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USD/CAD recent bounce continues, the pair trades above 1.275, nearing hourly resistance given at 1.2796 (25/12/2018 high). Hourly support is maintained at 1.2466 (15/02/2018 low). The technical structure indicates that continued rise is expected in the short-term.

In the longer term, the pair is trading between resistance point at 1.3805 (05/05/2017 high) and support at 1.2128 (18/06/2015 low). Strong resistance is given at 1.4690 (22/01/2016 high). The pair is likely to head lower. The pairs is trading at its 200 DMA.

USD/CHF interrupted its consolidation phase, heading above the 0.94 range. The pair approaches hourly resistance at 0.9469 (24/01/2018 high). Hourly support remains at 0.9188 (16/02/2018 low). The technical structure suggests short-term increase.

In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support lies at 0.9072 (07/05/2015 low) while resistance at 1.0344 (15/12/2016 high) is distanced. The technical structure favours a long term bullish bias since the unpeg in January 2015.

USD/JPY slightly rises, trading above 107. USD/JPY downward pattern is however maintained. Hourly support and resistance are given at 105.55 (16/02/2018) and 109.09 (31/01/2018 high). The technical structure suggests short-term upside moves.

We favor a long-term bearish bias. Support at 105.55 (03/05/2016 low) is almost reached. A gradual rise toward the major resistance at 125.86 (05/06/2015 high) seems unlikely. Expected to decline further support at 101.20 (09/11/2016 low).

GBP/USD trades at the 1.39 range, currently trading indistinctly. The upward trend of November 2017 is intact. The pair trades between hourly support and resistance given at 1.3742 (16/01/2018) and 1.4151 (05/02/2018). The technical structure suggests further short-term sideway moves.

The long-term technical pattern is reversing. The Brexit vote had paved the way for further decline but the pair is moving to 2016 highs. Long-term support and resistance are given at 1.1841 (07/10/2017 low) and 1.5018 (24/06/2016 high).

EUR/USD is weakening, approaching hourly support at 1.2165 (17/01/2018 low). Hourly resistance remains at 1.2434 (06/02/2018 high). The technical structure suggests downside moves.

In the longer term, the momentum is turning largely positive. We favor a continued bullish bias. Key resistance is holding at 1.2886 (15/10/2014 high) while strong support lies at 1.1554 (08/11/2017 low).

Whither the dollar?

The US dollar rose across the board yesterday afternoon as the new chair of the Federal Reserve made some hawkish comments during a congressional testimony. Jerome Powell revised his assessment of the US economy upward and suggested that the Fed could increase borrowing rates four times this year, compared to three hikes expected by market participants and signalled by the central bank so far.

The dollar index broke the 90.0 resistance level and stabilised around 90.45 amid a sharp drop in EUR/USD and a continued rally in USD/CHF. The single currency fell 1% to $1.2220, while the dollar rose to 0.9415 against the Swiss franc. On the equity side, stocks fell across the globe with the S&P 500 sliding 1.27% to 2,744 and the Dow Jones closing at 25,410, down 1.16% on the session. In the bonds market, US Treasury yields spiked on Powell's remarks with the 10-year yield hitting 2.92%, while on the short-end of the curve, the 2-year yield printed a fresh 9-year high at 2.28%.

We have the feeling that investors don't know where to stand as the effects of higher borrowing rates will have various implications for the US economy. Indeed, it could trigger a slowdown in growth as the cost of debt increase, making more difficult for private companies and consumers to borrow money and increasing the debt burden for government. On the other hand, it will make the dollar more attractive for investors. For now, it seems that the market is still undecided: the greenback is still trading range bound against most of its peers.

European markets closed mixed amid Powell's testimony and weak February economic data

European markets closed in red territory on Tuesday following a decrease in early trading session and moving in different directions after Powell's testimony in the afternoon, reinforced by weaker Consumer Confidence and Consumer Price Index data published the same day. European Euro Stoxx 50 closed at 3'458 (-0.15%), hampered by Real Estate (-1.55%), Materials (-1.35%), Consumer Staples (-1.25%) and Telcos (-0.97%) while supporters were IT (+0.61%) and Financials (+0.56%). European market places followed the same trend, closing at 7'282 (-0.10%) for FTSE 100, 12'491 (-0.29%) DAX, 5'344 (-0.01%) CAC 40, 22'724 (+0.08%) FTSE MIB and 9'900 (-0.02%) IBEX 35. EUR/USD slightly declined, trading at 1.2234 (-0.67%) following Powell's speech that gave a real boost to the greenback against all major currencies while GBP/EUR, EUR/CHF and EUR/JPY are trading at 1.1363, 1.1508 and 131.05. European Bond yields gain ground, as the 30-year, 10-year and 2-year are estimated at 1.319 (+1.53%), 0.680 (+4.23%) and -0.521 (+3.08%).

