Sample Category Title

Daily Pivots: (S1) 0.9380; (P) 0.9411; (R1) 0.9465; More...

USD/CHF is staying in range of 0.9321/9490 and intraday bias remains on the downside. On the upside, break of 0.9490 will revive the case of near term reversal, on bullish convergence condition in 4 hour MACD. In that case, outlook will be turned bullish. On the downside, break of 0.9321 will indicate completion of the rebound from 0.9186. Intraday bias will be turned back to the downside for 0.9186 first. Break will resume larger down trend to 0.9115 projection level.

In the bigger picture, fall from 1.0342 is seen as a medium term down trend. Deeper decline should be seen to 100% projection of 1.0342 to 0.9420 from 1.0037 at 0.9115. Break will target 161.8% projection at 0.8545. In any case, sustained trading above 55 day EMA is needed to be the first sign of medium term reversal. Otherwise, outlook will stay bearish even in case of strong rebound. 

Daily Pivots: (S1) 1.3862; (P) 1.3887; (R1) 1.3928; More....

GBP/USD is still staying in the corrective pattern from 1.3711 temporary low and intraday bias remains neutral first. Decline from 1.4345 is in favor to extend. Below 1.3711 will resume the fall from 1.4345 through 1.3651 resistance turned support. We'll look for strong support from 38.2% retracement of 1.1946 to 1.4345 at 1.3429 to contain downside and bring rebound. This will be the preferred case as long as 1.4144 resistance holds.

In the bigger picture, as long as 1.3038 support holds, medium term outlook in GBP/USD will remains bullish. Rise from 1.1946 is at least correcting the long term down from 2007 high at 2.1161. Further rally would be seen back to 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466. However, GBP/USD fails to sustain above 55 month EMA (now at 1.4259) so far. Break of 1.3038 support, will suggest that rise from 1.1946 has completed and will turn outlook bearish for retesting this low.

Short Term USDJPY Elliott Wave view suggests that the rally to 107.9 ended Minor wave X. Pair is expected to resume lower while bounces stay below this level. Down from Minor wave X at 107.91, Minor wave Y is in progress as a double three Elliott Wave Structure. Minute wave ((w)) of Y ended at 105.23 as a zigzag Elliott Wave pattern. Above from there, Minute wave ((x)) is currently in progress to correct cycle from February 21 peak as a double three Elliott Wave structure in 3, 7, or 11 swing.

Internal of Minute wave ((w)) of Y unfolded as a zigzag Elliott Wave pattern where Minutte wave (a) ended at 106.35, Minutte wave (b) ended at 107.67, and Minutte wave (c) of ((w)) ended at 105.23. Up from there, internal of Minute wave ((x)) is unfolding as a double three Elliott Wave Structure where Minutte wave (w) ended at 106.46 and Minutte wave (x) ended at 105.43. Near term, expect pair to extend higher towards 106.66 – 106.95 area to end Minutte wave (y) of ((x)), then as far as pivot at 2/21 peak (107.9) stays intact, expect pair to extend lower. We don’t like buying the pair.

USDJPY 1 Hour Elliott Wave Chart

Daily Pivots: (S1) 1.2381; (P) 1.2413 (R1) 1.2441; More....

A temporary top is in place at 1.2443 in EUR/USD with 4 hour MACD crossed below signal line. Intraday bias is turned neutral first. For the moment, further rise will remain mildly in favor as long as 1.2268 minor support holds. Firm break of of 1.2555 and 1.2516 long term fibonacci level will carry larger bullish implications. On the downside, below 1.2268 minor support will turn bias back to the downside for 1.2154 instead.

In the bigger picture, key fibonacci level at 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516 remains intact despite attempts to break. Hence, rise from 1.0339 medium term bottom is still seen as a corrective move for the moment. Rejection from 1.2516 will maintain long term bearish outlook and keep the case for retesting 1.0039 alive. Firm break of 1.1553 support will add more medium term bearishness. However, sustained break of 1.2516 will carry larger bullish implication and target 61.8% retracement of 1.6039 to 1.0339 at 1.3862.

The financial markets show that investors are well prepared for the steel and aluminum tariff by the US. Dow closed down just -0.33% overnight, at 24801.36. 10 year yield gained 0.006 to 2.883, staying in near term sideway consolidation. Nikkei is trading up 0.5% at the time of writing while HSI is up 1.4%. In the currency markets, Yen is paring some gains as risk aversion recedes and commodity currencies recover today. In particular, Canadian Dollar responded rather positively to the news that the country will be temporarily excluded from the tariffs. Meanwhile, Euro is broadly softer today, digesting recent gains and as traders are preparing for ECB.

