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The Euro hit new high at 1.2240 on Monday (the highest since 24 Dec 2014) in extension of Friday's strong rally when the single currency advanced 1.3%. Weak dollar and rising hopes that the ECB could further trim its monetary stimulus, as signaled by hawkish minutes of Dec meeting, released last week, keeps the Euro well supported. Eventual break above key barriers at 1.2100 zone was bullish signal and the pair is looking for of highs posted in Dec 2014. Initial targets lay at 1.2271/1.2300, with stronger bullish acceleration capable of traveling through 1.2500 barrier towards 1.2568 (Dec 2014 high) and key resistance at 1.2597 (Fibo 61.8% of 1.3992/1.0340 descend). Caution on daily techs entering overbought territory which could signal corrective action in coming sessions. Broken former key barriers at 1.2100 zone now act as solid support and should contain corrective dips. Lower volumes could be expected during the US session due to US market holiday.

Res: 1.2240, 1.2271, 1.2300, 1.2350
Sup: 1.2187, 1.2116, 1.2092, 1.2040

Here are the latest developments in global markets:

FOREX: The US currency was on its fourth straight day of declines, with the dollar index falling to its lowest in two years as other majors were boosted on hopes of policy normalization on behalf of their respective central banks. The Chinese currency recorded a two-year high versus the greenback as the PBOC altered its rate fixing to the dollar.

STOCKS: The Japanese Nikkei 225 closed 0.3% higher even as the yen kept strengthening versus the dollar, with dollar/yen at one point hitting its lowest since mid-September. Hong Kong's Hang Seng was 0.3% down after previously rising as much as 1% to hit a fresh decade high. Euro Stoxx 50 futures traded 0.1% higher at 0741 GMT. Meanwhile, Dow, S&P 500 and Nasdaq 100 contracts were up by 0.3%, 0.1% and 0.1% respectively. US markets will be closed on Monday for Martin Luther King Jr. Day.

COMMODITIES: WTI and Brent crude were not much changed, trading at $64.38 and $69.84 per barrel respectively, not far below the recently tracked three-year highs. Gold continued gaining on the back of dollar weakness. The precious metal was up by 0.2% after touching $1,344.44 per ounce, its highest since early September.

Major movers: Dollar weaker across the board; euro records fresh 3-year high versus greenback

The dollar kept retreating versus a basket of currencies, with the dollar index touching 90.62 at its lowest, a level last experienced in January 2015. The euro and the yen continued posting gains relative to the greenback, buoyed by what some market participants perceived as rising prospects for the European Central Bank and the Bank of Japan to scale back their easy monetary policies; a speech by BoJ Governor Haruhiko Kuroda also stressed that Japan is on a path of recovery, while adding that core consumer prices are picking up. Euro/dollar touched 1.2240 at one point, its highest since late 2014, and dollar/yen fell as low as 110.54, a level last experienced on September 15.

The US currency was weaker across the board. Pound/dollar recorded its highest since mid-2016 of 1.3767; sterling was bolstered late last week after reports suggested that Spain and the Netherlands were supportive of a Brexit deal that allows the UK to remain as close as possible to the EU. Despite officials from the two countries not backing the claims, the British currency remained boosted. Aussie/dollar reached its highest since late September of 0.7960 as optimism about global growth is spurring hopes that commodity prices will remain elevated. Kiwi/dollar hit 0.7282, a level last seen in late September.

Adding insult to injury, the yuan touched a two-year high versus the US currency – dollar/yuan fell as low as 6.4140 – after the People's Bank of China raised the currency's reference rate to the highest since May 2016, at 6.4574 per dollar. The Bundesbank – the German central bank – also decided to include the yuan in its reserves.

Day ahead: Kiwi waits for New Zealand's business confidence and electronic retail sales

Monday will be a relatively quiet day in terms of data releases. Kiwi traders though will be waiting for updates on New Zealand's business confidence (2100 GMT) and electronic card retail sales (2145 GMT). In the US, markets will be shut for Martin Luther King Jr. Day.

Regarding New Zealand's business confidence, it will be interesting to see whether the business outlook continued to deteriorate in the fourth quarter of 2017 as the index has been slowing down since the beginning of the year when it touched a 2½-year high. In the third quarter, the measure hit the lowest growth mark seen in 2017, rising by 5.0%.

On the other hand, electronic transactions in New Zealand increasingly grew from September onwards, reaching a 10-month high of 1.2% m/m in December. If the measure continues to extend its uptrend, this would mirror further improvements in consumption and constitute a positive contribution to the country's economic expansion.

Political developments in Germany would attract attention the following weeks after Merkel's Conservatives managed to make progress on coalition talks with their former partners, the Social Democrats. The Social Democrats said on Sunday they would make efforts to improve the blueprint and gain the trust of their skeptical members, hoping for a deal at a congressional meeting on January 21, when a vote on the agreement will take place. Formal negotiations will be able to start only if the vote is positive.

Investors will also keep a close eye on several earnings reports due this week, which have the potential to lead to stock market positioning.

Technical Analysis: NZDUSD increasingly bullish but overbought

NZDUSD holds a bullish bias in the short-term. However, a pullback might take place in the short-term given that the RSI is currently located in overbought zone above 70.

In case New Zealand releases surprise to the upside, immediate resistance could be met at the 78.6% Fibonacci at 72.93 of the downleg from a more than a two-year high of 0.7433 to a low of 0.6779 (September – November). Further increases could also test the 0.7350, which was a congested area in the past, and the previous peak of 0.7433.

On the flip side, if figures disappoint, support could come first around the 61.8% Fibonacci at 0.7182 and then a stronger obstacle could be found at the 50% Fibonacci at 0.7105 where the 20- and the 200-day MA are currently located.