February Consumer confidence in euro zone decreased at 0.10, falling from January 17-year high at 1.40 while German and Spanish Preliminary Consumer Price Index Y/Y were given at 1.40% (consensus: 1.50%) and 1.10% (consensus: 0.90%), showing signs of continuing growth, as uncertainties regarding euro zone reforms, Italian elections and German GroKo are cooling down.

As the US data slipped overnight, showing signs of weakening the economy in the US, the data from China is also showing a slowing Manufacturing sector, yet from Europe, the data has been okay this week.  US Equities pulled back later in the session yesterday, causing the Dax to follow ever slightly, trade with caution as we may see a breakout move in the Dax30 in hours to come.

The price is very close to POC zone 12387-12407, and the move above the blue trend line could spike the price up to D H3 12490 and D H4 camarilla pivot - 12541. Only a 4h close above D H4 might mike a continuation move towards 12626. However, below 12385 the price might drop to D L4 - 12336 and 12262. Watch for these levels.

W H3 -Weekly Camarilla Pivot (Weekly Interim Resistance)

W L3 - Weekly Camarilla Pivot (Weekly Interim Support)

W H3 - Weekly Camarilla Pivot (Weekly Interim Resistance)

W H4 - Weekly Camarilla Pivot (Strong Weekly Resistance)

D H4 - Daily Camarilla Pivot (Very Strong Daily Resistance)

D L3 – Daily Camarilla Pivot (Daily Support)

D L4 – Daily H4 Camarilla (Very Strong Daily Support)

POC - Point Of Confluence (The zone where we expect price to react aka entry zone)

The pair bounced above 0.78 handle after retesting key supports at 0.7780 zone (200/100 SMA’s) in Asia.

Strong fall on Tuesday was contained here, with repeated failure, proving the strength of support.

The pair showed little reaction on downbeat Chinese PMI data released in early Asian trading, but immediate outlook remains negative and favoring renewed attacks at key supports within 0.7780 and 0.7760 zone (consisting of 200/100SMA’s / daily cloud base and 09 Feb low).

Extended consolidation is likely to precede as bears show strong hesitation and fresh bullish momentum is building.

Stronger upticks are expected to ideally remain under 0.7858/68 (10/55SMA bear-cross / falling 20SMA) with extensions to be capped by cloud top (0.7884) and keep bearish bias in play.

Res: 0.7830, 0.7858, 0.7868, 0.7884
Sup: 0.7780, 0.7770, 0.7760, 0.7742

Notes/Observations

European inflation data continues to highlight that it had yet to show more convincing signs of a sustained upward adjustment (Euro Zone flash CPI in-line but lower from month ago levels; France, Italy both miss expectations

Germany Feb Unemployment Change beats expectations as the unemployment rate matched a post German reunification record low; March GFK Consumer Confidence moved off recent 16-year highs

China February PMI data showed a softening of conditions beyond what is a normal seasonal softening of activity owing to the Chinese New Year.

Chair Powell’s semiannual Congressional testimony had a very positive outlook on growth, fiscal stimulus, and inflation

Asia:

Bank of Japan (BOJ) Gov Kuroda reiterates BOJ easing was to reach price target. Would not continue easing if CPI was at 2% in 'stable' manner but any normalization would be very gradual process

BOJ reduced its purchases in the over 25-year JGBs part of its daily bond buying operations (2nd time in 2018 this occurred in this part of the curve) **Note: BOJ had previously noted that day to day JGB buying operations did not indicate future course of monetary policy. Target was yield curve and not the amount of JGB purchases

Japan Jan Preliminary Industrial Production registers its largest monthly decline since March 2011 (M/M: -6.6% v -4.0%e)

China Feb Govt Official Manufacturing PMI registered its lowest level since July 2016 (50.3 v 51.2e) Govt cited the Lunar New Year Holiday for decline and expected the economy to resume stable operations

China PBoC Open Market Operation (OMO): Skip operations for a 2nd straight session

China Commerce Ministry (MOFCOM): China will take necessary measures to protect legal (trade) rights

Europe:

