Daily Pivots: (S1) 114.04; (P) 114.71; (R1) 115.22; More...

Today's sharp fall dragged 4 hour MACD below signal line and suggests that recovery from 112.56 is completed at 115.61. Intraday bias is turned neutral first. Below 112.56 will extend the corrective fall from 118.65. In that case, we'd expect strong support from 38.2% retracement of 98.97 to 118.65 at 111.13 to contain downside and bring rebound. On the upside, above 115.61 will target a test on 118.65 first. Break will resume whole rise from 98.97 and target 125.85 key resistance.

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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Daily Pivots: (S1) 0.9986; (P) 1.0040; (R1) 1.0066; More.....

USD/CHF's fall from 1.0342 resumed by taking out 0.9995 and reaches as low as 0.9981 so far. Intraday bias is back on the downside. As noted before, rise from 0.9443 has completed at 1.0342 already, after failing to sustain above 1.0327 key resistance. Fall from there would now target 61.8% retracement of 0.9443 to 1.0342 at 0.9786 and below. On the upside, break of 1.0121 resistance is needed to indicate short term bottoming. Otherwise, near term outlook will stay bearish in case of recovery.

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 expect the larger rally to resume later to 38.2% retracement of 1.8305 to 0.7065 at 1.1359.

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Dollar weakens broadly as another week starts. EUR/USD and USD/CHF extend recent near term move with EUR/USD hitting as high as 1.0749 so far. GBP/USD also takes out 1.2432 resistance. Some analysts attribute the selloff in the greenback to uncertainty over US president Donald Trump's policies. The markets were generally let down by the lack of details, or even direction other than "America first", in Trump's inauguration last Friday. Trump reiterated over the weekend that he's going to withdraw from the Trans-Pacific Partnership trade pact. However, nothing has been said regarding what pushed the markets higher since election. That is, expansive policies with lower taxes and higher infrastructure spending. The greenback will stay weak until the markets get some more clarity on the issues.

Q4 GDP report from UK and US will be the main focus of the week ahead. Dollar and Sterling are so far the weakest major currencies this month, for different reasons. Dollar is weighed down by uncertainties on Trump's policies while Sterling is pressured by concern of hard Brexit. Traders will likely look pass the GDP data from both countries and stay cautious. Eurozone PMIs and German Ifo will also catch some attentions. Meanwhile, Australian CPI will also be closely watched. Aussie is so far the strongest major currency this month and would look into inflation reading for additional strength.

Here are some highlights for the week ahead:

• Monday: Japan all industry index; Canada wholesale sales; Eurozone consumer confidence
• Tuesday: Eurozone PMIs; UK public sector net borrowing; US existing home sales
• Wednesday: Japan trade balance; Australia CPI; Swiss UBS consumption; German Ifo; US house price index
• Thursday: New Zealand CPI; Swiss trade balance; German Gfk consumer sentiment; UK GDP; US jobless claims, trade balance, wholesale inventories, new home sales, leading indicators
• Friday: Japan CPI; Australia PPI, import prices; Eurozone M3 money supply; US GDP, durable goods

Canadian dollar was sold off sharply last week after dovish message from BoC governor Stephen Poloz that rate cut cannot be ruled out. The surge in AUD/CAD suggests that decline from 1.0396 has completed at 0.9591 already. More importantly, the cross stayed inside medium term channel from 0.9148, arguing that rise from there is still in progress. Near term outlook is mildly bullish for 1.0396 resistance and above. But overall, the cross is bounded in long term consolidation pattern after making a top at 1.0784 (2012). Price actions from 0.9148 doesn't warrant a break out yet and the consolidation is still set to extend with at least another medium term decline.

USD/CHF Daily Outlook

Daily Pivots: (S1) 0.9986; (P) 1.0040; (R1) 1.0066; More.....

USD/CHF's fall from 1.0342 resumed by taking out 0.9995 and reaches as low as 0.9981 so far. Intraday bias is back on the downside. As noted before, rise from 0.9443 has completed at 1.0342 already, after failing to sustain above 1.0327 key resistance. Fall from there would now target 61.8% retracement of 0.9443 to 1.0342 at 0.9786 and below. On the upside, break of 1.0121 resistance is needed to indicate short term bottoming. Otherwise, near term outlook will stay bearish in case of recovery.

