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'The euro has already survived a number of scares since its inception in 1999, with the political and economic elites proving willing to do whatever it takes to support the currency.' – Ian Wishart, Mira Rojanasakul and John Fraher, Bloomberg

Pair's Outlook

On early Wednesday morning the common European currency was slowly continuing its way lower against the US Dollar. The rate had finally broken free from the grip of the weekly PP at 1.0582, around which the currency exchange rate was fluctuating around for almost 48 hours. The currency pair is set to fall next to the weekly S1, which is located at 1.0533 level. It is most likely that the decline will occur gradually, as there are minor support levels, which have proven themselves to be strong enough to even change the direction of the rate for short periods of time.

Traders' Sentiment

For the third consecutive trading session SWFX traders remain neutral bullish, as 51% of open positions are long on Wednesday. Meanwhile, 61% of trader set up orders are to sell the Euro.

'GBP is consequently one of the most attractive currencies to sell for an extension of the dollar's interest rate rally.' – JP Morgan (based on PoundSterlingLive)

Pair's Outlook

The Pound suffered once again yesterday, falling deeper down against the US Dollar. The relatively sharp bearish momentum has been prevailing for nearly two weeks in a row now when the Cable retested the down-trend at 1.2570, and is expected to remain in the markets today as well. The GBP/USD pair could then fall towards 1.2119, namely the monthly S2, even though a possibility of bulls taking over still exists, as technical studies retain mixed signals. Moreover, a disappointment in today's ADP Employment Change reading is likely to weaken the US Dollar, which would allow the Sterling to take the opportunity and recover some of previous two-week losses.

Traders' Sentiment

Traders' sentiment remains bullish at 62%, but the portion of purchase orders declined over the day, namely from 60 to 54%.

'With attention on whether the Fed can conduct three hikes this year, Friday's jobs data will provide important cues as to whether an inflation-inducing wage increase is taking place.' – IG Securities (based on Reuters)

Pair's Outlook

On Tuesday, the USD/JPY pair remained relatively unchanged again, unable to reclaim the 114.00 major level. Even if this mark is overcome, the Buck is still unlikely to appreciate beyond 114.50, as the ascending channel's resistance line is located there, also bolstered by the 55-day SMA, the monthly R1 and the upper Bollinger band. Technical indicators are also in favour of the positive outcome, but today's ADP Employment data could turn the tide for the US Dollar, causing it to fall to around 113.30. A flat outcome would also not be a surprise, as the main focus is still on Friday's NFP data this week.

Traders' Sentiment

Today 60% of all open positions are long, compared to 61% on Tuesday. At the same time, the number of orders to purchase the Greenback inched up from 54 to 57%.

'Gold has made a modest recovery this morning as early Asian buyers are sighted.' – Jeffrey Halley, OANDA

Pair's Outlook

The yellow metal has dropped below the 1,220 mark. In particular, the commodity price managed to decline as low as 1,213.92, where the bullion's price rebounded and began a surge, which occurred during the early hours of Wednesday's trading session. It is most likely that the decline of the bullion will continue in the near future, as the commodity price is facing the resistance put up by the weekly S1 at 1,216.60 and the 38.20% Fibonacci retracement level at the 1,219.20 level. The next level to decline to is the cluster of support, which surrounds the 1,208.96 level, where the monthly S1 is at.

Traders' Sentiment

Traders remain firm regarding their opinion, as 54% of open positions remain long. Meanwhile, 62% of trader set up orders are set to buy the metal.

'This is no longer a blip. We've got a good run going here.' - Peter Hall, Export Development Canada

The Canadian trade balance remained in the positive territory for the third consecutive month in January, the longest streak since 2014, suggesting the economy regained momentum after the oil price collapse. Statistics Canada reported on Tuesday that the country's trade surplus hit C$0.8 billion, while analysts expected January's surplus to come in at C$0.2 billion. Meanwhile, December's originally reported trade surplus of C$0.9 billion was revised down to C$0.4 billion. Data showed exports advanced 0.5% in January, while imports fell 0.3%. In volume terms, exports and imports rose 1.0% and 2.5%, respectively. After the release, the Canadian Dollar rose slightly against its US counterpart, trading at C$1.3406. Back in the Q4 of 2016, the Canadian economy expanded at a stronger than expected pace, driven by higher household spending and lower imports. However, despite the economy's strong performance, the Bank of Canada left its key interest rate unchanged at its last policy meeting on March 1, pointing to significant uncertainties in the Canadian economy. Other data released on Tuesday showed the Ivey PMI dropped to 55.0 last month, after hitting 56.4 in the previous month. February's decline was mainly driven by lower material prices. However, the Employment Index climbed to 54.5 from 53.5 in January.

