Daily Pivots: (S1) 1.0027; (P) 1.0073; (R1) 1.0098; More.....

USD/CHF lost momentum after hitting 1.0118 and intraday bias is turned neutral first. Near term outlook stays cautiously bullish as long as 0.9929 minor support holds. Fall from 1.0342 could have finished at 0.9860 already. Above 1.0118 will turn bias back to the upside for retesting 1.0342. However, break of 0.9929 will likely extend the decline from 1.0342 through 0.9860 low.

In the bigger picture, prior rejection from 1.0327 resistance argues that USD/CHF is staying in a medium term sideway pattern. In any case, decisive break of 1.0342 resistance is needed to confirm underlying strength. Otherwise, we'll stay neutral in the pair first. In case of another fall, we'd expect strong support from 0.9443/9548 support zone. Meanwhile firm break of 1.0342 will target 38.2% retracement of 1.8305 to 0.7065 at 1.1359.

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Daily Pivots: (S1) 113.69; (P) 114.32; (R1) 114.80; More...

USD/JPY lost momentum after hitting 114.94 and intraday bias is turned neutral again. With 113.24 minor support intact, further rise is still in favor. We're holding on to the view that correction from 118.65 has completed at 111.58. Break of 115.36 will confirm this bullish case and bring retest of 118.65 high. Meanwhile, below 113.24 minor support will dampen this bullish view and could extend the correction from 118.65. In that case, downside should be contained by 38.2% retracement of 98.97 to 118.65 at 111.13 and bring rebound.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance. Rejection from 125.85 and below will extend the consolidation with another falling leg before up trend resumption.

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Daily Pivots: (S1) 1.3056; (P) 1.3088; (R1) 1.3112; More...

Intraday bias in USD/CAD remains neutral as it's still bounded in range of 1.2968/3211. Near term outlook remains rather mixed. But, on the upside, break of 1.3211 resistance will argue that fall from 1.3598 has completed at 1.2968. And more importantly, rise from 1.2460 is still in progress. In that case, intraday bias will be turned back to the upside for 1.3598 and above. On the downside, below 1.2968 will revive the case that rise from 1.2460 is completed and turn outlook bearish for this low. Overall, choppy rise from 1.2460 is still seen as a corrective move.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. The second leg could be completed at 1.3598 and fall from there is tentatively seen as the third leg. Break of 1.2460 will target 50% retracement of 0.9460 to 1.4689 at 1.2075 before completing the correction. In case of another rise, we'd look for reversal signal above 61.8% retracement of 1.4689 to 1.2460 at 1.3838.

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Daily Pivots: (S1) 0.7658; (P) 0.7689; (R1) 0.7740; More...

AUD/USD's rise resumed by taking out 0.7695 and reaches as high as 0.7731 so far. Intraday bias is back on the upside for 0.7777 resistance next. Bearish divergence condition remains in 4 hour MACD. Thus, we'd expect strong resistance from 0.7777/7833 resistance zone to limit upside and bring near term reversal. On the downside, break of 0.7605 support will indicate that rise from 0.7158 has completed already and turn bias back to the downside for 55 day EMA (now at 0.7517) first.

In the bigger picture, we're still treating price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seek to 55 month EMA (now at 0.8205) and above.

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Dollar jumped overnight on a string of solid economic data but quickly reversed. There were a chorus of hawkish comments from Fed officials. But those comments provided no support to the greenback. In the background, stocks extended recent record record with major indices showing upside acceleration. Treasury yields also strengthened even though both 10-year and 30-year yield are bounded in recent range. Fed fund futures are pricing in 26.6% chance of a March hike and 74% chance of hike by June. That was up from prior day's pricing of 17.7% and 68.0% respectively. The lack of sustained buying in Dollar with positive development elsewhere is worth noting. We can't find any convincing reason for the sluggishness in the greenback yet. But it's likely that Dollar will head lower before going up again.

Yellen defended Fed before the House

Fed Chair Janet Yellen's second day of testimony to the Congress revealed nothing new about her views on monetary policies. Nonetheless, she was scrutinized by House lawmakers for Fed's performance. Yellen had to admit that growth had been "quite disappointing" since the global financial crisis since nearly a decade ago. Nonetheless, she noted that "the economy has recovered more quickly, for example, than ... European Union economies have in the aftermath of the crisis." And Fed is coming "very close" to achieving the objectives of maximum employment and price stability. There were voices criticizing Fed for not finding the "proper balance" between regulation and growth. But Yellen defended that "the economy is recovering from a very severe crisis." And, "we've put in place stronger financial regulation that has forced our banks to build up their capital buffers to deal with problem loans and to strengthen themselves to the point where they have been to support economic growth and recovery in our economy."

