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For the 24 hours to 23:00 GMT, the GBP declined 0.31% against the USD and closed at 1.2202.

On the macro front, UK's seasonally adjusted Halifax house price index rose 0.1% MoM in February, undershooting market expectations for an advance of 0.4% and following a revised drop of 1.1% in the prior month.

Separately, the OECD predicted the UK economy to expand by 1.6% this year, sharply up from its prior prediction of 1.2% in November, due to a less severe impact from Brexit than it anticipated. However, it still expects Brexit to impose a drag on GDP growth in 2017 and 2018.

In the Asian session, at GMT0400, the pair is trading at 1.2208, with the GBP trading a tad higher against the USD from yesterday's close.

The pair is expected to find support at 1.2166, and a fall through could take it to the next support level of 1.2124. The pair is expected to find its first resistance at 1.2251, and a rise through could take it to the next resistance level of 1.2294.

Moving ahead, investors will eye UK's spring budget, due to be announced later in the day.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average

For the 24 hours to 23:00 GMT, the USD slightly rose against the JPY and closed at 113.97.

In the Asian session, at GMT0400, the pair is trading at 113.68, with the USD trading 0.25% lower against the JPY from yesterday’s close.

Overnight data indicated that Japan’s final gross domestic product (GDP) was revised up to 0.3% QoQ in 4Q 2016, compared to market anticipations for an advance of 0.4% and following a similar rise in the prior quarter. On the contrary, the nation’s (BOP basis) trade deficit stood at ¥853.4 billion in January, compared to market expectations for the nation to record a deficit of ¥800.2 billion. Meanwhile, the nation had registered a surplus of ¥806.8 billion in the previous month.

Earlier today, the nation’s flash leading economic index rose more than expected to a level of 105.5 in January, compared to investor consensus of a rise to a level of 105.4 and following a reading of 104.8 in the prior month. Also, the nation’s flash coincident index surprisingly climbed to a level of 114.9 in January, defying market expectations of a drop to a level of 114.3 and after recording a reading of 114.8 in the prior month.

The pair is expected to find support at 113.48, and a fall through could take it to the next support level of 113.28. The pair is expected to find its first resistance at 114.01, and a rise through could take it to the next resistance level of 114.34.

Looking ahead, traders would await the release of Japan’s preliminary machine tool orders for February, due to release tomorrow.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.08% against the CHF and closed at 1.0128.

In the Asian session, at GMT0400, the pair is trading at 1.0130, with the USD trading marginally higher against the CHF from yesterday's close.

The pair is expected to find support at 1.0099, and a fall through could take it to the next support level of 1.0069. The pair is expected to find its first resistance at 1.0165, and a rise through could take it to the next resistance level of 1.0201.

Going ahead, market participants will focus on Switzerland's inflation figures for February, due to release in a few hours.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

GBP/USD - 1.2205

Most recent candlesticks pattern   : N/A

Trend                                 : Near term down

Tenkan-Sen level                 : 1.2206

Kijun-Sen level                    : 1.2205

Ichimoku cloud top              : 1.2258

Ichimoku cloud bottom        : 1.2250

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As cable has recovered after falling to 1.2169 yesterday, suggesting consolidation above this level would be seen and recovery to the lower Kumo (now at 1.2250) is likely, however, reckon upside would be limited and renewed selling interest should emerge around 1.2301 resistance, bring another decline, break of said support at 1.2169 would extend recent selloff to 1.2150 but loss of downward momentum should prevent sharp fall below 1.2120-25 and reckon 1.2100 would hold, bring another rebound later. 

In view of this, would not chase this fall here and would be prudent to look to sell cable on subsequent rebound as 1.2301 resistance should cap upside. Above 1.2325-30 would suggest a temporary low is formed instead, risk rebound to previous support at 1.2347 first.

For the 24 hours to 23:00 GMT, the USD marginally rose against the CAD and closed at 1.3409.

Macroeconomic data revealed that Canada's seasonally adjusted Ivey PMI unexpectedly eased to a level of 55.0 in February, compared to a reading of 57.2 in the prior month and confounding market consensus for the PMI to climb to a level of 58.5. In contrast, the nation's international merchandise trade surplus rose more-than-estimated to a level of C$0.81 billion in January, compared to a revised international merchandise trade surplus of C$0.45 billion in the previous month.

In the Asian session, at GMT0400, the pair is trading at 1.3401, with the USD trading 0.06% lower against the CAD from yesterday's close.

The pair is expected to find support at 1.3376, and a fall through could take it to the next support level of 1.3352. The pair is expected to find its first resistance at 1.343, and a rise through could take it to the next resistance level of 1.346.