Trump to sign tariff order today, exclude Canada and Mexico temporarily

US President Donald Trump is set to ignore all the oppositions from Republicans and business leaders and sign the order for steel and aluminum tariffs on Thursday afternoon at the White House. It's being planned to hold at 3:30pm ET in the Roosevelt Room. A top White House trade advisor Peter Navarro said "the proclamation will have a clause that does not impose these tariffs immediately on Canada and Mexico". But whether there will be permanent exclusion will depend on NAFTA negotiations. Press secretary also gave similar comments as "there are potential carve-outs for Canada and Mexico based on national security, and possibly other countries as well".

EU responded formally yesterday on the counter measures in a statement. Commissioner for Trade Cecilia Malmström said after the meeting of the College of Commissioners that "we have made clear that if a move like this is taken, it will hurt the European Union. It will put thousands of European jobs in jeopardy and it has to be met by firm and proportionate response. And she pointed to "the root cause of the problem in the steel and aluminium sector is global overcapacity" and, " a lot of steel and aluminium production takes place under massive state subsidies, and under non-market conditions."

Fed Bostic: No certainty to what products would be pulled into trade wars

Atlanta Fed President Raphael Bostic offered some direct comments on monetary policies. He said the tax cuts "were forcing us to more aggressive policy" But, "the trade stuff is uncertainty in the other direction" referring to Trump's initiative to impose steel and aluminum tariffs. He added that "the U.S. in this latest round has identified aluminum and steel as issues. Europe has signaled they would hit a whole host of other products that are not aluminum or steel. There is just not certainty as to which products are going to get pulled into this." And, "anyone who is engaged in any kind of international trade space has got to be concerned."

BOC Left Rates On Hold, More Concerned About US Trade Policy

As widely anticipated, BOC left the policy rate unchanged at 1.25% yesterday. The accompanying statement was more cautious than the previous one, over the trade outlook. Policymakers suggested that 'trade policy developments are an important and growing source of uncertainty for the global and Canadian outlooks', in addition to reiteration of the need for remaining 'cautious in considering future policy adjustments'. Expectations of another rate hike in April diminished after the announcement.

More on BoC: BOC Left Rates On Hold, More Concerned About US Trade Policy

Australia recorded massive AUD 1.06b trade surplus in January

Australia recorded massive trade surplus of AUD 1.06b in January, a turnaround from December's AUD -1.15b trade deficit. Exports jumped 4% mom to AUD 33.9b, with 4% rise in non-rural goods, 54% rise in non-monetary gold. Much more than offsetting -8% fall in rural goods. Imports, on the other hand, dropped -2% to AUD 32.9b. Consumption goods dropped -7%, non-monetary gold dropped -19%, capital goods dropped 1%.

China pledges "justified and necessary response" to trade wars"

China Foreign Minister Wang Yi pledged to have "justified and necessary response" to trade wars. He said that "A trade war has never been the right way to solve the problem, especially under globalization." And, these conflicts "will only harm everyone and China will surely make a justified and necessary response."

At the same time China's trade surplus widened to USD 33.7b in January, or CNY 225b. Both were way better than expectation of USD -8.5b or CNY -71b deficit. Exports rose 44.5% yoy. Imports rose 6.3% yoy.

ECB as the main focus ahead

ECB is widely expected to keep interest rate and asset purchase program unchanged today. The main question to the markets is when the central bank will start tweaking its forward guidance to pave the way for ending QE. This topic will certainly be discussed during the meeting. But it's uncertain whether ECB will take this meeting to do it. In particular, there could be some concerns over resurgence of Euro sceptics shown in Italian election. And, the intensification of risks of trade war with the US could also concerns policymakers much. But it should be noted that, the reactions in Euro could be huge even if ECB apply a "small dose" of chance in the language.

In addition, Swiss will release unemployment rate. Germany will release factory orders. Canada will release housing starts, new housing price index and building permits. US will release jobless claims as usual on a Thursday.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.2381; (P) 1.2413 (R1) 1.2441; More....

A temporary top is in place at 1.2443 in EUR/USD with 4 hour MACD crossed below signal line. Intraday bias is turned neutral first. For the moment, further rise will remain mildly in favor as long as 1.2268 minor support holds. Firm break of of 1.2555 and 1.2516 long term fibonacci level will carry larger bullish implications. On the downside, below 1.2268 minor support will turn bias back to the downside for 1.2154 instead.