NY Fed Dudley: Details of fiscal policy could tile risks to the upside

New York Fed president William Dudley said "we expect to gradually remove further monetary policy accommodation and snug up interest rates a little bit further in the months ahead". But he also noted that there was little detail regarding fiscal policies for the moment and that made it "really hard to factor into your forecast". Nonetheless, "we're probably going to get some fiscal stimulus at some point, so that is just another factor that tilts the risks to the economy a little to the upside." Philadelphia Fed president Harker echoed and said that "until there's more specificity on policies I really can't factor those into my forecasts."

Boston Fed president Eric Rosengren sounded hawkish and said that "it will likely be appropriate to raise short-term interest rates at least as quickly as suggested by the Fed's current ... median forecast, and possibly even a bit more rapidly." And he warned that "if GDP is growing faster than potential and we reach both elements of the dual mandate, the Federal Reserve risks overshooting".

Aussie higher after mixed job data

Aussie strengthens broadly today after job data. Employment in Australia grew 13.5k in January, above expectation of 10.0k. However, that was solely driven by part-time jobs as full-time jobs contracted by -44.8k. Unemployment rate, on the other hand, dropped slightly to 5.7%. Consumer inflation expectations slowed to 4.1% in February.

Looking ahead, ECB will release monetary policy meeting accounts in European session. US will release housing starts, building permits, jobless claims and Philly Fed survey.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7658; (P) 0.7689; (R1) 0.7740; More...

AUD/USD's rise resumed by taking out 0.7695 and reaches as high as 0.7731 so far. Intraday bias is back on the upside for 0.7777 resistance next. Bearish divergence condition remains in 4 hour MACD. Thus, we'd expect strong resistance from 0.7777/7833 resistance zone to limit upside and bring near term reversal. On the downside, break of 0.7605 support will indicate that rise from 0.7158 has completed already and turn bias back to the downside for 55 day EMA (now at 0.7517) first.

In the bigger picture, we're still treating price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seek to 55 month EMA (now at 0.8205) and above.

Economic Indicators Update

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EUR/USD

Following a quiet Asian session, the USD appreciated after London's opening, further accelerating its advance ahead of Wall Street opening, amid strong US data supportive of a March rate hike. The EUR/USD pair bottomed for the day at 1.0521, its lowest level since January 11th, but the greenback changed course during the US afternoon, suddenly entering negative territory daily basis against all of its major rivals. Dollar's reversal came in spite of another strong tax headline from US President Trump, who said that a massive tax plan will see the light in the "not-too-distant future," when speaking with retail executives. The pair set a daily high of 1.0608, but settled a few pips below 1.0590.

In the US, January Retail Sales rose by 0.4% when compared to the previous month, while the core reading, ex-autos, advanced 0.8%. Inflation in the same month surged by the most in four years, up by 0.6%, doubling expectations of 0.3%. The annual inflation rate printed 2.5%, above the 2.4% expected and previous 2.1%. Additionally, the New York Empire State Manufacturing index for February surged to 18.7, a strong bounce from previous 6.5, and the highest reading in over two years.

The late recovery was not enough to revert the negative tone of the pair, as in the 4 hours chart, the recovery stalled right around a still bearish 20 SMA. Furthermore and in the same chart, technical indicators have posted moderate bounces from their mid-lines, but remain well into negative territory. The pair has briefly broke below the 1.0565 Fibonacci support before recovering above it, but renewed selling interest below the level will likely result in fresh weekly lows, particularly if hopes about the upcoming US tax reform keep fueling sentiment. Additional gains beyond 1.0625, the immediate resistance, could result in a recovery up to the 1.0660 region, en route to the critical 1.0705 price zone.

