Daily Pivots: (S1) 1.3105; (P) 1.3136; (R1) 1.3178; More...

Intraday bias in USD/CAD remains neutral for the moment. 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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Daily Pivots: (S1) 1.0634; (P) 1.0671 (R1) 1.0693; More.....

At this point, EUR/USD is still holding above 1.0619 minor support. Intraday bias stays neutral first. Choppy rise from 1.0339 is seen as a correction. Hence, in case of another rise, upside should be limited by 1.0872 resistance and bring fall resumption eventually. Break of 1.0619 will argue that the corrective rise is completed and turn bias to the downside for retesting 1.0339 low.

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.

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Daily Pivots: (S1) 1.2462; (P) 1.2522; (R1) 1.2553; More...

GBP/USD is still bounded in range of 1.2346/2705. At this point, intraday bias remains neutral. Price actions from 1.1946 are viewed as a consolidation, no change in this view. 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.

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Daily Pivots: (S1) 0.9961; (P) 0.9990; (R1) 1.0043; More.....

USD/CHF's recovery from 0.9860 continues but it's staying below 1.0043 minor resistance. Intraday bias remains neutral first. With 1.0043 minor resistance intact, deeper decline is expected. Current fall from 1.0342 is seen as the third leg of the pattern from 1.0327. Below 0.9860 will target 61.8% retracement of 0.9443 to 1.0342 at 0.9786 and below. On the upside, break of 1.0043 will indicate short term bottoming and turn bias back to the upside.

In the bigger picture, rejection from 1.0327 resistance suggests that consolidation pattern from there is still in progress. Fall from 1.0342 is seen as the third leg and retest of 0.9443/9548 support zone could be seen. But we'd expect strong support from there to contain downside. At this point, we're still expecting the larger rally to resume later to 38.2% retracement of 1.8305 to 0.7065 at 1.1359, after the consolidation completes.

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Daily Pivots: (S1) 112.19; (P) 112.76; (R1) 113.81; More...

USD/JPY rebounds strongly with a break of 113.44 minor resistance. The development suggests that correction fro 118.65 has completed at 111.58 already, ahead of 38.2% retracement of 98.97 to 118.65 at 111.13. Intraday bias is mildly on the upside for 115.36 resistance next. 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.

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US equities' up trend resumed overnight with all three major indices closed at new record highs. Sentiments were lifted by news that US president Donald Trump will deliver a "phenomenal" plan to overhaul taxes on business without "two or three weeks". DJIA jumped 118.06 pts, or 0.59%, to close at 118.06. S&P 500 rose 13.2 pts, or 0.58%, to close at 2307.87. NASDAQ rose 32.73 pts, or 0.58%, to close at 5715.18. Treasury yields followed with 10 year yield gained 0.044 to close at 2.395. 30 year yield rose 0.050 to close at 3.011. Dollar also strengthened some what but the dollar index lost momentum after hitting 100.73, limited by 55 day EMA (now at 100.66). In the currency markets, Yen is the biggest loser for the day and with USD/JPY, EUR/JPY and GBP/JPY took out minor resistance level, suggesting more upside.

10 year yield recovered some support from 55 day EMA and recovered. The development affirmed the view that price actions from 2.621 are merely forming a consolidation pattern. That is, up trend from 1.336 remains intact. This is also in line with the view that Dollar index should receive strong support from around 99.43 to bring up trend resumption. Real focus is on 2.621 resistance in TNX. Decisive break there will confirm rally resumption and that should help pull dollar index back to 103.82 high. However, sustained trading below 55 day EMA (now at 2.357) will dampen our view and turn focus to 38.2% retracement of 1.336 to 2.621 at 2.130.

St. Louis Fed Bullard: Why Not Wait?