In the bigger picture, key fibonacci level at 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516 remains intact despite attempts to break. Hence, rise from 1.0339 medium term bottom is still seen as a corrective move for the moment. Rejection from 1.2516 will maintain long term bearish outlook and keep the case for retesting 1.0039 alive. Firm break of 1.1553 support will add more medium term bearishness. However, sustained break of 1.2516 will carry larger bullish implication and target 61.8% retracement of 1.6039 to 1.0339 at 1.3862.

Economic Indicators Update

Trumps is set to ignore all the oppositions from Republicans and business leaders and sign the order for steel and aluminum tariffs on Thursday afternoon at the White House. It's being planned to hold at 3:30pm ET in the Roosevelt Room. A top White House trade advisor Peter Navarro said "the proclamation will have a clause that does not impose these tariffs immediately on Canada and Mexico". But whether there will be permanent exclusion will depend on NAFTA negotiations. Press secretary also gave similar comments as "there are potential carve-outs for Canada and Mexico based on national security, and possibly other countries as well".

Canadian dollar responded quite positively to the news with USD/CAD dipping sharply after failing to take out 1.3000.

China Foreign Minister Wang Yi pledged to have "justified and necessary response" to trade wars. He said that "A trade war has never been the right way to solve the problem, especially under globalization." And, these conflicts "will only harm everyone and China will surely make a justified and necessary response."

At the same time, released today, China's trade surplus widened to USD 33.7b in January, or CNY 225b. Both were way better than expectation of USD -8.5b or CNY -71b deficit.

Exports rose 44.5% yoy. Imports rose 6.3% yoy.

Australia recorded massive trade surplus of AUD 1.06b in January, a turnaround from December's AUD -1.15b trade deficit.

Exports jumped 4% mom to AUD 33.9b, with 4% rise in non-rural goods, 54% rise in non-monetary gold. Much more than offsetting -8% fall in rural goods.

Imports, on the other hand, dropped -2% to AUD 32.9b. Consumption goods dropped -7%, non-monetary gold dropped -19%, capital goods dropped 1%.

AUD/JPY is tentatively drawing strong support from key medium term cluster at 81.48, 50% retracement of of 72.39 (2016) low to 90.29 (2017 high) at 81.34. But the bigger hurdle is on 84.34 support turned resistance for confirming short term bottoming. Otherwise, risk will remain on the downside.

STOCKS

Most of the stock indices are testing immediate resistance as seen on the respective daily candle charts. While they hold, the indices may come off in the near term. Immediate view is bearish to sideways for most indices.

Dow (24801.36, -0.33%) tested a low of 24535 yesterday but moved up to close near 24800. As mentioned yesterday, 24500 is an immediate support which if holds, could produce a bounce back towards 25500 levels in the near term. Failure to bounce back from 24500, would trigger a fall to lower levels of 24000.

Dax (12245.36,+1.09%) made an intra-day high of 12275, attempting to test 12300 on the upside. If 12300 holds as interim resistance, the index may come off towards 1190 again; else a break above 12300 is needed to confirm a near term uptrend targeting 12500-12600 in the coming sessions. Wait to see price action near 12300.

Nikkei (21411.38, +0.75%) is stuck in the 21000-21600 region for the last few sessions and is likely to test 21800 on the upside just now. A break on either side of 21000-21800 zone would indicate further directional movement. Till then some narrow sideways movement may continue.

Shanghai (3283.44, +0.36%) came off a bit from immediate resistance near 3300 as seen on the daily candle chart. If that holds in the near term, the index could come off towards 3250-3200 again in the coming sessions.

Nifty (10154.20, -0.93%) and Sensex (33033.09, -0.85%) are trading lower and look bearish for the week. Nifty could test 10080-10020 on the downside whereas Sensex could come off towards 32500 in the next few sessions.

COMMODITIES

Brent (64.49) has immediate resistance near 66 and while that holds, price may test lower levels of 63-62. WTI (61.30), on the other hand, is likely to trade in the 60-62.50 levels in the coming sessions.

Gold (1328.30) came off sharply contrary to our expectation of moving up towards 1350. The price may be trapped in the 1345-1315 region for the next few sessions.

Copper (3.1370) came off from 3.1750 and could test 3.10-3.07 on the downside in the next few sessions before again moving back towards 3.20.

FOREX

The Dollar Index (89.596), after seeing lows near 89.4 in the last couple of days is currently trading near 89.6. As mentioned yesterday, there is crucial long term support level on the weekly line charts near 89.0-89.5. Whether the index will break this support zone and move down towards lower support on daily candles near 88 would highly depend on the two central bank meetings in the next 2 days – ECB and Bank of Japan. If the ECB makes a slight step forward in the direction of future tightening of its monetary policy, we might see Dollar weaken and the Dollar index come down below 89.0-89.5.

