EUR/USD

After being under pressure for seven consecutive weeks, the American dollar managed to change course against the common currency, and the EUR/USD pair closed the week around 1.0630, its lowest settlement in almost a month. Renewed hopes about the US government applying policies to boost growth and inflation, after President Donald Trump promised a "phenomenal" tax reform, was behind dollar's strength. The American currency advance was uneven across the board, with the Pound and the Aussie the most reluctant to give up. The EUR on the other hand, is among the most vulnerable, given the ongoing political woes in the region, with upcoming elections in Germany and France, a possible referendum in Italy, and Greece's bailout on "shaky ground," according to the European Commission President Jean-Claude Juncker.

The week with probably start in slow motion, with no major data scheduled in Europe and America. That said, political headlines could continue to affect currencies one way or the other. From a technical point of view, the EUR/USD pair´s daily chart shows that, after reaching the 50% retracement of the November/January decline, the pair is back below the 38.2% retracement of the same decline and poised to test the next Fibonacci support at 1.0565. Technical indicators in the mentioned time frame head sharply lower within negative territory, whilst the price is below its 20 and 100 DMAs, this last with a strong downward slope around 1.0700. In the shorter term, and according to the 4 hours chart, technical readings also favor the downside, as a bearish 20 SMA kept capping the upside, currently around 1.0660, whilst the Momentum indicator turned south after failing to overcome its mid-line, and the RSI indicator consolidates around 38.

Support levels: 1.0620 1.0590 1.0565

Resistance levels: 1.0660 1.0710 1.0750

USD/JPY

The USD/JPY pair closed the week with modest gains around 113.20, down on Friday after failing to regain the 114.00 level. Risk appetite was not enough to fuel the pair, with bulls probably disappointed by the outcome of the Abe-Trump meeting, as both leaders shook hands and praise one another, but said nothing about a possible trade deal or on how the relationship between the two countries will continue. Despite Wall Street closed at record highs for a second consecutive day on hopes for an upcoming tax cut and recovering US Treasury yields, the USD/JPY pair closed the week with a lower low and a lower high, somehow suggesting that yen's rally is not yet over. Risk aversion may re-surge with the weekly opening, as over the weekend, North Korea fired an unidentified ballistic missile, triggering condemnatory comments from both, Abe and Trump, with the first saying that missile tests "can absolutely not be tolerated." Technically, the daily chart shows that the pair was unable to break below a bullish 100 DMA, currently at 111.85, while the 38.2% retracement of the latest bullish run stands at 111.95, providing a major support for the upcoming days. In the same chart, however, technical indicators have lost upward strength right below their mid-lines, and the RSI is slowly turning south, leaning the scale towards the downside. In the 4 hours chart, the price is struggling with a bearish 100 SMA, while the RSI indicator pulled back from overbought readings, now heading lower around 54, whilst the Momentum indicator maintains its bullish strength near overbought readings.

Support levels: 112.85 112.40 111.90

Resistance levels: 113.60 114.00 114.55

GBP/USD

The GBP/USD pair closed the week flat a few pips below the 1.2500 threshold, hit by dollar's strength by the end of the week and in spite of strong UK data. Industrial and manufacturing production more than doubled expectations in December, with the first up 1.1% and the second 2.1% when compared to the previous month. The year-on-year figures came in at 4.3% and 4.0% respectively, while previous month's reading were revised higher. Also, the goods trade balance for the same month showed a deficit of £-10.89B, better than the expected £-11.500B or previous £-11.55B, whilst the NIESR GDP estimate for the three months to January came in at 0.7%, beating expectations and above previous. Adding strong macroeconomic figures to the Brexit bill passing smooth through the Parliament, seems Pound's declines are set to be limited. Technically, the daily chart shows that the pair is right below a bullish 20 DMA, whilst technical indicators head modestly lower within neutral territory. The chart also shows that the pair bounced strongly from the 38.2% retracement of its latest bullish run at 1.2430 a key support for the upcoming days. In the 4 hours chart, the price is trading below horizontal moving averages, with the 200 EMA a few pips above the mentioned Fibonacci support, while technical indicators are also standing within neutral readings, with a modest bearish potential.

