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The muted market reaction following the European Central Bank's decision to leaving key interest rates unchanged in March should be no surprise. Markets had already priced in such an outcome with the main focus directed towards Mario Draghi's press conference which may come under heavy scrutiny. Although growth and inflation in the Eurozone have followed a positive trajectory, the mounting uncertainty around the elections in Europe could force the Central Bank to adopt a dovish stance. Investors may seize this opportunity to obtain some clarity on how the Central Bank plans to mitigate the shocks from the rising political risks. With Draghi likely to face some tough questions concerning the high-risk elections in France and the Netherlands, the Euro could be injected with volatility.

It is becoming visibly clear that the growing threat of Eurosceptic parties disrupting the unification of the Eurozone has left the Euro vulnerable to steep losses in the first quarter of 2017. Euro weakness may remain a dominant theme with anxiety set to heighten as the election process in France, Germany and the Netherlands get under way. The EURUSD is fundamentally bearish and a strengthening Dollar from the prospects of higher US interest rates could open a path towards 1.0350 in the medium to longer term. Technical traders could utilize the technical bounce on the EURUSD to send prices back down towards 1.0500 in the short term.

Commodity spotlight - Gold

Gold received a pummelling this week, with prices crashing to a fresh five-week low at $1203.13 during Thursday's trading session as expectations heightened over the Federal Reserve raising US interest rates next week. A dominant Dollar acquired from the bullish sentiment towards the US economy has attributed to Gold's sharp selloff with bears firmly in control on the daily charts. The downside momentum remains healthy with steeper declines expected in the short term if NFP exceeds expectations on Friday. From a technical standpoint, Gold is under intense pressure with previous support around $1210 acting as a light resistance for a decline lower towards $1200. A solid breakdown below $1200 could open a path towards the next relevant support at $1190.

Currency spotlight - GBPUSD

The ongoing Brexit woes have effectively limited any meaningful gains on Sterling during trading this week. Investors seem to have overlooked Wednesday's spring Budget with sellers simply exploiting the rising anxiety ahead of the Article 50 invocation to attack the Sterling on Thursday. Sterling may find itself under renewed rounds of selling if the Brexit uncertainties persist this month. From a technical standpoint, the GBPUSD is bearish on the daily charts. Weakness below 1.2150 could encourage a further depreciation towards 1.2000.

GBPUSD: The pair continues to face further weakness following more declines on Wednesday. Support lies at the 1.2150 level where a break will turn attention to the 1.2100 level. Further down, support lies at the 1.2050 level. Below here will set the stage for more weakness towards the 1.2000 level. Conversely, resistance stands at the 1.2250 levels with a turn above here allowing more strength to build up towards the 1.2300 level. Further out, resistance resides at the 1.2350 level followed by the 1.2300 level. On the whole, GBPUSD continues to face downside threats but with caution.

JPY (USDJPY) made a new high above last Friday's peak and now seems to be pulling back. Move up from 113.53 ((x)) low could be viewed as a 5 swing Leading Diagonal Elliott Wave structure. There is RSI divergence (not showing) between red wave iii and blue (a) which further supports the idea of JPY move up from 113.53 low being a diagonal structure. As per Elliott Wave theory, after a 5 wave move up or diagonal structure higher completes, pair should make a corrective pull back before rallying again. Decline from 114.93 -114.48 could be viewed as just the first leg of proposed wave (b) pull back. As current bounce stays below 114.93, pair has scope to make another push lower to complete wave (b) pull back before it turns higher again in wave (c) towards 115.30 -116.11 area. As pair is showing 5 waves up from 113.53 low, we don't like selling the pair in proposed wave (b) pull back and expect it to find intra-day buyers in the dip as far as price stays above 113.53 low and the pivot there remains intact. Break above 114.93 would suggest wave (b) completed already at 114.48 and pair has started the next leg higher in wave (c) toward the above mentioned area.

JPY (USDJPY) 1 Hour Chart

USD/CHF - 1.0150

Original strategy :

Buy at 1.0080, Target: 1.0200, Stop: 1.0045

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0080, Target: 1.0200, Stop: 1.0045

Position : -

Target :  -

Stop : -

Although the greenback has rebounded after finding support at 1.0123 yesterday, break of this week’s high at 1.0171 is needed to signal recent erratic rise from 0.9861 low has resumed and extend further gain to 1.0200-10 but near term overbought condition should limit upside to 1.0220-25 and price should falter below previous chart resistance at 1.0248. If said resistance at 1.0171 continues to hold, then further consolidation would take place and risk of another retreat to 1.0123 cannot be ruled out, however, reckon downside would be limited to 1.0100 and support at 1.0173 should hold, bring another rise later.

In view of this, would not chase this rise here and would be prudent to buy dollar on subsequent pullback as support at 1.0073 should limit downside. A drop below 1.0065 support would abort and signal top is formed instead, risk weakness to 1.0040-45 but reckon support at 1.0009 would remain intact. 

GBP/USD - 1.2152

Original strategy :

Sell at 1.2215, Target: 1.2115, Stop: 1.2250

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.2215, Target: 1.2115, Stop: 1.2250

Position : -

Target :  -

Stop : -

As cable has remained under pressure after recent selloff, adding credence to our bearish view that recent decline from 1.2706 is still in progress and may extend further weakness to 1.2110-15, then 1.2090, however, loss of near term downward momentum should prevent sharp fall below 1.2070-75 and price should stay above 1.2050, risk from there is seen for a rebound later.