UK govt official stated that PM May won't agree to the European Court of Justice (ECJ) as an arbiter of the exit deal; would offer 'robust' response to EU on withdrawal

EU to publish first draft of Brexit treaty which was expected to say that Northern Ireland might have to follow EU single market rules to avoid a hard border. DUP party (part of May coalition) had stated if the Irish sea became a trade border it would withdraw its support for the UK govt

German Acting Fin Min Altmaier: Govt to maintain its stern fiscal orthodoxy it pursued under Schaeuble even if the Finance Ministry post was given to a Social Democrat in next Govt

Americas:

Treasury Sec Mnuchin: the goal is for US companies to participate fairly in the China market. Had begun very high level conversations on Trans-Pacific Partnership (TPP). Rejoining the regional trade pact was an option for President Trump

District Judge Gonzalo Curiel ruled Trump administration had the authority to waive a host of environmental laws and other regulations to begin construction

Economic Data:

(IN) India Feb Manufacturing PMI: 52.1 v 52.4 prior (7th month of expansion)

(ZA) South Africa Jan M3 Money Supply Y/Y: 5.8% v 6.5%e; Private Sector Credit Y/Y: 5.5% v 6.7%e

(DE) Germany Mar GfK Consumer Confidence: 10.8 v 10.9e

(NO) Norway Jan Retail Sales W/Auto Fuel M/M: -0.4% v +0.4%e

(NO) Norway Q4 Manufacturing Wage Index Q/Q: 0.1 v 0.4% prior

(FI) Finland Q4 GDP Q/Q: 0.7 v 0.2% prior; Y/Y: 2.7 v 2.5% prior

(DK) Denmark Q4 Preliminary GDP Q/Q: 1.0% v 0.9%e; Y/Y: 1.2% v 1.0% prior

(TR) Turkey Jan Trade Balance: -$9.1B v -$9.1Be

(MY) Malaysia Jan CPI Y/Y: 2.7% v 2.8%e

(TH) Thailand Jan Current Account: $5.2B v $4.3Be; Overall Balance of Payments (BOP): +9.0B v -$1.2B prior; Trade Account Balance: $1.3B v $1.5B prior; Exports Y/Y: 16.7 v 9,3% prior; Imports Y/Y: 22.5 v 15.4% prior

(FR) France Q4 Preliminary GDP (2nd reading) Q/Q: 0.6% v 0.6%e; Y/Y: 2.5% v 2.4%e

(FR) France Feb Preliminary CPI M/M: -0.1% v +0.3%e; Y/Y: 1.2% v 1.4%e

(FR) France Feb Preliminary CPI EU Harmonized M/M: 0.0% v 0.2%e; Y/Y: 1.3% v 1.5%e

(FR) France Jan Consumer Spending M/M: -1.9% v +0.4%e; Y/Y: -1.9% v +1.1% e

(FR) France Jan PPI M/M: 0.1% v 0.0% prior; Y/Y: 0.9% v 1.7% prior

(CH) Swiss Feb KOF Leading Indicator: 108.0 v 106.0e

(CZ) Czech Jan PPI Industrial M/M: 0.5% v 0.4%e; Y/Y: 0.5% v 0.4%e

(AS) Austria Q4 Final GDP SA Q/Q: 0.8% v 0.7% prelim; Y/Y: 2.9% v 2.8% prelim

(HU) Hungary Jan PPI M/M: 0.3% v 0.0% prior; Y/Y: 3.3% v 3.9% prior

(SE) Sweden Q4 GDP Q/Q: 0.9% v 1.0%e; Y/Y: 3.3% v 3.4%e

(SE) Sweden Jan Retail Sales M/M: 0.1% v 0.4%e; Y/Y: 1.2% v 2.9%e

(SE) Sweden Jan PPI M/M: 0.8% v 1.6% prior; Y/Y: 2.5% v 2.3% prior

(SE) Sweden Dec Non-Manual Workers Wages Y/Y: 2.5% v 2.2% prior

(DE) Germany Feb Unemployment Change: -22K v -15Ke; Unemployment Claims Rate: 5.4% v 5.4%e

(CH) Swiss Feb Credit Suisse Survey Expectations: 25.8 v 34.5 prior

(PL) Poland Q4 Final GDP Q/Q: 1.0% v 1.0% prelim; Y/Y: 5.1% v 5.1%e

(PT) Portugal Feb Preliminary CPI M/M: -0.7% v -1.0% prior; Y/Y: 0.6% v 1.0% prior