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 expect the larger rally to resume later to 38.2% retracement of 1.8305 to 0.7065 at 1.1359.

Economic Indicators Update

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US equities ended Friday mildly higher but closed the week down as US president Donald Trump's inauguration provided little inspiration to the markets. DJIA closed at 19827.25 comparing to prior week's close at 19885.73. S&P 500 closed at 2271.31 comparing to prior week's close at 2274.64. Treasury yields, however, were notably higher. 10 year yield closed at 2.467 comparing to prior week's close at 2.309. Dollar ended the week mixed, closing higher against Yen and Canadian but down against all others. Dollar index gyrated around 101 last week, where the 55 day EMA sits. In other markets, Gold hit as high as 1218.9 but lost momentum above 1200 handle. WTI crude oil stayed in recent range and closed at 53.24.

Focus will remain on Trump's new administration this week as we'd likely see actions in terms of executive orders. The would set the tone of his priorities. Fed officials delivered generally hawkish but cautious tones over the week. For example, Fed chair Janet Yellen reiterated that it's "prudent to adjust the stance of monetary policy gradually over time". But she also talked down the risks of a surge in inflation and emphasized that Fed has not "fallen behind the curve". Fed fund futures are pricing in 70.6% chance of another Fed hike by June.

Overall, Canadian Dollar was the weakest major currency over the week. BoC left its overnight rate unchanged at 0.50%. Governor Stephen Poloz revealed that 'Governing Council was particularly concerned about the ramifications of U.S. trade policy, because it is so fundamental to the Canadian economy'. He suggested that further rate cut cannot be ruled out of US' protectionist policy puts BOC's inflation target at risk. On the other hand, Sterling was the strongest one as it rebounded after UK prime minister Theresa May's speech on Brexit.

The development, or the lack of development, in the financial markets was a bit disappointing. The dull price actions so far did reveal that markets were generally in a consolidative mode, rather than trend reversal. For example, 10 year yield rebounded strongly ahead of 55 day EMA. The structure of the price actions from 2.621 so far suggest that it's forming a consolidative pattern. Such consolidation should extend for a while below 2.621 and there is prospect of another fall. But downside should be contained by 38.2% retracement of 1.336 to 2.621 at 2.130 to bring up trend resumption. We're still looking at a take on 2013 high at 3.036 later in medium term.

Dollar index's price actions from 103.82 also gives us more confidence that it's merely a correction. Deeper fall could still be seen in near term and break of 100 handle cannot be ruled out. But downside should be contained by 99.11/43 support zone to bring rebound. Recent up trend is not completed yet and we're expecting another rise to 61.8% projection of 78.90 to 100.39 from 91.91 at 105.19. Hence, while more downside in dollar is possible in near term, we're expecting the greenback to pick up strength again later. But that would come only after more clarity on Trump's policies and FOMC rate decision on February 1. And as for trading strategies, we'll keep our hands off for the moment.

USD/CAD Weekly Outlook

USD/CAD's strong rebound from 1.3017 argues that price actions from 1.3588 are merely a three wave consolidation pattern. It could also be completed at 1.3017 already. Initial bias stays mildly on the upside this week for 1.3598 resistance. Break will extend the whole choppy rise from 1.2460 to next fibonacci level at 1.3838. On the downside, below 1.3235 minor support will turn focus back to 1.3017 instead.

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 is still in progress and could target 61.8% retracement of 1.4689 to 1.2460 at 1.3838. As rise from 1.2460 is seen as a corrective move, we'd look for reversal signal above 1.3838. Meanwhile, break of 1.3017 will likely start the third leg to 1.2460 and below.

In the longer term picture, rise from 0.9056 (2007 low) is viewed as a long term up trend. It's taking a breath after hitting 1.4689. But such rise expected to resume later to test 1.6196 down the road.

