Sample Category Title

BOJ on hold, raises GDP forecasts and inflation outlook

Asia Mid-Session Market Update: Political showdown over Trump's immigration curbs keeping markets on edge; BOJ on hold, raises GDP forecasts and inflation outlook

US Session Highlights

(US) DEC PCE DEFLATOR M/M: 0.2% V 0.2%E; Y/Y: 1.6% V 1.7%E

(US) DEC PERSONAL INCOME: 0.3% V 0.4%E; PERSONAL SPENDING: 0.5% V 0.5%E

(US) DEC PCE CORE M/M: 0.1% V 0.1%E; Y/Y: 1.7% V 1.7%E

(US) JAN DALLAS FED MANUFACTURING ACTIVITY: 22.1 V 15.0E; new orders, capex and employment rise m/m

(US) Atlanta Fed forecasts initial Q1 GDP growth at 2.3% v Friday's advanced government figure of 1.9%

VIX and Gold pop as investors look to offload risk

US markets on close: Dow -0.6%, S&P500 -0.6%, Nasdaq -0.8%

Best Sector in S&P500: Utilities

Worst Sector in S&P500: Basic Materials

Biggest gainers: AMG +4.8%, ADS +2.6%, WHR +2.4%, DG +2.4%, LM +2.3%

Biggest losers: VAR -12.5%, RIG -7.1%, CHK -6.7%, RRC -6.6%, DO -6.5%

At the close: VIX 11.9 (+1.3pts); Treasuries: 2-yr 1.20% (-1bps), 10-yr 2.48% (flat), 30-yr 3.08% (-1bps)

US movers afterhours

SANM: Reports Q1 $0.75 v $0.66e, R$1.72B v $1.68Be; Guides Q2 $0.67-0.72 v $0.64e, R$1.68-1.73B v $1.66Be; +10.9% afterhours

AEIS: Reports Q4 $1.06 v $0.81e, R$135.3M v $129Me- Guides Q1 $0.90-1.00 v $0.77e, R$141-151M v $125Me; Op margins 29-31%; +6.7% afterhours

WERN: Reports Q4 $0.30 v $0.26e, R$518.8M v $509Me; Guides initial FY17 net CAPEX expenditures "$225-275M" vs $430M y/y; +5.8% afterhours

IDTI: Reports Q3 $0.35 v $0.34e, R$176M v $178Me; Guides Q4 R$175M +/-$5M v $180Me; -4.4% afterhours

GBX: Files to sell $125M 2024 convertible unsecured notes; -4.6% afterhours

RMBS: Reports Q4 $0.16 v $0.16e, R$97.6M v $93.8Me; -5.4% afterhours

TEVA: Confirms District Court Decision in COPAXONE® 40 mg/mL Patent Trial; to appeal court decision; -8.9% afterhours

RRTS: Restates prior 2014-2016 period financial statements; -14.7% afterhours

Asia Key economic data:

(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%, AS EXPECTED; RAISES OUTLOOK FOR PRICES

