EUR/USD

Current level - 10648

The downtrend is intact, heading towards 1.0580, en route to 1.0500 area. Crucial resistance on the upside is 1.0700.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 113.68

The bias remains positive, for  break through 114.00 resistance area, towards 115.65 zone.

GBP/USD

Current level - 1.2512

The intraday outlook is neutral after the recent reversal at 1.2436. Key support lies at 1.2415 and major resistance is projected at 1.2610.

On the 4h chart of EURUSD, we are observing a nice bearish reversal taking place, with price currently trading in black wave 3 as part of a higher degree decline, that may unfold in weeks ahead. As such this bearish reversal is a sign for a completed complex correction that was recognized in wave 4). A five wave fall from the highs and a broken corrective channel line is also an indication for lower levels to follow.

EURUSD, 4H

Sunrise Market Commentary

• Rates: Calm start of the week?
  The eco calendar is empty today. Sentiment in Asia is modestly risk-on. In this context, core bonds may feel some modest downside pressure, especially as investors will also be cautious ahead of Yellen's testimony on Tuesday and a raft of US eco data, including inflation to be released Wednesday.
• Currencies: dollar extends gradual rebound
  The dollar still profits from a constructive risk sentiment. The positive tone from the meeting between president Trump and Japanese PM Abe eased market fears on global trade and is marginally supportive for the dollar. The prospect of important tax measures in the US still prevents investors from going short equities and the dollar.

The Sunrise Headlines

• On Friday, US equities eked out modest gains, setting again new all-time highs in an uneventful session. Asian equities start the week with moderate gains, as the yen weakens and dollar slightly strengthens and ahead of key US eco data.
• Japanese investors culled their stakes of US Treasuries in December by the most in four years. It's not just Japanese investors, as across the world foreigners are pulling back from USD debt like never before.
• Fed Tarullo, dove and architect of the Fed's banking regulation, will leave the Fed early April. It gives Donald Trump the opportunity to nominate 3 new Fed governors and to reshape the Fed's oversight of Wall Street and monetary policy.
• Commodities opened the week excellent with copper and iron ore surging, while oil stabilizes. Copper futures hit the highest level since 2014. It pushed producer shares higher in Asia.
• Fitch affirmed Sweden's AAA+ rating stable outlook and Slovakia's A+ rating stable outlook
• Fed vice chair Fischer said over the weekend that significant uncertainty remains over the outlook for US fiscal policy
• Tokyo stocks gained as PM Abe and president Trump refrained from arguing about FX levels during their meeting. Japanese GDP grew for the 4th consecutive quarter, but the advance (0.2% Q/Q) was slightly below expectations.
• Today's eco and event calendar is empty. Attention might go to the Italian BTP auction. Later this week, Yellen will hold her semi-annual testimony before Congress and manifold interesting US eco data will be released

Currencies: Dollar Extends Gradual Rebound

Dollar extends gradual rebound

On Friday, the dollar traded again higher, as the new phase in the reflation trade continued. USD/JPY trended higher in the 113 big figure, supported by higher core/US yields and by a decent equity sentiment. The decline of EUR/USD was even more pronounced as the pair also suffers from underlying euro softness. The US rally slowed in US trading after Michigan consumer confidence was reported softer than expected. USD/JPY closed the session at 113.22 (from 113.25 on Thursday). EUR/USD finished the session at 1.0643 (from 1.0655).

Overnight, Asian equities show modest gains across the board. The meeting between US president Trump and Japanese PM Abe developed in a constructive environment, easing market fears on global trade tensions. Asian equities are also supported by new equity records (three indices) in the US on Friday. Japan Q4 GDP was reported marginally softer, but had no big impact on trading. Japanese investors cut their Treasury holdings the most on four years in December. This could be a negative for the dollar. However, currently, the risk-on sentiment prevails and is supporting the dollar. USD/JPY is trading in the 113.70 area. EUR/USD also resumed its gradual decline, trading in the 1.0630 area.

