Daily Pivots: (S1) 1.3041; (P) 1.3099; (R1) 1.3139; More...

USD/CAD is staying in range of 1.2968/3211 and intraday bias remains neutral. Near term outlook stays mixed. On the upside, break of 1.3387 resistance will confirm 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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Near term crude oil outlook:

No change as the market remains in that $55.25/$50.71 range that has been in place since Jan 3rd. Still seen as a large topping near the ceiling of the rising wedge pattern since Jun, and with eventual declines to the base/bullish trendline from Aug (currently at $44.50/00). However as been discussing for some time, there is no confirmation of such a top "pattern-wise" (5 waves down for example), leaving open scope for a further period of this ranging and even a retest of the ceiling of the wedge before finally rolling over (see in red on daily chart below). Also may be forming a triangle/pennant from that Jan high, generally seen as a continuation pattern and adds to the near term risk of a final pop above that $55.25 to that ceiling of the wedge (currently at $55.50/00) and before rolling over (triangles are generally viewed as continuation patterns). Nearby support is seen at $52.50/75 and the base of the triangle (currently at $51.10/35, close below would argue a larger rolling over). Nearby resistance is seen at the ceiling/bearish trendline from Jan 3rd (currently at $51.10/35). Bottom line: view of an important top/topping and eventual declines to the bull trendline from Aug/base of rising wedge (currently at $44.50/00) remains, but still risk for a further period of topping first.

Strategy/position:

With scope for more ranging and even a retest of the ceiling of the huge wedge (and only if more aggressive), would now buy $0.25 above the base of the triangle and then initially stopping on a close $0.25 below. However with such upside likely limited/short-lived (in the bigger picture), will want to get much more aggressive with stops on nearby gains and especially an upside resolution of the triangle/bear trendline from the Jan high (to maintain a good risk/reward in the position).

Long term outlook:

As discussed above, no change as the market continues to form that large rising wedge pattern since last June. Seen as a topping/reversal pattern and along with technicals that have not confirmed the last few months of gains and generally poor upside momentum, suggests a more significant topping. Note too that the longer term market remains bearish from a "simple" supply/demand standpoint as EIA inventories remain well above their 5 year average and are pushing back to their June peaks (see 3rd chart below). But wedge patterns break down into 5 legs and in turn leaves open scope for a more extended period of ranging (at least another few months) before finally rolling/resolving lower (see in red on weekly chart/'2nnd chart below). Long term resistance above the ceiling of the wedge is seen at seen at $59.00/25 (38% retracement from the Aug 2013 high at $112.24) and the ceiling of the bearish channel from Jun 2014 (currently at $60.75/25). Bottom line: important topping near the ceiling of the rising wedge since June but scope for at least another few months of large swings in both directions in the pattern before finally rolling over.

Strategy/position:

With a potentially more important top also forming, would await higher confidence of at least a short term top before entering.

Current:

Nearer term : if more aggressive, buy $0.25above base of triangle from Jan for final pop to new highs.
Last : short Dec 12 at $53.50, took prof Jan 20 above t-line frm high ($52.15, closd $52.42, $1.08 prof).

Longer term : important topping, await higher confidence of at least near term top to switch to bear.
Last : bear bias Dec 12th at $53.50 to neutral Jan 20th at $52.42.

STOCKS

Overall the major indices are trading higher and look potentially strong for the week.

Dow (20412.16, +0.70%) has broken above the 20400 levels without seeing any rejection yet. The bulls look strong and if it maintains above 20400, it could move up towards 20600 or even higher in the near term. A rejection from either 20600 or 20800 is possible in the middle term while the index remains above 20400.

Dax (11774.43, +0.92%) also moved up but could not break above 11820 yesterday. We may see a test of 11820-11930 region in the next few sessions before coming off again.

Nikkei (19431.46, -0.14%) is trading a little lower today. Resistance near 19620 may hold good in the near term bringing back the index towards 19260 or lower. Overall the broad 19000-19620 region could be the band for the next few sessions.

Shanghai (3213.19, -0.10%) looks positive and while above 3200, it can continue the rally towards 3300 in the near term.

