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Daily Pivots: (S1) 0.8872; (P) 0.8895; (R1) 0.8917; More...

Range trading continues in EUR/GBP, inside 0.8686/8928. Intraday bias remains neutral. Near term outlook will remain mildly bearish as long as 0.8928 resistance holds. On the downside, firm break of 0.8686 will resume whole decline from 0.9305. As 61.8% retracement of 0.8312 to 0.9305 should then be taken out too. Deeper decline would be seen to retest 0.8303/8312 support zone. Nonetheless, on the upside, break of 0.8928 will indicate near term reversal and turn outlook bullish for 0.9304 resistance.

In the bigger picture, there are various ways to interpret price actions from 0.9304 high. But after all, firm break of 0.9304/5 is needed to confirm up trend resumption. Otherwise, range trading will continue with risk of deeper fall. And in that case, EUR/GBP could have a retest on 0.8303. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside.

STOCKS

Dow (24893.49, +1.03%) has recovered well and looking bullish in the near term after a break of 24500 on the upside. Immediate target on the upside is 25000-25200 levels.

Dax (12339.16, +1.17%) is likely to range in the 12400-12000 region in the coming sessions. A break above 12400, if seen could take the price towards 12600 which is also a decent resistance. Overall while the index remains below 12600, view remains sideways to bearish.

Nikkei (21434.63, +1.33%) is up slightly and remains above 21000 support. We prefer support near 21000 to hold in the medium term, thus pushing the index towards 22200 or a little higher in the coming sessions. A break below 21000, if seen could make the index vulnerable to a sharp fall in the longer run.

Shanghai (3199.16, +0.45%) is trading a bit higher today, trying to recover from levels near 3050. Now the earlier support turned resistance near 3260 is important and while the index remains below 3260, near term is likely to remain bearish with a possibility of another fall from levels near 3230. Only a sustained rise above 3260 can take the index back to higher levels in the long term.

Nifty (10500.90, -0.37%) is holding well above 10380-10400 levels and while that holds, the prices may attempt to move up towards 10800 or even higher in the medium term. Sensex (34155.95, -0.42%) also has similar support near 33750 which is likely to hold and keep the price stable for now.

COMMODITIES

Brent (64.86) has moved up well from 62. Support as mentioned yesterday. 65 is an important levels for the near term. A sustained break above 65 is needed to move higher towards 67 in the medium term; else the price is likely to remain ranged in the 63-65 region for some time.

WTI (61.24) has moved up from the upper limit of the support region 57.30-58.00 as mentioned yesterday and is trading higher as expected. A test of 62 is possible in the coming sessions. A sustained rise above 62 is needed o confirm the possibility of further upside just now. Else another fall towards 59-58 could be possible.

Gold (1353.66) has also moved up as expected. A test of 1360 is possible over the next 1-2 sessions. Break above 1360 could take it higher towards 1375-1380 levels.

Copper (3.24) is trading higher and is likely to come off from resistance at 3.25. Near term looks bearish

FOREX

Strong rise in Euro (1.2458) overnight to test the Resistance on the Weekly Line chart, as mentioned yesterday. The previous high of 1.2537 (25-Jan) is the next Resistance to look at. If this also breaks, then we would look at 1.2600 and 1.2670. Having said that there are some chances of a dip from 1.2537. We will have to assess that.

Our target of 106.50 has also been met exactly on Dollar-Yen (106.50). There is some immediate Support at 106.00 and then deeper Support at 105.50, which we should give some respect to. Beware, however, that a break below 105.50 could be very bearish.

The Euro-Yen (132.67) has seen a low of 132.35, just above the target of 132 mentioned yesterday. It could take on more bearishness while below 133 and 134, but confirmation is needed in form of a break below 132.00-131.50.

Dollar-Rupee (64.09) trades at 63.95 on the NDF. We see Supports in the 63.90-85 region.

INTEREST RATES

US 10 Year Yield (2.91), US 30 year Yield (3.16), US 5 year yield (2.66), US 2 year yield (2.18) : Higher than expected inflation in Jan’18 has spooked bond investors globally, increasing the likelihood of a string of rate hikes by the US Fed this year. This is leading to a sell-off, thereby depressing bond prices and increasing yields. The near end yields have seen a rise of almost 15-17 bps in one day while the far end yields have seen a rise of 7-10 bps. As previously stated, our expectation was for yields to respect their long term resistance levels (2.85-2.90, 3.20, 2.7 and 2.2 respectively) in this month. We will have to see if renewed bearishness in the bond market proves us wrong. For now, the channels on short term charts show resistances near 2.9 and 3.16 for 10 year and 30 year respectively which sync well with the long term resistance view.

Daily Pivots: (S1) 1.1515; (P) 1.1550; (R1) 1.1602; More...

Intraday bias in EUR/CHF remains neutral as consolidation from 1.1445 is extending. With 1.1639 resistance intact, further decline is expected. Below 1.1445 will extend the corrective fall from 1.1832 to 1.1355 cluster support (38.2% retracement of 1.0629 to 1.1832 at 1.1372.) At this point, we'd expect strong support from there to contain downside and bring rebound.

In the bigger picture, a medium term top should be in place at 1.1832 on bearish divergence condition in daily MACD. But there is no indication of long term reversal yet. As long as 1.1198 resistance turned support holds, we'd still expect another rise through prior SNB imposed floor at 1.2000.

Daily Pivots: (S1) 1.2438; (P) 1.2543; (R1) 1.2596; More....