Today, the eco calendar is empty. So, USD trading will be driven by global market sentiment. The price action in Asia suggests a positive risk sentiment at the European open. This is USD supportive. Investors apparently still don't want to go short US equities and/or short USD as US president Trump promised to present its tax plans in the near future. Short-term, markets will also look forward to Fed's Yellen semi-annual testimony before Congress (Tuesday). The Fed chair will probably keep a balanced approach, but confirm that the Fed is nearing its targets. Yellen's assessment at least shouldn't be negative for the dollar. Markets will also keep a close eye on the US CPI and retail sales data (Wednesday). We start the week with a cautious USD-positive bias, but the moves might by modest given the upcoming key events/data

Global context: The dollar is/was in a corrective downtrend since the start of January as the Trump reflation trade petered out. Interest rate differentials in favour of the dollar narrowed. Trump's communication became a source of uncertainty, also for the dollar. At some point, absolute interest rate support should provide a USD floor, especially as the Fed is expected to continue its policy normalisation. Last week, the dollar showed tentative signs of a bottoming out process, supported by the ‘Trump tax promise'. Price action earlier last week showed that euro weakness might be a factor too. As we see the 1.0874 as solid resistance, a sell EUR/USD on upticks approach might be considered. The downside test of USD/JPY is also rejected. USD/JPY 111.16 (38% retracement of the 99.02/118.66 rally) remains key support. The day-to-day momentum improved, but a return to the recent highs looks an uphill battle. The post-Trump highs (118.60/66) are still far away.

EUR/USD: Topside test rejected. Dollar succeeds a cautious/gradual comeback

EUR/GBP

EUR/GBP holding in the 0.85 area

On Friday, UK eco data were unequivocally positive. Production rose more than expected and so was construction output. At the same time, the UK trade deficit narrowed more than expected. However, for the production output and the trade deficit, the ONS mentioned one-off factors potentially distorting the data. Sterling gained temporary a few ticks after the data, but the gains couldn't be sustained. EUR/GBP even spiked temporary higher in the 0.85 big figure. Sterling sentiment improved slightly later in the session. EUR/GBP closed the day at 0.8513 (from 0.8526). Cable ended the session at 1.2491.

Today, there are no UK or EMU eco data. For now, we see no driver for sterling trading. A constructive risk-on sentiment and tentative euro softness caps the topside of EUR/GBP short-term. Later this week, important UK eco data including the CPI, the labour data and the retail sales will be published. We still look out whether the 0.8450 support will continue to play its role as ST line in the sand. Context. The ongoing balanced BoE approach capped the topside of sterling and helped a cautious bottoming out process for EUR/GBP. Last week, sterling rebounded as the UK Parliament was allowed to vote on the final Brexit agreement. We don't see this ‘agreement' as a reason for further sterling strength though. The EUR/GBP 0.8450 support remains key for EUR/GBP short-term. A cautious EUR/GBP buy-on-dips approach remains preferred, but overall euro softness remains a risk. In case of a break, the 0.8304 area is the next MT support

EUR/GBP still struggles to rebound off the 0.8450 support area

Download entire Sunrise Market Commentary

The US dollar opened with a positive gap on Monday against most of its counterparts and continued to trade higher during the Asian morning in the aftermath of the meeting between US President Trump and Japanese Prime Minister Abe over the weekend. The positive reaction in the greenback may have been due to the absence of any discussion on the issues of currency manipulation or trade policy by the two leaders. What's more, market participants may have been concerned of President Trump taking this opportunity to jawbone the dollar again. With that risk finally out of the way, investors likely breathed a sigh of relief, and may have assumed new long positions in USD.

USD/JPY was one of the currency pairs that opened with a gap up and continued to rally until it hit resistance slightly above the 114.00 (R1) barrier. Then the pair retreated somewhat, but we still believe that the short-term outlook may have turned positive following the completion of a short-term double bottom on Thursday. Considering the recent signals from Trump that he will announce a "phenomenal" plan on tax reform within the coming weeks, we maintain the view that speculation regarding fiscal stimulus could keep the greenback broadly supported in coming days, absent any verbal interventions from the government. As such, we expect the bulls to regain control soon and push the rate up for another test near 114.00 (R1). A clear break above that obstacle could see scope for extensions towards our next resistance of 114.80 (R2). The next major market moving event for USD will probably be tomorrow, when Fed Chair Yellen testifies before Congress.