Nifty (8805.05, +0.13%) could test 8900-8970 levels in the near term before a corrective dip is seen. Immediate trend is up.

COMMODITIES

Gold (1226.46) has weakened a bit due to a firm Dollar (100.97) but the medium term uptrend remains intact as long as the major support of 1205-1200 holds. This week may see a continued sideways consolidation un the range of 1220-50.

Silver (17.85) is stalling near the resistance of 18.00-10 as expected but near term weakness would be confirmed only on a break below 17.50. Till then, it can oscillate in the narrowing range of 17.50-18.10.

Both Brent (55.78) and WTI (53.08) have suffered rejection at the higher end of their respective ranges as expected which keep the medium term broader ranges of 53-58 and 50-55 intact. This sideways consolidation may continue for the rest of the week.

Copper (2.79) is consolidating the sharp gains made this week but to keep the bullish momentum intact and higher targets of 2.90-95 open, it must hold above the interim support of 2.75

FOREX

The January Consumer Inflation expectations in US has hit a 19-month high, keeping the Dollar firm against the other majors but the Fed chair Yellen’s Congressional testimony tonight may be the near term decider.

Dollar Index (100.99) is sustaining the higher levels as no rejection is visible from the resistance of 101.00. The chances of further rise to 101.75-102.00 have increased now but the near term path may depend on the Yellen testimony tonight.

Euro (1.0598) is trading near an interim support at 1.0590 but may decline further to test 1.0530-00 levels depending on the Yellen testimony.

Dollar-Yen (113.72) has been holding above the support of 113.50 but needs a break above the minor resistance of 114.30 to extend the rise to 115-116.

Pound (1.2523) keeps oscillating in the range of 1.2350-1.2700 which may continue for the rest of the week. From a larger perspective, it must be noted that any Brexit related issues are not impacting the currency that much.

Aussie (0.7672) is stuck in a contracting range of 0.76-0.77 for the 9th session but may break out of the range soon enough. Repeat - while the trend is still up, the proximity of the major resistance near 0.7750-0.7800 warrants caution as the chances of a sudden reversal can’t be ruled out.

Dollar Rupee (67.01) is trading sideways in the range of 66.80-67.07, keeping the bias neutral. Only a break on either side of the 66.80-67.07 range may give immediate direction clarity.

INTEREST RATES

The US yields have risen slightly. The 5Yr (1.93%), 10YR (2.45%) and the 30YR (3.04%) are higher from previous levels of 1.91%, 2.43% and 3.03% respectively. The 30Yr and the 10Yr yield is headed towards 3.1% and 2.50-2.75% respectively in the near term.

The Japanese 30YR (0.85%) yield has risen slightly and could head towards 0.9% in the near term.

The UK yields are also trading higher. The 5Yr (0.48%), 10Yr (1.39%) and the 20YR (1.87%) are all higher from previous levels of 0.45%, 1.34% and 1.83% respectively.

Daily Pivots: (S1) 120.21; (P) 120.69; (R1) 120.99; More...

EUR/JPY is staying in tight range below 121.32 and intraday bias stays neutral. We're holding on to the view that corrective fall from 124.08 has completed at 119.32 already. Above 121.32 will turn bias to the upside for 123.30 resistance. Break of 123.30 will likely extend the whole medium term rise from 109.20 through 124.08 high. Below 119.32 will bring another fall. In that case, downside should be contained by 118.45 cluster support (38.2% retracement of 109.20 to 124.08 at 118.39) and bring rebound.

In the bigger picture, price actions from 109.20 medium term bottom are seen as part of a medium term corrective pattern from 149.76. There is prospect of another rise towards 126.09 key resistance level before completion. But even in that case, we'd expect strong resistance between 126.09 and 141.04 to limit upside, at least on first attempt. Nonetheless, decisive break of 118.45 cluster support (38.2% retracement of 109.20 to 124.08 at 118.39) will argue that rise from 109.20 is completed and turn outlook bearish for 61.8% retracement at 114.88 and below.

