted demand for the yuan as well as other emerging market currencies and aussie, which is positively correlated to the EM complex.
AUD/USD erased losses induced by the RBA minutes and has rallied above the 55-DMA and the February 15 high.
The price action has technicals suggesting further gains.
Daily RSI deepens its bull bias while a long lower wick forms on February's candle.
Bulls now target the 0.7235/45 zone and 200-DMA.

NAB Research discusses USD/JPY outlook and highlights a higher bar for further gains in the near-term.

"USD/JPY is back trading closer to the middle of its ¥108.5 to ¥114.5 range held since early 2017.

Where to from here? Technically the 100DMA, (now at ~¥111.60), is a hurdle to further USD/JPY gains and while our fair value model is telling us the pair is currently trading within its fair value range, spot is closer to the expensive zone than neutral/cheap," NAB notes. 

"A look at key USD/JPY relationships we monitor also suggests further gains should now be a little harder to come by. For one, the relationship between USD/JPY and 10y UST yields, courtesy of the BoJ commitment to its Yield Curve Control policy, is currently suggesting further USD/JPY gains need to be accompanied by a move higher in 10y UST yields, but with a Fed on hold and data dependent, higher UST yields require solid US data releases," NAB argues. 

• BOJ joins growing parade of potentially easier bank policy nL3N20E21C
• Kuroda said ready to ramp stimulus to counter impact of stronger JPY
• Benchmark 10yr JGB yield goes negative, Street re-thinking JPY forecasts
• Activation of market puts at PBOC, Fed, BOJ and ECB signal reflation trade
• Central banks actively managing risk, JPY crosses to benefit
• More here nL1N20E03A nL1N20E04C

ING discusses EUR/USD technical outlook and maintains a neutral bias on a multi-days basis.

"The daily chart is not convincing with prices still consolidating below the former upward sloping trend line around 1.1325. This is not ruling out the making of a lower high followed by the next decline. That would suggest new short-term lows below last week’s low at 1.1234, although the downside potential would likely be limited within this scenario," ING notes. 

"Next solid support comes in between the former upper end of the falling trend channel around 1.1205 and the horizontal line around 1.1115. A close above the MA-50 line at 1.1389 is necessary to expect a continuation of the sideways price pattern of the past few months," ING adds. 

MUFG Research discusses USD/JPY outlook and maintains a tactical neutral bias, expecting the pair to trade in 112-109 range in the near-term.

"USD has been rallying in February, with JPY strengthening and weakening mixed. USD has been rallying as concerns about US-China trade friction and US fiscal spending have diminished, and the USD level will likely be reinforced over the near term," MUFG notes. 

"Because JPY buying flows will pick up, we expect the current USDJPY level to be reinforced. In Japan, the FY19 budget deliberation will be center stage in the current ordinary Diet session, but we do not expect any ramifications," MUFG adds. 

• AUD/USD revisited its 0.7107 Asian session low during the European morning
• Asia drop to 0.7107 was spurred by RBA minutes nRUAIDEF4P nRUAIDEF4P
• 0.7123 = interim high. 0.7160 was Monday's high/100DMA and high since Feb 6
• Feb 6 was the day on which AUD tanked after a dovish steer from Lowe
• Australian Q4 wage data is due Wednesday at 0030GMT, +2.3 pct YY f/c
• Aussie Jan employment data due Thursday, Lowe speaks Friday nL1N20D01A

• Euro zone seasonally adjusted c/a surplus narrows significantly
• Dec 16 bln euros from a prior 23 billion, smallest surplus in 2 years
• ZEW -13.4 in Feb from -15.0, current conditions 15 from 27.6 and vs 23 f/c
• Germany's growth outlook remains subdued - ZEW
• EUR/USD trades down 1.1324-1.1299 after data from 1.1294 low in Asia (EBS)
• Slowdown evident. TLTROs look likely. Fuel for euro funded carry trades

• UK average earnings are expected to rise further to 3.5% yy from 3.4%
• Pay growth is at 10-year highs and employment highest on record
• Employment is f/c rising another 140k in December
• Brexit continues to frustrate BOE but data may spur rate hike speculation
• GBP/USD relatively soft, 1.29 within recent 1.2773-1.3218 bounds
• High probability of a rise but confluence 21/200-DMAs 1.2988/1.3004 may cap

• Sterling's advance capped by the 30DMA, 1.2949
• Still looking for the Feb 25 cloud twist to exert a pull on price, 1.2770
• Cloud components bearishly aligned with tenken below kinsen
• We are running short from 1.2890 for 1.2715 having riden out Monday's rally
• Above the 30DMA opens up 200DMA at 1.3005, our stop is at 1.3015
• Daily RSI flattening out and momentum maintaining negative readings

• Eurozone current account data at 9.00GMT has been l-term support for euro
• German ZEW at 10.00GMT is expected to improve slightly -14 from -15
• EUR/USD at the lower-end of 1.12-1.16 bounds logically has more upside risk
• Disappointing data could put that range under pressure though break unlikely
• More likely to see another move back to neutral territory
• Daily Ichimoku cloud twist end Fed at 1.1410-16 may well attract

• AUD/USD continues to be weighed down by RBA minutes, hits a low of 0.7107
• Nearby support seen at 10 DMA at 0.7103, close below negative
• S/t MAs and momentum studies send mixed signals, trend unclear
• 5 DMA cross above 10 DMA positive, but now flat-lining, mom. studies mixed
• Close below 10 DMA targets a return to recent lows at 0.7050/60
• Clear resistance at Mon high and 100 DMA at 0.7160, 50% retrace at 0.7175.