As for the bigger outlook of USD/JPY, the recent recovery confirms our view that the slide started early January was just a corrective phase which could be over. However, we prefer to wait for a decisive break above 115.50 (R3) before we assume the resumption of the prevailing medium-term uptrend.

CAD lifted by remarkable employment data

The Canadian dollar came under renewed buying interest on Friday, following the release of the nation's jobs data for January. All the indicators beat their forecasts significantly, with the unemployment rate declining instead of staying unchanged as expected, and the labor force participation rate rising. This means that the number of unemployed people fell, even as the total number of people available to work rose, a strong indication that the slack in Canada's labor market is quickly diminishing. In our view, these data lower notably the likelihood for the Bank of Canada to take any action in the foreseeable future, something that may keep the Canadian dollar supported for a while. USD/CAD tumbled to break below the support (now turned into resistance) barrier of 1.3110 (R1), but hit support slightly above 1.3050 (S1) and rebounded to test the 1.3110 (R1) zone as a resistance. We believe that sellers may take advantage of that level and drive the battle lower for another test near 1.3050 (S1). If they prove strong enough to overcome that obstacle, we may see a test near the psychological zone of 1.3000 (S2). This view is amplified by the fact that oil prices remain relatively high and that the recent sentiment in the energy market appears somewhat bullish. The latest IEA report on Friday showed that OPEC members have reached a record 90% compliance with their agreed output cuts, which suggests that oil prices could remain elevated in coming weeks. However, considering our view for both a stronger USD and a stronger CAD, we would avoid USD/CAD as a proxy for any further CAD gains. The technical picture agrees with that view as the pair seems to be trading within a falling wedge formation on the daily chart, something that may keep any further declines limited near the lower bound of the pattern. Instead, EUR/CAD may be a better pair to exploit more strength in the Canadian dollar, especially given the political risks facing the Eurozone, which have started to weigh on the common currency.

Today's highlights:

During the European day, the economic calendar is very light. The only noteworthy indicator we get is Sweden's unemployment rate for January, though no forecast is available yet.

With regards to the speakers, US President Trump will meet Canada's Prime Minister Trudeau. Any comments on trade policy, especially on the future of NAFTA, could cause some volatility in both USD and CAD.

As for the rest of the week:

On Tuesday, during the Asian morning, we get China's CPI and PPI data for January. In the US, the main event will be Fed Chair Yellen's semi-annual testimony on monetary policy before the Senate Banking Committee of Congress. She will present the same testimony before the House of Representatives on Wednesday. Although the testimony will be the same on both occasions, we expect market participants to pay extra attention to the Q&A sessions. In particular they may be on the lookout for any fresh hints regarding her view on the economy, and whether she is likely to vote in favor of a rate hike in the upcoming policy meetings. From the UK, we get inflation data for January.

On Wednesday, market participants are likely to turn their gaze to Sweden, where the Riksbank will announce its policy decision. The last time the officials met, they extended the duration of their QE program and maintained a rather sanguine tone in the meeting statement, indicating that the outlook for economic activity in Sweden and abroad has improved somewhat. Considering that since that gathering the nation's CPI and CPIF rates for December both surged to reach highs last seen in 2011 and 2012 respectively, we see a very low likelihood for the Bank to take action. In the UK, employment data for December are due out. As we already noted, in the US, Fed Chair Yellen will testify before lawmakers again, this time before the House Committee on Financial Services. With regards to the US economic indicators, we get inflation and retail sales data, all for January.

On Thursday, the economic agenda is relatively empty, with no major events and only second-tier indicators due to be released.

On Friday, we get UK retail sales data Sweden's CPI data, both for January.