(JP) JAPAN DEC OVERALL HOUSEHOLD SPENDING Y/Y: -0.3% V -0.9%E

(JP) JAPAN DEC JOBLESS RATE: 3.1% V 3.1%E; Job to applicant: 1.43 v 1.42e

(JP) JAPAN DEC PRELIMINARY INDUSTRIAL PRODUCTION M/M: 0.5% V 0.3%E; Y/Y: 3.0% V 3.0%E

(JP) JAPAN DEC VEHICLE PRODUCTION Y/Y: 4.2% V 6.6% PRIOR

(AU) AUSTRALIA DEC PRIVATE SECTOR CREDIT M/M: 0.7% V 0.5%E; Y/Y: 5.6% V 5.4%E

(AU) AUSTRALIA DEC NAB BUSINESS CONFIDENCE: 6 V 6 PRIOR; CONDITIONS: 11 (6-month high) V 6 PRIOR

Asia Session Notable Observations, Speakers and Press

Tremors from US president Trump's broad-sweeping executive order on immigration curbs from 7 Middle East countries continue to be felt in the markets, as safe-haven JPY and Gold remain bid while Asian equities and US futures are under pressure. Obama-appointed Acting Attorney General Sally Yates has instructed DoJ attorneys not to defend the EO - one which has already been criticized by lawmakers of both parties, foreign leaders, tech and financials (Goldman) CEOs, and State Sec nominee Tillerson. In response, Pres Trump has fired Yates, proclaiming her to be "weak on borders and very weak on illegal immigration". Knee-jerk market response to the firing was to the downside, as the contentious stance could further polarize the anti-Trump protests and complicate the confirmation process for AG-nominee Sessions.

Today's Bank of Japan policy decision was accompanied by continued resilience of economic data, as jobless rate remained at a low 3.1%, household spending decline was lower than expected, and industrial output m/m beat consensus. As speculated BOJ raised its GDP target for FY16, FY17, and FY18 to 1.4%, 1.5%, and 1.1% respectively, while maintaining inflation expectations. In the accompanying statement, BOJ also maintained its policy of interest rates at -0.1% and JGB purchases at ¥80T, but also extended its low-rate lending facility for financials and growth industries by a year. Finally, BOJ's Quarterly statement was notably more upbeat on inflation expectations, raising Outlook for prices to "increase from 0 to become slightly positive" vs prior "Y/Y CPI likely to be slightly negative or about 0%" thanks to diminished effect of low energy price.

Australia's reporting season for output by mining and energy names was highlighted by Fortescue - company saw sequential rise in iron ore output and also affirmed FY17 shipments. CEO also noted improved demand in China steel sector, sending shares up by over 2%.

China

(CN) S&P: China overseas buyers will face tougher regulatory and political hurdles this year

Japan:

(JP) Japan Fin Min Aso: Critical to reach mutual agreement with US on FX; Expects economic recovery driven by domestic demand

(JP) Barclays: BOJ likely to maintain its bond-buying duration when it unveils its Feb plans at 17:00JST - press

Australia/New Zealand

(NZ) New Zealand RBNZ Gov Wheeler expected to make an announcement on his future "fairly soon" - financial press

Asian Equity Indices/Futures (23:30ET)

Nikkei -1.6%, Hang Seng closed, Shanghai Composite closed, ASX200 -0.6%, Kospi -0.4%

Equity Futures: S&P500 -0.3%; Nasdaq -0.3%; Dax -0.4%; FTSE100 -0.4%

FX ranges/Commodities/Fixed Income (23:30ET)

EUR 1.0690-1.0710; JPY 113.25-113.85; AUD 0.7550-0.7570; NZD 0.7270-0.7300

Apr Gold +0.6% at $1,204/oz; Mar Crude Oil -0.4% at $52.40/brl; Mar Copper -0.3% at $2.66/lb

(KR) South Korea sells KRW1.1T 3-month bonds, avg yield 1.37%

Asia equities/Notables/movers by sector

Consumer discretionary: NVT.AU Navitas Ltd -6.1% (H1 result); 6923.JP Stanley Electric Co +6.1% (9-month result); 9831.JP Yamada Denki -2.4% (9-month result speculation); 9022.JP Central Japan Railway Co -2.8% (9-month result)

Industrials: 4005.JP Sumitomo Chemical +4.5% (9-month result); 000270.KR Kia Motors Corporation -3.3% (US sales speculation); 7261.JP Mazda Motor Corp -3.5% (FY16/17 result speculation); 7270.JP Fuji Heavy Industries Ltd -3.3% (Jefferies cuts rating); 6305.JP Hitachi Construction Machinery -4.5% (9-month result); 9064.JP Yamato Holdings Co -5.4% (9-month result); 4005.JP Sumitomo Chemical Co +4.3% (9-month result)

Technology: 6758.JP Sony Corp -2.1% (share sales); 6502.JP Toshiba Corporation -2.7% (speculated to cut stake in Westinghouse); 6701.JP NEC Corp -16.1% (9-month result)