Support levels: 1.2470 1.2430 1.2390

Resistance levels: 1.2535 1.2585 1.2620

GOLD

Gold prices extended their gains this past week, with spot reaching a fresh three-month high of $1,244.67 a troy ounce, to close the week at 1,234.01, down on Thursday amid re-surging risk appetite. Despite broad dollar's strength, demand for gold remained high, amid reduced hopes of three rate hikes coming from the FED this year, with speculators foreseeing the most, two hikes one in June and one in December. Gold prices will depend much on the upcoming Federal Reserve Chair Janet Yellen semi-annual testimony before congress, with a hawkish stance probably taking gold down. From a technical point of view, the upside is still favored given that in the daily chart, the price is well above a bullish 20 DMA that crossed above a bearish 100 DMA, whilst technical indicators have advanced within positive territory, with the Momentum indicator heading north at fresh monthly highs. In the 4 hours chart, however, the price is right below a horizontal 20 SMA, the Momentum indicator retreats from its 100 level within bearish territory, whilst the RSI indicator lacks strength around 55, suggesting a break above Friday's high of 1,237.10 is required to confirm further gains.

Support levels: 1,230.00 1,219.40 1,210.10

Resistance levels: 1,237.10 1,244.70 1,255.15

WTI CRUDE

West Texas Intermediate crude oil futures advanced for a second consecutive day, with the commodity setting a couple of cents above 53.00. WTI set a daily high of $53.20 a barrel, still underpinned by Wednesday's news, showing an unexpected draw in US gasoline stockpiles that suggest rising demand for the commodity. Despite a large build in crude inventories, the commodity advanced for a second consecutive day, although the price continues developing within the range set mid December. Technically, the daily chart shows that the price is now around a flat 20 SMA, whilst technical indicators have turned flat around their mid-lines, indicating a limited upward scope. In the 4 hours chart, the price advanced beyond a still bearish 20 SMA, but is currently struggling with the 100 and 200 SMAs, both flat, whilst the Momentum indicator heads higher above its 100 level and the RSI remains flat around 54, in line with the longer term view.

Support levels: 52.50 51.80 51.10

Resistance levels: 53.20 53.65 54.20

DJIA

US equities extended their Thursday's rally, with all of the three major indexes closing the day at all-time highs. On Friday, the Dow Jones Industrial Average added 96 points or 0.48% to end at 20,269.37, while the S&P gained 0.36% to 2,316.10. The Nasdaq Composite settled at 5,734.13, up by 18 points. Stocks rallied on Trump's promises of an upcoming tax reform, and a recovery in oil prices that lifted the energy sector. Within the Dow, Caterpillar led gainers, up by 2.50%, followed by NIKE that added 1.65% and Boeing, up by 1.19%. On the losing side, Coca-Cola topped losers' list, down 1.62%, followed by Wal-Mart Stores that shed 1.53%. From a technical point of view, the upside is favored given that in the daily chart the Dow is well above a modestly bullish 20 SMA, whilst the RSI indicator heads higher around 70, with the Momentum indicator, however, diverging, neutral around its 100 line. In the 4 hours chart, the bias is firmly bullish with the index well above a bullish 20 SMA, the Momentum indicator heading north near overbought readings and the RSI hovering around 72.

Support levels: 20,228 20,157 20,090

Resistance levels: 20,297 20,350 20,415

FTSE 100

London shares got a boost from China last Friday as a better-than-expected trade surplus in the country sent mining-related equities higher, helping the FTSE 100 to add 29 points and close at 7,258.75. A weaker Pound also lifted the mood among local traders. Rio Tinto was the best performer, up 5.63%, followed by Antofagasta that gained 4.65% and Anglo American that added 4.40%. Reckitt Benckiser was the worst performer, down 2.96%, followed by Royal Bank of Scotland that lost 1.80%. The index closed at its highest in three weeks, and technical readings in the daily chart support additional gains, given that the benchmark has extended above a still flat 20 SMA, but indicators maintain bullish slopes within positive territory. In the 4 hours chart, the 20 SMA advanced to converge with the 100 SMA at 7,208, providing a strong dynamic support, while the RSI indicator consolidates at 71 and the Momentum indicator turned higher within positive territory, in line with the longer term perspective.