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EURUSD

The EURUSD attempted to push higher yesterday topped at 1.0658 but closed lower at 1.0591. The bias remains bearish in nearest term testing 1.0550 – 1.0500 area as a part of the bearish scenario after broke below the bullish channel and H4 EMA 200 as you can see on my H4 chart below. Immediate resistance is seen around 1.0650. A clear break above that area could lead price to neutral zone in nearest term testing 1.0700 area. Overall I remain neutral.

GBPUSD

The GBPUSD had a moderate bullish momentum yesterday topped at 1.2539. The bias is neutral in nearest term probably with a little bullish bias testing 1.2600 resistance area. Immediate support is seen around 1.2480. A clear break below that area could trigger further bearish pressure testing 1.2440/00 support area. Overall I remain neutral.

USDJPY

The USDJPY was indecisive yesterday. Price attempted to push higher topped at 114.16 but closed lower at 113.72 and hit 113.53 earlier today in Asian session. The bias is neutral in nearest term probably with a little bearish bias testing 113.00 – 112.85 support area. Immediate resistance is seen around 114.00. A clear break and daily close above that area could trigger further bullish pressure testing 115.60 key resistance which remains a good place to sell.

USDCHF

The USDCHF had a moderate bullish momentum yesterday topped at 1.0069. The bias remains bullish in nearest term testing 1.0100 – 1.0150 area. Immediate support is seen around 1.0040. A clear break below that area could lead price to neutral zone in nearest term testing 1.0000 or lower. Overall I remain neutral.

Daily Pivots: (S1) 141.76; (P) 142.18; (R1) 142.89; More...

GBP/JPY edges higher today and intraday bias remains mildly on the upside for 144.77 resistance. Rise from 136.44 is seen as the second leg of the consolidation pattern from 148.42. Break of 144.77 will target a test on this 148.42 high. On the downside, below 140.67 minor support will turn bias back to the downside and extend the fall fro 144.77 through 138.53.

In the bigger picture, price actions from 122.36 medium term bottom are still seen as a corrective pattern. Main focus is on 38.2% retracement of 195.86 to 122.36 at 150.42. Rejection from there will turn the cross into medium term sideway pattern with a test on 122.36 low next. Though, sustained break of 150.42 will extend the rebound towards 61.8% retracement at 167.78.

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Daily Pivots: (S1) 1.0648; (P) 1.0664; (R1) 1.0672; More...

EUR/CHF is staying in tight range of 1.0631/0706 and intraday bias remains neutral first. With 1.0706 resistance intact, outlook stays mildly bearish. Break of 1.0620 key support level will extend the larger decline from 1.1198 to 1.0485 fibonacci level. However, considering bullish convergence condition in 4 hour MACD, break of 1.0706 minor resistance will raise the chance of medium term reversal. In that case, focus will be turned back to 1.0749 and then 1.0897 key resistance.

In the bigger picture, the decline from 1.1198 is seen as a corrective move. Such correction is still in progress. Sustained trading below 38.2% retracement of 0.9771 to 1.1198 at 1.0653 will target 50% retracement at 1.0485. On the upside, break of 1.0897 resistance is needed to confirm completion of such fall. Otherwise, outlook will stay bearish.

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Daily Pivots: (S1) 0.8437; (P) 0.8478; (R1) 0.8499; More...

EUR/GBP's break of 0.8469 support indicates resumption of fall from 0.8851. This is in line with our view that fall from 0.8851 is the third leg of the corrective pattern from 0.9304. Intraday bias is now back on the downside for 0.8303 low next. Break will extend the fall from 0.9304 to 0.8116 key cluster support level. On the upside, above 0.8550 minor resistance will turn bias neutral first. But outlook will stay bearish as long as 0.8643 resistance holds.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. Deeper fall cannot be ruled out yet. 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. Overall, the corrective pattern would take some time to complete before long term up trend resumes at a later stage. Break of 0.9304 will pave the way to 0.9799 (2008 high).

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Daily Pivots: (S1) 1.3834; (P) 1.3862; (R1) 1.3894; More...