Market movers today

We have a very quiet start to an otherwise busy week on the macro front. Today will not provide any key figures, only new economic forecasts from the European Commission. Apart from data and central bank speeches, focus will continue to be on any announcements by Donald Trump on policies and on developments in the French election campaign.

On the macro front, Fed chairman Janet Yellen is due to hold her first semi-annual testimony before Congress since Trump was inaugurated. Focus will be on any guidance on the timing of the next rate hike. We continue to look for a June hike but risks are still skewed towards an earlier hike.

On the global data front, focus will be on US retail sales and CPI, German ZEW index and GDP, UK CPI and Chinese producer price inflation. See Weekly Focus, 10 February 2017 for more on this.

In the Scandies, all eyes will be on the Riksbank on Wednesday and Swedish inflation data on Friday. In Norway, the annual address by the central bank governor will be the main event.

Selected market news

Reflation trades were back in fashion late last week with equities and bond yields higher and USD stronger again. US equities finished at a new all-time high after trading sideways for a while and all Asian indices are up this morning. Risk sentiment got a lift from a change in tone from US president Donald Trump on foreign politics, lowering the immediate risk of a clash between the US and China or other trade partners. Trump's telephone call with Chinese president Xi Jinping last week and his two-day summit with Japan's Prime Minister Shinzo Abe points to a change in style on foreign politics following his very confrontational comments recently.

For now, this has lowered the risk of a foreign policy clash or trade war. We would warn against Trump given he has changed tack many times before, and given his very harsh criticism of China previously, it is probably still too early to call off the risk of a trade war. However, for now, it is clearly a positive development and has dampened one of the key risks this year.

Oil prices rose on Friday as OPEC achieved 90% compliance with its pledged oil cut. The news came from the International Energy Agency (IEA). Brent oil prices are back in the upper end of the past three months' range between USD54 and USD57 per barrel.

In Japan, GDP for Q4 rose 1.0% q/q annualised, which was close to expectations of 1.1% q/q annualised.

No big news in the French election campaign. Polls still suggest Emmanuel Macron is currently the favourite to become the new French President. However, there is still a long way to go until the election in late April and many things could happen before then.

President Donald Trump now has to nominate three Fed governors, as Daniel Tarullo has announced he will step down on 5 April. While Trump has expressed different views on monetary policy, we think it is most likely that he will appoint hawkish governors.

Fed Chair Yellen's and Vice Chair Fischer's terms expire in 2018 (in February and June, respectively) and Trump has indicated he would be likely to replace them. One of Trump's nominees for the three vacant seats is likely the next Fed Chair.

Trump is likely to nominate a total of five new governors over the next two years, as Yellen and Fischer are expected to leave the Fed if they are not reappointed.

The Fed may become more rule-based in coming years due to Trump's nominations. A simple Taylor rule based on PCE core inflation and output gap suggests the Fed funds rate should be 3.0% currently. It is more difficult to predict the impact on overall US yields, as it also depends on the impact on inflation expectations.

The Fed's independence may come under greater pressure, as tighter monetary policy would offset Trump's expansionary fiscal policy, which could frustrate him.

After five consecutive weeks of declines,the U.S. dollar finally received a boost last weekleaving many traders wondering if this spike is going to be short-lived or if it would lead to a major reversal and a re-test of the 14-year high.

The motivation behind the rally cannot be attributed to improvement in macroeconomic conditions as only Tier 2 data were released from the U.S. and were rather mixed. In fact, the dollar essentially got a boost from President Trump comments on Thursday regarding the announcement of a phenomenal tax reform proposal to be expected in the next two to three weeks. It's possible that nothing will take fruition as these were the same promises that drove U.S. equities to record highs after the elections; however, it was enough to distract investors from his initial policies on travel bans and protectionism.

There's a high chance for the greenback to resume its rally the week ahead, especially if such comments were reiterated, but traders should be aware that with no progress on such policies the impact on the dollar's price action will be diminished on the longer run. Another risk dollar bulls should be aware of is that President Trump is against a strong currency, so a reduction in taxes along with spending programs may come along with policies to cap any potential rally in the greenback, such as implementing trade tariffs.

