Cable maintains bearish tone following last week's close in red and Friday's spike to fresh 7-week low at 1.2212. However, the pair failed to close below important support at 1.2260 (Fibo 61.8% of 1.1986/1.2704 rally) on the second attempt, lacking stronger bearish signal for resumption of bear-leg from 1.258 (24 Feb high) for now. Near-term price action may hold in extended consolidation before fresh attempts lower, with initial barrier at 1.2300 zone, holding for now. Converged falling 10/55SMA's at 1.2384/85) offer solid resistance, together with daily Ichimoku cloud that twisted higher and is currently spanned between 1.2379/95, where extended upticks should be capped. Break and close below 1.2260 pivot is needed to open 1.2156 (Fibo 76%) and increase risk of full retracement of 1.1986/1.2704 rally.

Res: 1.2300; 1.2348; 1.2379; 1.2395
Sup: 1.2260; 1.2212; 1.2155; 1.2119

The Euro was slightly lower in early Monday, after repeated probe above the top of thin daily Ichimoku cloud at 1.0620 (reinforced by Fibo 38.2% of 1.0827/1.0492 descend) failed.

Friday's strong rally which marked gains of over 1% left long bullish daily candle (the biggest one-day gain since 05 Jan), underpins bullish near-term structure for fresh attempts higher.

However, daily studies remain weak and keep the downside at risk. Lift above daily cloud (which is going to start widening on Tuesday), would face a cluster of barriers that may limit extended upside attempts.

Falling 30 SMA marks initial barrier at 1.0646, followed by daily Kijun-sen at 1.0660 and falling 100SMA at 1.0672.

Only sustained break higher would trigger extended retracement of 1.0827/1.0492 downleg.

On the downside, first pivot lies at 1.0572 (Fibo 38.2% of Friday's rally), ahead of daily Tenkan-sen at 1.0560, close below which would generate stronger bearish signal.

Res: 1.0620, 1.0646, 1.0660, 1.0672
Sup: 1.0591, 1.0572, 1.0560, 1.0542

EUR/USD

Current level - 10593

Friday's rebound above 1.0490 has reached 1.0630 resistance and the intraday bias is already slightly bearish, for a test of 1.0570 support area. Only a break through the latter will signal a renewal of the bearish bias for 1.0450. Crucial on the upside is 1.0680.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 113.79

The intraday bias is negative after the recent peak at 114.75, for a test of 113.37 support. The latter should provide a reliable base for another upswing towards 115.+ area. 

GBP/USD

Current level - 1.2278

The downtrend has been reversed at 1.2212 and the intraday bias is slightly positive, for a corrective rebound before drowning towards 1.2110 area. Initial intraday resistance lies at 1.2325.

'The euro area's travails are largely due to lack of effective convergence, both before the financial crisis and since then.' – Benoit Coeure, ECB (based on Bloomberg)

Pair's Outlook

During the early hours of Monday's trading session the common European currency traded at the 1.06 level against the US Dollar. The rate was looking for support, as profit taking was taking place after the major jump, which occurred during Friday's trading session. During Friday's trading session the currency exchange rate jumped from 1.0504 to end the day at 1.0619. The reason for the jump was fundamental, as speeches from the FOMC members dictated the strength of the US Dollar. It is likely that by the end of the day the currency exchange rate will move to the 1.0582 level, where the weekly PP is located at.

Traders' Sentiment

SWFX traders are almost neutral on the pair, as 51% of open positions are long. Meanwhile, 57% of trader set up orders are set to sell.

'The old floor at $1.24 now becomes important resistance, though, before it, we suspect a recovery from the current stretched condition will be more limited.' – BBH (based on FXStreet)

Pair's Outlook

Some uncertainty in Yellen's speech of Friday caused the British currency to erase all intraday losses and end the day with a 33-pip rally against the US Dollar. Now the Cable faces an important psychological support, namely the 1.2250 level, as a breach would likely lead to a drop to the 1.20 major level. Even though technical indicators are giving mixed signals in the daily timeframe, the possibility of a recovery is also doubtful, as the 1.23 mark acts as a tough resistance, which the GBP/USD could struggle to overcome today. Ultimately, the Sterling is expected to retest the bearish trend-line again, before a plunge towards 1.20 could become achievable once again.

Traders' Sentiment

Today 61% of all open positions are long (previously 58%). At the same time, the number of purchase orders edged up from 48 to 59%.

'There's a lot of positive news now priced into the market, and I think we'll probably see some profit-taking, so I think we'll probably see the dollar weaken from here.' – Douglas Borthwick, Chapadelaine Foreign Exchange (based on Reuters)

Pair's Outlook

With the return of the risk-off sentiment, the US Dollar weakened against the Japanese Yen on Friday, managing to retain its position above the 114.00 handle. However, risk-aversion remains in the markets, thus, another leg down is anticipated. The nearest support rests circa 113.30, formed by the 20-day SMA, the weekly and the monthly PPs, which is to prevent the USD/JPY pair from edging lower today. Meanwhile, the pair appears to have formed a moderate ascending channel pattern, the upper border of which, along with the monthly R1, the 55-day SMA and the Bollinger band, represent immediate resistance circa 114.50.