Ahead in the day, Canada's housing starts for February and building permits for January, will be closely watched by market participants.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

EUR/USD - 1.0565

Most recent candlesticks pattern   : N/A

Trend                      : Sideways

Tenkan-Sen level              : 1.0566

Kijun-Sen level                  : 1.0581

Ichimoku cloud top             : 1.0595

Ichimoku cloud bottom      : 1.0575

Original strategy  :

Buy at 1.0535, Target: 1.0635, Stop: 1.0500

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0535, Target: 1.0635, Stop: 1.0500

Position : -

Target :  -

Stop : -

Although the single currency has remained under pressure after retreating from 1.0640 and near term downside risk remains for weakness to 1.0540-45, reckon downside would be limited to 1.0530 and bring another rebound later, above 1.0600-05 would bring test of said resistance at 1.0640 but break there is needed to 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, however, 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 abort and 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.

USD/JPY - 113.73

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 113.82

Kijun-Sen level                  : 113.88

Ichimoku cloud top             : 114.16

Ichimoku cloud bottom      : 113.89

Original strategy  :

Sell at 114.55, Target: 113.55, Stop: 114.85

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 114.55, Target: 113.55, Stop: 114.85

Position :  -

Target :  -

Stop : -

Although the greenback has retreated after meeting resistance at 114.15 yesterday and test of support at 113.56 cannot be ruled out, break there is needed to add credence to our view that top has been formed at 114.75, bring retracement of recent rise to 113.20-25 (50% Fibonacci retracement of 111.69-114.75), however, downside would be limited to 113.00 and 112.84-86 (previous resistance and 61.8% Fibonacci retracement), bring rebound later. If said support continues to hold, then further consolidation would take place and another bounce to 114.15 cannot be ruled out but upside should be limited to 114.50-55 and bring another decline.

In view of this, would not chase this fall here and we are looking to sell dollar on recovery for such move as 114.50-55 should limit upside, bring another decline. Only above said resistance at 114.75 would abort and signal the rise from 111.69 has resumed and extend gain to 114.96 (previous resistance) but price should falter well below resistance at 115.38.

Currency pair USD/JPY

The USD/JPY seems to be retracing within a wave 2 (brown) back to the Fibonacci levels which could act as support. The wave 1-2 (brown) structure is invalidated once price breaks below the bottom (blue).

The USD/JPY is building an ABC (orange) within wave 2 (brown) and could retrace back to the Fibonacci levels of wave 2 vs 1 (brown).

Currency pair EUR/USD

The EUR/USD remains between a support (green) and resistance trend line (red), which mark the borders of the corrective zone. A break above resistance (red) could see price move higher to test the Fibonacci levels of wave 2 (purple) but a push above the 100% level invalidates the wave structure. A break below support (green) could see the downtrend continue within waves 3 (red/green).

The EUR/USD is moving lower in a choppy and corrective way, which makes it likely that price is retracing within a wave B (blue). The invalidation spot of this wave B (blue) is the bottom (green)

Currency pair GBP/USD

The GBP/USD continued with the downtrend yesterday and posted a new lower low. Price remains in a bearish trend as long as it stays in the channel and below resistance (red/orange).

The GBP/USD break below the support trend line (blue) could see price continue with wave 5 (blue) of wave 3 (green). A break above the inner resistance line (light orange) could see price expand the wave 4 (orange). A break above the 61.8% Fibonacci level would make a wave 4 (orange) unlikely.

A note on lower timeframe confirming price action...

Waiting for lower timeframe confirmation is our main tool to confirm strength within higher timeframe zones, and has really been the key to our trading success. It takes a little time to understand the subtle nuances, however, as each trade is never the same, but once you master the rhythm so to speak, you will be saved from countless unnecessary losing trades. The following is a list of what we look for:

• A break/retest of supply or demand dependent on which way you're trading.
• A trendline break/retest.
• Buying/selling tails ... essentially we look for a cluster of very obvious spikes off of lower timeframe support and resistance levels within the higher timeframe zone.
• Candlestick patterns. We tend to only stick with pin bars and engulfing bars as these have proven to be the most effective.

EUR/USD

As we entered into the early hours of yesterday's London segment, the single currency tapped the underside of the 1.06 handle and sold off. Despite this, the selloff was a relatively short-lived one, as price found support just ahead of the H4 mid-way support level at 1.0550.

With the session producing very little in terms of movement, our desk continues to favor the 1.05/1.0520 area for longs. The zone comprises of: a round number at 1.05, January's opening level at 1.0515, daily support at 1.0520 as well as being reinforced by the weekly support area at 1.0333-1.0502.

Our suggestions: Seeing as how the 1.05/1.0520 zone has already been tested twice, we would not be comfortable trading from here without additional lower-timeframe confirmation. This could be either an engulf of demand followed by a retest as supply, a trendline break/retest or simply a well-defined collection of buying tails around the higher-timeframe zone.