EUR/AUD's decline continues today and reaches as low as 1.3808 so far. Intraday bias remains on the downside for 1.3671 key support level next. At this point, we'd still expect strong support around 1.3671 to bring rebound. On the upside, above 1.3888 minor resistance will turn bias neutral first. Firm break of 1.4025 support turned resistance will indicate short term bottoming and turn focus back to 1.4289 resistance.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. Deeper fall could be seen but, we'd expect strong support above 1.3671 to contain downside and bring rebound. Up trend from 1.1602 should not be finished and will resume later. Break of 1.4721 resistance will indicate completion of such correction and outlook bullish for retesting 1.6587 high. However, sustained break of 1.3671 will invalidate our bullish view and would turn focus back to 1.1602 long term bottom.

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US stocks extended the record run overnight as Trump trade remained in force. DJIA closed up 142.79 pts or 0.70% at 20412.16. S&P 500 rose 12.15 pts, or 0.52% to end at 2328.25. NASDAQ gained 29.83 pts or 0.52% to 5763.96. All three indices closed at record highs. Treasury yields also increased mildly but stayed in familiar range. 10 year yield rose 0.025 to end at 2.434. Dollar followed higher with the index hitting 101.11 and breached 101.02 resistance. But there is no sustainable momentum above this resistance yet. In the currency markets, Yen remains the weakest major currency on risk appetite. Euro follows as the second weakest on worries over political situations in Europe. The economic calendar is very busy today but main focus will be on Fed chair Janet Yellen's semiannual testimony to the Senate.

Fed Yellen to Deliver Non-Committal Message

Fed fund futures are pricing in 17.7% chance of a March Fed hike and 66.1% chance by June. Markets will look into Yellen's speech on any change on Fed's forecasts of three rate hike this year. Some might also want to get hints on chance of March hike. However, based on uncertainties over the fiscal policies Trump would adopt, it's likely that Yellen would sound non-committal. Meanwhile, there are also talks that Fed's Yellen's speech doesn't carry the same significance as before. Yellen's stance could be irrelevant as US president Donald Trump would appoint three member of Fed. And that would reshape the policy path.

Dallas Fed Kaplan: Mover Sooner

Dallas Fed president Rob Kaplan said yesterday that Fed should be "moving sooner rather than later will make it more likely that future removals of accommodation can be done gradually - that is, reduce the likelihood that the Fed will get 'behind the curve' and feel the need to remove accommodation more rapidly." He argued that keep rates on hold at current low level for too long could create distortions in investment and hiring.

NY Fed Survey: Inflation Expectations Highest Since June 2015

A New York Fed survey released yesterday show that US inflation expectations rose to the highest level since June 2015. The year-ahead inflation expectations jumped to 3.0%, up from 2.8% in December and 2.5% in November. The three-year inflation expectation was at 2.9% up from 2.8% in December. New York Fed noted that "both increases were fairly broad-based, but largest among younger and higher-income respondents."

On the data front, Australia business confidence rose to 10 in January. China CPI accelerated to 2.5% yoy in January while PPI also accelerated to 6.9% yoy. Looking ahead in European session, Eurozone, Germany and Italy GDP will be featured together with German ZEW economic sentiment. Swiss and UK will both release CPI and PPI. Later in the day, US will release PPI.

EUR/AUD Daily Outlook

Daily Pivots: (S1) 1.3834; (P) 1.3862; (R1) 1.3894; More...

EUR/AUD's decline continues today and reaches as low as 1.3808 so far. Intraday bias remains on the downside for 1.3671 key support level next. At this point, we'd still expect strong support around 1.3671 to bring rebound. On the upside, above 1.3888 minor resistance will turn bias neutral first. Firm break of 1.4025 support turned resistance will indicate short term bottoming and turn focus back to 1.4289 resistance.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. Deeper fall could be seen but, we'd expect strong support above 1.3671 to contain downside and bring rebound. Up trend from 1.1602 should not be finished and will resume later. Break of 1.4721 resistance will indicate completion of such correction and outlook bullish for retesting 1.6587 high. However, sustained break of 1.3671 will invalidate our bullish view and would turn focus back to 1.1602 long term bottom.

Economic Indicators Update

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