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Daily Pivots: (S1) 1.2481; (P) 1.2524; (R1) 1.2598; More....

Intraday bias in USD/CAD remains neutral for the moment. On the upside, above 1.2687 will extend the rebound from 1.2246 to retest 1.2919 key near term resistance. On the downside, below 1.2450 will target 1.2246 first. Break there will extend the fall from 1.2919 and target 1.2061 keys support level.

In the bigger picture, the rebound from 1.2246 is mixing up the medium term outlook. Nonetheless, USD/CAD is staying below falling 55 week EMA, hence, the bearish case is in favor. That is, fall from 1.4689 is not completed yet. Sustained break of 1.2061 key support will carry larger bearish implication and target 61.8% retracement of 0.9406 to 1.4689 at 1.1424. However, firm

Daily Pivots: (S1) 0.7902; (P) 0.7934; (R1) 0.7977; More...

AUD/USD recovers mildly today after drawing support from 4 hour 55 EMA. But it's staying below 0.7988 temporary top. Intraday bias remains neutral at this point. On the upside, above 0.7988 will extend the rebound to retest 0.8135. On the downside, below 0.7758 will resume the fall from 0.8135 and target 0.7500 key near term support. At this point, there is no strong case for a range breakout yet and 0.7500/8135 could hold for a while.

In the bigger picture, medium term rebound from 0.6826 is seen as a corrective move. It might still extend higher but we'd expect strong resistance from 38.2% retracement of 1.1079 to 0.6826 at 0.8451 to limit upside to bring long term down trend resumption. On the downside, break of 0.7500 support will now be an important signal that such corrective rebound is completed.

Commodity currencies are trading generally higher in Asian session, following the rebound in Asian stocks. Meanwhile, weakness is seen in Dollar, Yen and Swiss Franc. But after all, most pairs are confined by Friday's range. The economic calendar is light today, also with US on holiday. So, trading will likely be subdued. Nonetheless, the week ahead if packed with some important events, including minutes of RBA, Fed and ECB meeting. The forex markets will come back to life for certain.

Japan exports grew 14th straight months

Japan exports grew solidly by 12.2% yoy in January, above expectation of 10.3% yoy. That's the 14th straight month of growth, led by 30.8% yoy growth in trade with China. Imports grew 7.9% yoy, below expectation of 8.3% yoy. Trade balance came to a deficit of JPY - 0.94T, smaller than expectation of JPY -1T. But that's still the first trade deficit in eight months. In adjusted terms, trade balance came in at JPY 0.37T surplus.

EU Verhofstadt: Voting down May's Brexit deal means crisis

European Parliament's chief Brexit negotiator Guy Verhofstadt said in a BBC interview that EU was "not against a transition period" regarding Brexit. And he added that "it's normal that in a transition, you simply continue the existing rules and the existing policies." However, it would be unacceptable to violate the freedom of movement of people principle during the transition. And that would be "penalizing citizens" of the EU. Verhofstadt also warned if the UK parliament votes down Prime Minister Theresa May's Brexit deal, it could be a "crisis in British politics". And that might lead to a re-election, a new government and a new Brexit position. And in that case, there will be risk of Brexit "without any arrangement".

The week ahead: RBA, FOMC and ECB minutes in focus

Three central banks will release monetary policy minutes this week. RBA minutes will likely just echo the neutral stance of its top officials. Governor Philip Lowe is clear with his messages, RBA won't follow other global central banks in tightening. A key reason for that is RBA didn't cut interest rate that deep as others like Fed and ECB. Spare capacity in the economy is expected to keep wage growth subdued. The cool down in housing markets also gives the central some more room to wait, with inflation staying on the lower side of the target band.

FOMC minutes will also likely reaffirm the case for a March hike. Fed fund futures are pricing in over 80% chance of that already. Higher than expected inflation reading in January and solid wage growth is keeping the case for three hikes alive. Indeed, markets are already starting to expect as many as four hikes this year. January FOMC minutes are not expected to alter such expectations.

ECB January minutes will be the more interesting one. There are calls from officials for the central bank to alter its communications. The purpose is to send a clear message that the asset purchase program is coming to an end after September. But so far, ECB didn't change much in its forward guidance yet. And the markets would like to see what discussions were carried out during the meeting regarding the change in communications.

