EUR/USD

Current level - 1.0721

My outlook here is negative, for a break through 1.0656 low towards 1.0580 area.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 114.58

Today's pullback should be considered corrective, before another leg upwards, to 116.70 area. Initial intraday support lies at 114.10.

GBP/USD

Current level - 1.2563

The bias is still negative, for a slide towards 1.2415 zone. Key hurdle lies at 1.2608.

• Rates: German inflation expected to hit 2% - More Bund losses?
  German inflation is expected to hit the psychological 2%-mark for the first time since the end of 2012 which could inflict more losses on the Bund in the wake of last week’s hawkish German ECB comments and technical break below the neckline of a double top. Risk sentiment is a wildcard for trading following this weekend’s executive orders by US President Trump.
• Currencies: Trump-migration uncertainty to weigh on the dollar?
  At the end of last week, the dollar showed tentative signs of bottoming out. However, the uncertainty on the Trump immigration measures might create some nervousness on global markets. It weighs slightly on the dollar this morning. Is a further risk-off driven correction of the dollar in store?

The Sunrise Headlines

• On Friday, US equities ended a dull session virtually unchanged, digesting new all-time highs set earlier in the week. Many Asian markets are closed. The others open in a modest risk off mode on Trump’s immigration orders. For similar reasons, bonds and gold are a bit higher and the dollar weaker.
• Former French Education Minister Hamon beats Manuel Valls for the Socialist presidential nomination by an provisional 59% to 41%.
• Italy’s €20B government rescue fund is sufficient to recapitalize the country’s troubled banks, and about a third of the money will be used for Monte Dei Paschi, Bank of Italy governor Visco said
• Turkey’s rating was cut to BB+ from BBB- by Fitch with stable outlook. It cited the toll of political developments on the nation’s economy as the main reason. S&P and Moody’s also have a junk rating for the country, suggesting that more investors may now shun Turkey’s debt.
• Fitch affirmed Denmark’s AAA rating stable outlook which reflects their wealthy, high-value added and diversified economy, strong institutions, low public debt and solid external finances. It also affirmed Spain’s BBB+ rating (outlook stable). S&P affirmed the Slovak A+ rating (stable outlook)
• Global opposition to U.S. president Trump intensified, as world leaders including Canadian PM Trudeau and German Chancellor Merkel denounced his decision to limit entry from seven Muslim countries in the name of fighting terrorism.
• Today, the eco calendar contains the January EMU economic confidence report and the German inflation data, while Spain and Belgium report their Q4 GDP. In the US, the December personal Income and Spending data are released.

Currencies: Trump-Migration Uncertainty To Weigh On The Dollar?

Trump measures to block USD comeback?

On Friday, the focus of USD traders was on the US Q4 GDP. The report was slightly softer than expected. The dollar lost a few ticks, but the move is technically insignificant. EUR/USD closed the day at 1.0699 (from 1.0682). USD/JPY finished the day at 115.10 (from 114.53).

This morning, a lot of Asian markets are closed for the Lunar New Year. The immigration measures of US President Trump are modestly negative for global risk sentiment. The Trump-driven uncertainty weighs on the dollar and supports the yen. USD/JPY is trading in the 114.50/60 area. Japanese Dec retail data disappointed, but had limited impact on yen trading. EUR/USD is changing hands in the 1.0725 area, as markets await the impact of the Trump measures on European and US (equity) markets.