Traders' Sentiment

There are 59% of traders holding long positions today (previously 60%), whereas the share of buy orders remains unchanged at 56%.

'We are fairly neutral on the outlook for gold this week.' - Daniel Hynes, ANZ (based on Reuters)

Pair's Outlook

On Monday morning the yellow metal's price remained unchanged, as the bullion attempted and failed to move higher and break the resistance put up by the 20-day SMA at 1,234.09 and the monthly R1 at 1,237.68. As a result the bullion was set to fall down to the 38.20% Fibonacci retracement level at 1,219.20, which it failed to reach on Friday because comments from US monetary policy makers bashed the strength of the US Dollar lower. That caused the yellow metal to regain the losses it had suffered, as the Buck had strengthened.

Traders' Sentiment

SWFX traders have not changed their opinion, as 54% of open positions are long and 57% of trader set up orders are to buy the metal on Monday.

Weekly

• Last Candlesticks pattern: Shooting star 
• Time of formation: 03 May 2016
• Trend bias: Down

Daily

• Last Candlesticks pattern: Shooting star
• Time of formation: 3 May 2016
• Trend bias: Sideways

EUR/USD – 1.0633

As the single currency has staged another strong rebound after holding above previous support at 1.0493, a long white candlestick was formed on Friday and suggesting further consolidation above this level would be seen and test of the Kijun-Sen (now at 1.0661) cannot be ruled out, however, a daily close above resistance at 1.0714 is needed to signal the pullback from 1.0829 top has ended at 1.0493 earlier, bring further gain to1.0745-50 first but price should falter well below said resistance at 1.0829.

On the downside, whilst pullback to 1.0580 cannot be ruled out, reckon downside would be limited to 1.0520 and bring another rebound later. Only a drop below support at 1.0493 would signal the fall from 1.0829 top is still in progress for further weakness to support at 1.0454 but a sustained breach below there is needed to signal the rebound from 1.0340 (Jan low) has ended, bring further fall to 1.0400 and later retest of said support which is likely to hold from here.

Recommendation: Buy at 1.0580 for 1.0780 with stop below 1.0480.

On the weekly chart, euro continued finding support around 1.0493 and has recovered and consolidation above this level would be seen, hence gain to 1.0630-35 cannot be ruled out, however, reckon upside would be limited to 1.0700-05 and 1.0770-80 should hold, bring further consolidation. Only break of resistance at 1.0829 would suggest another leg of rise from 1.0340 low is underway, bring retracement of early decline to previous resistance at 1.0873 and later 1.0930-35 (61.8% Fibonacci retracement of 1.1300-1.0340) but reckon 1.1000 would limit upside and price should falter below 1.1050-60.

On the downside, although pullback to 1.0570-80 is likely, reckon said support at 1.0493-96 would remain intact, bring another rebound later. A drop below 1.0493-96 would extend the retreat from 1.0829 towards key support at 1.0454 but a sustained breach below this level is needed to signal the rebound from 1.0340 has ended, then further fall to 1.0390-00 and later retest of this January low would follow.

On the 4h chart of NZDUSD we can see a nice bearish breakdown to be in progress, with price now specifically trading in the middle of red wave three. As we know, wave 3 is known as the strongest and the steepest wave, which means in our case even more weakness may follow. Well, regarding the intraday view, we see price now trading in sub-wave three, which can see limited downside around the 100.0 Fibonacci ratio and make a temporary reversal into wave 4.

NZDUSD, 4H

Sunrise Market Commentary

• Rates: US yield resistance difficult to break ahead of payrolls or even Fed
  Fed chairwoman Yellen sealed the deal for a March rate, which is completely discounted in rate markets. Given this week's back loaded calendar (payrolls on Friday) and last week's failed test of US yield resistance (2y: 1.3%, 5y: 2%), we believe that consolidation is likely. On EMU bond markets, more French spread narrowing is likely if Juppe nevertheless replaces Fillon.
• Currencies: Dollar falls prey to profit taking. Euro remains well bid
  Late on Friday, the dollar was captured by a buy-the-rumour, sell-the fact-move after Fed's Yellen ‘approved' the scenario of a March Fed rate hike. The euro was well bid as French political uncertainty eased. Today, the eco calendar is thin. There is probably no trigger from a new USD up-leg short-term