St. Louis Fed president James Bullard said that "it is unlikely that fiscal uncertainty will be meaningfully resolved by the March meeting, which is only a few weeks away." Therefore, "why not wait until that gets resolved?" He emphasized that "there is some downside risk as well as upside to the growth rate in the U.S. economy." And policymakers should see what the fiscal package is really going to be before moving on rates. Chicago Fed president Charles Evans reiterated yesterday that it is "not unreasonable, and that's three" rate hikes. He noted that "there is uncertainty but it's got a particular direction to it in terms of economic stimulus" and that direction is "up," he said of fiscal policies.

Shinzo Abe to Meet Donald Trump

The meeting between US president Donald Trump and Japan prime minister Shinzo Abe in Washington today will be closely watched by the markets. While there are news surrounding Trump's accusation of Japan as currency manipulator and others, the key would be the development in trade relationships of the two countries. Trump dismissed the Trans Pacific Partnership in his very early days in office. And it's known that Abe would like to secure a bilateral trade deal with the US.

China trade surplus widened to USD 51.4b in January, up from USD 40.8b, and beat expectation of USD 48.8b. In CNY terms, trade surplus widened to CNY 354.5b, up from CNY 275.4b, and beat expectation of CNY 295.3b. Japan domestic CGPI rose 0.5% yoy in January. Australia home loans rose 0.4% in December. UK trade balance will be released in European session, together with productions. Canada employment will be the main focus in US session. US will release import price index and U of Michigan sentiment.

USD/JPY Daily Outlook

Daily Pivots: (S1) 112.19; (P) 112.76; (R1) 113.81; More...

USD/JPY rebounds strongly with a break of 113.44 minor resistance. The development suggests that correction fro 118.65 has completed at 111.58 already, ahead of 38.2% retracement of 98.97 to 118.65 at 111.13. Intraday bias is mildly on the upside for 115.36 resistance next. 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.

Economic Indicators Update

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STOCKS

Almost all stocks have risen and are trading higher. Important resistance on Nifty and Shanghai is seen above current levels. Dax and Nikkei have some more room on the upside.

Dow (20172.40, +0.59%) has moved up towards 20200 but there could be some pause either near 20200 or at higher levels of 20300-20350 region which could keep the index in a consolidative mode for some sessions in the last few sessions next week.

Dax (11642.86, +0.86%) has also moved up along with the other indices. A break above 11680 could take it higher towards 11820-11930 levels in the medium term. Overall view remains bullish while above 11400.

Nikkei (19343.64, +2.31%) moved up sharply as Dollar-Yen (113.67) shot up breaking the 111.36-112.60 range mentioned yesterday. With fresh rise in the Dollar Index boosting weakness in the Japanese Yen, we could see a rise in Nikkei too in the near term. Immediate target on the upside would be 19615 over the next few sessions.

Shanghai (3193.58, +0.33%) is on the verge of breaking above the important resistance near 3200. If this breaks on the upside, we could target for levels near 3300-3400 levels in the next couple of weeks.

Nifty (8778.40, +0.11%) could continue rising towards 8800-8850 levels before pausing shortly. 9000 is a crucial resistance we are looking at for the medium term which may not easily break on the upside.

COMMODITIES

Dollar (100.67) strength is hurting precious metals but Crude remains stable.

Gold (1225.04) has corrected to the significant support of 1220 after making a high at 1245, in the middle of the resistance band of 1240-50. If 1220 holds, then another bounce to 1250 may emerge but a break below 1220 may extend the decline to 1205-1200. Wait and watch.

Silver (17.59) has weakened and may test the major support near 17.38-35 which must hold to keep the upside possibilities open. The uptrend remains intact above 17.35 but a break below 17.35 can drag it down to 17.10-00 levels.

Brent (55.67) has retraced half of it recent fall from 57.41 to 54.41 and WTI (53.08) has retraced more than 60% of the fall from 54.34 to 51.38. The sentiment in the immediate term has turned bullish but the IEC and OPEC reports due today and Monday respectively may determine the near term path.

Copper (2.654) is unchanged in the range of 2.61-2.70 as expected, which may continue for a few days more.

FOREX

A Trump promise to overhaul business taxes in a big way in the next 2-3 weeks has boosted the Dollar. Rupee is still more driven by domestic factors more than the global ones.