Materials: ERA.AU Energy Resources of Australia -4.9% (prelim FY16 result); FMG.AU Fortescue Metals Group +2.7% (Q2 result); ILU.AU Iluka Resources -2.4% (Q4 result)

Energy: TAP.AU Tap Oil -1.1% (Q1 result); 5020.JP JX Holdings -2.0% (earnings speculation); ORG.AU Origin Energy -2.1% (Q2 result)

Healthcare: 2413.JP M3 Inc -4.9% (Sony sells stake); VRT.AU Virtus Health -17.7% (H1 result)

Utilities: 9505.JP Hokuriku Electric Power -10.5% (9-month result)

STOCKS

Corrective dip seen in the equities overall. But on a longer term the trend remains bullish. All eyes focus on the FOMC and the Indian Union Budget due tomorrow.

Dow (19971.13, -0.61%) came down to test 19870 yesterday and closed at levels just below 20000. We could possibly see a test of 19720 again in the near term before bouncing back towards 20000-20200 levels. The FOMC meeting tomorrow could also bring in some momentum which could be the driver for the coming weeks. Above 20200, we are open to test 20500-20700 zone.

Dax (11681.89, -1.12%) also saw a sharp fall yesterday in line with the weekly candle resistance. But while the support at 11400 holds, we remain bullish for the medium term. We have already seen levels of 11680 as mentioned yesterday.

Nikkei (19116.84, -1.30%) could possibly be headed towards 18800-18700 support levels from where it could reverse the immediate trend.

Nifty (8632.75, -0.10%) was almost stable yesterday and could trade within the 8600-8700 region today also. Some volatility may come into the markets after the Budget tomorrow.

COMMODITIES

Gold (1200.65) and Silver (17.184) have moved up on fresh Dollar weakness. But we would have to consider resistances in the 1210-1215 region on Gold and 17.50-18.00 region on Silver which could hold in the near term bringing prices back to lower levels.

Brent (55.15) and WTI (52.35) are trading low, with the WTI falling faster than the Brent. They could test 54.25 and 51.65 over the next couple of sessions before bouncing back towards 56 and 54 respectively. Overall the crude prices may remain ranged in the near term.

Copper (2.6630) saw a slight dip but is trapped within the immediate support near 2.60-2.65 and weekly resistance near 2.70-2.72 regions respectively. The commodity price could remain range-bound in the 2.60-2.75 region for some more time.

FOREX

As discussed yesterday, the markets will be keen to know the Fed's path for increase of interest rates after the FOMC meeting on Wednesday, especially in light of the weak Q4 GDP data in the USA. The weakness of Dollar continues.

Dollar Index (100.35) has been holding above the support of 100.05-99.75 despite the failure to rise above 101.20-25, the near term resistance we have been watching. The swing high of 101.02 becomes the new reference point as only a higher high may signal a reversal to the upside. The near to medium term direction may be set by the FOMC announcement coming tomorrow.

Just like Dollar Index, Euro (1.0705) has established the swing low of 1.0620 as the new reference point as the near term uptrend remains intact as long as it stays above this support. A gradual rise to 1.0725-50 can’t be ruled out but the next few sessions may see a consolidation in the region of 1.0650-1.0750.

Dollar-Yen (113.34) has broken below 113.85-65 as written yesterday after the BOJ kept the rates unchanged but if the decline is contained within the major support around 112.80-50, then another bounce to 114.00-50 can’t be ruled out.

Pound (1.2517) is in a shallow corrective mode with the major support coming at 1.2400. The upside possibilities remain open till iy stays above 1.2400 but the resistance around 1.28 may keep it rangebound in 1.2400-1.2800 for the next couple of weeks.

Aussie (0.7570) is rising in a very feeble manner but the weekly resistance near the current levels caps the immediate upside and keeps the chances of seeing 0.74 in the near term open.

