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EUR/USD - 1.0643

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.0652

Kijun-Sen level                  : 1.0677

Ichimoku cloud top             : 1.0665

Ichimoku cloud bottom      : 1.0613

Original strategy  :

Bought at 1.0640, Target: 1.0740, Stop: 1.0610

Position : - Long at 1.0640

Target :  - 1.0740

Stop : - 1.0610

New strategy  :

Hold long entered at 1.0640, Target: 1.0740, Stop: 1.0610

Position : - Long at 1.0640

Target :  - 1.0740

Stop : - 1.0610

Although the single currency has slipped again today and marginal weakness from here cannot be ruled out, reckon downside would be limited and as long as previous resistance at 1.0615 (now support) holds, mild upside bias remains for another rise, above 1.0680 would suggest the retreat from 1.06714 has ended, bring retest of this level, break there would extend the erratic rise from 1.0493 low to 1.0740-45 (1.5 times projection of 1.0495-1.0640 measuring from 1.0525) but loss of upward momentum should prevent sharp move beyond 1.0760 (1.618 times projection of 1.0495-1.0640 measuring from 1.0525).

In view of this, we are holding on to our long position entered at 1.0640. Below previous resistance at 1.0615 would abort and signal top has been formed, risk further fall to 1.0575-80 first. 

Market movers today

We expect to see a continued improvement in the German ZEW indicator, which is due to be released today. Later, US producer prices are due out but are unlikely to have much impact on markets.

The main event in the Scandi markets will be the Swedish inflation data for February – it should be in line with the Riksbank's projections.

Selected market news

We saw some modest gains in the US equity markets ahead of the string of central bank meetings this week (US, UK, Japan and Switzerland due this week). The US government bond market came under pressure given a string of corporate bond issuance yesterday, where a number of corporate bonds issuers came to the market in the 10Y and 30Y segment. This led to pressure on the US Treasury curve from the long end of the curve.

It has been a mixed picture in the Asian equity markets this morning, while oil prices has rebounded modestly after having fallen over the past week. There have been modest movements in the major FX crosses this morning. The Norwegian krone rebounded yesterday versus the euro as it was close to the 9.20 level. This morning it trading at the 9.12 level. We expect further strengthening of NOK versus the euro.

The UK continues its path towards Brexit after the vote in parliament yesterday. However, Scotland is looking for a new independence vote in 2018 or 2019. Hence, the pressure for a weaker sterling is expected to persist for now.

USD/JPY - 114.96

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 114.87

Kijun-Sen level                  : 114.73

Ichimoku cloud top             : 114.94

Ichimoku cloud bottom      : 114.94

New strategy  :

Stand aside

Position :  -

Target :  -

Stop : -

Although the greenback recovered after falling to 114.48 yesterday and minor consolidation is in store, reckon upside would be limited to 115.15-20 and near term downside risk remains for the fall from 115.51 top (last week’s high) to bring at least a retracement of recent upmove to 114.26 support but downside should be limited to 114.00-05 (38.2% Fibonacci retracement of 111.69-115.51) and price should stay well above strong support at 113.56-61), bring rebound later.

In view of this, would be prudent to stand aside for now. Above 115.15-20 would suggest an intra-day low is formed, bring a stronger rebound but still reckon said resistance at 115.51 would cap upside. Only break there would revive bullishness and extend recent upmove to previous resistance at 115.62, then towards 115.90-00. 

Currency pair GBP/USD

The GBP/USD is building a larger bullish retracement within a downtrend. The Fibonacci levels of wave 4 (blue) are potential resistance zones for a bearish turn.

The GBP/USD could expand the correction within wave 4 (blue) via a WXY (orange) unless price breaks below the support (blue/green) which could trigger a continuation of the downtrend. The 38.2%-50% Fibonacci area is the most likely bouncing spot for a wave 4.

Currency pair EUR/USD

The EUR/USD has bounced at the 61.8% Fibonacci retracement level of wave 2 (purple) but could retrace to a deeper Fib level such as the 78.6% before building a bearish turn. A break above the 100% level invalidates the wave 1-2 structure.

The EUR/USD bullish momentum could be part of a wave 3 (pink). In that case price is now at the 50% Fibonacci retracement level of wave 4 (pink). A break below the support (green) and Fibs would invalidate that wave 4 and could lead to a larger bearish move.

Currency pair USD/JPY

The USD/JPY seems to have completed a wave 4 (purple) at a shallow Fibonacci level from the daily-weekly charts, which makes a larger uptrend more likely. The uptrend stays intact if price manages to stay above the bottom of wave 2 (blue).

The USD/JPY could be building a wave 1-2 (orange) but a break below the 100% Fibonacci level invalidates wave 2 (orange).