'One poor result doesn't have a huge impact on the milk price [but] it will be difficult for prices to recover quickly while there is surplus product available'. - Susan Kilsby, AgriHQ

Dairy product prices dropped markedly at the latest Global Dairy Trade auction, official figures revealed on Tuesday. The GDT Price Index fell 6.3% amid a decrease in skim-milk and whole-milk powder prices. Data showed the price of whole-milk powder, New Zealand's key commodity export, fell 12.4% to $2,782 per tonne, while the price of skim-milk powder declined 15.5% to $2,118 per tonne. Back in February, Fonterra confirmed its forecast farm gate milk price for 2016-2017 of $6 a kilogram of milk solids amid a rebound in whole-milk powder pricing. Nevertheless, whole-milk powder prices dropped 22.5% since December. Usually at this time of the year offer volumes of dairy products start to decline; however, the recent pick-up in Fonterra's milk intake is expected to increase the company's supply of dairy products. Last week, Fonterra lifted 49% skim-milk powder volumes, as well as increased 6% the amount of whole-milk powder available. Analysts reported that the GDT prices at this morning's auction had been even weaker than the marked initially expected. Anhydrous milk-fat prices fell 0.8%, while prices of cheddar, lactose and casein dropped 4.2%, 4.3% and 6.6%, respectively. However, the price of butter climbed 1.2%, whereas the butter-milk powder price rose 8.4%.

'The manufacturing sector is very worried about the development of U.S. economic policy. I think that is one of the reasons why they are very cautious about making greater business investments. This is the one area where we have a great deal of uncertainty in Japan'. - Sayuri Shirai, Keio University

The Japanese economy expanded at a stronger than initially reported pace in the last quarter of 2016, due to upward revisions in business spending and business investment. The Cabinet Office reported on Wednesday the economy grew at an annualized pace of 1.2% in the Q4 of 2016, up from the preliminary reading of 1.0%. However, the figure missed analysts' expectations, who anticipated growth at 1.6%. On a quarterly basis, Japan's GDP climbed 0.3%, above the 0.2% preliminary reading, yet below consensus estimates of a 0.4% rise. Fresh data confirmed the presence of serious challenges, faced by Japan's policymakers. Even though the Japanese economy reported growth for four consecutive quarters, marking the longest stretch in three years, business investment and consumption remained subdued. The Bank of Japan's former board member Sayuri Shirai said that the corporate sector was 'very cautious of making an investment' amid uncertainties in both global and local economy. Shirai served at the BoJ's Policy Board from April 2011 to March 2016 and supported the QQE programme in 2013 and 2014. However, back in January 2016, she voted against negative interest rates. Data showed capital expenditure advanced 2.0% quarter-over-quarter in the Q4, surpassing expectations for a 1.7% climb and following the preliminary figure of 0.9%.

EUR/USD

Current level - 10567

The intraday bias is negative, for a slide towards 1.0493 low, en route to 1.0450. Crucial on the upside is 1.0600 high.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 113.69

The corrective pattern above 113.50 needs one more upswing to 114.25 before drowning towards 112.80 support area. 

GBP/USD

Current level - 1.2204

My outlook remains bearish, for a slide towards 1.2115 area. Initial intraday resistance lies at 1.2220, followed by the crucial high at 1.2300.

EUR/CAD – 1.4030

EUR/CAD: Wave 4 ended at 1.4380 and wave 5 as well as circle wave C has possibly ended at 1.2129, major (A)-(B)-(C) correction has commenced and indicated target at 1.6000 had been met.

Euro's rebound after falling to 1.3784 last month together with the breach of indicated resistance at 1.4132 add credence to our view that a temporary low has been formed there, hence consolidation with mild upside bias is seen for this rebound to bring retracement of recent decline and gain to 1.4250-60 is likely but resistance at 1.4308 should hold from here. Looking ahead, only above this level would indicate recent decline has ended, bring retracement of the intermediate fall from 1.5282, hence further gain to 1.4365-70 and then 1.4440-50 would follow.

Our latest preferred count is that larger degree wave [C] from 1.3289 as well as circle wave B ended at 1.7509 in Dec 2008 with (A): 1.6325, (B): 1.4719 followed by wave (C) at 1.7509, hence circle wave C is unfolding with wave 1 ended at 1.5186 (diagonal wave 1), wave 2 at 1.6096, impulsive wave 3 has ended at 1.2451, followed by wave 4 at 1.4380, in view of recent strong rebound, we are now treating the wave 5 as well as larger degree circle wave C has ended at 1.2129, hence (A)-(B)-(C) correction has commenced from there with impulsive wave (C) now unfolding and indicated initial upside target at 1.6000 had been met and reckon 1.6500 would hold.