Dollar-Rupee (67.75) is trading at 67.75 in the NDF market, which signals a potential breakdown of the 6-week range of 67.90-68.40 to the downside and opens up 67.70-60 as the near term target/support.

INTEREST RATES

Despite the Dollar (100.35) weakness in the near term, Euro (1.0705) has failed to capitalize on it as the German-US 10Yr yield differentials (-2.04%) still remains unable to break above the medium term resistance of -2.00%.

On the other hand, the US-Japan 10Yr (2.40%) remains almost unchanged and the BOJ keeping its rates unchanged as per the market expectations has not triggered any sharp moves, opening up the possibility of keeping Yen (113.34) stable in the near term.

Pound is technically still strong but the upside may be limited in the near term as the UK-US 10Yr (-0.95%) faces a major long term resistance at the current levels.

A Tale of Two Weeks

A tale of two weeks and how quickly investor sentiment can turn. Last week, Tumpenomics' rally has given way to a vote of no confidence from investors who are growing leery of President Trump's agenda and are restless about the lack of focus on the fiscal front.

The weekend's immigration headlines have won the president few friends globally. There's an increasing level of unease amongst investors that the recent executive orders are eroding minted political relationships abroad and will have a negative impact on US trade negotiation.

While the Muslim travel ban may have been universally condemned, keep in mind, capital markets lack a moral compass, and while it makes a compelling storyline, the market meltdown overnight was investors voting with their feet in a direct challenge to the Tump-inflation trade. Sure the immigration ban was risk adverse, but leeriness will quickly fade if the US administration comes through on the fiscal front.

While the markets have started the week on a sour note, it is not the time to bury your head in the sand as we are in for one of the busiest data calendars in some time. The key risk events are the three central bank events: the BoJ, FOMC and the BoE, where we have the Quarterly Inflation Report. Last of all and at the top of my agenda, Friday's granddaddy of all data releases, US Non-Farm Payroll

The BoJ is expected to give their policy announcement between 10 am to 11:30 am (Singapore time), but as we have seen so often in the past, there is no specific timetable for the release. Nonetheless, the BoJ is not expected to yield any real surprises as they will likely be more than happy to leave policy unchanged and continue to see inflation drift towards their target. However, the markets may be on forwarding guidance watch after reports that the BoJ is looking into how they could raise their 10y bond yield target from zero in the future without roiling the financial markets, as market chaos usually ensues if the BoJ surprises.

Speaking of which, it was a year ago yesterday when the BoJ unexpectedly slashed rates into negative territory for the first time and kicked off the seven-month chase for yield with dominated trade flow through much of 2016. Let's see what rabbit the BoJ pulls out of its hat later today.

Australian Dollar

The Aussie has been stuck in the muck, over the past 24 hours while the Kiwi has basked in the sun. The market is voicing their opinion on the probable course of each country's monetary policy. While the AUD has sat glued to .7555-60 level overnight, the Kiwi appears ready to test the rarified air above .7300 once again.

To be honest, I had to take a second at my Aussie screen as I thought it was a stale price given the unwind and about-face we have seen on the broader USD sentiment overnight.

It once again illustrates the importance of the Carry, in the 3C equation (Carry Commodity and China) for the Aussie dollar, and I believe last week's weaker than expected Australian CPI will continue to dampen enthusiasm for the Australian dollar.

Japanese Yen

For USD JPY, the focus is all on today's the BoJ monetary policy meeting , where it is widely believed the policy will be left unchanged. However, dealers will be homing in on forwarding guidance after reports surface that the BoJ was looking for ways to taper for 0% 10 Year Rinban targets. But, it is likely too early for the BoJ to rock the boat despite the recent uptick in inflation.

I believe the shift away from 0% 10 years' is inevitable given the likelihood of US 10 Year Yield moving above 3% and global yield shift higher. It sure feels like the markets' love affairs with Trumpenomics is fading with USDJPY falling below 114 coat tailing the 1% drop in the S&P. While the move was triggered after the US economy, it's difficult to determine just how much the move is related to pre-data position expectations, month-end rebalancing or risk off. I suspect the truth lies within all.

