eFXplus DATA

• Italy's Borghi: Italy may have to leave EU if EU elections bring no change
• EUR/USD sinks as political concerns grow ahead of EU elections in May
• ECB's Coeure: slowdown stronger & broader than expected, inflation shallower
• EUR/USD hits new low nL1N20A0JQ but Coeure TLTRO comment tempers bears
• EU bank stocks lift on TLTRO tip while US Jan IP downside miss weakens US$
• EUR/USD bounces above 1.1295 late but downside risks remain nL1N20A0SE

AUD/USD can keep rolling back losses suffered in its slide from the Jan.
31 peak as long as the U.S. and China keep talking about trade.
Completion of the latest U.S.-Sino trade talks and news that they would resume in Washington D.C. next week highlighted an alignment of bullish factors favoring further recovery in AUD/USD.
President Trump said he would meet President Xi sometime after the talks. Yuan gains in the face of optimism that the two sides could avoid additional tariffs underpinned the aussie, while the emergence of weak U.S. data has left the U.S. dollar looking suddenly less desirable.
A big downside surprise to January industrial production and downward revision to December's result bolsters views that Fed hikes are off the table for 2019 and that the Fed's balance sheet reduction could cease earlier than expected.
Upbeat risk sentiment in reaction to the U.S.-China talks is adding fuel to AUD/USD gains as equities, oil and copper rally while iron-ore prices hold near recent highs.
Daily technicals highlight the bullish risks.
AUD/USD has pierced the 10-DMA, RSI deepens its bull bias and a bull hammer candle forms on daily charts.
A break of 0.7135/40 resistance and converging 21- and 55-DMAs should accelerate the rally.
Resistance near 0.7235/45 is then targeted.

TD Research discusses EUR/USD tactical outlook and adopts a neutral sidelined bias, while sees a scope for a better setup in considering short EUR/AUD exposure over the coming week.

"For the EUR, the single most important factor over the next few months is a turn in the macro data. Our HFFV, which incorporates some of these and other factors, point to EURUSD at 1.137. That is a 1-sigma discount that could cheapen a bit more before some of the sticky investors (like central banks) offer a floor," TD notes. 

"Still, at these levels, we don't see a compelling case to chase it lower (unless we get auto tariffs, a big if) and yet don't see a strong case to buy it either. It is a better cross trade. The break of the 200dma (and our tactical, upbeat stance on AUD) imply a nice setup lower in EURAUD over the coming week," TD adds. 

EUR/USD is running out of hope to avoid dropping to the lower end of its 1.1200-1.1600 range as the ECB nL1N20A0JQ and signs of economic weakness pile pressure on the euro.
Highlighting the increasing concerns of slower euro zone economic growth, data showed new car registrations in Europe fell for the fifth consecutive month [ Click here

], and Fitch ratings cut its 2019 GDP growth forecast to 1.0 percent nFWN20A0R0.
ECB board member Benoit Coeure added to the downbeat sentiment by saying the economic slowdown is stronger and broader that what was expected and that inflation's path will be shallower.
EUR/USD sank to a new low but stalled short of November's 1.1216 low.
EUR/USD longs did get some relief though.
Coeure said there might be scope for another growth-supporting TLTRO and U.S. January industrial production came in well below forecasts.
EUR/USD bounced, but the rebound has been meager.
Traders are reluctant to rally EUR/USD as the U.S. Commerce Department's report on auto imports is due soon nL1N2060NI, which could result in tariffs on imports of European autos into the U.S. Technicals highlight bear risks as RSIs are biased down and consolidation of long-term losses persists.
A break below 1.1200 should see 1.0850/1.0950 support targeted.

NAB discusses NZD/USD technical outlook and flags the importance of a weekly close above 0.6836 to lend the pair some support in the near-term.

"Weekly close above the 50 week MA at 0.6836 will imply that the corrective decline is complete," NAB notes. 

"The MT uptrend structure remains in play however,  along with a positive LT momentum bias. This conflict lends itself to a range trading environment in the coming weeks.

We anticipate that MT trend support will hold  any dips around 0.6645/55, while recent highs towards 0.6950 will continue to cap the range," NAB adds.  

MUFG Research discusses EUR/USD outlook and adopts a tactical bearish bias in the near-term.

"The euro is currently trading on the defensive against the US dollar after failing last month to break above the top of its recent 1.1200 to 1.1500 range. A potential test of the bottom of the range at 1.1200 appears more likely in the week ahead.

The weak euro-zone data flow is weighing more heavily on the euro in the near-term. The release of the PMI surveys for February in the week ahead will be watched closely to assess growth momentum at the start of this year... The release of the latest ECB minutes may also attract more attention to assess any potential policy tweaks in response to weak growth," MUFG notes. 