China retail sales growth disappoints while industrial output and asset investment top forecasts

US Session Highlights

(US) President Trump to meet with auto execs in Detroit on Weds regarding review of vehicle emissions regulations - press

(LY) Libya crude output said to have declined to 609K bpd from 620K bpd on Friday - press

(KW) Kuwait govt would support extension of OPEC cuts agreement past June, but it's still early for a decision from OPEC - Kuwaiti press

(US) Atlanta Fed confirms selecting Raphael Bostic as new president to replace Dennis Lockhart; to take office June 5th - press

(US) New York Fed Consumer Expectations Feb survey: 1 -year food inflation forecast is at record low of 4.4%

US markets on close: Dow -0.1, S&P500 flat, Nasdaq +0.2%

Best Sector in S&P500: Materials

Worst Sector in S&P500: Healthcare

Biggest gainers: CTXS +6.8%, WYNN +4.8%, DPHI +4.0%, CPK +3.5%, RIG +2.9%

Biggest losers: URBN -3.8%, AAL -3.5%, UAL -3.4%, GPS -3.0%, NRG -3.0%

At the close: VIX 11.4 (-0.3 pts); Treasuries: 2-yr 1.38% (flat), 10-yr 2.61% (+3bps), 30-yr 3.19% (+2bps)

US movers afterhours

RT: Reports prelim Q3 R$225.7M (no ests), SSS -4.0%; To Explore Strategic Alternatives; +17.8% afterhours

PPHM: Reports Q3 -$0.04 v -$0.03e, R$10.7M v $14.0Me; -8.9% afterhours

VRX: Pershing Square sold its entire 27.2M share stake at $11.00/shr and Ackman to leave the board; -9.7% afterhours

TLYS: Reports Q4 $0.22 v $0.21e, R$160.2M v $160Me; Guides Q1 -$0.15 to -$0.07 v -$0.04e; SSS to decrease by a low to mid single-digit percentage; -12.5% afterhours

Politics

(US) CBO scores American Health Care Act (AHCA): 14M more people would be uninsured in 2018 and 24M more by 2026

(US) Speaker Ryan (R-WI): recognizes concerns about access to health care coverage following CBO report

(FR) France former PM Valls planning to endorse Macron - French press

Asia Key economic data:

(CN) CHINA JAN-FEB RETAIL SALES Y/Y: 9.5% V 10.6%E (multi-year low)

(CN) CHINA JAN-FEB INDUSTRIAL PRODUCTION Y/Y: 6.3% V 6.2%E (6-month high)

(CN) CHINA JAN-FEB FIXED ASSETS EX RURAL YTD Y/Y: 8.9% V 8.3%E (8-month high)

(AU) AUSTRALIA FEB NAB BUSINESS CONFIDENCE : 7 V 10 PRIOR; CONDITIONS: 9 (3-month low) V 16 PRIOR

(AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 113.1 v 113.9 prior

Asia Session Notable Observations, Speakers and Press

Asia equity markets are seeing compressed volatility as the quiet before the Wednesday FOMC decision envelops sentiment. Oil remains under pressure near 3-month lows, while US airline stocks hit some turbulence ahead a massive snowstorm bearing down on the northeast. Dollar majors were similarly contained in narrow ranges - AUD/USD saw the most notable decline after a retreat in NAB business confidence/conditions from multi-month highs last month.

Jan-Feb economic data from China were the key risk events for the session, coming in mixed. Retail sales growth disappointed with a multi-year low of 9.5%, despite recent comments from Beijing that economy is making progress in transition to consumption-driven growth. Industrial output rise hit a 6-month high however, with 6.3% increase in power generation, 5.8% rise in crude steel production, and 8% decline in crude oil output. Fixed Asset investment hit an 8-month high rate of growth, driven by 8.9% rise in property investment amid 26% increase in property sales value. Speaking after the data release, NBS noted business environment is still much better as fundamentals of economy are improving. Stats bureau also noted consumption will remain stable this year and CPI will rebound after last month's surprise decline.

NAB business conditions hit a 3-month low after printing a 9-year high last month. NAB noted it is more concerned about the longer term picture as contributions from LNG exports and construction activity fade, forecasting another RBA rate cut this year.

Japan's Toshiba was down over 7% after press reports swirled that the company will again delay earnings that were expected out today as auditing firms compute the impact of Westinghouse write-down. Shares were off their lows late in the day, as the company affirmed delay in Q3 release but also affirmed write-down amount of ¥712.5B and disclosed consideration for sale of overseas nuclear operations.

