EURUSD TECHS: Bull Theme Remains In Play

There'll be more focus on European Equities on the Open, and going forward.

Estoxx future (VGH5) continues to trade near Friday's high, Cash Estoxx (SX5E) traded at its highest level in two decades (highest since Sept 2000) on Friday, Bank index (SX7E) was at its highest level since 2015, and the FTSE and Dax traded at a new all time record highs.

• Calls: Estox 50: +0.25%, Dax: +0.15%, CAC: +0.25%, FTSE +0.04%, SMI +0.19%.

• RES 4: 0.6429 High Dec 12
• RES 3: 0.6384 High Dec 13               
• RES 2: 0.6302/35 High Jan 6 / 50-day EMA   
• RES 1: 0.6229/47 20-day EMA / High Jan 15
• PRICE: 0.6220 @ 07:53 GMT Jan 20 
• SUP 1: 0.6131 Low Jan 13   
• SUP 3: 0.6100 Round number support
• SUP 3: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
• SUP 4: 0.5994 1.618proj of the Sep 30 - Nov 6 - 7 price swing

A bearish trend condition in AUDUSD remains intact and the latest shallow recovery appears corrective. The pair has recently breached 0.6179, the Dec 31 low, maintaining the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too. Scope is seen for an extension towards the 0.6100 handle next. Initial firm resistance is 0.6229, 20-day EMA (pierced). The 50-day EMA is at 0.6335.

Little net movement in GBP STIR pricing this morning.

• 63.5bp of cuts priced through year-end after briefly touching 36bp last week.
• Next 25bp cut fully discounted come the end of the March MPC, ~90% priced through the February decision.
• SONIA futures flat to -1.5.
• Much of the weekend domestic headline flow centred on political posturing ahead of U.S. President Trump’s inauguration.
• That event dominates the macro calendar today.
• UK labour market data is due tomorrow.
• The dovish and centrist members of the BoE MPC are focusing more on growth data and deemphasising labour market data.
• We (and the market) still pay attention to the wage data in particular and are concerned it may increase more than the Bank estimates in H125, although we do see increased risks of downside growth shocks putting some downside pressure on wages.
• Expect our full preview of that release later today.
• Flash PMI data is due Friday.
• The market could be very sensitive to the PMIs, given the focus on any signs that the UK economy may be slowing further.