Support levels: 1.0565 1.0520 1.0470

Resistance levels: 1.0625 1.0660 1.0705

USD/JPY

The USD/JPY pair retreated from a fresh weekly high of 114.95 to close the day flat in the 114.20 region. The greenback got a boost from much better-than-expected inflation and retail sales January data, but was unable to sustain gains and plummeted to 113.85 as the dollar index suffered a sharp reversal after printing a 4-week high of 101.73. Bank of Japan Governor Haruhiko Kuroda spoke early Wednesday, but said nothing new, noting that policy makers have no plan to raise the central bank's bond yield targets, and that inflation is still far from the 2% target. There are no major economic releases scheduled for this Thursday. From a technical point of view, the pair still has to firm up above 114.55, the 23.6% retracement of the November/December rally, to be able to recover further. In the 4 hours chart, the price is struggling around a bearish 200 SMA, whilst technical indicators turned south from near overbought readings, indicating that buying interest is still limited. The 100 SMA in the mentioned char stands flat around 113.35, with a break below it most likely resulting in a bearish extension during the following sessions.

Support levels: 113.85 113.35 112.90

Resistance levels: 114.55 114.90 115.40

GBP/USD

The GBP/USD pair closed the day marginally lower around 1.2445, with the Pound hit by mixed employment data coming from the UK. According to official numbers, the employment rate rose to 74.6% in the three months to December, the highest rate on record, whilst the unemployment rate remained steady at an eleven-year low of 4.8%. Average hourly earnings including bonus, however, rose 2.6% in the same period, below previous 2.8%, the slower pace in almost two years. In January, unemployment claims fell by 42.4K much better than the 0.8K expected. Weak earnings in a rising inflation environment, may affect overall economic growth during the upcoming months. The pair traded as low as 1.2382 before settling around 1.2440, and the 4 hours chart shows that a late spike was contained by selling interest around a bearish 20 SMA, whilst technical indicators maintain modest bearish slopes within negative territory. The pair has an immediate support at 1.2430, the 38.2% retracement of its latest bullish run, followed by the mentioned daily low. Below this last, the pair has scope to extend down to the 1.2330/50 region a major support area that will likely hold on a first attempt to break lower.

Support levels: 1.2430 1.2380 1.2345

Resistance levels: 1.2500 1.2535 1.2585

GOLD

Spot gold bounced sharply from a daily low of 1,216.64, ending the day around $1,231.60 a troy ounce. The recovery was limited, as US data released this Wednesday backed Yellen's Tuesday comments about being risky to wait too long to raise rates, as inflation pressures are increasing. Dollar bulls rushed to take profits after the currency reached some critical levels against its major rivals, resulting in a strong intraday reversal that anyway is not enough to confirm an interim top. In the case of stop gold, the daily chart shows that the price bounced sharply after testing its 20 DMA, still advancing below the 100 DMA, whilst technical indicators are attempting to recover after a modest downward correction from overbought readings. In the 4 hours chart, the price is slightly above a flat 20 SMA whilst technical indicators head higher around their mid-lines, with limited upward strength. While further gains are not technically confirmed the risk of a bearish move seems well-limited according to technical readings, with only a break below the 1,200 level indicating a steeper decline afterwards.

Support levels: 1,221.80 1,210.10 1,200.00

Resistance levels: 1,237.10 1,244.70 1,252.90

WTI CRUDE

West Texas Intermediate crude oil futures closed flat for a second consecutive day a few cents above $53.00 a barrel, as large US stockpiles builds dented optimism about OPEC's output cut. US crude stocks rose 9.5 million barrels according to the EIA, much more than the 3.7 million expected, while gasoline stockpiles rose by 2.8 million barrels, also far beyond market's expectations. A decline in distillate stocks and crude oil imports partially offset the headline reading. Technically, the daily chart maintains the neutral stance seen on previous updates, with the price still stuck around a flat 20 SMA and technical indicators heading nowhere around their mid-lines. In the 4 hours chart, the price is trapped within horizontal moving averages, the Momentum indicator is flat below its 100 level, whilst the RSI indicator has turned south around its mid-line. Overall, the fundamental background favors a bearish extension, but it will take a break below 52.60 to confirm such move, with WTI then poised to test the key 50.00 figure.

Support levels: 52.60 52.00 51.40

Resistance levels: 53.70 54.40 55.20

DJIA

The positive momentum of US equities sent the three major indexes to all-time highs for a fifth consecutive session, with the Dow Jones Industrial Average adding 107 points to close at 20,611.58. The Nasdaq Composite added 36 points, to end at 5,819.44 whilst the S&P settled at 2,349.25, up 0.50%. The unstoppable rally was fueled by comments from US President Trump, who reaffirmed a massive tax reform will come in the "not-too-distant future." Banks were again among the best performers, with JP Morgan Chase up 1.15% and Goldman Sachs adding 0.47%. The DJIA daily chart shows that technical indicators keep heading sharply higher, despite being in extreme overbought territory, with the RSI indicator at 81, whilst the index is far above a bullish 20 DMA, a reflection of the ongoing buying fever. In the 4 hours chart, the technical picture is quite alike, with the RSI indicator still heading north around 87, the Momentum barely retreating within extreme overbought readings and the benchmark far above bullish moving averages. As long as optimism about upcoming policies aimed to boost growth and inflation in the US persist, equities will continue rallying, despite whatever extreme readings indicators mark.