China

(CN) China Stats Bureau (NBS): Fundamentals of real economy are improving, business environment much better than this time last year; PPI may have peaked in Feb

(CN) PBoC Official: seeing slower home mortgage growth - Chinese press

Japan

(JP) Japan Fin Min Aso: Financial regulations and taxation will be topics at G20; plan to explain Japan's economy and listen to others opinions

Australia

(AU) RBA Assistant Gov Bullock: Calming effect of tighter rules on housing lending might be fading; ready to impose more restrictions if necessary to head off risks in the market

Korea

(CN) China military plans to counter THAAD deployment in South Korea with anti-radar equipment - Chinese press citing former deputy commander of China's Nanjing Military Region

(KR) South Korea Ministry of Employment and Labor: Feb manufacturing jobs fell 1.7K to 3.58M, declining for 3rd straight month - Korean press

(KR) South Korea Finance Ministry: Prepared to take market stabilizing measures in the event of volatility following Fed meeting - press

Asian Equity Indices/Futures (00:00ET)

Nikkei -0.1%, Hang Seng +0.1%, Shanghai Composite +0.1%, ASX200 -0.1%, Kospi +0.7%

Equity Futures: S&P500 -0.1%; Nasdaq flat, Dax flat; FTSE100 -0.1%

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

EUR 1.0645-1.0660; JPY 114.75-115.00; AUD 0.7550-0.7575; NZD 0.6910-0.6930

Apr Gold flat at $1,203/oz; Apr Crude Oil +0.1% at $48.43/brl; May Copper +0.2% at $2.63/lb

SPDR Gold Trust ETF daily holdings rise 6.8 tonnes to 832.0 tonnes; first rise since Mar 2nd

(CN) China to cut retail gasoline and diesel prices by CNY85/tonne, effecitve March 31st

USD/CNY (CN) PBOC SETS YUAN MID POINT AT 6.9118 V 6.8988 PRIOR

(CN) PBOC to inject combined CNY40B v CNY30B prior in 7,14, and 28-day reverse repos

(JP) Japan's MoF sells ¥1.0T in 0.7% (0.6% prior) 20-year JGBs; Avg yield: 0.673% v 0.669% prior; bid-to-cover: 3.78x v 4.05x prior

(AU) Australia sells A$150M in 2.5% inflation indexed 2030 bonds; avg yield 1.1256%; bid-to-cover 3.37x

Asia equities / Notables / movers by sector

Consumer discretionary: BGR.NZ Briscoe Group +0.2% (FY16 result); DMP.AU Domino’s -3.8% (Citi cuts to rating); 7733.JP Olympus Corp +0.6% (Macquarie raises rating)

Financials: 604.HK Shenzhen Investment +2.9% (Feb result); ABP.AU Abacus Property Group -1.0% (Shaw & Partners cuts rating)

Industrials: 3399.HK Guangdong Yueyun Transportation Co -5.4% (FY16 result); 7011.JP Mitsubishi Heavy Industries +5.9% (considers spinoff); 5108.JP Bridgestone Corp -1.1% (Daiwa cuts rating)

Technology: 6502.JP Toshiba Corporation -7.3% (delays earnings)

Materials: 2233.HK West China Cement -0.9% (FY16 result); BKW.AU Brickworks +6.8% (Raises at Bell Potter); FMG.AU Fortescue +1.5%, RIO.AU Rio Tinto +0.7%, BHP.AU Billiton +0.7% (iron ore rises); 2168.HK Yingde Gases -1.6% (Origin water sold stake)

Energy: ORG.AU Origin Energy +2.7% (Credit Suisse raises rating)

Healthcare: 1177.HK Sino Biopharmaceutical -4.2% (FY16 result)

Key Points:

• EURUSD facing volatility as U.S. Fed gets set to determine near term rate policy.
• Uncertainty growing due to mixed rate hike messages from the FOMC.
• Consider your current positioning given the difficulty in calling this event.

The Euro rallied strongly throughout most of last week as the pair initially rose in response to some optimistic rhetoric from the ECB's Mario Draghi. In addition, the EU GDP rose to meet market expectations at 0.4% q/q. Subsequently, the pair was remained relatively robust as it charged higher towards the 1.07 handle. However, the pair is facing an increasingly volatile week ahead as the US Fed gets ready to deliver their verdict on rate hikes. Subsequently, it remains to be seen if the Euro can retain its current lustre as a key risk event looms.

Last week saw the Euro rallying strongly, back above the 100 MA, largely in response to statements from the ECB's Mario Draghi which was interpreted as highly optimistic for the Eurozone. In addition, the EU's GDP results proved on target at 0.4% q/q which represents a slight gain from the prior result. However, despite the gains, the pair was expected to decline late in the week in response to a strong U.S. Jobs report. Fortunately, the release of the U.S. NFP figures proved to be nothing but a bump in the road and the 235k result had little impact on the Euro's unstoppable rise. Subsequently, the pair closed the week sharply higher at 1.0669 and with price action having broken through the 100 day MA.