Today, the US data, PCE and pending Home sales, won’t affect markets much. The former are already included in Friday’s Q4 GDP report. The latter are no market mover. In EMU, German inflation is expected to have dropped sharply M/M, but Y/Y inflation is expected to jump to 2% from 1.7% Y/Y (energy base effect). If confirmed, the release might be politically sensitive and increase German resistance against the ECB’s very accommodative policy. The EMU confidence data (source: EC) are expected broadly stable after a substantial improvement in previous months. Finally, we get the first EMU Q4 GDP figures of Spain and Belgium ahead of tomorrow’s EMU Q4 GDP. Markets are expecting a 0.4% Q/Q and a 1.7% Y/Y increase (for EMU). We see risks on the upside. The EMU data might be slightly euro supportive, but the focus for FX trading will be on global issues. Investors will try to assess the impact of the US immigration measures on specific parts of the economy and on global markets sentiment. Of late, it mostly ignored potential negative side-effects the Trump policy. The jury is still out whether recent measure will derail the reflation trade. In a day-to-day perspective, investors might turn a bit more cautious on global risk and on the dollar. So, last week’s USD bottoming out process might stop. Especially, EUR/USD 1.0775 resistance remains with reach and might come again under pressure. The downside of USD/JPY looks a bit better protected. Markets dislike being too yen long ahead of tomorrow’s BOJ meeting.

Global context: EUR/USD touched a multi-year low (1.0341) early this month. After the Trump rally, plenty of good USD news was discounted while US/EMU rate differentials narrowed (correction), causing a dollar correction. Longer-term, the absolute interest rate support should provide a USD floor, if US data remain good and as long as there are no profound doubts on Trump’s pro-growth policy. The day-to-day USD momentum improving slightly at the end of last week, but the jury is still out whether this might be the start of a new upleg. A return above EUR/SD 1.0874 would question the USD positive outlook. On the downside, EUR/USD 1.0341 is the first key support. USD/JPY is trading well off the post-Trump highs (118.60/66). The rebound off the 112.57/53 reaction low was quite constructive. USD/JPY 111.16 (38% retracement of the 99.02/118.66 rally) is a tough support

EUR/USD: USD comeback to slow on Trump immigration measures

EUR/GBP

Sterling rebound slows

On Friday, sterling trading entered calmer waters, as investors awaited the outcome of the meeting between UK PM May and US president Turmp. EUR/GBP gradually returned north of 0.85. Political comments suggest that the UK labour party won’t be very aggressive in trying to amend the Brexit blil in order to reach a softer Brexit. This was slightly negative for sterling. The meeting between UK May and US president Trump developed in a constructive environment, but the direct impact on sterling was limited. Negotiations on a trade agreement might start in the near future. EUR/GBP closed the session at 0.8526 (from 0.8480). Cable finished the day at 1.2555 (from 1.2597). So, sterling softness prevailed.

Today, the UK calendar is uneventful. Cable hardly profits from USD weakness overnight and EUR/GBP is trading relatively strong in the 0.8535 area. So, it looks that sterling still trades with a soft bias at the start of the new week. The global context (slightly risk-off?) will set the tone for sterling trading. It might be a slightly negative for the UK currency. Markets will also look forward to Thursday’s BoE meeting. Despite recent good eco data, the BoE probably will maintain a wait-and-see stance and give no indication on a rate hike. Longer term, we still look to sell sterling as long as there is no clear indication that the BoE prepares to tighten policy to fight rising inflation. The Brexit divorce remains a complicated process. Sterling momentum was strong of late, but eased a bit at the end of last week. EUR/GBP 0.8579 50% retracement and 62% retracement (0.8515) of the 0.8304/0.8854 rebound is broken. The correction low comes in at 0.8451 and should provide strong support. A break would be technical significant. We look for confirmation of last week’s bottoming out process in EUR/GBP

EUR/GBP: 0.8450 support remains intact for now

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EUR/JPY Daily Outlook

Daily Pivots: (S1) 122.42; (P) 122.87; (R1) 123.51; More...

EUR/JPY is staying in the consolidation pattern from 124.08 and intraday bias remains neutral. On the upside, break of 124.08 will extend the larger rally from 109.20 to 126.09 key resistance next. On the downside below 120.54 will bring another fall. But in that case, downside should be contained by 118.45 cluster support (38.2% retracement of 109.20 to 124.08 at 118.39) and bring rebound.

In the bigger picture, price actions from 109.20 medium term bottom are seen as part of a medium term corrective pattern from 149.76. There is prospect of another rise towards 126.09 key resistance level before completion. But even in that case, we'd expect strong resistance between 126.09 and 141.04 to limit upside, at least on first attempt.