Support levels: 20,609 20,552 20,506

Resistance levels: 20,650 20,700 20,750

FTSE 100

The FTSE 100 closed at 7,302.41, up by 33 points or 0.47%, with the banking sector leading the way higher across the region. The index reached an almost one month high, further fueled by a weakening Pound. Ashtead Group was the best performer, up 3.20%, followed by Barclays that added 2.97%. Standard Chartered gained 2.66% while Royal Bank of Scotland closed 2.07% higher. The mining sector ended mixed, with BHP Billiton up 2.90%, but Antofagasta down 1.98% and Anglo American closing 1.03% lower. The index retains the bullish tone in its daily chart, holding above a flat 20 SMA and with technical indicators heading north within positive territory, still poised to retest the record high posted last January at 7,354, now the immediate resistance. In the 4 hours chart, the index is well above a bullish 20 SMA, but the Momentum indicator continues diverging lower within positive territory, whilst the RSI lost upward strength in overbought territory, none of them enough to confirm a bearish move, but acting as an immediate warning over a possible correction.

Support levels: 7,296 7,254 7,208

Resistance levels: 7,354 7,390 7,425

DAX

European equities closed with modest gains, with the banking sector leading the way higher following hawkish comments made by Federal Reserve Chairwoman Janet Yellen. The German DAX added 22 points or 0.19% to close at 11,793.93, with Deutsche Bank leading gainers' list, up 2.06%. Commerzbank added 2.01%. The German benchmark advanced to a fresh 3-week high of 11,848, and despite the lack of clear momentum coming from technical readings, sentiment favors a bullish extension for the upcoming days. In the daily chart, the DAX continues developing above a horizontal 20 DMA, but far above bullish 100 and 200 DMAs. Indicators in the mentioned chart are flat, with the Momentum around 100, but the RSI at 62, supporting the bullish case. In the 4 hours chart, the 20 SMA continues advancing below the current level, with an approach to it having been quickly reverted, whilst technical indicators are aiming higher after correcting overbought conditions reached earlier this week.

Support levels: 11,745 11,694 11,640

Resistance levels: 11,848 11,891 11,935

STOCKS

Overall stocks are mixed. While Dow, Dax and Shanghai look bullish, Nikkei may consolidate in the near term. Nifty looks potentially bearish for the coming sessions.

Dow (20611.86, +0.52%) continues to rise vertically and is headed towards 20800 in the near term. Thereafter we could possibly expect a short corrective dip towards 20400-20200 levels.

Dax (11793.93, +0.19%) closed at slightly higher levels. While support at 11600-11650 holds, the index has potential to move higher in the coming sessions. We keep open the higher target levels of 11930-12000 as mentioned yesterday.

Nikkei (19349.24, -0.46%) is finding it difficult to move above 19500 just now and is stuck in the broad 19620-18870 region. It may continue to remain within the said zone for some more sessions in the near term.

Shanghai (3211.19, -0.06%) tested the daily trend-line resistance at 3235.98, coming off from there yesterday. While the resistance holds, the index could come off to 3200 and then bounce back again towards 3225-3250 levels in the medium term.

Nifty (8724.70, -0.77%) saw its first sharp fall this year coming down from levels near 8821. In case it continues to fall further, we may see a fall towards 8700-8635 levels in the near term before bouncing back towards 8800.

COMMODITIES

Almost all the commodities are mute with no discernible activity.

Gold (1226.46) has tested the support of 1215 as expected and the following bounce from the support may push it to 1240-50 once more but any fresh strength in Dollar (100.93) may keep it stable in the range of 1215-40 if not outright weaken.

As discussed yesterday, Silver (18.016) remains in an uptrend with no real momentum. If the Gold-Silver ratio (68.55) rallies from the current levels as expected, then any weakness in Gold due to Dollar strength may trigger a sharper decline in Silver. Immediate resistance remains unchanged at 18.10.