Support levels: 7,208 7,163 7,128

Resistance levels: 7,275 7,326 7,354

DAX

European equities closed marginally higher on Friday, with the German DAX finishing at 11,666.97, up 24 points. Despite staring the day with a strong footing, shares failed to extend the risk-appetite rally triggered by the US president on Thursday, but remained afloat on strong earnings reports released earlier in the week, and positive trade data coming from China. In Germany, banks were among the worst performers, with Commerzbank down 2.37%, leading losers' list, and Deutsche Bank down 1.35%. ThyssenKrupp was the best performer by adding 2.35%, followed by Heidelberg Cement that closed 1.58% higher. Technically, the pair presents a modest upward potential in the daily chart, as it´s just holding at the upper end of its latest range, and a few points above a flat 20 SMA, whilst technical indicator in the mentioned time frame barely aim higher within neutral territory. In the 4 hours chart, the index settled above all of its moving averages, but the 20 and 100 SMAs lack clear directional strength, whilst technical indicators have turned lower within positive territory, limiting chances of a steeper recovery as long as the benchmark is unable to advance beyond 11,720, Friday's high and the immediate resistance.

Support levels: 11,605 11,545 11,498

Resistance levels: 11,720 11,794 11,845

STOCKS

Dow, Dax and Nikkei may face resistances above current levels and could possible come off by the end of the week while Nifty and Shanghai looks bullish for now. Nifty is also heading towards crucial resistance from where it may come off sharply.

Dow (20269.37,+0.48%) is trying to move up. Immediate resistance is seen in the 20300-20400 region which could push off the index in the near term back towards 20000.

Dax (11666.97, +0.21%) is trading at important resistance of 11700 and could turn bullish towards 11820-11930 levels only on a break above current resistance. In case 11700 holds, we could see some consolidation in the 11700-11500 region again.

Nikkei (19500.91 +0.63%) could test 19615/20 on the upside before coming off slightly from there. Only on a break above 19620 can we shift our focus to higher levels for the near term.

Shanghai (3209.83, +0.41%) has broken above the immediate resistance at 3200 and is now headed towards 3225-3300 levels in the near term. The index looks bullish on the 3-day candle chart.

Nifty (8793.55, +0.17%) has created some room on the upside towards 8900 after consolidating in the last week. The index looks potentially strong towards 8900-9000 in the near term from where a sharp correction is possible.

COMMODITIES

Gold (1230.09) has held above 1220 to bounce a bit as expected and now may test 1240-50 in the next couple of sessions. It may oscillate in the range of 1220-1250 this week.

Silver (17.94) has rallied to the near term target/resistance of 18.00-10 sooner than expected but may stall and correct from these levels in the near term. A consolidation in the range of 17.50-18.10 may be more likely for the week.

Both Brent (56.73) and WTI (53.87) are approaching the higher end of their respective medium term ranges of 53-58 and 50-55. It remains to be seen if profit booking emerges at the higher levels once again, keeping the range intact.

Copper (2.81), contrary to expectations, enjoyed a huge breakout above the medium term resistance of 2.75-80 as the supply from the two largest mines of the world has been shut down. With this momentum, it may rise to 2.90-95 levels very soon.

FOREX

Not only the US equities but Dollar is also boosted by the Trump promise of a huge tax plan and a smooth meeting between the US President and the Japanese PM has weakened Yen.

Dollar Index (100.92) is testing the resistance of 101.00 for the second time in as many days which must be broken above to extend the rise to 101.75-102.00. The near term path depends on the congressional testimony of the Fed chair Yellen but the near term downside may be limited to 100.00 even if it fails to rise above 101.00 immediately.

Euro (1.0620) is trading near the previous week’s low of 1.0607 and may decline below 1.06 if Dollar manages to break above 101.00. The near term upside may be limited to 1.07 in case any short covering emerges.

Dollar-Yen (113.93) has been rising gradually for the last 3 sessions and may rally to 115-116 if it manages to stay above 113.50.

Pound (1.2488) is unaffected by the global cues at this point and it may continue the sideways movement inside the range of 1.2350-1.2700 for a few sessions more.

Aussie (0.7670) is trading at the higher end of the 6-day range of 0.76-0.77 but 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 (66.88) has managed to stay above 66.80 till now but it is yet to confirm a reversal. Unless it rises above 67.07 in the next couple of sessions, the possibility of a break below 66.80 may strengthen, bringing the long term support of 66.50-35 into consideration and we may have to abandon our preferred bullish view.