Data points to consider: US ADP non-farm employment change at 1.15pm GMT

Levels to watch/live orders:

• Buys: 1.05/1.0520 ([wait for a lower-timeframe signal to form before looking to pull the trigger] stop loss: dependent on where one confirms the zone).
• Sells: Flat (stop loss: N/A).

AUD/USD

Kicking this morning's report off with a look at the daily timeframe, we can see that the commodity currency has now chalked in two back-to-back bearish pin bars off the underside of a daily resistance pegged at 0.7609. Assuming that this encourages selling, the next downside target to have noted is the daily demand area drawn from 0.7511-0.7543. In conjunction with the daily picture, weekly action also indicates that there's room to push lower down to a weekly support area seen at 0.7524-0.7450 (bolsters the aforementioned daily demand).

Stepping across to the H4 candles, price settled for the day just ahead of February's opening level at 0.7577. Despite what we've noted on the higher-timeframe structures, to become sellers we would need to see a H4 close beyond 0.7577. This would, as you can see, potentially open up the runway south down to the H4 mid-way point 0.7550 which happens to be positioned directly above the top edge of the current daily demand.

Our suggestions: Should a close below 0.7577 come to fruition, we would look to short any retest seen to the underside of this line assuming that it's backed with a lower-timeframe confirming signal (see the top of this report), targeting 0.7550.

Data points to consider: Chinese trade balance (tentative). US ADP non-farm employment change at 1.15pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Watch for price to engulf 0.7577 and then look to trade any retest seen thereafter (waiting for a lower-timeframe confirming signal to form following the retest is advised] stop loss: dependent on where one confirms the level).

USD/JPY

USD/JPY prices are little changed this morning, with the market spending the day ranging (43 pips) around the 114 handle. This lackluster performance, as you can see on the daily chart, formed yet another daily indecision candle!

With weekly action recently printing a strong-looking weekly bullish engulfing candle, and daily movement seen loitering around the underside of a daily resistance area at 115.62-114.60, higher-timeframe technicals are somewhat mixed at the moment.

Our suggestions: While a H4 close above 114 would be considered a bullish signal, and considering that you'd also be trading in line with weekly flow, price may very well reach the nearby H4 trendline resistance extended from the high 115.62. However, this would also place one against daily sellers! It's just not worth the risk, in our opinion. The same goes for shorting this piece. A short would obviously place one in line with daily flow, but at the same time, against weekly direction!

Therefore, at least for now, we will remain on the sidelines.

Data points to consider: US ADP non-farm employment change at 1.15pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Flat (stop loss: N/A).

USD/CAD

Much the same as yesterday, the USD/CAD is still seen capped at 1.3434/1.3419 (November, December and January's opening levels). Also worth noting is the converging weekly trendline resistance extended from the high 1.4689 and daily supply coming in at 1.3461-1.3426. While this collective structure places the unit in a somewhat overbought position right now, there's been very little bearish intent registered so far. This, of course, could have something to do with the daily support area seen in play at 1.3387-1.3317! Assuming that the bears regain consciousness here, however, the next downside target on the H4 scale is a broken Quasimodo line at 1.3353.

Our suggestions: If one is able to pin down a lower-timeframe short position (see the top of this report) from the above noted monthly levels today, a short position could be considered, targeting the above said broken H4 Quasimodo level. In regards to buying this unit, we would advise against this given the opposing structures seen on the weekly and daily timeframes.

Data points to consider: US ADP non-farm employment change at 1.15pm. Crude oil inventories at 3.30pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.3434/1.3419 ([wait for a lower-timeframe signal to form before looking to pull the trigger] stop loss: dependent on where one confirms the zone).

USD/CHF

For a while now we have been banging the drum about the 1.02/1.0170 (yellow zone) neighborhood for shorts. The reason being is that this area comprises of the following converging structures: both December and January's opening levels at 1.0170/1.0175, a H4 trendline resistance pegged from the high 1.0118, a H4 Quasimodo resistance at 1.0197, a 1.02 psychological handle and let's not forget that all of this is seen housed within the daily supply zone mentioned above 1.0248-1.0168.

As can be seen from the H4 chart this morning, price actually tagged the underside of this region yesterday and aggressively sold off. Unfortunately, we were looking to sell from January's opening level at 1.0175, so we missed the trade by five pips! Well done to any of our readers who managed to short from this beautiful zone.

Going forward, the pair is now seen trading between a H4 resistance at 1.0135 and a nearby H4 demand base coming in at 1.0107-1.0118. Given the near-touch of January's open level, our team believes further selling could very well be on the cards today/this week. However, selling is a little tricky right now. Apart from the nearby H4 demand, we also have a psychological band coming in at 1.01, followed closely by the March opening level at 1.0066 to contend with!