Dollar Index (100.67) is trading at the current week high and may test the resistance of 100.75-101.00 soon. A break above 101.00 may give the impetus to rise higher towards 101.70-102.00 by the next week but a failure near 101.00 can keep it in the range of 100.00-101.00 for a few sessions more.

Euro (1.0658) is testing the immediate support of 1.0650 once again and if Dollar manages to break above 101.00, then it can slide down to 1.0570 or even lower instead of the expected consolidation in 1.0650-1.0800.

Dollar-Yen (113.66) has rallied above the major resistance of 113.50-60 exactly as expected and if it manages to sustain above 113.50, then it may appreciate further to 115-116.

Pound (1.2513) is almost unchanged as it continues to trade horizontally in the range of 1.2350-1.2700 without any directional bias in the near term.

Aussie (0.7644) is stuck in the contracting range of 0.7600-0.7680 for the last 4 sessions but an upside breakout looks more likely which may take it to the resistance of 0.7725-50, where the bears may return again and push the price down.

Dollar Rupee (66.85) has closed below the support of 66.90 yesterday and if it doesn’t bounce from 66.80 today, then we may have to abandon our near term bullish view and consider lower levels of 66.50-35.

INTEREST RATES

The German-US 2YR (-1.98%) and the German-US 10Yr (-2.11%) are falling off from resistance levels indicating a fall in the Euro in the near term. The 2YR differential may head towards -2% to -2.05% while the 10YR differential may test -2.15% in the near term.

Near term trend line supports have held well helping the US yields to bounce back. The 5YR (1.89%), 10YR (2.42%) and the 30YR (3.02%) have risen slightly and could rise for a couple of sessions more before pausing. Overall in the medium term a deeper fall in the US yields is expected.

The 10Yr GOI (7.0145%) has risen above 7% and could rise further today. This has been a sharp vertical rise which could possibly extend towards immediate resistance near 7.10%. Thereafter a small dip can be expected.

EUR/USD

For a change, the American dollar advanced in the US afternoon, tracking a rally in US stocks after US President Trump said that his administration will be announcing "something phenomenal in terms of taxes" during the upcoming weeks. Dollar gains are tepid to say the least, and the currency is mixed across the board, with the EUR and the JPY underperforming, but commodity-related currencies holding on to gains. The EUR/USD pair gave back its Wednesday's gains, but held above the weekly low of 1.0640, settling some 20 pips above this last by the end of the US session. Seems stocks traders are believing Mr. president's words, but across the FX market, traders are not convinced, particularly after FED's Bullard said that rates can remain low all through 2017.

There was little in the fundamental news that could affect the pair this Thursday, with minor releases both shores of the Atlantic. Germany released its December trade balance data, showing a lower-than-expected surplus of €18.4B from a previously revised €21.8B. Imports in the month were unchanged, but exports plunged by 3.3%. For the whole 2016, exports increased by 1.2%, while imports by 0.6%, exceeding 2015 figures. In the US, weekly unemployment claims beat expectations, falling to a three-month low of 234K against the 250K expected, while wholesale inventories remained unchanged at 1%.

Technically, the pair is at risk of falling further, as in the 4 hours chart, the price was contained by a bearish 20 SMA that extended its slide below the 100 SMA, while technical indicators have been unable to recover into positive territory, and particularly the RSI, has resumed its decline within negative territory, now heading south around 38. Adding to the bearish case is the fact that the pair was unable to regain the 1.0700 threshold, discouraging bulls. Below 1.0640, the pair has scope to extend its decline down to the 1.0580/90 this Friday.

