The recovery in US Equities late on Friday has been sustained into the Asian session overnight, despite the fact that Japanese markets are taking a holiday. Last week saw a notable move lower as worsening economic data and doubts grew with regard to the US and China making progress on a resolution to their trade spat. The rally in the US session pared Friday’s earlier losses but failed to make much headway against Thursday’s move lower. China returns from its Lunar New Year celebrations today with gains on its stock markets. The Shanghai Composite has gained 1.2% with the CSI 3000 up 1.7%. The Hang Seng is the weakest of the three, only gaining 0.5%. Elsewhere in Asia, Stock Markets are trading lower. US and Chinese negotiators return to the table this week for more talks, which can impact valuations going forward. Gold is trading lower today while the US Dollar has strengthened somewhat. USDJPY has moved back up to the 110.000 level.
UK economic data is dominating proceedings this morning, with GDP expected to be flat at 0.0% from 0.2% previously, while Preliminary GDP is expected to move down to 0.3% from 0.6%. UK Manufacturing Production is expected to gain to 0.2% from -0.3% previously. Preliminary Business Investment is expected to slip to -1.3% from -1.1%, which was revised up from -1.2%. Construction Output is expected to fall to 0.2% from 0.6% and Industrial Production is expected to rise to 0.1% from -0.4%. UK Goods Trade Balance is expected to remain at -12.0B and the Index of Services is expected to remain at 0.3%.
The GBPCAD chart shows how the pair found resistance around the 1.7525 area towards the end of January and moved lower to 1.7000 before settling around the 1.7150 area today. A loss of the nearby support around 1.7151/1.7150 may result in a test down to 1.7100. Below this area the round number support around 1.7000 comes into play, including the recent low at 1.6984. A loss of this support area potentially hands the initiative to sellers, who might wish to target support around 1.6819/1.6800. Buyers may step in to support price around this area but a failure to do so might put lower levels at 1.6700 and 1.6600 into focus.
Resistance around 1.7200 has been tested as the high so far today. The Canadian Jobs data, released on Friday, showed that 66.8K jobs were added but Unemployment ticked up to 5.8% from 5.7%. This mixed data helped to create a doji candle for Friday that ate into some of Thursday’s rally, whose high around 1.7274 will have to be overcome to engage resistance at 1.7284/1.7300. A break above this area may open the way to 1.7377 and 1.7400, potentially leading to a test towards 1.7500. Both of the recent attempts to move higher have found resistance in this latter area.
The EURUSD chart has engaged its support around 1.1320, after breaking down under the rising support trend line for a second time last week. The first break down found support under 1.1300 at 1.1289 and price rallied higher to test the falling resistance trend line. The selloff has led to a drop to 1.1320 with a move below support targeting the higher low at 1.1265. Below this area the 1.1216 level may provide support ahead of 1.1200. Further selling that might push price under this level may result in sellers heading for 1.1150 or 1.1100.
Resistance at the rising support trend line around 1.1373 may be the target of buyers in the short term with a view to clearing this area and attacking resistance at 1.1400 and 1.1461. The main line of resistance comes in the form of the falling resistance trend line and a sustained, confirmed move above this line, around 1.1500 today, may force sellers to close their short positions and hand control to buyers. The next potential resistance above this line may pause any break out around 1.1568 as the lower high. Beyond this level 1.1600 and 1.1621 may come into view.