Our suggestions: in the absence of cleaner price action, we have decided to remain flat for the time being.

Data points to consider: US ADP non-farm employment change at 1.15pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Flat (stop loss: N/A).

DOW 30

In recent hours we have seen the US equity market tumble down to a H4 demand area marked at 20837-20869. Be that as it may, we have our eye on the zone seen between this H4 demand and the one directly below it: 20769-20801/ 20837-20869, which happens to be positioned within the walls of the nearby daily demand zone at 20714-20821. The interesting thing here is that in between these two H4 barriers (the yellow zone) is March's opening level at 20824 and a possible H4 AB=CD completion point at 20813 (see black arrows).

Our suggestions: Should we see price strike the yellow zone today, our team would, assuming that a reasonably sized H4 bull candle takes shape, look to buy from here with stops either placed below the trigger candle or below the H4 demand at 20769-20801.

Data points to consider: US ADP non-farm employment change at 1.15pm GMT.

Levels to watch/live orders:

• Buys: 20801/20837 region ([wait for a reasonably sized H4 bull candle to form before looking to pull trigger here] stop loss: ideally beyond the trigger candle).
• Sells: Flat (stop loss: N/A).

GOLD

Gold took yet another hit to the mid-section yesterday as the unit crashed through bids at a H4 Quasimodo support level coming in at 1221.7. In view of the H4 candles now seen loitering mid-range between this H4 level and February's opening level at 1211.5, where do we go from here? Well, both weekly and daily action suggest further selling could be on the horizon, with the closest higher-timeframe support coming in at 1197.4-1187.7: a daily support area. Therefore, a short from the recently broken 1221.7 hurdle could be an option today, targeting 1211.5 as your initial take-profit zone (as per the black arrows).

Our suggestions: Since we are dealing with a fixed level here, to avoid the possibility of a fakeout we would strongly recommend waiting for a lower-timeframe sell signal to form before pulling the trigger.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1221.7 region ([wait for a lower-timeframe signal to form before looking to pull the trigger] stop loss: dependent on where one confirms the zone).

Global Markets:

• Asian stock markets: Nikkei down 0.55 %, Shanghai Composite gained 0.05 %, Hang Seng rose 0.40 %, ASX 200 declined 0.10 %
• Commodities: Gold at $1217 (+0.10 %), Silver at $17.51 (-0.15 %), WTI Oil at $52.80 (-0.65 %), Brent Oil at $55.65 (-0.50 %)
• Rates: US 10 year yield at 2.51, UK 10 year yield at 1.19, German 10 year yield at 0.32

News & Data:

• China Trade Balance (CNY) (Feb): -60.4bn (est 172.50B, prev 354.50B)
• China Exports YoY (CNY) (Feb): 4.2% (est 14.60%, prev 15.90%)
• China Imports YoY (CNY) (Feb): 44.7% (est 23.10%, prev 25.20%)
• Japan GDP Nominal SA (QoQ) (Q4 F): 0.40% (est 0.50%, prev 0.30%)
• Japan GDP Annualized SA (QoQ) (Q4 F): 1.20% (est 1.50%, prev 1.00%)
• Japan GDP Private Consumption (QoQ) (Q4 F): 0.0% (est 0.00%, prev 0.00%)
• Japan GDP Business Spending (QoQ) (Q4 F): 2.0% (est 1.70%, prev 0.90%)
• Japan BoP Current Account Balance (JPY) (Jan): 65bn (Est 270.0B, prev 1112.2B
• Japan Trade Balance BoP Basis (JPY) (Jan): -853.4bn (Est -800.2B, prev 806.8B)
• Asian stocks slip as caution sets in; debt yields firm – RTRS
• Pharma, bank stocks pull Wall Street lower – RTRS

Markets Update:

Risk appetite decreased in Asia. Most of the major stock markets are down on the day, led by the Nikkei 225, which lost more than 0.50 %. Meanwhile, the Japanese Yen rose against most other currencies overnight.

The main event in Asia was the release of Chinese trade data. The trade balance showed a deficit, while the market was expecting a surplus of over 170 billion Yuan. However, the big increase in imports was caused by the Chinese New Year holiday and has only a temporary effect.

Volatility in the major currency pairs has been low in the past few trading days. Traders are waiting for the ECB rate decision tomorrow and the US employment data on Friday. The market is not expecting any changes from the ECB, but is looking for hints if the QE programme could end earlier.

Upcoming Events:

• 07:00 GMT – German Industrial Production
• 07:45 GMT – French Trade Balance
• 08:15 GMT – Swiss CPI
• 13:15 GMT – US ADP Nonfarm Employment Change
• 15:30 GMT – US Crude Oil Inventories