In view of this, would not chase this fall here and would be prudent to sell cable on recovery as 1.2210-15 should limit upside. Above resistance at 1.2253 would defer and suggest a temporary low is possibly formed instead, risk a stronger rebound to 1.2275-80 but price should falter below resistance at 1.2301 and bring another selloff.

EUR/USD - 1.0550

Original strategy  :

Buy at 1.0515, Target: 1.0625, Stop: 1.0485

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0515, Target: 1.0625, Stop: 1.0485

Position : -

Target :  -

Stop : -

Although the single currency has rebounded after falling to 1.0525, reckon upside would be limited to 1.0600-05 and near term downside risk remains for another decline, however, as broad outlook remains consolidative, reckon downside would be limited to 1.0510-15 and bring another rebound later. Above 1.0600-05 would suggest the fall from 1.0640 has ended, bring further gain to 1.0620, then test of said resistance at 1.0640. Only a break above 1.0640 would extend the erratic rise from 1.0493 low for retracement of early decline to 1.0660-65 (50% Fibonacci retracement of 1.0829-1.0493) and possibly towards resistance at 1.0680 but price should falter well below 1.0700-05 (61.8% Fibonacci retracement).

In view of this, we are looking to buy euro on dips. Below 1.0510 would risk retest of 1.0493 but only break there would shift risk back to the downside and signal recent decline from 1.0829 has resumed for further selloff to 1.0470 and then towards previous support at 1.0454.

At today's meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.

Regarding non-standard monetary policy measures, the Governing Council confirms that it will continue to make purchases under the asset purchase programme (APP) at the current monthly pace of €80 billion until the end of this month and that, from April 2017, the net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. The net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the APP. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

USD/JPY - 114.67

Original strategy  :

Buy at 114.20, Target: 115.20, Stop: 113.85

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 114.20, Target: 115.20, Stop: 113.85

Position :  -

Target :  -

Stop : -

Yesterday’s rally after finding renewed buying interest at 113.61 signals the rise from 111.69 is still in progress and may extend further gain to previous chart resistance at 114.96, however, break there is needed to signal early erratic rise from 111.59 low has resumed and extend gain towards another previous resistance at 115.38 but price should falter below previous resistance at 115.62, bring retreat later.

In view of this, we are looking to buy dollar on pullback as the Kijun-Sen (now at 114.19) should limit downside and bring another rise later. Below 113.95 support would signal an intra-day top is formed instead, risk weakness towards said strong support at 113.56-61 which is likely to hold from here.

The ECB is stealing the spotlight temporarily from the Federal Reserve today as it announces its latest monetary policy decision and hopefully offers some guidance for the rest of the year.

While inflation in the eurozone is currently running above the ECBs target of below but close to 2%, core inflation is still well below and the base effect in commodities is broadly responsible for the moves in the headline figure. What's more, while the economy is showing signs of improvement, it's still too early to remove accommodation again, having only cut its asset purchase program by €20 billion in December, a move that only comes into effect after this month.

The ECB will also likely want to keep a low profile ahead of the upcoming elections in the Netherlands and France. The most popular parties in these countries are strongly anti-euro and want to pull their respective countries out of the currency union. The last thing Draghi will want to do is rock the boat ahead of these crucial votes, especially if there's absolutely no reason to do so. That said, in the press conference after, we may get some insight into what the central bank intends to do later this year when the current quantitative easing program expires. This is what will create waves in the markets, assuming he gives anything away of course. I think it's more likely that he'll refrain from letting much go at this early stage but highlight the improvement in the data and possible reduction in downside risks.

The euro is trading a little higher ahead of the ECB decision, having spent the last three days in the red. Still, it continues to linger around its two month lows against the dollar, with 1.05 still offering significant support. Against the pound it's been a little better supported but this may largely be due to the weakness in sterling more so than strength of the euro. It continues to struggle against the yen, with safe haven flows continuing to support the latter. With all this in mind, the euro may be susceptible to some decent upside, should Draghi strike a more hawkish tone.

Oil has been the biggest mover this morning, with Brent and WTI both down by more than 2.5%. This week's large inventory build, the third substantial increase in four weeks, really appears to have hit home in the markets, triggering some significant losses over the last 24 hours and a break below the range it had traded within for the last three months. With the downside now taken out, we could well see further losses ahead for Brent and WTI, with $50 and $47.35 being the next major tests. Oil producers may have been patting themselves on the back in recent months about the success of the output cut, with compliance much higher than many expected, but with prices looking weaker once again, an extension to the deal may be more of a necessity than an option.

WTI Crude oil extends weakness today and falls below $50 per barrel for the first time since Dec 15.

Yesterday's sharp fall, triggered by unexpectedly strong build in crude stocks (8.2 mln bls build vs 1.1 mln bls forecast and 1.5 mln bls previous week) was the biggest one day fall since July 2016.

Fresh acceleration lower today was sparked by break below psychological $50 support and the base of thick daily cloud (spanned between $49.88 and $53.03) that acted as strong support zone.

Further downside is seen likely, as the price generated strong bearish signal yesterday's close below $50.27 (Fibo 38.2% of $42.19/$55.22) and today's violation of cloud top, close below which would be seen as another strong bearish signal.

Weakness may extend towards next strong support at $48.70 (200 SMA / 50% retracement / weekly Kijun-sen) initially, with break here to generate another strong bearish signal.

However, strongly oversold daily studies suggest that sharp bearish acceleration mmight be paused for corrective action.

Broken cloud base is now acting as initial barrier, ahead of broken 100SMA ($50.91) which sholud ideally cap.

Res: 49.88; 50.00; 50.91; 51.21
Sup: 49.18; 48.70; 47.90; 47.17