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GBP/JPY Daily Outlook

Daily Pivots: (S1) 143.97; (P) 144.37; (R1) 144.76; More...

Intraday bias in GBP/JPY remains mildly on the upside at this point. As noted before, corrective fall from 148.42 has completed at 136.44 already. Break of 145.38 resistance will target a test on 148.42 high. Break there will resume whole rise from 122.46 and target 150.42 long term fibonacci level next. On the downside, below 140.74 will turn bias to the downside to extend the pattern from 148.42 with another falling leg.

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

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Daily Pivots: (S1) 0.8482; (P) 0.8510; (R1) 0.8550; More...

Intraday bias in EUR/GBP remains neutral for the moment. As noted before, corrective rise from 0.8303 should have completed at 0.8851 already. Break of 0.8449 support should confirm our bearish view and bring resumption of whole corrective fall from 0.9304. In that case, next target is 0.8116 cluster support. However, break of 0.8650 will turn focus back to 0.8851 instead.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. Deeper fall cannot be ruled out yet. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside. Overall, the corrective pattern would take some time to complete before long term up trend resumes at a later stage. Break of 0.9304 will pave the way to 0.9799 (2008 high).

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Daily Pivots: (S1) 1.4134; (P) 1.4179; (R1) 1.4213; More...

Intraday bias in EUR/AUD remains neutral at this point. Price action from 1.4025 are seen as a corrective pattern and thus maintain near term bearishness. Below 1.4025 will resume the larger fall from 1.6587 to key support level at 1.3671. We'd expect downside to be contained there to bring reversal. Meanwhile, above 1.4251 minor resistance will turn focus back to 1.4721 resistance.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a consolidative pattern. 50% retracement of 1.1602 to 1.6587 at 1.4095 was already met. While further fall cannot be ruled out, we'd expect strong support above 1.3671 to contain downside and bring rebound. Up trend from 1.1602 should not be finished and will resume later. Break of 1.4721 resistance will be the first sign of resumption of up trend from 1.1602 and target retesting of 1.6587 high first.

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Daily Pivots: (S1) 1.0675; (P) 1.0685; (R1) 1.0697; More...

Intraday bias in EUR/CHF stays on the downside for the moment. Prior break of 1.0677 support indicate resumption of larger decline. Next target will be 1.0620 support. Decisive break there will confirm resumption of whole fall from 1.1198. On the upside, break of 1.0749 resistance is needed to indicate near term reversal. Otherwise, outlook will remain bearish in case of recovery.

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

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Daily Pivots: (S1) 1.0660; (P) 1.0693 (R1) 1.0727; More.....

EUR/USD is staying in tight range below 1.0774 and intraday bias remains neutral for the moment. Price actions from 1.0339 are seen as a corrective rise. In case of extension, upside should be limited by 1.0872 resistance. Break of 1.0588 will indicate that such 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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Currency pair USD/JPY

The USD/JPY broke above the resistance of the bearish trend line (dotted red). This could signal the completion of wave 4 (purple) and the start of the wave 5 (purple).

The wave 4 (brown) retracement is invalidated if price pushes below the 61.8% Fibonacci level of wave 4 vs 3 and the previous top of wave 1 (brown). A bearish breakout (red arrow) could occur below the support level (blue) whereas a bullish breakout (green arrow) could occur above the resistance trend line (red).

Currency pair EUR/USD

The EUR/USD showed a bearish turn at the 78.6% Fibonacci level of wave 2 vs 1 (brown). A break above the resistance trend line (red) could indicate a larger correction towards the 88.6% Fibonacci level.

The EUR/USD bearish reaction could be a wave 1 (blue) but a break above the 100% Fibonacci level of wave 2 vs 1 invalidates this wave count.

Currency pair GBP/USD

The GBP/USD seems to have completed an ABC zigzag (blue) and at the moment seems to be expanding a complex correction (wave W blue).

The GBP/USD built an ABC zigzag (orange) within a potential larger correction (WXY blue).

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

Intraday bias in GBP/USD remains neutral at this point. 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.

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