  One of the leading issues in high-$T_C$ superconductors is the origin of the
pseudogap phase in underdoped cuprates. Using polarized elastic neutron
diffraction, we identify a novel magnetic order in the YBa$_2$Cu$_3$O$_{6+x}$
system. The observed magnetic order preserves translational symmetry as
proposed for orbital moments in the circulating current theory of the pseudogap
state. To date, it is the first direct evidence of an hidden order parameter
characterizing the pseudogap phase in high-$T_C$ cuprates.