Fed Chair Janet Yellen's first semi-annual testimony before Congress on Tuesday and Wednesday is going to grab most of traders' attention the week ahead. The Fed's statement on February 1 didn't provide any additional clues on monetary policy direction, and as of last week, markets were only pricing in 13.3% chance for a rate hike in March and 23.7% in May. Overall, markets still believe that only two rate hikes will occur in 2017 as opposed to the Fed's guidance of three. In terms of economic data, there wasn't sufficient evidence to support aggressive tightening, and same applies for fiscal measures. Thus, it's going to be interesting on which side will Yellen move the needle. If she was able to convince the markets that the Fed is on the path of three rate hikes and that March is a live meeting, then U.S. bond yields will rise further and the best way to play it is against the Japanese Yen. I choose the Japanese currency because yield spreads of U.S. and Japanese bonds will potentially widen the most, thus providing USD/JPY another boost towards 115. Otherwise a dovish message will lead USDJPY to resume its six weeks' downtrend potentially retesting 111.50.

Despite the fact that Yellen's testimony is likely to be the major risk event for the U.S. dollar; traders will also have a busy economic calendar to monitor. Inflation figures, retail sales, industrial production, housing starts and building permits are all due to release.

Japan GDP maintains growth trajectory

Asia Mid-Session Market Update: Trump-Abe summit marred by North Korea missile launch; Japan GDP maintains growth trajectory

Friday US markets on close: Dow +0.5%, S&P500 +0.4%, Nasdaq +0.3%

Best Sector in S&P500: Materials

Worst Sector in S&P500: Consumer Staples

Biggest gainers: ATVI +18.9%; CBG +7.7%; NWSA +7.3%

Biggest losers: CERN -4.4%; TDC -3.2%; WU -3.1%

At the close: VIX 10.9 (-pts); Treasuries: 2-yr 1.21% (flat), 10-yr 2.41% (+1bps), 30-yr 3.01% (flat)

Weekend US/EU Corporate Headlines

SAZ.DE: Private equity group Cinven makes €3.6B takeover offer or ~€58/shr (17% premium to Fri close) - press

Politics

(US) White House advisor Stephen Miller: Administration is considering different options after immigration ban decision in the appeals court, including drafting a new executive order - press

(ES) Spain PM Rajoy has been reelected as the leader of the ruling conservative Popular Party for the 4th term - press

(MX) Approval rating for Mexico's left-wing National Regeneration Movement party leader López Obrador has risen 4pts since the US election give his vocal opposition to President Trump - press

Key economic data:

(JP) JAPAN PRELIM Q4 GDP Q/Q: 0.2% V 0.3%E; Y/Y: 1.0% V 1.1%E

(NZ) NEW ZEALAND JAN CARD SPENDING M/M: +2.7% V 0.7%E; TOTAL M/M: 2.5% V 0.0% PRIOR

Asia Session Notable Observations, Speakers and Press

Asian equity markets remaining bid despite the geopolitical concerns and uncertainty regarding US policy. Sentiment continued to reverberate from the reflation "Trump-trade" persisting in the US session on Friday and pushing indices to record highs. Lift in commodity prices such as new 2-year high in Dalian iron ore has buoyed miners in Australia, while a 2-week high in USD/JPY above ¥114 is supporting Japan's export-rich market.

Pro-growth business and tax agenda of US Pres Trump is once again overshadowing other factors. Trump met with Japan PM Abe over the weekend, pledging commitment in joint defense and investment in Japan business partnership, hinting he will announce big news on taxes and other industry-supportive changes in the near term.

Another missile launch by North Korea on Sunday has not deterred buyers. This is the first launch during the Trump administration, and thus far he has only stated that US stands to defend Japan 100%. North Korea's state press KCNA announced the test of ballistic missile was successful, while South Korea defense officials said the missile flew 500km before falling into the sea though also acknowledging this was an improved version of the last test. KCNA also stated that the missile type launched on Sunday would be capable of carrying a nuclear warhead.