Support levels: 1.0640 1.0610 1.0585

Resistance levels: 1.0710 1.0750 1.0800

USD/JPY

The USD/JPY pair added roughly 100 pips in the US afternoon, following comments from US President Donald Trump, vowing to make a shocking announcement on tax's reform during the upcoming weeks, in a meeting with airline industry leaders. The headlines wake-up risk appetite, reviving the Trump-trade and sending US equities to all-time highs, weighing on the safe-haven yen. During the upcoming Asian session, Japan will release its Domestic Corporate Goods Price Index figures for January, which will hardly affect the yen. News coming from the US, despite minor, were also encouraging, with weekly unemployment claims down to 234K for the week ending February 4th, against previous 246K. The pair stands at fresh weekly highs, and the bearish potential has eased, but not yet reverted. In the 4 hours chart, the pair pared gains a few pips below a bearish 20 SMA, whilst technical indicators are turning modestly lower within positive territory, indicating that the upward potential is limited. The pair bounced for fourth consecutive day from its 100 DMA, now around 111.80, and held above the 38.2% retracement of November/December around 112.00, the support area that the pair needs to break to resume its bearish trend. On the other hand, it will take an extension beyond the daily high of 113.29 to see the pair extending its advance towards the 114.00/50 price zone.

Support levels: 111.60 111.25 110.80

Resistance levels: 112.10 112.60 113.00

GBP/USD

The GBP/USD pair retreated from a fresh weekly high of 1.2581 in the US afternoon, ending the day marginally lower around the 1.2500 figure. There were no big news coming from the US this Thursday, but news late Wednesday indicating that the Brexit bill passed through the House of Commons without amendments, incremented the positive sentiment towards the British Pound. This Friday, the UK will release its manufacturing and industrial production figures for December, expected to have risen at a slower pace than in the previous month. Despite the negative close, the technical picture is far from suggesting upcoming Pound weakness, as the GBP/USD pair ended the day above its 20 SMA, now around 1.2480, whilst the Momentum indicator maintains its bullish slope within positive territory, although the RSI indicator has turned south and currently pressures the 50 level, suggesting the pair may extend its decline at least to 1.2470, Thursday's low. Also, favoring a downward move is the fact that the pair was unable to settle above 23.6% retracement of its January/February rally at 1.2535, although renewed buying interest above it can see the pair regaining the 1.2600 level before the week is over.

Support levels: 1.2470 1.2425 1.2390

Resistance levels: 1.2535 1.2585 1.2620

GOLD

Gold closed the day with losses after spending the day near the three-month high posed on Wednesday, weighed by renewed dollar's demand in the US afternoon. Spot closed the day around $1,235.10 a troy ounce, as market's sentiment improved, with investors rushing into high-yielding assets in detriment of the safe-haven metal. The daily chart for the commodity shows that it held above a key support, the 50% retracement of the November/December slide around 1,230.00, while the 20 DMA is advancing above the 100 DMA, both far below the current level and limiting chances of a steeper decline. Technical indicators in the mentioned chart remain within positive territory, with the Momentum flat and the RSI hovering around 67. In the shorter term, and according to the 4 hours chart, the price is currently struggling around a bullish 20 SMA, whilst technical indicators are modestly bouncing from their mid-lines after correcting extreme overbought readings.

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

Resistance levels: 1,244.70 1,255.15 1,263.90

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

Wall Street's three main indices all closed at record highs as financials rallied, with the Dow Jones Industrial Average settling at 20172.40, up 0.59% or 118 points. The Nasdaq Composite added 32 points, to 5,715.18 while the S&P closed at 2,307.87, 0.58% higher. Further supporting US equities were higher oil prices and US President Trump comments about an upcoming "phenomenal" tax plan. The Dow traded as high as 20,206 and the daily chart shows that it extended further above a modestly bullish 20 DMA, while the RSI indicator turned sharply higher, now around 67, as the Momentum keeps consolidating within positive territory. Shorter term, and according to the 4 hours chart, the index is the index is biased higher, as the 20 SMA has accelerated its advance beyond the 100 and 200 SMAs, with the shortest maintaining a strong upward slope some 100 points below the current level, whilst the RSI indicator consolidates around 67. In this last time frame, the Momentum indicator eased within positive territory, rather reflecting low volumes after the close and the retracement from the mentioned record high.