INTEREST RATES

The US yields have risen from immediate supports on the daily near term charts but while crucial resistances hold, the medium term outlook remains bearish. 3.10-3.25% levels on the 30Yr (3.02%) and 2.50-2.75% on the 10Yr (2.43%) are important resistance zones to keep an eye on.

The UK-US 10Yr (-1.08%) has fallen sharply from resistance near -0.90% and could come off a little more in the next few sessions pulling down the Pound also to lower levels.

The UK yields have risen slightly but the longer term charts look potentially bearish in the near term. The 5Yr (0.45%), 10Yr (1.35%) and the 20YR (1.83%) may fall some more in the coming sessions.

The German-US 2YR (-2.01%) has fallen exactly in line with our expectation and while the spread continues to move down, the Euro could also fall in the near term. Look at Currencies section above)

EURUSD - With the pair closing lower the past week on correction, further weakness may occur in the new week. However, we think a move back up could happen. On the upside, resistance comes in at 1.0700 level with a cut through here opening the door for more upside towards the 1.0750 level. Further up, resistance lies at the 1.0800 level where a break will expose the 1.0850 level. Conversely, support lies at the 1.0600 level where a violation will aim at the 1.0550 level. A break of here will aim at the 1.0500 level. All in all, EURUSD faces further downside pressure but with caution.

GOLD - The commodity continues to retain its upside pressure leaving risk higher prices in the new week on the cards. On the downside, support comes in at the 1,230.00 level where a break will turn attention to the 1,220.00 level. Further down, a cut through here will open the door for a move lower towards the 1,210.00 level. Below here if seen could trigger further downside pressure targeting the 1,200.00 level. Conversely, resistance resides at the 1,240.00 level where a break will aim at the 1,250.00 level. A turn above there will expose the 1,260.00 level. Further out, resistance stands at the 1,270.00 level. All in all, GOLD looks to strengthen further.

Nothing new this morning as markets open and we all get settled back in, but I just wanted to highlight this support/resistance level that we posted in Thursday's Oil blog:

Oil Hourly:

Remember that price still has a bit of room to move higher and still see the higher time frame level hold, so I don't know if this is the type of setup to be aggressively shorting, but the levels are definitely in play.

Being at the bottom of a higher time frame resistance zone, we were looking to possibly use this to level to short off and manage our risk around. But being at the very bottom of the higher time frame level also meant that the short term level could break higher and shorts still could be in play.

As you can see, the short term resistance level didn't hold and price broke up higher through it. What I did want to highlight though is the re-test of the short term level from the other side at the ‘red x'.

US stocks soared to new record high last week on resurgence of talk of president Donald Trump's expansive policies. In particular, bulls regained control after Trump said he would announce "phenomenal" tax reforms within two or three weeks. DJIA closed the week up 197.9 pts, or 0.99% at 20269.37. S&P 500 gained 18.7 pts or 0.81% for the week to close at 2316.10. NASDAQ rose 67.4 pts or 1.19% to close at 5734.13. All three major indices closed at record highs. The developments helped lift treasury yield from intra-week selloff. 10 year yield closed at 2.409 after dipping to 2.325, comparing to prior week's close at 2.491. Dollar was given a boost and ended as the second strongest major currency, next to Sterling. The Dollar index closed at 100.71, up from prior week's close at 99.73. Fed chair Janet Yellen's testimony to Congress will be a major focus this week. But Trump's tweets and any economy-related announcements will be the things that move markets.

Dollar Index Could Have Bottomed at 99.23

With the dollar index depended key support zone. There is growing prospect of a near term reversal. Despite dipping to 99.23 earlier this month, the index quickly recovered back above 99.43 support. Now, firstly, daily MACD has crossed above signal line already, acting as a early sign of bottoming. Secondly, the structure of the fall from 103.82 to 99.23 is consistent with the view that it's a correction. Immediate focus this week is on 101.02 resistance. Decisive break there will confirm that the correction has completed and turn outlook bullish for a test on 103.82 high. Rejection from 101.02 would bring another fall, possibly to 61.8% retracement of 95.88 to 103.82 at 98.91.

Yields Stayed in Consolidation

Dollar's near term fate will also depend on developments in treasury yields. Or at least, should be in sync with benchmark yields to confirm underlying momentum. 10 year yield defended 55 day EMA last week and recovered. So far, structure of the price actions from 2.621 is consistent with the view that it's a consolidation pattern. More upside is in favor this week in TNX. But the real obstacle is in 2.555 resistance. Decisive break there will very likely bring resumption of up trend from 1.336. Though, rejection from 2.555 will extend the consolidation from 2.621 with another falling leg.