Euro (1.2403) saw a high of 1.2445 yesterday but is currently trading just above 1.24. We might see muted movement in the Euro in the few hours before the ECB meeting. The Euro infact stands at a crucial juncture right now. Looking at the daily candles, we see both a downmove towards support near 1.225-1.23 and an upmove towards resistance near 1.255 possible. The charts suggest slightly greater chances (say 55-60%) of it rising up. However, as mentioned yesterday too, Draghi might have to be as emphatic as his famous "whatever it takes" statement if he wants to talk the Euro down. In that case the Euro dips back to 1.23 and 1.22. Chances are 40-45%.

Dollar-Yen (106.09) has again bounced from the crucial 105.45-105.50 levels . This is the lowest level seen by the Dollar Yen in more than a year. The struggle to break this level might suggest that the markets are waiting for both the ECB and BOJ meetings. We repeat that a downmove towards 105 could imply medium term bearishness and could lead to a quick test of support close to 104.0-104.5, on daily and 3 day candles.

The Euro-Yen (131.570) had tested resistance near 132 on daily and 3 day candles day before yesterday and might see a slow downmove towards 129-130 in the coming sessions.

As mentioned yesterday, Pound (1.3904) is slowly moving up towards 1.395, which is seen as immediate resistance on daily candles. It is likely to dip after testing 1.395.

Dollar-Rupee (64.885): Test of Support at 64.80-75 still possible. Look for a bounce from there to 65.20-25. Else, break below 64.75 raises chances of 64.60-40.

INTEREST RATES

The German 10 Yr – US 10 Yr yield differential (-2.22%) has again dipped slightly towards long term support level near -2.25% via a dip in the German 10 year yield towards 0.655% and rise in US 10 Yr towards 2.877%. We will have to watch out for the ECB meeting later today and 21st March US Fed meeting as they now become extremely vital to the course of yields and forex rates. Any indication of tightening by the ECB might lead to a rise in the German yields and correspondingly the German – US yield spread.

US 10 Year Yield (2.877), US 30 year Yield (3.148), US 5 year yield (2.64), US 2 year yield (2.246) : US yields have been seeing sideways movement in a very narrow range for the past few days and are likely to see a significant move soon. The sentiment surrounding global politics indicate that a rise in US yields beyond long term resistance levels is imminent.

The first half of March should see muted movement in US yields – however, some volatility due to the ECB meeting on 8th March is possible. As the 21st March Fed meeting comes closer, there could be a rise in yields in anticipation of a rate hike.

(Long term resistance levels for the 4 yields have been as follows: 2.85-2.90, 3.20, 2.7 and 2.2 respectively – a decisive breach of these levels could happen in March 2nd half.)

Key Highlights

• The Euro made a nice upside move and traded above the 0.8920 resistance against the British Pound.
• There is a connecting bullish trend line forming with support at 0.8920 on the 4-hours chart of EUR/GBP.
• The Euro Zone Gross Domestic Product increased 0.6% in Q4 2017, similar to the market forecast.
• Today, the ECB Interest Rate Decision will be announced, and the central bank is likely to keep rates at 0%.

EURGBP Technical Analysis

The Euro started a fresh upside wave from the 0.8840 level against the British Pound. The EUR/GBP pair traded above 0.8900 and moved into a positive zone.

During the upside move, the pair broke a major bearish trend line with resistance at 0.8830 on the 4-hours chart. Moreover, there was a break above a crucial resistance zone at 0.8910-20.

It opened the doors for more gains and the pair traded toward the 1.236 fib extension of the last decline from the 0.8951 high to 0.8884 low. If the current trend continues, the pair may even test the 1.618 fib extension of the last decline from the 0.8951 high to 0.8884 low.

On the downside, there is a connecting bullish trend line forming with support at 0.8920 on the 4-hours chart. However, the most important support is near 0.8910, which was a resistance earlier.

Recently, the Euro Zone Gross Domestic Product for Q4 2017 was released by the Eurostat. The market was looking for a rise of around 0.6% in the GDP compared with the previous quarter.

The result was similar to the forecast as there was a 0.6% rise. In terms of the yearly change, there was a rise of 2.7%, similar to the forecast and the last reading.

Overall, the Euro may continue to rise versus the British Pound, and the 0.8900-10 support area remains a crucial zone for EUR/GBP.

Economic Releases to Watch Today

• German Factory Order for Jan 2018 (MoM) – Forecast -1.6%, versus +3.8% previous.
• ECB Interest Rate Decision – Forecast 0%, versus 0% previous.
• US Initial Jobless Claims – Forecast 220K, versus 210K previous.