(PT) Portugal Feb Preliminary CPI EU Harmonized M/M: -0.6% v -1.2% prior; Y/Y: 0.7% v 1.1% prior

(ZA) South Africa Jan PPI M/M: 0.3% v 0.3%e; Y/Y: 5.1% v 5.1%e

(EU) Euro Zone Feb Advance CPI Estimate Y/Y: 1.2% v 1.2%e; CPI Core Y/Y: 1.0% v 1.0%e

(IT) Italy Feb Preliminary CPI (NIC incl. tobacco) M/M: 0.1% v 0.2%e; Y/Y: 0.6% v 0.7%e

(IT) Italy Feb Preliminary CPI EU Harmonized M/M: -0.3% v -0.1%e; Y/Y: 0.7% v 1.0%e

Fixed Income Issuance:

(IN) India sold total INR140B vs. INR140B indicated in 3-month, 6-month and 12-month bills

(SI) Slovenia opened its book to sell EUR-denominated Mar 2028 note; guidance seen +30bps to mid-swaps

(SE) Sweden sold SEK5.0B vs. SEK5B indicated in 6-month bill; Avg Yield: -07483% v -0.8233% prior; bid-to-cover: x v 1.57x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.1% at 381.8, FTSE -0.2% at 7266, DAX -0.2% at 12472, CAC-40 -0.2% at 5334 , IBEX-35 -0.5% at 9855, FTSE MIB +0.1% at 22755 , SMI -0.4% at 8952, S&P 500 Futures +0.2%]

Market Focal Points/Key Themes:

European Indices trade lower across the board following a weaker close in Wallstreet overnight following comments from new FED Chair Powell.

It was another busy day on the corporate calendar, with notable earners trading higher include Ahold Delhaize, Dialog Semi, St James Place; Notable downisde movers include German Dax component Bayer, following a miss on the top and bottom line, while ITV, Taylor Whimpy, Travis Perkins trade lower in the UK. Biomerieux trades sharply lower in France, Solvay trades lower in Belgium.

Looking ahead notable earners include Loews, Valeant and TJX Companies.

Movers

Consumer Discretionary [ ITV [ITV.UK] -5.1% (Earnings), Travis Perkins [TPK.UK] -7.8% (Earnings), Foxtons [FOXT.UK] -1.6% (Earnings), Ahold Delhaize [AD.NL] +2.7% (Earnings)]

Industrials [ Solvay [SOLB.BE] -2.5% (Earnings), Kuehne & Nagel [KNIN.CH] -4.6% (Earnings)]

Materials [Salzgitter [SZG.DE] -1.3% (Earnings)]

Healthcare [Bayer [BAYN.DE] -3.3% (Earnings), Biomereux [BIM.FR]-10% (Earnings)]

Financial [Admiral [ADM.UK] +1.6% (Earnings), St James Place [STJ.UK] +4.0% (Earnings) ]

Technology [Dialog Semi [DLG.DE] +9.3% (Earnings)]

Real Estate [Taylor Wimpey [TW.UK] -4.6% (Earnings)]

Speakers

ECB's Hansson (Estonia) stated that General Council to continue along its policy path. He himself did not want to apply for the position of the ECB President

Bank of Japan (BOJ): announced its Bond purchases for month of March which would maintain current pace of buying to prior month levels

Currencies

USD was holding onto gains in the aftermath of Fed Chair Powell’s inaugural Humphrey Hawkins testimony. Overall the market take of the testimony was interpreted as hawkish. Dealers noted that Powell stopped short of confirming that his expectation for 2018 for 4 rate hikes but established that his personal outlook for the economy had strengthened since December

EUR/USD was lower by 0.1% just ahead of the NY morning. Numerous bits of European inflation data continued to highlight that CPI had yet to show more convincing signs of a sustained upward adjustment. pair at 1.2220 area just ahead of the NY morning.

GBP/USD was holding below the 1.39 handle as markets awaited the EU publication of its first draft of Brexit treaty.

USD/JPY lower by 0.2% but holding above the 107 level.

Fixed Income

Bund Futures trades up 7 ticks at 159.33 as Bunds are underpinned as curves bull flatten as month-end gains focus. Upside targets 159.75, while a return lower targets the157.75 level.

Gilt futures trade at 121.73 up 21 ticks as Gilts continue to attempt to push higher. Support continues to stand at 120.75 then 120.15, with upside resistance at 122.00-122.25 zone then 122.85.