"In contrast, the US dollar’s relative appeal is being boosted by weakness overseas...The release of the latest FOMC minutes could provide further insights into the likely length of the rate hike pause, and/or plans for a larger balance sheet," MUFG adds. 

Inflation expectations suggest an already-wide gap in interest rates that's weighing on EUR/USD will widen further, so it's worth betting the pair falls further this year.
The rate gap is big.
An investor short EUR/USD will earn over 3 percent each year, and the probability that will grow is high.
Not only are inflation expectations for the euro zone plummeting, those in the United states have started to move higher.
Earlier fears of a slowdown had hit expectations for both U.S, and eurozone inflation, but this fresh divergence should have an impact on EUR/USD.
The number of traders short EUR/USD should slow a coming decline, but the resilience of risk appetite that's supported stocks this year will weigh on the euro, which is the most liquid funding currency, and will support the dollar, which is the highest-yielding major currency.
Abundant liquidity makes this a safe bet, too, which should make it very popular -- intensifying the pressure on EUR/USD.

• GBP/USD broke and closed below the 1.2814 Fibo, increasing the downside risk
• 1.2814 Fibo is a 50 percent retrace of the 1.2409 to 1.3218 January rise
• Scope for losses through 1.2718 Fibo (61.8%) to 30-day lower BB at 1.2688
• We have lowered our offer to 1.2890 ahead of the 10-DMA at 1.2900
• EUR/GBP rose by 63 pips on Thurs, the joint biggest one-day gain of 2019
• Cross closed above 0.8803 -- 38.2% of 0.9102 to 0.8618 (Jan) fall = bullish

Japan's investors recently went crazy for foreign bonds, but investors can bet on a handsome return just by buying cash and sitting on their hands nL1N20A062.
Obviously, FX risk remains but when USD/JPY makes big moves down, as it did in January, it's worth betting the risk of yen rise is already priced in.
Over the course of a year, anyone sitting long of USD/JPY will make 3 percent, and while it can move rapidly, it rarely does.
USD/JPY usually has about one or two big moves a year.
The early-year aberration took benchmark vol into double figures, but it has subsequently halved that move -- options say USD/JPY is going nowhere fast.
Buying further dips to bank the carry seems prudent.
Ranges were 110-115 and have now dropped with strong resistance ahead of 112.
The daily Ichimoku cloud 108.35-109.58 should support and provide buyers with attractive levels for entry.

• Mkt recovers to trade back above the 30-day lower bolli-band now at 1.1255
• Scope grows for a bullish resumption to the 30-DMA which is now at 1.1394
• Initial targets at 1.1324/1.1371 Fibos need to be overcome
• 1.1324/1.1371 Fibos are 23.6%/38.2% of 1.1570 to 1.1248 (Jan to Feb) fall
• We are long at 1.1310 for 1.1410, while our stop is at 1.1245
• Gearing up for gains through key Fibos to 30-DMA nL1N20905X, nL1N20909X

• AUD/USD drifts lower Friday with mild risk aversion as stocks ease
• AUD/USD range for Asia 0.7080/0.7107, last at 0.7090
• Hang Seng and Kospi lead stock losses down 1.6%, S&P e-mini -0.4%
• Initial support at Thurs low of 0.7072, then Mon/Tues lows at 0.7054/57
• Initial resistance 10 DMA at 0.7120, then 21, 55 & 100 DMAs 0.7150/60
• Next move driven by comments from US-China trade talks concluding today

TD Research discusses EUR/USD outlook and highlights the importance of closing above the 1.1345 level to regain some support in the near-term.

"The majors sit mostly in a holding pattern, as the recent sessions showed the market confirming the lower end of the ranges.

We remain headline watchers, especially in regards to a possible US/China trade truce and European politics. The Brexit clock is ticking and EURUSD needs a close above 1.1345 to reinforce support," TD notes. 

Adds weekly chart

• GBP/USD held up by daily Ichimoku Cloud support at 1.2793
• Technical floor deters test of psychological barrier 1.2800
• Needs to close under 1.2670 daily Cloud base to spur fresh selling
• Another crucial support at 1.2708 would then be breached as well
• Friday close below triggers weekly Bollinger downtrend channel
• Brexit woes continue to work against the pound nL1N2091XK

• Tight - closed -0.4% with EUR/GBP +0.7%, as May defeated again nL5N2093TO
• Conservative right wing working towards a hard Brexit, moderates must unite
• Net negative momentum studies, 5, 10, 21 & 200 DMAs head south or crest
• A close above this week's 1.2959 high needed to end the downside bias
• The break of 1.2814, 50 percent of the 2019 bounce targets 1.2718 61.8%
• NY 1.2773/1.2840 range is initial support/resistance

• US sales dive halts USD/JPY's 2019 recovery shy of key 200-DMA
• 111.13 o/n high, 110.50 EBS post-data low by 55-DMA nL1N2090NR
• Some skepticism re harrowing US sales data, but Q4 GDP f/cs tumble
• Other Dec and 2019 data suggest US econ still in decent shape
• Upside limited on fear US-China trade deal's structurally stymied
• Cautious sub-111 trading expected until trade talk pressers Fri
• Yen crosses fall back, but still within recent ranges
• US Jan IP and CU, Feb Michigan Sentiment are on tap Friday

ANZ Research discusses AUD/NZD outlook in light of its latest recommendation* to buy the recent dip targeting a move towards 1.07.