Overbought DJIA Approaches Double Resistance Level

Meanwhile, there is an important factor that would limit the strength in yield and dollar, or even reverse last week's move. DJIA did extended its record run. However, firstly, it's now close to long term projection level at 61.8% projection of 10404.49 to 18351.36 from 15450.56 at 20361.72. Secondly, it's also close to the long term upper channel line. Thirdly, weekly RSI is clearly in overbought region. At this point, we don't seen any ground for powering through fibonacci and channel resistance. Hence, while we're staying bullish in stocks, we'll be very cautious in the next two weeks. And, a pull back in stocks will most likely pressure yields and Dollar again.

To conclude, at this point, we're not seeing any clear near term direction in the forex markets yet. While there are factors supporting Dollar to regain control, there are counter-factors too. We'll keep our hands off for another week. Probably, Fed Chair Janet Yellen and US president Donald Trump would clear up the uncertainties and set the tone for the rest of Q1.

EUR/USD Weekly Outlook

EUR/USD's decline last week suggests that the corrective rise from 1.0339 has completed at 1.0828 already. Initial bias stays on the downside this week for 1.0339 low. Decisive break there will confirm resumption of medium term down trend. On the upside, however, above 1.0713 minor resistance will delay the bearish case and turn bias neutral first.

In the bigger picture, whole down trend from 1.6039 (2008 high) is in progress. Such down trend is expected to extend to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

In the long term picture, the down trend from 1.6039 (2008 high) is still in progress and there is no clear sign of completion. We'd expect more downside towards 0.8223 (2000 low) as long as 1.1298 resistance holds.

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EUR/USD's decline last week suggests that the corrective rise from 1.0339 has completed at 1.0828 already. Initial bias stays on the downside this week for 1.0339 low. Decisive break there will confirm resumption of medium term down trend. On the upside, however, above 1.0713 minor resistance will delay the bearish case and turn bias neutral first.

In the bigger picture, whole down trend from 1.6039 (2008 high) is in progress. Such down trend is expected to extend to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

In the long term picture, the down trend from 1.6039 (2008 high) is still in progress and there is no clear sign of completion. We'd expect more downside towards 0.8223 (2000 low) as long as 1.1298 resistance holds.

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USD/JPY edged lower to 111.58 last but recovered. Correction from 118.65 could have completed at 111.58, with bullish convergence condition in 4 hour MACD, ahead of 38.2% retracement of 98.97 to 118.65 at 111.13. Initial bias is cautiously on the upside this week for 115.36 minor resistance. Break will confirm this bullish case and target 118.65 high next. In that case, the larger rally from 98.97 could be resuming.

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.

In the long term picture, the rise from 75.56 long term bottom to 125.85 medium term top is viewed as an impulsive move. Price actions from 125.85 are seen as a corrective move which could still extend. But, up trend from 75.56 is expected to resume at a later stage for above 135.20/147.68 resistance zone.

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GBP/USD dipped to 1.2346 last week but recovered since then. Initial bias remains neutral this week first. Overall outlook remains unchanged. Price actions from 1.1946 are viewed as a consolidation pattern, with rise from 1.1986 as the third leg. In case of another rise, we'd expect upside to be limited by 1.2774 to bring larger down trend resumption. On the downside, below 1.2346 will revive the case that such consolidation is completed at 1.2705 already. In that case, intraday bias will turn back to the downside for retesting 1.1946 low.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There is no sign of medium term bottoming yet. Sustained trading below 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 will target 100% projection at 0.9532. Overall, break of 1.3444 resistance is needed to confirm medium term bottoming. Otherwise, outlook will remain bearish.

In the longer term picture, no change in the view that down trend from 2.1161 is still in progress. Current momentum suggests that the down trend will go deeper than originally expected.

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USD/CHF's rebound from 0.9860 extended higher last week. The development indicates short term bottoming, with bullish convergence condition in 4 hour MACD. Initial bias remains mildly on the upside this week. Sustained trading above 55 day EMA (now at 1.0038) will pave the way for a test on 1.0342 high. On the downside, below 0.9935 minor support will turn focus back to 0.9860 instead.

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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