Mid-Day Report: Markets in Range as Investors Calmed Down

Markets are generally in tight range today with dollar a bit softer. The pull back in dollar is so far mild while the recovery in crude oil and gold lack follow through buying. It looks as if risk aversion flows in the markets pull back from last week's climax and investors have calmed down a bit. Some more consolidations would possibly be seen in near term. But, sterling, which faces some pressure on political issues today, would probably gyrate lower even though other currencies stay in range.

The pound is so far the weakest currency this month and focus is turning to GBP/CAD today, which leads the top movers chart. Canadian dollar was relatively resilient last week, as supported by solid job report and has bottomed earlier than others against dollar. GBP/CAD's break of 1.6670 support today confirms that rebound from 1.6397 has completed at 1.7282 already. Further downside is in favor towards lower end of recent range at 1.6233/6397 next and break will confirm long term down trend resumption. In short, we'd expect sterling to under perform Canadian dollar in most time frames.

On the data front, Japan current account surplus narrowed to JPY 1.10T in December. Eco watchers survey, current, rose more than expected to 38.8 in January. Swiss unemployment rate unexpectedly dropped to 4.1% in Jan. Retail sales rose stronger than expected by 4.7% yoy in DEcember. Eurozone Sentix investor confidence dropped sharply to -8.2 in February. Canada housing starts rose slightly to 186k in January.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.3592; (P) 1.3669; (R1) 1.3754; More.

With 4 hours MACD crossed above signal line, an intraday low might be in place at 1.3585 and bias is turned neutral. Some more consolidations could be seen, but upside should be limited by 1.3852 support turned resistance and bring fall resumption. Below 1.3585 should target 61.8% retracement of 1.2329 to 1.5143 at 1.3404 first. Break will target 161.8% projection of 1.5143 to 1.4217 from 1.4578 at 1.3076 next.

In the bigger picture, three wave rise from 1.2329 is treated as consolidation to fall from 1.6039 only and should have completed at 1.5143 already. Fall from 1.5143 is tentatively treated as resumption of the whole down trend form 1.6039 and should target a new low below 1.2329. Break of 1.4217 resistance is needed to be the first signal of medium term bottoming. Otherwise, outlook will remain bearish even in case of strong rebound.

Economic Indicators Update

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