Japan Q4 preliminary GDP was a decimal shy of consensus but roughly on par with the growth rates reported in Q3. Key components showed flat Private Consumption v 0.3% prior, though Japan Econ Min attributed the slowdown to rising food prices. In contrast, CAPEX was a bright spot, growing 0.9% after a contraction of -0.4% in Q3.

Attention this week turns to Fed Chair Yellen semiannual testimony in Congress, and investors will look for more clues on how probable are the expectations of a March rate hike. Recall the last FOMC decision has dented those probabilities, producing a bounce in US treasuries. Part of the uncertainty lies with the fiscal side of the US economy, and whether President Trump's bold agenda will nudge the purse strings of Republican controlled Congress. Over the weekend, Fed vice chair Fischer echoed as much, stating that there is significant uncertainty about what Congress and the Administration will do with fiscal policy.

China

(CN) Mitsubishi UFJ analyst: PBoC is "trying to juggle too many balls" given all of its various policy tools - press

(CN) China FX regulator SAFE chief Pan: will continue supporting opening of financial markets - Chinese press

(CN) China state researcher: PBoC should step up risk controls in 2017 - Chinese press

(CN) Schedules for approval of 3rd batch of Free Trade Zones (FTZ) have been submitted to central govt; Expected to be launched soon - Chinese press

Japan

(JP) Japan Econ Min Ishihara: No change to view of Japan in moderate recovery

(JP) Japan Chief Cabinet Sec Suga: Important that US and Japan firmly ally on North Korea; urge China to take constructive measures on North Korea

Australia/New Zealand:

(AU) RBA Gov Lowe: Hard to say that exchange rate is too high - AFR (update)

(NZ) ANZ: New Zealand housing shortage estimated at about 60K units - NZ press

Asian Equity Indices/Futures (23:00ET)

Nikkei +0.6%, Hang Seng +0.5%, Shanghai Composite +0.6%, ASX200 +0.7%, Kospi flat

Equity Futures: S&P500 +0.2%; Nasdaq +0.2%, Dax +0.3%, FTSE100 +0.1%

FX ranges/Commodities/Fixed Income (23:00ET)

EUR 1.0610-1.0635; JPY 113.45-114.15; AUD 0.7655-0.7680; NZD 0.7180-0.7210; GBP 1.2465-1.2495

Apr Gold -0.4% at 1,231/oz; Mar Crude Oil -0.1% at $53.80/brl; Mar Copper +0.7% at $2.80/lb

GLD SPDR Gold Trust ETF daily holdings rise 4.1 tonnes to 836.7 tonnes; 7th consecutive increase; Highest since Dec 16th

(CN) PBOC to inject combined CNY100B v CNY50B on Feb 2nd in 7-day, 14-day and 28-day reverse repos (1st injection after 6 consecutive halts)

(CN) PBOC SETS YUAN MID POINT AT 6.8898 V 6.8819 PRIOR; 2nd straight weaker setting; weakest CNY setting since Jan 13th

(AU) Australia MoF sells A$300M in 4.5% 2033 bonds; avg yield 3.164%; bid-to-cover 3.42x

Asia equities/Notables/movers

Australia

AMC.AU Amcor +4.5% (H1 result)

AZJ.AU Aurizon +3.6% (H1 result)

JBH.AU JB Hi-Fi +2.8% (H1 result)

OZL.AU Oz Minerals +2.8% (raised at Morgan Stanley)

BHP.AU +2.3%, RIO.AU +3.4% (iron ore price at 2-year high)

NCM.AU Newcrest Mining +1.0% (H1 result)

ANN.AU Ansell Ltd -2.3% (H1 result)

Hong Kong

175.HK Geely Auto +6.0%; 494.HK Li& Fung -3.2% (Geely replace Li&Fung in Hang Seng)

1098.HK Road King Infrastructure Limited +4.9% (profit alert)