Keep in mind the recent run of US economic data, including Friday miss on USD GDP has also weighed on sentiment. But really after some 13 % rally on the S&P let's not get to wound up my a relatively minor retracement.

The technical edges remain entrenched 112.50-115.50

Asia FX

Not much happening due the holidays , but the market is very much tethered to movement in the broader USD. But I think we're entering some very important times as the markets are digging for clues on the Trump policy front and the market is cautious to not get ahead of the plot this time around.

Positioning is relatively neutral but I maintain risk is gibbous to US Fiscal and Trade headlines, but there remains a thick air of caution permeating the APAC FX landscape

A couple of weeks ago, we were looking for a possible GBP/JPY counter-trend long. The Beast was sitting at a horizontal support/resistance zone and if it had have held then we were looking for that first intraday pullback to get long off of. But alas the level didn’t hold and price dropped lower through it.

Three weeks later and price is back at the zone again and the setup has some real promise.

GBP/JPY 4 Hourly:

That looks like a textbook trend line breakout which if you keep reading, would mean a possible entry short on a re-test. But how often do we see the textbook setups like this fail miserably. Nothing in forex trading is textbook! If it is written in a textbook then the smart money will so often do the opposite otherwise everyone would make money.

Ah this trading game is a strange one, I know!

GBP/JPY 15 Minute:

So now zooming into an intraday chart, with that 4 hour horizontal support/resistance zone looking like it’s holding for now, the play might actually be to look to get long.

Your options are to aggressively get long on this current pullback if you think that the support zone has held, or you can wait and see if it properly breaks higher and then buy the first true pullback once you have that confirmation.

Following last week when the Dow Jones, NASDAQ and S&P 500 all reached record highs, with this positivity having a similar impact on both the Asian and European markets; there is now an air of caution throughout the financial markets as the new trading week gets underway. It is very possible that the reason for this caution, and the European markets slipping lower is due to investors digesting those record moves seen in the US last week. There is also no denying that the turmoil caused by the Trump administration banning certain nationals from entering the United States, which has caused anger worldwide, could be linked to the subdued atmosphere.

While investors were very quick to price in the expected impact that deregulation, infrastructure spending and job growth could have on the US economy, I find it very difficult to believe that after pricing in heavy premiums based on fiscal promises, that investors are not now reconsidering what damage Trump might do by implementing other promises that supplemented an incoherent and ranting political campaign. Whether it is building a wall, banning certain nationalities, starting a trade war or pretty much anything else President Trump may do to upset people, it does risk both creating and deepening a negative perception of the US.

What if someone now reacts by banning US products, or even worse US nationals from entering their nations? What if investors now decide to take money out of US funds? Over one million Britons have already reacted by signing a petition to stop an upcoming visit from Trump to the United Kingdom, something that will put even more pressure on Theresa May as she has not only just concluded a meeting with the new President but is already under pressure to meet her own deadline to invoke Article 50 within the next two months. Although it is expected and understood that the UK will be aiming to strengthen relationships around the world following the result of the EU Referendum, I am unsure how people will react to Theresa May strengthening a relationship with the United States that appears on track to isolate itself from globalisation.

GBPUSD at risk to falling below 1.25

The GBPUSD is at risk to declining for the third successive day as investors continue to take profit after the pair reached a 6-week high marginally below 1.27 last week. Investors are still reluctant to consider longer-term buying positions on the British Pound with the continuous uncertainty around Article 50 being invoked around the corner. It will likely require another round of unwinding on USD positions or for the date to be delayed for the invoking of Article 50 to send the Pound back to the higher 1.20's.