Tuesday's liquidity report showed Monday's excess liquidity fell to €1.845T from €1.848T prior. Use of the marginal lending facility fell to €20M from €25M prior.

Corporate issuance saw 13 issuers raise $13.3B in the primary market

Looking Ahead

05:30 (DE) Germany to sell €3.0B in 0.5% Feb 2028 Bunds

06:00 (PT) Portugal Q4 Final GDP Q/Q: No est v 0.7% prelim; Y/Y: No est v 2.4% prelim

06:00 (IL) Israel Jan Unemployment Rate: No est v 4.0% prior

06:00 (EU) Russia to sell combined RUB50B in 2024 and 2034 OFZ Bonds

06:00 (EU) EU published first draft of Brexit treaty

06:30 (CL) Chile Central Bank Traders Survey

06:45 (US) Daily Libor Fixing

07:00 (US) MBA Mortgage Applications w/e Feb 23rd: No est v -6.6% prior

07:00 (ZA) South Africa Jan Budget Balance (ZAR): No est v 13.2B prior

07:00 (ZA) South Africa Jan Trade Balance (ZAR): -1.7Be v +15.7B prior

07:00 (BR) Brazil Jan National Unemployment Rate: 12.0%e v 11.8% prior

07:00 (CL) Chile Jan Industrial Production Y/Y: 3.5%e v 0.3% prior, Manufacturing Production Y/Y: 2.7%e v -3.4% prior, Copper Production Total: No est v 536.6K prior

07:00 (CL) Chile Jan Unemployment Rate: 6.3%e v 6.4% prior

07:00 (IN) India Q4 GDP Y/Y: 7.0%e v 6.3% prior, GVA Y/Y: 6.7%e v 6.1% prior, 2018 GDP Annual Estimate Y/Y: 6.5%e v 7.1% prior

08:05 (UK) Baltic Dry Bulk Index

08:30 (US) Q4 Preliminary GDP Annualized Q/Q: 2.5%e v 2.6% advance; Personal Consumption: 3.6%e v 3.8% advance

08:30 (US) Q4 Preliminary GDP Price Index: 2.4%e v 2.4% advance; Core PCE Q/Q: 1.9%e v 1.9% advance

08:30 (CA) Canada Jan Industrial Product Price M/M: +0.5%e v -0.1% prior; Raw Materials Price Index M/M: No est v -0.9% prior

09:00 (BE) Belgium Q4 Final GDP Q/Q: 0.5%e v 0.5% prelim; Y/Y: No est v 1.9% prelim

09:45 (US) Feb Chicago Purchasing Manager: 64.0e v 65.7 prior

10:00 (US) Jan Pending Home Sales M/M: 0.5%e v 0.5% prior; Y/Y: No est v -1.8% prior

10:00 (MX) Mexico Jan Net Outstanding Loans (MXN): No est v 4.052T prior

10:00 (CO) Colombia Jan National Unemployment Rate: No est v 8.6% prior; Urban Unemployment Rate: 13.2%e v 9.8% prior

10:00 (PT) Portugal Fin Min Cendano in Parliament

10:30 (US) Weekly DOE Crude Oil Inventories

11:00 (SE) Sweden Central Bank (Riksbank) Gov Ingves speech in Lulea, Sweden

12:00 (CA) Canada to sell 2-Year Bonds

12:30 (BR) Brazil Jan Nominal Budget Balance (BRL): -8.9Be v -65.6B prior; Primary Budget Balance: +32.0Be v -32.3B prior

14:00 (AR) Argentina Dec Economic Activity Index (Monthly GDP) M/M: No est v 0.4% prior; Y/Y: 2.6%e v 3.9% prior

14:00 (AR) Argentina Jan Industrial Production Y/Y: 2.6%e v 0.3% prior, Construction Activity Y/Y: No est v 14.5% prior

(MX) Mexico Central Bank (Banxico) Quarterly Inflation Report (QIR)

The Pound Sterling has been bound by an ascending channel against the Australian Dollar since September 2017. The GBP/AUD pair bounced off the lower boundary of a dominant pattern on September 12 and has since surged against the Aussie.

The exchange rate has moved closer to the border of a medium-scale triangle and could be set for a breakout. The pair tested the monthly R1 at 1.7861 and moved back south. From a theoretical aspect, this might be a correctional movement. However, this correctional movement could find support set by the weekly pivot point at 1.7783.

The overall market sentiment is bullish and it is likely to continue for the following week until it reaches the upper boundary of the junior channel where the weekly R1 is located.