Looking ahead, the Euro is likely facing a relatively volatile week with the U.S. FOMC set to decide upon the fate of interest rates. Given the Fed's recent PR campaign to suggest that interest rates are imminent, the chance of a live meeting is very real. Subsequently, expect to see plenty of volatility around that decision given that most market pundits are predicting no change to the FFR despite increasing rhetoric from the FOMC. In addition, the Eurozone CPI figures are also due out late in the week and are likely to have an impact on the pair's direction, therefore, keep a watch for any surprises.

From a technical perspective, the Euro's rebound and break of resistance at 1.0630 suggests that the medium term pullback has now completed. In addition, the RSI Oscillator is trending steadily higher, within neutral territory, suggesting that there is further room to move on the upside. Subsequently, our initial bias for the week ahead is bullish with targets set at the top of January's high around the 1.0800 handle. Support is currently in place for the pair at 1.0491, 1.0454, and 1.0364. Resistance exists on the upside at 1.0700, 1.0828, and 1.0872.

Ultimately, the week ahead is likely to be all about the U.S. Fed's decision on interest rates. Currently there is plenty of uncertainty sweeping the market which means, regardless of the decision, we are likely to see plenty of volatility during the event before the pair returns to an upward trajectory. However, all bets will be off if the central bank surprises us all and raises rates as this would lead to an immediate Euro depreciation. Subsequently, consider your positioning because this is one of the toughest FOMC meetings to correctly call for some time.

Daily Pivots: (S1) 122.04; (P) 122.46; (R1) 122.79; More...

A temporary top is in place at 122.88 with 4 hour MACD crossed below signal line. Intraday bias in EUR/JPY is turned neutral for consolidations. Deeper retreat could be seen but downside should be contained by 121.18 resistance turned support and bring another rally. Above 122.88 will target 124.08. Decisive break there will extend larger rise from 109.20 and target 126.09 key resistance next.

In the bigger picture, current development suggests that medium term rise from 109.20 is still in progress. Focus is now on 126.09 key resistance level. Sustained break will confirm completion of the whole decline from 149.76. And rise from 109.20 is of the same degree as the fall from 149.76. In such case, further rally would be seen to 104.04 resistance and possibly above before topping. Meanwhile, rejection from 126.09 will extend the fall from 149.76 through 109.209 low.

Daily Pivots: (S1) 139.59; (P) 140.04; (R1) 140.78; More...

Intraday bias in GBP/JPY remains neutral for the moment as it's bounded in choppy trading inside range of 138.53/142.79. Price actions from 148.42 are viewed as a consolidation pattern. On the downside, break of 138.53 support will bring deeper decline to 136.44 support and possibly below. However, we'd expect strong support at 50% retracement of 122.36 to 148.42 at 135.39 to bring rebound. On the upside, above 142.79 will turn bias back to the upside for 144.77 and above.

In the bigger picture, price actions from 122.36 medium term bottom are still seen as a corrective pattern. 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 with a test on 122.36 low next. Though, sustained break of 150.42 will extend the rebound towards 61.8% retracement at 167.78.

Daily Pivots: (S1) 0.8689; (P) 0.8737; (R1) 0.8766; More...

A temporary top is formed at 0.8786 in EUR/GBP with 4 hours MACD staying below signal line. Intraday bias is turned neutral for consolidations. Deeper retreat might be seen but downside should be contained by 38.2% retracement of 0.8402 to 0.8786 at 38.2% retracement of 0.8402 to 0.8786 at 0.8639 and bring another rise. Above 0.8786 will target 0.8851 resistance and above. However, price actions from 0.8303 are seen as the second leg of the corrective pattern from 0.9304. Hence, we'd expect strong resistance from 100% projection of 0.8303 to 0.8851 from 0.8402 at 0.8950 to limit upside.

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).

Daily Pivots: (S1) 1.4020; (P) 1.4102; (R1) 1.4148; More...

A temporary top is formed at 1.4183 in EUR/AUD and intraday bias is turned neutral first. Some consolidation would be seen but downside should be contained by 1.3874/4014 support zone and bring another rally. As noted before, we're favoring the case of medium term trend reversal defending key support level at 1.3671, on bullish convergence condition in daily MACD Above 1.4183 will turn bias back to the upside for 1.4289 resistance. Sustained break there will affirm our bullish view and target 1.4721 key resistance next.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. We'd expect strong support from 1.3671 key level 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 indicate completion of such correction and turn outlook bullish for retesting 1.6587 high. However, sustained break of 1.3671 will invalidate our bullish view and would turn focus back to 1.1602 long term bottom.