EURUSD continues to meet sellers

The Eurodollar is continuing to face near-term downside pressure, with the currency pair dipping back to 1.06 after opening and climbing above 1.07 as investors digested the news around the United States over the weekend. Generally speaking the USD is still trading higher against most of its major trading partners including the British Pound, Euro, Swiss Franc, Australia and New Zealand Dollar, as well as the Canadian Dollar. As long as the Dollar does not fall victim to a round of selling, the near-term pressure on the Euro should persist as the Eurodollar gradually reverses after from its gains since earlier in January.

Dollar slipping against emerging currencies

Despite the Dollar trading higher against most of the G-8 currencies, the USD has slipped lower against a host of emerging market currencies. The Turkish Lira, Mexican Peso, Thai Baht, Indian Rupee, Indonesian Rupiah and Philippine Peso have all strengthened at the start of the week. This is likely not due to the protests taking place throughout the United States, but instead linked to the overwhelming consensus that US interest rates will be left unchanged later this week. With that being said the news headlines are being completely dominated by politics.

Turkish Lira rebounds by 1.4%

This is likely just a small recovering following what has been a brutal couple of months for the Turkish Lira, but the currency has is the major market mover today with the USDTRY declining by over 1.4%. Despite what looks on headline as a significant move, Turkey is still plagued by a multitude of different social/economic and even political problems that makes it difficult to believe that the Lira will be able to recover much lost ground.

Personal income rose 0.3% in December, in line with consensus. Removing inflation and taxes, real disposable income rose 0.1% on the month.

Americans were clearly in a spending mood to end 2016, with consumption up 0.5%, also as expected. That marked an acceleration from the previous two months.

In real terms spending rose a decent 0.3%, following a 0.1% gain in November. Spending gains were concentrated on durable goods, which jumped 1,.4% on the month. Services spending was solid at 0.3% for the second consecutive month.

The combination of higher spending and more modest income gains saw the savings rate decline further to 5.4%. The personal saving rate trended down over the course of 2016, after creeping up through 2015.

Inflation, as measured by the year-on-year change in the personal consumption deflator, ticked up to 1.6%, from 1.4% in November. Core PCE inflation (ex food & energy) held steady at 1.7%, roughly where it has been for most of 2016.

Key Implications

Today's solid report provides a nice handoff for consumer spending growth heading into 2017. U.S. consumers drove growth in the fourth quarter, and we expect that momentum to be sustained in in the first quarter of 2017.

Consumers have been working down their savings buffers accumulated since the fall in energy prices, but the saving rate is not unduly low. We expect income growth to pick up in the months ahead reflecting robust wage and employment gains, providing a solid foundation for consumer spending.

Later this week we will hear from the FOMC. While the Fed does expect that a hotter economy will lift core price pressures in the coming months, so far in 2016 core inflation has remained fairly steady. That should enable the Fed to wait patiently on the sidelines until the second quarter, before taking rates another step higher.

• US nominal personal consumer expenditures (PCE) rose an expected 0.5% in December following a 0.2% increase in November and 0.4% October gain. Spending was up 0.3% on a volumes basis.

As-expected, overall December spending was boosted by a 2.8% increase in motor vehicle sales (consistent with the earlier-reported 3% increase in December unit vehicle sales) that contributed to a 1.4% gain in spending on durable goods. Spending on services also posted a solid 0.4% gain, although driven by a weather-related 12.2% monthly rebound in spending on electricity & gas that retraced most of a 13.5% decline over the previous three months (temperatures were closer to normal in December after a warmer-than-usual start to the winter, on balance). Spending on nondurable goods inched up 0.2%, though solely the result of higher prices with the volume of spending on non-durables unchanged.

Personal incomes continued to grow, rising 0.3% in December following a 0.1% gain in November and 0.5% jump in October. With monthly spending nonetheless outpacing monthly income growth, the saving rate inched lower to 5.4% from 5.6% in November and 6.1% a year ago.

Annual growth in the PCE deflator moved up to 1.6% from 1.4% in November as energy prices moved higher. The core PCE deflator held steady at 1.7% year-over-year, unchanged from November.