In addition, there are a number of economic data to watch including Eurozone PMIs, German ZEW and Ifo, UK employment extra. Canadian retail sales and CPI would be particularly watched for gauging the chance of another BoC rate hike in near term.

Here are some highlights for the week ahead:

• Monday: Eurozone current account
• Tuesday: New Zealand PPI; RBA minutes; Swiss trade balance; German ZEW, PPI; Eurozone consumer confidence; Canada wholesale sales
• Wednesday: Australia wage price index; Japan PMI manufacturing, all industry index; Eurozone PMIs; UK employment; US PMIs, existing home sales, FOMC minutes
• Thursday: German Ifo; ECB meeting accounts; UK GDP revision; Canada retail sales; US jobless claims
• Friday: New Zealand retail sales; Japan CPI; Eurozone CPI final; Canada CPI

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7902; (P) 0.7934; (R1) 0.7977; More...

AUD/USD recovers mildly today after drawing support from 4 hour 55 EMA. But it's staying below 0.7988 temporary top. Intraday bias remains neutral at this point. On the upside, above 0.7988 will extend the rebound to retest 0.8135. On the downside, below 0.7758 will resume the fall from 0.8135 and target 0.7500 key near term support. At this point, there is no strong case for a range breakout yet and 0.7500/8135 could hold for a while.

In the bigger picture, medium term rebound from 0.6826 is seen as a corrective move. It might still extend higher but we'd expect strong resistance from 38.2% retracement of 1.1079 to 0.6826 at 0.8451 to limit upside to bring long term down trend resumption. On the downside, break of 0.7500 support will now be an important signal that such corrective rebound is completed.

Economic Indicators Update

Key Highlights

• The Euro traded higher this past week, but it failed to move above the 1.2550 resistance against the US Dollar.
• There is a major bullish trend line forming with support at 1.2380 on the 4-hours chart of EUR/USD.
• The US Building Permits rose 7.4% in Jan 2018 (MoM), more than the forecast of 3.5%.
• The US Housing Starts grew 9.7% in Jan 2018 (MoM), better than the forecast of 3.4%.

EURUSD Technical Analysis

The Euro made good ground this past week and traded above 1.2500 against the US Dollar. The EUR/USD pair faced sellers near 1.2550 and later it started a downside correction.

Looking at the 4-hours chart of EUR/USD, there was a clear failure to break an important resistance area near 1.2520-1.2550. The pair started a downside correction and moved below the 23.6% Fib retracement level of the last wave from the 1.2205 low to 1.2555 high.

However, there are many supports on the downside, including a major bullish trend line with support at 1.2380 on the same chart. Moreover, the 50% Fib retracement level of the last wave from the 1.2205 low to 1.2555 high is near 1.2380.

As long as the pair is above the 1.2350-1.2380 support zone, it remains in an uptrend. On the upside, an initial resistance is at 1.2450, followed by 1.2500. However, the most significant resistance is near 1.2520-1.2550, which would be hard to breach.

UK US Building Permits and Housing Starts

This past Friday, the US Building Permits and Housing Starts report for Jan 2018 was released by the US Census Bureau, at the Department of Commerce.

The US Building Permits was forecasted to increase by 3.4% in Jan 2018 compared with the previous month. However, the actual was better, as there was a rise of 7.4%. Similarly, the Housing Starts increased 9.7% in Jan 2018 compared with the previous month, better than the forecast of 3.4%.

The report added about the building permits:

This is 7.4 percent (±1.2 percent) above the revised December rate of 1,300,000 and is 7.4 percent (±1.9 percent) above the January 2017 rate of 1,300,000. Single-family authorizations in January were at a rate of 866,000; this is 1.7 percent (±1.3 percent) below the revised December figure of 881,000.

Overall, the Euro could decline a few pips, but the stated 1.2350-1.2380 support zone holds the key for the next move.

EURUSD - With the pair retaining its bull pressure it remains biased to the upside medium term. But we may see a pullback in the new week. On the upside, resistance comes in at 1.2450 level with a cut through here opening the door for more upside towards the 1.2500 level. Further up, resistance lies at the 1.2550 level where a break will expose the 1.2600 level. Conversely, support lies at the 1.2350 level where a violation will aim at the 1.2200 level. A break of here will aim at the 1.2150 level. Below here will open the door for more weakness towards the 1.2100. All in all, EURUSD faces further bull threats but with caution of a pullback.