Nothing changed for Brent (55.70) and WTI (53.06) in the last session. Repeat – both are trading exactly at the midpoint of their respective ranges of 53-58 and 50-55 with no directional bias and this horizontal movement may continue for a few more days.

Copper (2.746) is trading quietly in the range of 2.70-85 which may continue for the next 5-10 days.

FOREX

Dollar is correcting after a 10-day rally but if the immediate support holds, Dollar may firm up again and the majors may weaken.

Dollar Index (100.93) has made4 a high at 101.76 and corrected just as expected. It is currently testing the support near 100.85 which must hold to keep the near term trend up and push it higher towards 100.50-75 once more.

Euro (1.0615) has tested and bounced from the support area of 1.0530-00 just as expected but unless it can sustain above 1.0625-35, it may decline to sub-1.06 levels once again.

Dollar-Yen (113.86) has corrected after registering a swing high at 114.95, almost identical with our target of 115. If the immediate support at 113.65 holds, then a fresh bounce to 114.50 and higher can be seen.

Pound (1.2457) has tested the lower end of the narrower range 1.2400-1.2600 before bouncing back to maintain the sideways mode. No greater expansion than 1.2350-1.2700 is expected in the rest of the week.

Aussie (0.7707) is struggling near the major resistance zone of 0.7750-0.7800 as expected and a failure to rise above 0.7800 soon may push it to 0.7650-30 or even lower levels.

As long as Dollar Rupee (66.90) manages to hold above 66.80, the chances of a recovery to 67.10+ can’t be ruled out but now there may be slightly higher chances of a fall towards 66.70-50, but that could be the end of the current decline.

INTEREST RATES

The US yields continue to rally. The 5YR (1.99%), 10Yr (2.48%) and the 30Yr (3.07%) are all trading higher from 1.97%, 2.44% and 3.04% respectively. But we may soon see a pause or a corrective dip in the near term.

The US 10-5YR (0.50%) has come off by 1bps and could be headed towards 0.49-0.48% in the next few sessions before bouncing back.

The UK yields have bounced well and are heading towards resistance levels visible on the near term charts. Near term looks bullish followed by a sharp fall in the medium term.

USDCHF - The pair continues to look for more weakness on loss of upside pressure. On the downside, support lies at the 1.0000 level. A turn below here will open the door for more weakness towards the 0.9950 level and then the 0.9900 level. On the upside, resistance resides at the 1.0100 level where a break will clear the way for more strength to occur towards the 1.0150 level. Further out, resistance comes in at the 1.0200 level. All in all, USDCHF remains biased to the downside on further weakness.

Taking a look at the daily charts across the AUD spectrum, we can see that almost all of the pairs are pushing into a clear daily resistance zone.

AUD/USD Daily:

AUD/JPY Daily:

AUD/CAD Daily:

If you're an aggressive trader then you can sell as soon as price hits the zone, but for me there is no point jumping in front of a moving train and fighting momentum when you have no idea if it's going to pull up or not.

From here the safest play is to wait and see if the higher time frame level holds, and then to sell any short term pull backs.

• The year-over-year rate of CPI inflation rose to 2.5% in January from 2.1% in December as energy prices continued to recover from last year's lows. Core inflation (ex food and energy) edged up to 2.3%, matching post-recession highs and defying expectations for a dip to 2.1%.

Headline CPI rose 0.6% on a month-over-month basis, the strongest increase in four years. Energy prices played a big role, rising 4% in January as gasoline prices increased at nearly twice that pace. Food prices edged up by 0.1%, the first increase since April 2016. A stronger-than-expected 0.3% monthly increase in core CPI was also a factor. Core commodities picked up strongly, led by the apparel component, and non-energy services prices also increased at a solid pace driven in part by the transportation sector.

Our Take:

Headline inflation has now risen for six consecutive months as energy prices switched from a source of disinflation to a positive add. We expect that trend will continue in February with inflation picking up closer to 2¾%. The Fed is likely to view this increase as transitory, although their tolerance of higher inflation would likely be limited if fiscal stimulus looks set to push the economy into excess demand. Even without a fiscal boost, today's report provides some evidence of firming price pressure - core inflation surprised to the upside and services inflation ex shelter (likely a better indicator of domestically-generated prices pressure) also increased. This supports Chair Yellen's comment yesterday that it would be "unwise" to wait too long before raising rates further. There is a clear bias to hike again before mid-year, although given lingering uncertainty regarding US fiscal and trade policy, we think the balance of risks favours waiting until Q2 rather than raising the fed funds rate at the coming meeting in March.