Our Take:

Today's consumer spending numbers provide the monthly pattern behind the solid 2.5% increase in real spending in the advance Q4/16 GDP report. The strong finish to the end of the quarter (real spending in December was an annualized 1.1% above its Q4 average) bodes well for another strong gain in Q1/17. We expect household spending will remain a support to economic activity going forward reflecting strong labour markets, rising consumer confidence, and low interest rates. Although still early, data-to-date (including strong household spending, a pickup in business equipment shipments, and a bounce-back in December exports) point to solid underlying momentum in the economy. We expect overall GDP to increase at an above-trend 2.3% rate in Q1/17 to build on a 1.9% Q4 gain and 3.5% jump in Q3. Although much uncertainty remains about the future of U.S. government policy under the new Trump administration, we expect underlying economic improvement is strong enough to warrant higher interest rates and look for the Fed to implement two additional 25 basis point hikes to the fed funds target range this year.

USD/CAD has edged higher at the start of the trading week. In the Monday session, the pair is trading at 1.3150. On the release front, there are no Canadian events on the schedule. In the US, the key event of the day is Pending Home Sales, which is expected to rebound with a gain of 1.6%. On Tuesday, Canada will release GDP, with an estimate of 0.3%. The US will publish CB Consumer Confidence, with the markets expecting a strong reading of 112.6 points.

Canada will release the November GDP report on Tuesday. In October, GDP was unexpectedly low, missing the estimate of a 0.1% gain. This marked the first decline since May and has raised concerns that economic growth in the fourth quarter will be weak. If GDP again misses expectations, we could see the Canadian dollar lose ground, and the BoC will be under increased pressure to lower interest rates. Last week, Earlier in January, the bank held rates at 0.50% but expressed concerns of economic turbulence due to Donald Trump's protectionist stance, which could have significant repercussions for the Canadian economy.

The markets had predicted that US economic growth would soften in the fourth quarter, and Advance GDP fell short of the estimate. The economy expanded 1.9%, shy of the estimate of 2.1%. Business investment and consumer spending remains solid and should continue into 2017. However, Trump's protectionist rhetoric and action, which saw tensions escalate with Mexico last week, could cloud the bright picture for the US economy.

Donald Trump has barely warmed the president's chair in the Oval House, but has already signed a host of controversial executive orders which have been condemned both domestically and abroad. Trump has withdrawn from the Trans-Pacific Partnership and declared he will reopen the NAFTA trade agreement with Canada and Mexico. He has also ordered work to begin on a wall with Mexico and banned immigrants from seven Moslem countries. Trump's unconventional and disjointed approach to international politics and trade could have major ramifications on global trade and could lead to financial instability in global markets, triggering volatility in the currency markets. Just a few days before being sworn in as president, Trump stated that the US dollar was "too strong", blaming a weak Chinese currency. Predictably, the greenback lost ground after Trump's remarks. It's a safe bet that Trump's offhand tweets and comments will continue to fuel market movement.

Daily Pivots: (S1) 1.2506; (P) 1.2555; (R1) 1.2596; More...

GBP/USD's fall from 1.2673 extends but it stays above 1.2414 minor support so far. Intraday bias remains neutral first. Rise from 1.1986 is seen as the third leg of the consolidation pattern from 1.1946. Break of 1.2414 minor support will argue that it's completed and turn bias to the downside for 1.1946 low. In case of another rise, we'd expect strong resistance at 1.2774 to limit upside and bring down trend resumption eventually.

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.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Daily Pivots: (S1) 0.9963; (P) 0.9995; (R1) 1.0021; More.....

USD/CHF recovers today but stays in tight range above 0.9958. With 1.0121 minor resistance intact, deeper fall is still in favor. Decline from 1.0342 is seen as the third leg of the pattern from 1.0327. Below 0.9958 will target 61.8% retracement of 0.9443 to 1.0342 at 0.9786 and below. Nonetheless, break of 1.0121 will indicate near term reversal and turn focus back to 1.0342.

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.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box