USDCHF - With the pair weakening further on Thursday, more decline is likely. On the downside, support lies at the 0.9250 level. A turn below here will open the door for more weakness towards the 0.9200 level and then the 0.9150 level. On the upside, resistance resides at the 0.9300 level where a break will clear the way for more strength to occur towards the 0.9350 level. Further out, resistance comes in at the 0.9400 level. Above here if seen will turn attention to 0.9450. All in all, USDCHF faces further upside pressure on correction.

Don't go barking up the wrong tree in the Year of the Dog

A predictable wave of profit taking and risk reduction, as is standard form ahead of US long weekends, dominated Friday session leading to USD gains as US yields pulled back. And while the broader US dollar negativity continues to seep through capital markets, some traders are suggesting of potential shifts in conviction levels while others believe Friday to be little more than pre-weekend risk reduction. But one thing that's clear, even the most prolific purveyors of price action are baffled regarding the breakdown of historical correlations across most asset classes.

One telling feature, however, is long-term investors continue to shun the greenback and this should continue to weigh on near-term sentiment. So no don't go barking up the wrong tree in this Year of the Dog, stick to the basics and follow the flow.

By way of the ordinary course of developments, the various market holiday observances might challenge liquidity conditions. Golden Week celebrations continue across Asia through Wednesday, while both the US and Canada take holidays Monday. Still, it could be an actionable week with numerous Fed speakers on tap and the FOMC minutes are sure to liven things up. Keep in mind; March rate hike is all but entirely priced-in so the markets will be keying on forwarding guidance.

As the markets pivot to Fed speak and the FOMC minutes this week, “deficit mania” is sounding a few decibels lower this morning.But none the less, ongoing concerns about swelling deficit's and the Feds sequence of interest rate normalisation should be the markets key focus this week and the primary drivers of near-term volatility.

And while US Bond yields eased on Friday, traders see icebergs ahead suggesting Friday's price action was little more than a reprieve amidst a bear market.

Equity Markets

Equity markets continue climbing the wall of worry despite inflationary fears gaining momentum and Bond Yields moving higher.Eventually, something has to give, but so far investors are betting on corporate earning rather than the shifting macro narratives.

Oil markets

Oil prices finished modestly higher on Friday to chalk up a weekly gain as prices continue to see-saw between the binary descriptions from OPEC's ongoing efforts to blow out the worldwide glut against the indications of rising U.S. production.Although Fridays price movements were likely position sensitive amid USD risk reduction and book squaring ahead of tomorrows Oil contract expiration

We should expect the WTI whipsaw to continue as debate rages between US shale and OPEC, but we're starting to carve out near-term ranges as longer-term oil bulls remain in dip buying mode with shale oil hedger looking to sell upticks.

Gold Markets

Gold prices eased late Friday as the dollar tentatively lifted off the canvas, despite taking a standing eight count earlier in the session when the DXY hit a three year low. A couple of hours USD short covering is unlikely to change the broader USD negativity, but when coupled with inflationary concerns heightening and a probable follow-up correction in equities markets around the corner, golds haven demand should continue to glitter.

On the physical side of demand, China Lunar New Year has seen few gold bars change hands despite physical premiums easing as futures prices continue to grind higher.

G-10 Currency Markets

Japanese Yen

Although the reappointment of Kuroda and the reshuffle of deputy governors is slightly more dovish BoJ, it is hard to reverse USDJPY downside given that continuous USD weakness could further drag USDJPY into the abyss. With the tables turned upside down on ten year US yield to JPY correlation and the US ” deficit mania. ” likely to return, USDJPY is in a precarious position.

Predictably we heard from Japan as Currency Chief Asakawa that he's readying the necessary action to prevent “one-sided” currency moves, but with the Buck getting pounded against all major currencies, Japans verbal intentions are falling on deaf ears.

The Euro

The pace of the EURUSD rally post-CPI last week surprised everyone but none the less if not for timely comments( seems always to happen when EUR rallies) from ECB Cœuré, we should have closed closer to the 1.2500 rather than 1.2400 handles. His remarks spooked the markets in pre-weekend risk reduction mode after he suggested policymakers are unanimous in sequence when market positioning was suggesting the Hawks were gaining the upper hand. But at some juncture, the market will ignore this verbal balderdash, and in reality, 1.3000 shouldn't be unimaginable before long predicated on strong fundamentals, the realisation of more hawkish ECB guidance but also the mechanics of the taper could reverse bond outflows.