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EUR/USD lost much upside momentum after hitting 38.2% retracement of 1.1298 to 1.0339 at 1.0705. Initial bias stays neutral this week first. With 1.0578 minor support intact, further rise could be seen. But such rise from 1.0339 is seen as a corrective move and should be limited by 1.0872 resistance. On the downside, below 1.0453 will argue that it's completed and turn bias back to the downside for 1.0339 support.

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.

In the long term picture, the down trend from 1.6039 (2008 high) is still in progress and there is no clear sign of completion. We'd expect more downside towards 0.8223 (2000 low) as long as 1.1298 resistance holds.

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USD/JPY rebounded after dipping to 112.56 last week. The development argues that pull back from 118.65 could have completed already. Initial bias is cautiously on the upside for 118.65 first. Break will resume whole rise from 98.97 and target 125.85 key resistance. In case of another fall, we'd expect strong support from 38.2% retracement of 98.97 to 118.65 at 111.13 to contain downside and bring rebound.

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.

In the long term picture, the rise from 75.56 long term bottom to 125.85 medium term top is viewed as an impulsive move. Price actions from 125.85 are seen as a corrective move which could still extend. But, up trend from 75.56 is expected to resume at a later stage for above 135.20/147.68 resistance zone.

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GBP/USD's rebound form 1.1986 lost some momentum ahead of 1.2432 resistance. Initial bias stays neutral this week first. With 1.2188 minor support intact, rebound from 1.1986 could extend higher through 1.2432. But still, such rise is seen as the third leg of the consolidation pattern from 1.1946. Thus, we'd expect strong resistance at 1.2774 to limit upside and bring down trend resumption eventually. On the downside, below 1.2188 minor support will turn bias 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.

In the longer term picture, no change in the view that down trend from 2.1161 is still in progress. Current momentum suggests that the down trend will go deeper than originally expected.

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USD/CHF recovered mildly after dropping to 0.9995 last week. But the weak recovery was limited below 1.0135 minor resistance. Initial bias stays neutral this week first. At this point, we're favoring the case that rise from 0.9443 has completed at 1.0342 already, after failing to sustain above 1.0327 key resistance. Below 0.9995 will target 0.9443/9548 support zone. On the upside, above 1.0135 minor resistance will turn focus back to 1.0342 resistance instead.

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 expect the larger rally to resume later to 38.2% retracement of 1.8305 to 0.7065 at 1.1359.

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AUD/USD's rebound from 0.7158 lost momentum after breaking 0.7523 resistance. That could be seen in the mild bearish divergence condition in 4 hour MACD. Further rise could be seen with 0.7448 minor support intact this week. But upside should be limited by 0.7777/7833 resistance zone to bring near term reversal. On the downside, below 0.7448 minor support will turn bias back to the downside for 0.7144 key support level.

In the bigger picture, AUD/USD is staying inside long term falling channel and it's likely that the down trend from 1.1079 is still in progress. Break of 0.6826 low will confirm this bearish case. We'll be looking for bottoming sign again as it approaches 0.6008 key support level. Meanwhile, sustained break of 0.7833 resistance will be a strong sign of medium term reversal.

In the longer term picture, while the down trend from 1.1079 might extend lower, we're not anticipating a break of 0.6008 (2008 low) yet. We'll look for bottoming above there to reverse the medium term trend.

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USD/CAD's strong rebound from 1.3017 argues that price actions from 1.3588 are merely a three wave consolidation pattern. It could also be completed at 1.3017 already. Initial bias stays mildly on the upside this week for 1.3598 resistance. Break will extend the whole choppy rise from 1.2460 to next fibonacci level at 1.3838. On the downside, below 1.3235 minor support will turn focus back to 1.3017 instead.

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 is still in progress and could target 61.8% retracement of 1.4689 to 1.2460 at 1.3838. As rise from 1.2460 is seen as a corrective move, we'd look for reversal signal above 1.3838. Meanwhile, break of 1.3017 will likely start the third leg to 1.2460 and below.

In the longer term picture, rise from 0.9056 (2007 low) is viewed as a long term up trend. It's taking a breath after hitting 1.4689. But such rise expected to resume later to test 1.6196 down the road.

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