Daily Pivots: (S1) 0.7863; (P) 0.7893; (R1) 0.7942; More...

AUD/USD's rally continues to as high as 0.7964 so far. The strong break of 0.7896 cluster resistance (61.8% retracement of 0.8124 to 0.7500 at 0.7886) resistance zone indicates solid upside momentum. Rise from 0.7500 could be resuming whole medium term rebound from 0.6826. Intraday bias stays on the upside for 0.8124 resistance and above first. On the downside, break of 0.7804 support is needed to indicate short term topping. Otherwise, outlook will remain bullish in case of retreat.

In the bigger picture, current development suggests that medium term rebound from 0.6826 is still in progress and could be resuming. Such rise could target 38.2% retracement of 1.1079 (2011 high) to 0.6826 (2016 low) at 0.8451. As such rise is seen as a corrective move, we'd expect strong resistance from 0.8451 to limit upside.

NZDUSD (0.7274): The NZDUSD maintained strong gains last week as price closed at a four month high of 0.7259. However, the doji close on Friday could indicate some profit taking resulting in a short term correction. With the daily trend line being breached, NZDUSD could revisit the breakout level around 0.7160. Establishing support at this level could validate further upside gains in the currency pair. At the same time, if NZDUSD fails to find support, we could expect to see a deeper correction that could push price down to the 0.6944 region.

USDJPY (110.67): The USDJPY closed at a two month low on Friday at 111.01. The declines extended for four consecutive days following the Bank of Japan's announcement on its longer date bonds. The price action is expected to see the USDJPY consolidate near the support zone of 111.00 - 110.88 region. We expect that price action will test this level a bit more firmly. The support level gives view to the upside as USDJPY could remain range bound within the 111.50 region and 111.00 levels of b

EURUSD (1.2227): The EURUSD rose to a 4-year high on Friday, closing at 1.2196. The gains came as price broke past the technical resistance level of 1.2090 - 1.2070. The surge was led by a strong bullish momentum in price. However, at the current levels, EURUSD remains slightly elevated and could pose a risk of a correction. The previously established resistance level at 1.2090 - 1.2070 could remain under pressure as price could revisit this level to establish support. Renewed buying interest could be seen, but a break down below this level could send the euro falling to the 1.1900 levels in the short term.

The U.S. dollar plunged to a three year low on Friday as investors flocked to the euro amid rising optimism of accelerated growth. The U.S. dollar index closed last week at 90.60. The declines came following the BoJ's surprise announcement to reduce its longer dated bond purchases and the ECB's meeting minutes.

The ECB's minutes showed that officials are hopeful of the economic recovery which could warrant a change to the central bank's forward guidance.

On Friday, economic data from the U.S. showed that consumer price rose at a subdued pace. Headline inflation was seen rising 0.1% on a month over month basis, following a 0.4% increase in November. Core CPI was slightly better, rising 0.3% on the month. Retail sales were broadly in-line with estimates rising 0.4% on headline and core retail sales.

Looking ahead, the economic calendar is quiet today. The markets are likely to continue from Friday's theme. The euro currency could see some further momentum as investors shape their expectations ahead of next week's ECB meeting.

Daily Pivots: (S1) 1.2420; (P) 1.2488; (R1) 1.2525; More....

USD/CAD is still staying in range above 1.2354 and intraday bias remains neutral. More consolidative trading could be seen in near term. But still, as As long as 1.2623 support turned resistance holds, deeper decline is expected. Break of 1.2354 will extend the fall from 1.2910 to retest 1.2061 low. However, sustained break of 1.2623 will argue that the fall has completed and turn bias back to the upside for 1.2919 resistance.

In the bigger picture, current development argues that rebound from 1.2061 has completed at 1.2919, rejected by 55 week EMA (now at 1.2850) and kept below 38.2% retracement of 1.4689 to 1.2061 at 1.3065. The development also suggests that long term fall from 1.4689 is not completed yet. Decisive break of 1.2061 low will target 61.8% retracement of 0.9406 to 1.4689 at 1.1424. This will now be the favored case as long as 1.2919 resistance holds.

Daily Pivots: (S1) 110.71; (P) 111.20; (R1) 111.49; More...

USD/JPY's reaches as low as 110.53 so far. Break of 110.83 indicates resumption of whole decline from 114.73. Intraday bias stays on the downside for 61.8% retracement of 107.31 to 114.73 at 110.14. We'd look for bottoming signal again below 110.14. On the upside, 111.27 minor resistance will turn intraday bias neutral first. But near term outlook will remain bearish as long as 113.38 resistance holds.

In the bigger picture, we're holding on to the view that correction from 118.65 is completed at 107.31. And medium term rise from 98.97 (2016 low) is going to resume soon. Sustained break of 114.73 should affirm our view and send USD/JPY through 118.65. However, break of 107.31 will dampen this view and extend the medium term fall back to 98.97 low.

Daily Pivots: (S1) 0.9632; (P) 0.9701; (R1) 0.9738; More....

USD/CHF's decline from 1.0037 continues today and reaches as low as 0.9627 so far. 61.8% retracement of 0.9420 to 0.1.0037 at 0.9656 is firmly taken out and downside momentum remains strong. Intraday bias remains on the downside and further fall could be seen back to 0.9420 low. On the upside, above 0.9684 minor resistance will turn intraday bias neutral first. But outlook will stay bearish as long as 0.9844 resistance holds.

In the bigger picture, range trading continues between 0.9420/1.0342. At this point, 0.9420 appears to be a strong support level. Therefore, in case of decline attempt, we don't expect a firm break of this level. Nonetheless, strong break of 1.0342 is also needed to confirm upside momentum. Otherwise, medium term outlook will stay neutral.