Asia FX

Malaysian Ringgit

External drivers and specifically the broader USD moves will dictate the Ringgit momentum this week with the critical focus on USDJPY 106 level.But on the positive side of the equation, one of the primary headwinds that we considered to be a negative for the Ringgit was higher US yields which typically and historically have supported the USD. But the US interest rate to FX correlation broken, and despite USD bond yields pushing much higher t, the USD continues to sell off.

The markets are still feeling the hangover effect from the Chinese Lunar New Year, and risk appetite is waning and with a plethora of Fed speak along with the FOMC minutes likely to cause an uptick in volatility this week, offshore demand could remain muted. None the less, 106 level USDJPY will be a crucial US dollar sentiment gauge, and if the market pushes through again this week, we could see the Ringgit move to 3.87 and below as traders would then set sights on the critical 3.85 level.

Singapore Dollar

The US CPI fallout was somewhat unusual; triggering moves out of the dollar and into riskier currencies, so the SGD benefited as the CNH rallied hard this week.But CNH could start to underperform. Let me qualify this next comment as no one, and I mean no one knows what the Pboc are going to do. So we can only make hay from innuendo and strategically placed criticisms from regulators in HK press. But there seems to be a pickup in debate onshore about the merits of further RMB appreciation which could dent SGD appeal. But in the mean times, we should enjoy the SGD strength ( not because I get paid in SGD, although that is always a welcome bonus). But there is some real value appeal that has emerged in SGD ahead of this weeks budget, as a rosier outlook in the statement could be the precursor to monetary tightening.But also appealing to foreign investors is the government will take measures to cover the current operating fiscal deficit gap.

EUR/USD breached 1.2537 high to 1.2555 last week but quickly retreated. Initial bias is turned neutral this week first. On the upside, break of 1.2555 will revive the bullish case of up trend resumption and target 100% projection of 1.0569 to 1.2091 from 1.1553 at 1.3075. However, break of 1.2205 will confirm rejection by 1.2516 key fibonacci level and trend reversal.

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. 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.

In the long term picture, 1.0339 is seen as an important bottom as the down trend from 1.6039 (2008 high) could have completed. It's still early to decide whether price action from 1.0339 is developing into a corrective or impulsive pattern. Reaction to 38.2% retracement of 1.6039 to 1.0339 at 1.2516 will give important clue to the underlying momentum.

USD/JPY's down trend continued last week and reached as low as 105.54. A temporary low was formed with 4 hour MACD crossed above signal line. Initial bias is neutral this week for consolidation first. But recovery should be limited below 108.72 support turned resistance and bring fall resumption. Below 105.54 will target 100% projection of 118.65 to 108.12 from 114.73 at 104.20 next.

In the bigger picture, current development argues that the corrective pattern from 118.65 is extending. The solid break of 61.8% retracement of 98.97 to 118.65 at 106.48. now suggests that the pattern from 125.85 high is possibly extending. Deeper fall could be seen through 98.97 key support (2016 low). This bearish case will now be favored as long as 110.47 resistance holds.

In the long term picture, the rise from 75.56 (2011 low) long term bottom to 125.85 top is viewed as an impulsive move, no change in this view. Price actions from 125.85 are seen as a corrective move which could still extend. In case of deeper fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77. Up trend from 75.56 is expected to resume at a later stage for above 135.20/147.68 resistance zone.

GBP/USD rebounded to 1.4144 last week but formed a temporary top there and retreated. Initial bias is neutral this week first. The pull back from 1.4345 should have completed with three waves down to 1.3764. Above 1.4144 will target 1.4345 first. Break will resume larger up trend and target long term trend line resistance (now at 1.5105). On the downside, below 1.3764 will extend the correction to 1.3651 resistance turned support instead.

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 1.4279) so far. Break of 1.3038 support, will suggests that rise from 1.1946 has completed and will turn outlook bearish for retesting this low.

In the longer term picture, rise from 1.1946 should at least be correcting the whole long term down trend form 2.1161 and should target 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466. It too early to tell if it's developing into a long term up trend. We'll monitor the upside momentum and reaction to 1.5466 to decide later.