Daily Pivots: (S1) 0.7511; (P) 0.7542; (R1) 0.7592; More...

AUD/USD continues to lose upside momentum as seen in 4 hour MACD. But with 0.7448 minor support intact, rebound from 0.7158 could extend higher towards 0.7777/7833 resistance zone. At this point, we'd expect strong resistance from this zone to limit upside. 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.

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Dollar remains in red for the week, except versus Yen and Canadian Dollar, as markets await Donald Trump's inauguration. Treasury Secretary nominee Steven Mnuchin had sent USD higher. As he suggested, USD's "long-term strength, over long periods of time, is important". He added that "the US currency has been the most attractive currency to be in for very, very long periods of time. I think that it's important". Regarding President-elect Donald Trump's recent statement that the greenback was too strong, Mnuchin clarified that "when the president-elect made a comment on the US currency, it wasn't meant to be a long-term comment".

Fed chair Janet Yellen said that monetary policy has not "fallen behind the curve". Also, she doesn't see overheating in labor market to cause inflation to surge. She expected labor market to strengthen as a moderate pace with GDP growth held down by "a variety of forces". That include, slow labor-force and productivity growth and weak global growth. And thus, it is "prudent to adjust the stance of monetary policy gradually over time". Traders saw that as a sign of no urgency for a faster hike and that limits dollar's strength in rebound attempt.

Yesterday, ECB left its policies unchanged, with the base interest rate staying at 0% and the deposit rate at -0.4%. Meanwhile, the current QE program stayed at EUR 80b per month. It would be extended until December, but at a decreased rate of EUR 60b from March on. On economic developments, President Mario Draghi acknowledged recent strength in activity indicators, but noted that "there are no signs yet of a convincing upward trend in underlying inflation". Draghi added that "the Governing Council will continue to look through changes in HICP inflation if judged to be transient and to have no implication for the medium-term outlook for price stability". On the monetary policy outlook, he reiterated that need to maintain low interest rates as "the recovery of all of the Eurozone is in the interests of everybody, including Germany".

BoJ governor Haruhiko Kuroda said yesterday that he hasn't heard any "pessimism about Abenomics". Yet, the central bank's 2% inflation target "has not yet been achieved". And, BoJ will "continue with monetary easing to hit the 2 percent target at the earliest possible time." He also said that he would closely monitor US president-elect Donald Trump's policies. But he showed little concern that protectionism under Trump would hurt the global economy. BoJ deputy governor Hiroshi Nakaso warned of a surge in dollar funding cost as policies diverge. But he didn't seen any "particular problem emerging for now".

China's GDP expanded 6.8% yoy in 4Q17, up from 6.7% in the prior quarter. Industrial production grew 6% yoy in December, down from 6.2% in November. The market had anticipated a 6.1% growth. Retail sales expanded 10.9% yoy, beating consensus of 10.7% and November's 10.8%. Urban fixed asset investment increased 8.1% for the full year 2016, slowing from 8.3% in the first 11 months of the year. Looking ahead, Germany will release PPI in European session. UK will release retail sales. Canada will also release retail sales and CPI today.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7511; (P) 0.7542; (R1) 0.7592; More...

AUD/USD continues to lose upside momentum as seen in 4 hour MACD. But with 0.7448 minor support intact, rebound from 0.7158 could extend higher towards 0.7777/7833 resistance zone. At this point, we'd expect strong resistance from this zone to limit upside. 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.

Economic Indicators Update

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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 March 2017 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.

Daily Pivots: (S1) 1.2205; (P) 1.2308; (R1) 1.2364; More...

With 1.2188 minor support intact, rebound from 1.1986 could still extend higher through 1.2432 resistance. 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.

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Daily Pivots: (S1) 1.0028; (P) 1.0051; (R1) 1.0096; More.....

With 1.0135 minor resistance intact, deeper fall could still be seen in USD/CHF. Rise from 0.9443 could have completed at 1.0342 already, after failing to sustain above 1.0327 key resistance. Deeper fall would be seen back to 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 extend the larger rally to resume later to 38.2% retracement of 1.8305 to 0.7065 at 1.1359.

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Daily Pivots: (S1) 113.21; (P) 113.98; (R1) 115.40; More...

Breaching 115.43 minor resistance suggests that pull back from 118.65 is completed at 112.56 already. Intraday bias is turned back to the upside for retesting 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.

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Daily Pivots: (S1) 1.0600; (P) 1.0657 (R1) 1.0685; More.....

EUR/USD retreated after hitting 38.2% retracement of 1.1298 to 1.0339. Intraday bias is turned neutral first. Rebound from 1.0339 is seen as a corrective move. Below 1.0453 will argue that it's completed and turn bias back to the downside for 1.0339 support. Break there will extend the larger down trend towards parity. In case of another rise, we'd expect upside to be limited by 1.0872 resistance and bring reversal.