On the downside, expect pullback to be limited to 1.4100-10 and 1.4005-10 should hold, bring another rebound later. Below previous resistance at 1.3960-65 would dampen this near term bullishness and risk weakness to 1.3900, however, still reckon downside would be limited to 1.3850 and 1.3800 should hold, bring another rebound. Only below said support at 1.3784 would signal recent decline from 1.6106 has resumed and may extend further fall to 1.3750-55 (76.4% retracement of 1.3025-1.6106) and possibly 1.3600 but reckon downside would be limited to previous support at 1.3518 and price should stay above 1.3355-60 (100% projection of 1.6106-1.4181 measuring from 1.5282).

Recommendation: Buy at 1.4100 for 1.4300 with stop below 1.4000.

On the bigger picture, our long-term count on the monthly chart is that a big sideways consolidation from 2000 low of 1.2557 has possibly ended at 1.7509 as circle wave B with [A]: 1.6976 ( (A): 1.4513, (B): 1.2612, (C): 1.6976), wave [B]: 1.3289 is a double three with 1st a-b-c: 1.5384, x: 1.6709 and 2nd a-b-c: 1.3289. As indicated above, the wave [C] has ended at 1.7509. The selloff from there is now unfolding which itself should be labeled as an impulsive wave with wave 1: 1.5186 (diagonal wave 1), followed by wave 2: 1.6096 and wave 3: 1.2451, wave 4: 1.4380, wave 5 as well as larger degree circle wave C has possibly ended at 1.2129 and major correction has possibly commenced for retracement of recent decline towards 1.4000, then 1.4180-90 (38.2% Fibonacci retracement of 1.7509-1.2129). Below said support at 1.2129 would risk weakness to psychological support at 1.2000 and then 1.1851 (50% projection of 1.7509-1.2451 measuring from 1.4380) but reckon 1.1500 would remain intact, bring reversal later.

AUD/USD     –  0.7565




AUD/USD – Wave 5 of C and (B) has possibly ended at 1.1081




As aussie has retreated quite sharply after rising to 0.7741 late last month, suggesting top is possibly formed there and consolidation below this level would be seen with mild downside bias for test of support at 0.7512, however, a daily close below there is needed to add credence to this view, bring retracement of recent upmove to 0.7490 (38.2% Fibonacci retracement of 0.7158-0.7696) and then 0.7455-60 but reckon downside would be limited to 0.7425-30 (50% Fibonacci retracement) and price should stay above 0.7360-65 (61.8% Fibonacci retracement), bring another rise later.



We are keeping our count that top has been formed at 1.1081 (wave 5 of V) and major correction (A-B-C-X-A-B-C) has commenced, indicated downside targets at 0.7945 (61.8% Fibonacci retracement of entire rise from 0.6007-1.1081) and 0.7750 had been met and downside bias is seen for further weakness to 0.6800, then 0.6700 but reckon 0.6500 would hold from here.

Our preferred count is that the rally from 0.6007 to 0.7270 (7 Jan 2009) is marked as wave A, the retreat to 0.6248 (2 Feb 2009) is wave B and the subsequent upmove is labeled as wave C with wave (iii) and wave (iv) ended at 0.8265 and 0.7700 respectively and wave (v) as well as 3 ended at 0.9407, then wave 4 ended at 0.8066 (instead of 0.8578). The wave 5 has met our indicated projection target of 1.1060 and could ended at 1.1081, this level is now treated as the peak of wave (C) as well as larger degree wave B, hence major fall in wave C has commenced, our initial downside target at psychological support at 0.7000 has just been met and further weakness to 0.6500 would be seen later.



On the upside, whilst recovery to 0.7600-05 cannot be ruled out, reckon upside would be limited to 0.7635-40 and bring another decline. Above 0.7700 would risk retest of said resistance at 0.7741 but break there is needed to extend recent rise from 0.7158 to resistance at 0.7778. Looking ahead, only a break of this level would suggest another leg of major corrective upmove from 0.6827 low is underway for retest of 0.7835 resistance first, then 0.7900, however, psychological resistance at 0.8000 should hold from here.



Recommendation: Sell at 0.7605 for 0.7450 with stop above 0.7705



Our alternate count on the daily chart treated the top formed in 2008 at 0.9851 could be a larger degree wave I and was followed by a deep and sharp correction in wave II to 0.6007 and wave III is unfolding from there.

The long-term uptrend started from 0.4775 (2 Apr 2001) with an impulsive structure. Wave I is labeled as 0.4775 to 0.9851 (15 Jul 2008), wave II has ended at 0.6007 (Oct 2008) and wave III is still in progress which may extend further gain to 1.1265.