Support levels: 20,157 20,090 20,013

Resistance levels: 20,210 20,270 20,340

FTSE 100

The FTSE 100 closed at 7,229.50, up 0.57% or 40 points, its highest settlement in three-weeks, backed by higher oil prices that boosted energy-related companies. International Consolidated Airlines Group topped winners list, up 3.51%, followed by Royal Bank of Scotland that added 2.51%, as strong earnings from French Société Générale that beat forecasts. Mining-related equities were among the worst performers, with Anglo American down 2.67% and Fresnillo ending the day 2.55% lower. The daily chart shows that the Footsie settled above a still flat 20 DMA, whilst technical indicators entered positive territory, maintaining bullish slopes and favoring additional gains, particularly after the Pound eased late Thursday. In the 4 hours chart the index has settled above its 20 and 100 SMAs that anyway lack directional strength, whilst the Momentum indicator heads north well above its 100 level and the RSI indicator consolidates around 65, in line with the shorter term perspective.

Support levels: 7,205 7,163 7,128

Resistance levels: 7,258 7,312 7,354

DAX

European equities closed higher, with the German DAX up 100 points to 11,642.86, helped by a recovery in oil prices and positive earnings reports. In Germany Commerzbank reported earnings above expectations, but closed the day down 1.96%, after the bank's CFO said that expectations are that 2018 will bring a moderate negative capital impact. Still, most components closed in the green with Adidas topping gainers' list, up by 2.81%, followed by RWE AG which added 2.42%. The benchmark holds around the mentioned close ahead of the Asian opening, maintaining a neutral stance in the daily chart, given that the index is currently around a horizontal 20 SMA, whilst the Momentum indicator continues lacking directional strength around its 100 level. The RSI indicator heads modestly higher around 54, limiting the downside, but not enough to confirm an upward move. In the 4 hours chart, the index is a few points above its 20 and 100 SMAs whilst technical indicators stand within positive territory, but with the RSI losing upward strength, also not enough to confirm a bullish extension ahead.

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

Resistance levels: 11,680 11,734 11,794

Continuing on with the XAU/AUD narrative that we started on Monday:

'While the most recent swings saw price chop through it, the fact that Friday's daily low was the exact level shows it's still significant in using it as a higher time frame level to manage risk around heading forward.'

With higher time frame support defined on that chart earlier in the week, price continued to rally off the level.

But with yesterday's Gold weakness, price has pulled back into this short term previous resistance turned possible support.

XAU/AUD Daily:

A possible level that we can look to manage our long's risk around.

The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 1.75 percent.

The recovery in commodity prices and more positive business and consumer sentiment in advanced economies have improved the global outlook. However, major challenges remain with on-going surplus capacity in the global economy and rising geo-political uncertainty.

Global headline inflation has increased, partly due to rising commodity prices. Global long-term interest rates have increased. Monetary policy is expected to remain stimulatory, but less so going forward, particularly in the US.

New Zealand's financial conditions have firmed with long-term interest rates rising and continued upward pressure on the New Zealand dollar exchange rate. The exchange rate remains higher than is sustainable for balanced growth and, together with low global inflation, continues to generate negative inflation in the tradables sector. A decline in the exchange rate is needed.

Economic growth in New Zealand has increased as expected and is steadily drawing on spare resources. The outlook remains positive, supported by ongoing accommodative monetary policy, strong population growth, increased household spending and rising construction activity. Dairy prices have recovered in recent months but uncertainty remains around future outcomes.

Recent moderation in house price inflation is welcome, and in part reflects loan-to-value ratio restrictions and higher mortgage rates. It is uncertain whether this moderation will be sustained given the continued imbalance between supply and demand.

Headline inflation has returned to the target band as past declines in oil prices dropped out of the annual calculation. Inflation is expected to return to the midpoint of the target band gradually, reflecting the strength of the domestic economy and despite persistent negative tradables inflation. Longer-term inflation expectations remain well-anchored at around 2 percent.

Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly.