• The precious metal builds on last week's gains.
  • US Dollar Index extends slide on Monday.
  • Trading volume thins out in the NA session.

After closing the previous week $8 higher, the troy ounce of the precious metal started the week on a strong note and recorded steady gains to touch its highest level since April at $1327.50. However, the President's Day holiday in the U.S. weighed on the trading volume in the last hours and caused the XAU/USD pair to go enter a consolidation stage. As of writing, the pair was up 0.35% on the day at $1236.

Although the market sentiment seems to have improved amid rising hopes for this week's talks in Washington to lead to a final trade deal following President Trump's optimistic tweet over the weekend, the safe-haven gold didn't have a difficult time finding demand. The economic hardship the euro area is facing and the uncertainty surrounding Brexit negotiations are two of the main reasons why investors are still looking for a safer alternative.

Additionally, the broad-based selling pressure surrounding the greenback provided an additional boost to the pair. The US Dollar Index, which posted losses on Thursday and Friday last week, opened with a bearish gap and struggled to make a meaningful recovery in the absence of fundamental triggers. At the moment, the DXY is down 0.15% on a daily basis at 96.80.

Key technical levels

The initial resistance for the pair aligns at $1327.5 (daily high) ahead of $1332 (Apr. 25, 2018, high) and $1338 (Apr. 9, 2018, high). On the downside, supports could be seen at $1320 (daily low), $1313 (20-DMA) and $1300 (psychological level). Meanwhile, today's upsurge lifted the CCI indicator on the daily chart above the 100 level, suggesting that buyers are in control of the price action.

  • Pound outperforms despite UK political headlines.
  • GBP/USD holds firm above 1.2900, 150 pips above last week lows.

The GBP/USD pair is consolidating gains and remains near the highs, holding above 1.2900. Earlier today, it climbed to 1.2937, the strongest level since last Wednesday.

During the last hours, it has been moving sideways, in a small range between 1.2910 and 1.2932. The pound is holding firm to daily gains and is the top performer among majors.

The move higher took place amid a slide of the US dollar across the board. Political development in the UK had no impact on the pound. Today, seven members of the Parliament quit from the Labour Party to form an independent group.

Regarding Brexit, the uncertainty still prevails. Comments from Minister David Lidington, saying that the UK government might be able to re-negotiate the deal with the EU or delay Brexit, favored the pound modestly.

Volatility is expected to continue subdued in the wake of the President's Day holiday in the US. The greenback is posting mix results on Monday.

Tomorrow in the UK, jobs data will be released. “We estimate the unemployment rate (three-month average) was unchanged at 4.0%, but it is probably a close call as to whether it fell to 3.9% or not. We estimate average weekly earnings ex bonuses (three-month average) were 3.3% y/y higher than in December 2017,” wrote analysts at Danske Bank. In the US, the next key even will be on Wednesday, with the release of the FOMC minutes.

Technical Levels

GBP/USD

Overview:
Today Last Price: 1.2917
Today Daily change: 0.0025 pips
Today Daily change %: 0.19%
Today Daily Open: 1.2892
Trends:
Daily SMA20: 1.2992
Daily SMA50: 1.2824
Daily SMA100: 1.2878
Daily SMA200: 1.3007
Levels:
Previous Daily High: 1.2898
Previous Daily Low: 1.2785
Previous Weekly High: 1.2959
Previous Weekly Low: 1.2773
Previous Monthly High: 1.3214
Previous Monthly Low: 1.2438
Daily Fibonacci 38.2%: 1.2855
Daily Fibonacci 61.8%: 1.2828
Daily Pivot Point S1: 1.2818
Daily Pivot Point S2: 1.2745
Daily Pivot Point S3: 1.2705
Daily Pivot Point R1: 1.2932
Daily Pivot Point R2: 1.2972
Daily Pivot Point R3: 1.3045

  • AUD/USD is correcting the weekly bearish outlook, climbing from the Feb lows down in the 0.7050s but capped a figure higher.
  • AUD/USD is currently trading at 0.7140, from a high of 0.7160 and up from a low of 0.7132.

With the US out for President's day, the markets are quiet and offer a time to reflect and plan ahead. We have the Minutes of the RBA Policy meeting from the 5 February, although this is likely to be a non-event.

The switch-to neutral /dovish Governor speech the next day was enough for markets to take a view on the Aussie, especially accompanied by the February 8 Statement on Monetary Policy that slashed growth forecasts and delayed yet again the return to target for core inflation.

"However, the actual policy statement released on Tuesday was rather upbeat (and misleading for the markets) suggesting that all was on track, just a small delay compared with expectations late last year," analysts at TD Securities noted and we will perhaps see why from the minutes today.

Key data ahead

We will see CFTC positioning and then wage growth and jobs data:

"We see wage growth chipping away at rate cut expectations. We look for +0.7%/q and 2.44%/y, and closer to 2¾%/y by year-end. For Jan employment our +20k and a steady 65.6% participation rate leaves the unemployment rate at 5.0%. An average of +20k/m leaves the u-rate steady at 5% by year-end, the RBA’s f/c. The Bank will be concerned if it creeps back towards 6% again,"

the analysts at TDS explained.

On the trade front, we will be keeping an ear out for progress between the US and Chinese officials this week meeting in Washington where a Chinese delegation led by Vice-Premier Liu He is expected to leave on Tuesday for the American capital after last week’s trade talks in Beijing produced ‘progress’, according to Chinese press. A tweet by US President Donald Trump on the ongoing trade war is a “positive” signal, brightening prospects of a deal from this week’s talks in Washington, according to an opinion piece published by China’s major state media outlets yesterday.

AUD/USD levels

Analysts at Commerzbank explained that AUD/USD spent much of last week attempting to recover:

"It has based slightly ahead of our near term target at the 0.7022/15 October low and 50% retracement. Cloud support comes in at 0.7066. Rallies are eroding the 55 day ma at 0.7148 and this should be enough to reassert upside pressure to the 200 day ma at 0.7271 and the .7295 January high. Near term weakness is viewed as corrective only. Price action in January was exhaustive – the market charted a hammer (reversal). We have a TD perfected setup on the daily chart and a 13 count on the weekly chart. This suggests the down move ended at 0.6738."

The ECB's chief economist Peter Praet recently crossed the wires saying that the ECB could adopt rate guidance if the economy were to slow sharply.

Key quotes (via Reuters)

  • What counts for us is medium-term and we see positive and negative factors there.
  • A rebound is likely, but it is too early to say by how much.
  • Biggest problem by far is political uncertainties persisting for so long, related to protectionism, Brexit.
  • Question is how financial sector would react; there's risk banks could act even more pro-cyclically than usual.
  • TLTROs have been a very useful tool to deal with impairments in transmission of monetary policy, are part of toolbox.
  • We do need to monitor the transmission of monetary policy through banking system carefully.
  • If euro area economy were to slow more sharply, we could adapt guidance on rates, complemented by other measures.
  • Further asset purchases may not be needed at all to ensure that financing conditions are appropriate.
  • It may make sense for ECB to review overall mon pol framework in future, now may not be right time.

EUR/USD daily chart

  • EUR/GBP is trading in a sideways trend below the 200-day simple moving averages (SMAs).
  • This Monday, on US President’s Day, the financial markets might offer limited moves.

EUR/GBP 4-hour chart

  • EUR/GBP is trading between the 50 and 100 SMAs on the 4-hour chart suggesting a sideways market in the medium-term.

EUR/GBP 30-minute chart

  • EUR/GBP is trading below the main SMAs suggesting bearish momentum in the short-term.
  • EUR/GBP is rejecting 0.8760 resistance. On the way down next supports are seen near 0.8740 and 0.8720 figure.
  • Resistance is seen at 0.8760 and 0.8785 level.

Additional key levels

EUR/GBP

Overview:
Today Last Price: 0.8755
Today Daily change: -9 pips
Today Daily change %: -0.10%
Today Daily Open: 0.8764
Trends:
Daily SMA20: 0.8753
Daily SMA50: 0.8885
Daily SMA100: 0.8857
Daily SMA200: 0.8865
Levels:
Previous Daily High: 0.8834
Previous Daily Low: 0.8751
Previous Weekly High: 0.8842
Previous Weekly Low: 0.8743
Previous Monthly High: 0.9119
Previous Monthly Low: 0.8617
Daily Fibonacci 38.2%: 0.8783
Daily Fibonacci 61.8%: 0.8802
Daily Pivot Point S1: 0.8733
Daily Pivot Point S2: 0.8701
Daily Pivot Point S3: 0.865
Daily Pivot Point R1: 0.8815
Daily Pivot Point R2: 0.8865
Daily Pivot Point R3: 0.8897

  • Trade optimism helps antipodeans stay strong.
  • US Dollar Index drops to 96.70 area.

The NZD/USD pair gained traction in the early trading hours of the Asian session and reached its highest level in 12 days at 0.6893 but struggled to preserve its bullish momentum. With markets quieting down in the last couple of hours amid the thin trading volume, the pair has gone into a consolidation phase and was last seen trading at 0.6872, adding 0.1% on the day.

Over the weekend, U.S. President Trump, via Twitter, said that big progress was being made on many different fronts in China trade talks ahead of this week's round of negotiations in Washington and helped trade-sensitive currencies such as the AUD and NZD start the week on a positive note. Additionally, New Zealand PM Jacinda Arden told reporters that the relationship with New Zealand and China were 'robust and mature', to provide an additional boost to the kiwi.

On the other hand, the greenback struggled to recover the losses that it suffered in the second half of the previous week and supported the pair's rally. However, with the trading volume thinning out in the second half of the day due to the President's Day holiday in the U.S., the US Dollar Index steadied near the 96.70 level and didn't allow the pair to continue to push higher.

On Tuesday, the RBA will publish the minutes of its last meeting and the AUD/USD pair's reaction to the publication could be the next catalyst for the pair.

Key technical levels

NZD/USD

Overview:
Today Last Price: 0.6872
Today Daily change %: 0.10%
Today Daily Open: 0.6865
Trends:
Daily SMA20: 0.6815
Daily SMA50: 0.6789
Daily SMA100: 0.6732
Daily SMA200: 0.6753
Levels:
Previous Daily High: 0.6875
Previous Daily Low: 0.6809
Previous Weekly High: 0.6875
Previous Weekly Low: 0.6719
Previous Monthly High: 0.694
Previous Monthly Low: 0.6516
Daily Fibonacci 38.2%: 0.685
Daily Fibonacci 61.8%: 0.6834
Daily Pivot Point S1: 0.6824
Daily Pivot Point S2: 0.6784
Daily Pivot Point S3: 0.6758
Daily Pivot Point R1: 0.689
Daily Pivot Point R2: 0.6916
Daily Pivot Point R3: 0.6956

  • The demand for the buck remains subdued today.
  • US-China trade hopes keep weighing on USD.
  • US markets are closed due to the President’s Day holiday.

The greenback, in terms of the US Dollar Index (DXY), remains on the defensive and so far unable to pick up any serious pace around the 96.70 region.

US Dollar Index weak on risk-on mood

The index remains depressed and under pressure, prolonging the correction lower from Friday’s fresh yearly peaks in the vicinity of 97.40, always against the backdrop of thin trade conditions due to the holiday in the US markets.

In fact, the greenback is down for yet another session today and flirting with the 10-day SMA in the 96.70 region. The downside pressure in the buck has been intensifying as of late in light of the recent progress at the US-China trade talks, which are set to resume later this week in Washington.

In the US calendar, the next significant event will be the publication of the FOMC minutes on Wednesday, seconded by the key Philly Fed index on Thursday, all along a slew of Fed speakers.

What to look for around USD

Market participants have considered as positive the recent developments from the US-China negotiations in Beijing ahead of this week’s further talks in Washington. In the meantime, investors will remain vigilant on upcoming results on US calendar and the release of the FOMC minutes. Despite market participants are holding on to the idea of a potential slowdown in the US economy in the next months, the deterioration in overseas fundamentals in combination with ‘softer’ stance in G10 central banks keeps occasional dips in the buck somewhat shallow. This view is reinforced by rising scepticism over a potential halt in the Fed’s tightening cycle this year.