"We think a long AUD/NZD trade provides a good way of adding a positive risk trade to the portfolio, as fruitful US-China talks make it increasingly likely that the deadline for the imposition of additional tariffs against China will be pushed out.  We have shown in the past that the AUD has a higher beta to risk appetite than the NZD. Indeed, prior to the past couple of weeks, much of the weakness in the AUD came from the weakness in China and the volatility in stock markets globally.  From here, if we were to see an extension of positive risk appetite (which we think is 50/50), we would expect the AUD to outperform," ANZ argues. 

"As such, we think this trade not only provides a good opportunity to enter at fundamentally cheap levels where relative central bank dynamics are well priced, but also an opportunity to get long risk in a low-risk fashion," ANZ adds. 

--

*Recorded in eFXplus Orders

 

• EUR/USD longs get a boost from uniform US CPI downside miss nL1N2090LF
• Gains short lived after headlines suggest US-Sino trade talks struggle
• Market concerns on trade, DE GDP q/q miss, Brexit and elections weigh
• CPI gains erode but risk bounces & US$ stays heavy, EUR/USD near 1.1300 late
• Long upper wick on daily candle & falling monthly RSI give techs a bear tint
• Although US$ gets dented EUR/USD gains will be difficult nL1N2090SQ

AUD/USD looked set to break above the 10-DMA after the uniformly poor U.S. December retail sales report but U.S.-Sino trade headlines quickly shifted sentiment, showing the aussie will remain hostage for now.
The dismal sales data sent the U.S. rate complex lower and tightened Australian-U.S.
yield spreads which helped lift AUD/USD above 0.7120 but the gains were short lived.
The trade talks have a greater impact on the pair.
A WSJ report [ Click here

] stating that Beijing is holding a hard line on forced technology transfers sent risk sentiment sharply lower.
Early equity and commodity gains reversed and AUD/USD followed suit.
Gains for the day were erased as the February 13 low was pierced.
AUD/USD's price action reminds traders of the strong correlation between aussie and global trade issues. AUD/USD longs will need to see positive results from the current talks to make gains. If talks fall apart sour risk sentiment will likely drive AUD/USD below the daily cloud top and support near 0.7050.
The 0.6980/95 support zone would then be targeted.

MUFG Research discusses GBP outlook in light of the latest Brexit development.

"Another development has been the evolution of an amendment by former Labour minister Yvette Cooper and Conservative MP Oliver Letwin, which aims to take the  threat of No Deal off the table. In particular, the amendment would give parliament the power to block a No Deal Brexit if PM May had not been able to get a deal passed through parliament by mid-March, and comes with the threat of potentially fifteen ministerial resignations. A similar amendment proposed by Cooper was rejected with the support of Labour rebels last month but it appears more likely that the amendment would pass when it is put to a vote on the 27th February," MUFG notes. 

"This will be an important test of whether parliament is sufficiently concerned at this point in time about a No Deal Brexit happening to unite behind removing this risk. If this amendment passes, it should be positive for the pound," MUFG argues. 

The big downside surprise to December U.S. retail sales data has taken the shine off the dollar and lifted EUR/USD nL1N2090LF, but the euro will struggle to secure further gains.
The U.S. rate complex has fallen hard after the data which has tightened German-U.S.
spreads, but the post-data reaction might be short-lived.
The December sales period covered by the data was marked by extreme volatility in financial markets, which likely had a negative effect.
Volatility has fallen sharply in early-2019, and that could indicate an improvement for future retail sales data.
German Q4 GDP (q/q) came in flat versus expectations for +0.1 percent, which reinforces the anemic conditions nL1N2070SF for euro zone growth.
Brexit, potential U.S. tariffs, U.S.-Sino trade and concerns on Spanish and EU elections are continual bearish risks facing euro.
Monthly technicals highlight the downside risks as consolidation of long-term losses persists and RSI is biased down.
EUR/USD longs will need future U.S. data releases to deteriorate as drastically, as seen in today's retail sales report, if the pair is to rally.
If U.S. data strengthens, EUR/USD could soon break lower from its broad 1.12001.1600 range nL1N2080QN.