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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ECB kept the main refinancing rate at 0.00% and deposit rate at -0.4% as widely expected. There is also no change to the asset purchase program. The central bank extended the program to December 2017, buying EUR 60b a month. ECB president Mario Draghi noted in the post meeting press conference that "there are no signs yet of a convincing upward trend in underlying inflation." He emphasized that "a very substantial degree of monetary accommodation is needed for euro area inflation pressures to build up and support headline inflation in the medium term". Meanwhile, growth would be "dampened" by "sluggish pace of structural reform" in the region. Euro lost much momentum against Dollar and Sterling and is trading mildly lower. Also from Europe, Eurozone current account surplus widened to EUR 36.1b in November. UK RICS house price balance dropped to 24 in December. Swiss PPI rose 0.2% mom, 0.0% yoy in December.

Economic data from US are generally strong and is providing Dollar mild strength for rebound. Initial jobless claims dropped 1.5k to 234k in the week ended January 14, below expectation of 251k. Four-week moving average of initial claims dropped 10.25k to 246.75k, lowest since November 1973. That's also the 98 straight week of sub 300k reading, longest streak since 1970. Continuing claims dropped 47k to 2.05m in the week ended January 7. Housing starts jumped 11.3% to 1.23m annualized rate in December, above expectation of 1.19m. Building permits rose to 1.21m but misse3d expectation of 1.22. Philly Fed survey rose to 23.6 in January, above expectation of 16.

Released from Canada, manufacturing shipments rose 1.5% mom in November. International securities transactions dropped to CAD 7.24b in November. BoC left its overnight rate unchanged at 0.5% yesterday. Yet, it delivered a more dovish than expected message and sent CAD to a one-week low against USD. At the press conference, 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. More in BOC Sent Dovish Message On Concerns Over Trump's Protectionist Policy.

Released earlier today, New Zealand business NZ manufacturing index rose to 54.5 in December, building permits dropped -9.2% mom in November. Australia employment rose 13.5k in December but unemployment rate rose to 5.8%.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0600; (P) 1.0657 (R1) 1.0685; More.....

EUR/USD retreated after hitting 38.2% retracement of 1.1298 to 1.0339. Intraday bias is turned neutral first. Rebound from 1.0339 is seen as a corrective move. Below 1.0453 will argue that it's completed and turn bias back to the downside for 1.0339 support. Break there will extend the larger down trend towards parity. In case of another rise, we'd expect upside to be limited by 1.0872 resistance and bring reversal.

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.

Economic Indicators Update

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As expected, BOC left its overnight rate unchanged at 0.5% in January. Yet, it delivered a more dovish than expected message and sent CAD to a one-week low against USD. At the press conference, 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.

Both the accompanying statement and Poloz's opening statement at the press conference stressed the uncertainty about the global economic outlook is a concern to Canada's growth outlook and BOC's monetary policy stance. As noted in the meeting statement, 'uncertainty about the global outlook is undiminished, particularly with respect to policies in the United States'. Poloz elaborated at the press conference that the members were 'particularly concerned about the ramifications of US trade policy, because it is so fundamental to the Canadian economy'. Yet, BOC's initial assumption was that fiscal stimulus, 'specifically, corporate and personal tax cuts that would raise the level of US GDP by about 0.5% in 2018'. On the exchange rate, BOC acknowledged the recent strength in Canada dollar, alongside the USD rally, warning that the phenomenon is 'exacerbating ongoing competitiveness challenges and muting the outlook for exports'.

On the macroeconomic outlook, BOC expect the economy to expand above trend in 2017 and 2018. It has revised higher Canada's GDP growth to +1.3% in 2016, from +1.1% previously, before accelerating to +2.1% in 2017 (previous: +2%) and steadying at the same rate in 2018. BOC continues to expect the economy to reach full capacity around mid-2018. Consumer spending would remain 'solid' and would remain the key growth driver this year, with the help of Federal and provincial fiscal measures. Net trade is expected to be neutral for growth, while business investment and housing would be 'tempered by previously announced changes to housing finance rules and by mortgage rates that have risen in response to higher bond yields'. While acknowledging the undershooting of inflation since October, BOC did not seem very concerned about slow pace. According to BOC, 'as consumer energy prices rise and the impact of lower food prices dissipates, inflation is expected to move close to the 2% target in the months ahead and remain there throughout the projection horizon while excess capacity is being absorbed'.

BOC judged that it is appropriate to maintain the overnight rate at 0.5% and pledged to 'assess the impact of ongoing developments, mindful of the significant uncertainties weighing on the outlook'. At the press conference, Poloz pledged that a rate cut remains on the table and 'it would remain on the table as long as those downside risks were still present'. For now, we retain the view that BOC would leave the monetary policy on hold throughout the year.

Daily Pivots: (S1) 139.56; (P) 140.12; (R1) 141.10; More...

Intraday bias in GBP/JPY remains neutral for the moment with a temporary low in place at 136.44. Deeper decline is still expected with 142.16 support turned resistance intact. Whole corrective rise from 122.36 could have completed at 148.42. Below 136.44 will target 61.8% retracement of 122.36 to 148.42 at 132.31 and below. Though, above 142.16 will turn focus back to 148.42 high instead.

In the bigger picture, price actions from 122.36 medium term bottom are seen as developing into a corrective pattern. Upside is so far limited by 38.2% retracement of 195.86 to 122.36 at 150.4 for setting the medium term range. At this point, we don't expect a break of 122.36 in near term and the corrective pattern would extend for a while.

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