US Dollar Index relevant levels

At the moment, the pair is losing 0.22% at 96.71 and a break below 96.65 (low Feb.18) would open the door to 96.42 (55-day SMA) and finally 96.31 (21-day SMA). On the other hand, the next hurdle emerges at 97.37 (2019 high Feb.15) followed by 97.71 (2018 high Dec.14) and then 97.87 (monthly high Jun.20 2017).

USD/CAD daily chart

  • On the daily time-frame, USD/CAD is trading between the 50 and the 100-day simple moving averages (SMAs) suggesting a sideways market.
  • This Monday, US President’s Day, might offer limited moves in the financial markets.

USD/CAD 4-hour chart

  • USD/CAD is trading between the 100 and 200 SMAs suggesting bearish momentum in the medium-term.

USD/CAD 30-minute chart

  • USD/CAD is trading below its main SMAs suggesting a bear market in the short-term.
  • Bears will likely try to reach 1.3200 figure to the downside.
  • Resistance is seen at 1.3240 and 1.3270 level.

Additional key levels

USD/CAD

Overview:
Today Last Price: 1.3235
Today Daily change: -12 pips
Today Daily change %: -0.09%
Today Daily Open: 1.3247
Trends:
Daily SMA20: 1.3241
Daily SMA50: 1.3363
Daily SMA100: 1.3245
Daily SMA200: 1.3148
Levels:
Previous Daily High: 1.3314
Previous Daily Low: 1.3245
Previous Weekly High: 1.3341
Previous Weekly Low: 1.3196
Previous Monthly High: 1.3664
Previous Monthly Low: 1.3118
Daily Fibonacci 38.2%: 1.3272
Daily Fibonacci 61.8%: 1.3288
Daily Pivot Point S1: 1.3223
Daily Pivot Point S2: 1.32
Daily Pivot Point S3: 1.3154
Daily Pivot Point R1: 1.3292
Daily Pivot Point R2: 1.3338
Daily Pivot Point R3: 1.3362

Irish foreign minister Simon Coveney was out on the wires recently, reiterating that the EU is unwilling to reopen the Brexit withdrawal agreement.

Key quotes (via Reuters)

  • No-deal Brexit would be “crazy” outcome of three years of Brexit negotiations.
  • UK parliament’s asks must be reasonable.
  • EU cannot remove backstop insurance and replace it with ‘wishful thinking’.
  • Time-limit to backstop would kick issue down in time, cannot be accepted.
  • Ireland spending hundreds of millions of euros preparing for no-deal Brexit.
  • Declaration on future ties is the area for manoeuvre on backstop assurances.
  • ‘We want to find ways’ to help pm may ratify Brexit deal in parliament.
  • US Dollar Index continues to push lower below 97.
  • European equity indexes stay quiet on Monday.
  • President's Day holiday in the United States.

The USD/JPY pair is trading in a narrow band on Monday as markets are struggling to identify the next catalyst. As of writing, the pair was up 0.1% on the day at 110.58.

The US Dollar Index, which closed the previous week on a negative note on dovish Fed expectations, extended its drop on Monday and was last down 0.23% on a daily basis at 96.70. Last Friday, Atlanta Fed President Bostic said that the Fed was in no rush to arrive at neutral rates and San Francisco Fed President Daly told The Wall Street Journal that there was a good chance that the Fed could refrain from hiking rates in 2019.

In the remainder of the session, the pair is likely to continue to move sideways as the President's Day holiday in the U.S. is expected to weigh on the trading volume.

Later in the week, the FOMC's meeting minutes, which is scheduled to be released on Wednesday, will be watched closely by the participants. On the other hand, trade balance data from Japan will be looked upon for fresh impetus on Tuesday.

Key technical levels

The pair could encounter the first technical resistance at 111 (psychological level/Feb. 13 high) ahead of 111.30 (100-DMA) and 111.55 (200-DMA). On the downside, supports are located at 110/109.90 (psychological level/20-DMA), 109.50 (50-DMA) and 108.80 (Jan. 30 high).