Break of 1.2489 minor support argues that rebound from 1.2246 has completed at 1.2687 already. Intraday bias is turned back to the downside for retesting 1.2246 low. Break will resume the fall from 1.2919 and target key support level at 1.2061.

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 break of 1.2919 will revive the case of medium term reversal and turn outlook bullish.

Daily Pivots: (S1) 0.7820; (P) 0.7877; (R1) 0.7982; More...

AUD/USD's break of 0.7909 minor resistance argues that fall from 0.8135 has completed at 0.7758 already. Intraday bias is turned back to the upside for retesting 0.8135 resistance first. Break will resume medium term up trend for 0.8451 fibonacci level. On the downside, below 0.7758 will resume the fall towards 0.7500 key support. We'd look for strong support from 0.7500 to contain downside and bring rebound.

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.

Daily Pivots: (S1) 0.9259; (P) 0.9317; (R1) 0.9349; More...

As long as 0.9373 minor resistance holds, fall from 0.9469 is in favor to extend to retest 0.9254 low. Break will resume larger down trend to next projection level at 0.9115. Above 0.9373 would bring another rise through 0.9469. However, note again that there is no sign of trend reversal yet. We'd be cautious on strong resistance from 38.2% retracement of 1.0037 to 0.9254 at 0.9553 to limit upside and bring down trend resumption.

In the bigger picture, fall from 1.0342 is developing into 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) 106.52; (P) 107.21; (R1) 107.69; More...

USD/JPY's fall extends to as low as 106.30 so far and is pressing 106.48 fibonacci level. At this point, we'd still look for strong support around 106.48 to bring rebound. But break of 107.89 minor resistance is needed to be the first sign of short term bottoming. Otherwise, outlook will stay bearish. Firm break of 106.48 will extend medium term fall from 118.65 to 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. There is risk of dropping further to 61.8% retracement of 98.97 to 118.65 at 106.48. But this level should provide strong support to contain downside and bring resumption of rise from 98.97. However, sustained break of 106.48 will now likely send USD/JPY through 98.97 to resume the corrective fall from 125.85 (2015 high).

Daily Pivots: (S1) 1.3859; (P) 1.3938; (R1) 1.4075; More.....

Intraday bias in GBP/USD remains neutral for consolidation above 1.3764 temporary low. On the upside, break of 1.4066 minor resistance will suggest that corrective pull back from 1.4345 has completed. Intraday bias would then be turned back to the upside for retesting 1.4345. Break will resume larger up trend. On the downside, below 1.3764 will extend the correction to 1.3651 resistance turned support.

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.

Daily Pivots: (S1) 1.2328; (P) 1.2397 (R1) 1.2518; More....

EUR/USD's strong rebound and break of 1.2403 suggests that pull back from 1.2537 has completed at 1.2205, after drawing support from 1.2222 key support level. Intraday bias is back on the upside for 1.2537 resistance. Decisive break there will resume larger up trend and target 100% projection of 1.0569 to 1.2091 from 1.1553 at 1.3075. In any case, for now, as long as 1.2205 support holds, outlook will remain bullish.

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. 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.

The moves triggered by stronger than expected CPI in the US proved to be short lived. DOW opened lower overnight to 24490.36 but quickly reversed. Eventually it ended up 1.03% at 24893.49. S&P 500 and NASDAQ also closed up 1.34% and 1.86% respectively. Dollar initially gained after the release but also reversed quickly. More importantly, it now looks like the greenback is ready to resume it's broad based down trend. Staying in the currency markets, Yen is trading as the strongest one for the week on revived speculations of stimulus exit. That's followed by Kiwi and then Euro. The only move that was persistent was the rally in treasury yields with 10 year yield closing up 0.073 to 2.913, resuming recent up trend towards 3.036 key resistance.

The post CPI rally in stocks could be seen as an indication that the crash in the prior weeks were excessive. That is, fear over aggressive Fed tightening was over-priced with DOW fall from 26616.71 historical high to 23360.29. Some analysts said that the worst is already over. We'll a bit more cautious stance for the moment. DOW will be entering into key near term resistance zone between 55 day EMA (24903) and 61.8% retracement of 26616 to 23360 at 25372. Reactions to this zone is the key to decide whether the correction from 26616.71 is over.

The sharp decline is Dollar index overnight now suggests that recent recovery from 88.43 is already over, limited well below 55 day EMA. The larger medium term down trend is ready to resume to target 61.8% projection of 103.82 to 91.01 from 95.15 at 87.23. This is in line with development in EUR/USD, which defended 1.2222 key support and is heading back to 1.2537 high.

Elsewhere

Japan machine orders dropped -11.9% mom in December. Australia employment grew 16k in January, unemployment rate dropped 0.1% to 5.5%. Australia consumer inflation expectation rose 3.6% in February. Eurozone trade balance is the only feature in European session. Later in the day, US will release regional Fed surveys from Empire state and Philadelphia, PPI, jobless claims, industrial production and NAHB housing index.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.2328; (P) 1.2397 (R1) 1.2518; More....

EUR/USD's strong rebound and break of 1.2403 suggests that pull back from 1.2537 has completed at 1.2205, after drawing support from 1.2222 key support level. Intraday bias is back on the upside for 1.2537 resistance. Decisive break there will resume larger up trend and target 100% projection of 1.0569 to 1.2091 from 1.1553 at 1.3075. In any case, for now, as long as 1.2205 support holds, outlook will remain bullish.

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. 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.

Economic Indicators Update