337.HK Greenland Hong Kong +1.6% (Jan sales)

1628.HK Yuzhou Properties Company -1.1% (Jan sales)

434.HK Boyaa Interactive -1.4% (profit warning)

Japan

7312.JP Takata +8.0% (9-month result)

1605.JP Inpex +5.9% (9-month result)

6502.JP Toshiba +2.1% (9-month result speculation)

9432.JP Nippon Telegraph And Telephone Corp -1.8% (9-month results)

European equity markets are expected to open higher on Monday, tracking gains in Asia overnight where investors appear relieved at the softening foreign policy stance of new US President Donald Trump towards the region.

It's been a surprisingly good few days for those that were concerned about the relationship between the US under Trump and two of Asia's powerhouses, China and Japan. It seems that Trump's stance in relation to both has softened considerably since being elected – at least in public – and he may have adopted a relationship more in line with previous regimes.

This is a big relief for investors given that Trump's previous stance had raised serious foreign policy concerns, not to mention the prospect of severely damaged trade ties with the region and increased protectionism. Of course, one phone call with Chinese President Xi Jinping is unlikely to have addressed some of Trump's biggest concerns, around the yuan and jobs for example, and details of what was discussed with Japanese Prime Minister Shinzo Abe are few and far between, but these early signs are at least encouraging.

Given how active he's been in the early stages of his tenure, Trump is likely to continue to be a big influence in the markets in the weeks ahead. As he settles into the White House and provides greater detail on a wide range of policies, investors should gain a better understanding of what they're dealing with which in turn should remove some of the uncertainty that is hanging over markets currently.

In contrast to last week, there's a lot of important economic data being released over the next few days which will give investors something else to think about, although today is looking very quiet on this front. The standout events this week will likely be Federal Reserve Chair Janet Yellen's appearances before the Senate Banking and House Financial Services committees. These are often highly charged events and may provide more insight on the path of interest rates going forward and the impact the new administration will have on this. Yellen may also be pressed on her future as Chair of the Fed.

Key Points:

• Fundamentals rather weak
• Double top seemingly forming on the daily chart.
• Plenty of news due out this week.

The Aussie Dollar's recent uptrend may be coming to an end this week as it looks as though a double top is forming on the daily chart. Additionally, a number of other technical and fundamental factors are signalling that the pair is destined for a tumble in the coming days. However, first of all it might be worth looking at what brought the AUD to where it is now.

Last week got off to a fairly torrid start for the AUD with the Australian Retail Sales posting a 0.1% m/m contraction. This negative sentiment carried through to the subsequent session, in which, the RBA elected to hold the Cash Rate steady at 1.50% which came as little surprise to the market. However, contrary to the broader market trend, the Aussie Dollar rebounded strongly later in the week as the reserve bank used the Monetary Policy Statement to skilfully downplay rising fears that the nation is already in, or could soon be facing, a recession.

On the technical front, the AUD had some strong underlying bullish sentiment but this could be about to abate as a result of what looks like a double top beginning to form. Moreover, the current zone of resistance has proven to be a rather difficult one to crack historically which should be an additional impediment to further gains moving forward. The main dissenting technical signal is the EMA bias which is patently highly bullish. Luckily, the MACD oscillator is showing some evidence of a signal line crossover which suggests that this uptrend is likely about to come to an end.

As for what lies ahead in the news, the coming week is rather data rich which should provide the requisite fuel for some strong moves. In the first half of the week, the NAB Business Confidence and Westpac Consumer Confidence figures are due out which could help to set the tone for the rest of the week. However, it is Thursday's employment data that will truly be in focus as, if another uptick in unemployment is seen, the RBA will have a hard time defending its stance that the country is unlikely to see a recession take hold.

As a result of all of this, it seems all it will take is some vaguely weaker Australian results to send the pair lower in the near-term. More precisely, given the rather weak technical and fundamental position the AUD is in, it could be overvalued at present. As a result of this, downside risks could be fairly substantial which is worth keeping a close watch on.