The Sunrise Headlines

• US equities closed Friday's session nearly unchanged, as early losses were gradually erased. Asian equities trade modestly higher with Japan underperforming, suggesting a continuation of the global equity rally.
• China wants to strike a balance between growth and risk, PM LI said, trimming its GDP target to 6.5% and cutting its money supply target to about 12%. China also wants to liberalize further the yuan's FX rate, a change from last year.
• A Kantor Sofres poll showed Fillon lost ground in the first round (17%). Le Pen wins (26%), narrowly followed by Macron (25%). If Juppe would be candidate (24,5%), Macron (20%) would not make to the 2nd round, with Le Pen at 27%.
• Moody's affirmed the Belgian Aa3 rating (stable). It expects that Belgium will avoid a return to the excessive debt procedure (EDF) for the foreseeable future and that the structural debt reduction will resume in 2017.
• Fitch affirmed France's AA rating (stable), but will reassess its fiscal forecasts after the elections. S&P confirmed Sweden's AAA rating (stable).
• Brent crude is modestly lower at €55.70/barrel despite Libya halting exports from two of its biggest ports and cutting production.
• Francois Fillon said Sunday he won't give in to pressure from his party to quit the presidential race and be replaced by Juppe. Party leaders meet today to discuss the issue.
• Today, the market calendar contains only second tier eco releases. BoE Haldane and Hogg speak. Highlights this week are the ECB meeting (Thursday), the US payrolls (Friday) and the Chinese Congress

Currencies: Dollar Falls Prey To Profit Taking. Euro Remains Well Bid

USD profit taking: Euro better bid

Thursday's rejected test of the EUR/USD 1.0494 support triggered a further EUR/USD short-squeeze on Friday. Tensions surrounding the French elections eased. After European closure, Fed's Yellen rubberstamped the scenario of a March rate hike. The dollar already lost ground versus euro ahead of Yellen and a further buy-the-rumour sell- the fact reaction led to more dollar selling. A the same time, the euro was fairly well bid across the board. EUR/USD finished the session at 1.0622 (from 1.0507). The correction of USD/JPY was more modest. The pair closed the week at 114.04 (from 114.41).

Overnight, Asian equities are trading modestly positive, with Japanese equities underperforming as South Korea launched missiles towards Japanese waters. The modest reaction to Yellen's comments on Friday supports regional risky assets. The yen trades slightly stronger on the North Korean geopolitical tensions. USD/JPY is changing hands in the 113.85 area. The euro preserves Friday's gains. EUR/USD is changing hands near 1.06.

Today, the euro area February Markit retail PMI and the March Sentix investor confidence are up for release. In the US, the January factory orders will be published. We don't expected a lasting impact on USD trading. Further out this week, the ECB meeting on Thursday and the US payrolls on Friday will be the highlights. (Currency) markets will also keep an eye at the political developments in France. If Juppé would become the Republican candidate for the French Presidential election, it might reduce political uncertainty and be a temporary supportive for the euro. Markets will also ponder whether ECB's Draghi would sound a bit less soft at Thursday's press conference. We don't expect a material change in the ECB assessment, but uncertainty on the issue might be a tentative euro supportive. In a day-to-day perspective, we start the week with a USD neutral bias. The US currency fell prey to modest profit taking at the end of last week and there is no obvious trigger for the USD rally to restart right now. The rejected test of EUR/USD 1.0494 and of the high USD/JPY 114 area is also slightly USD negative. Investors are also scaling back euro shorts. We still look to sell EUR/USD into strength, but are in no hurry to do so right now. EUR/USD 1.0679 is a first ST reference

Global context: Last week, the focus shifted from US fiscal policy to the Fed's monetary policy, as the Fed prepared markets for a rate hike in March. EUR/USD 1.0874 is a solid resistance and we still favour a sell EUR/USD on upticks approach. On the downside, the test of the first intermediate support at 1.0494 was rejected as a March Fed rate hike is discounted. So, some ST USD consolidation might be on the cards. The payrolls are the next key issue for USD trading. The downside test of USD/JPY was rejected. USD/JPY 111.60/111.16 (Range bottom/38% retracement of the 99.02/118.66 rally) remains key support. On the topside, 114.96 is a first point of reference. Last week's correction suggests that it is too early for a break and a new USD/JPY up-leg.

EUR/USD: test of 1.0494 support rejected even as Yellen keeps door wide open for a March Fed rate hike

EUR/GBP

EUR/GBP regains first technical resistance

On Friday, sterling was heavily sold, as the UK services fell more than expected for the second consecutive month. The rift between PM May and the Scottish PM Sturgeon was also sterling negative. May accused PM Sturgeon of sacrificing living standards in Scotland in her pursuit of a breakaway from the UK. EUR/GBP rose above the first resistance at 0.8592 and closed the session at 0.8631. Underlying euro strength also supported the EUR/GBP rebound. Cable dropped to the 1.2215 area after the PMI's were released but rebounded later on USD softness. The pair closed the session at 1.2291.

Today, the UK eco calendar is nearly empty. Later this week, sterling traders will look out for the continuation of the Brexit debate and for the Budget statement (on Wednesday). The UK government will probably indicate that it will set aside some money to counter the consequences of Brexit, but the budget might stay rather restrictive. If anything, we don't expect the budget to be a supportive sterling factor. Sterling sentiment has softened of late. At the same time, the euro was in better shape at the end of last week, helping EUR/GBP to regain the 0.8592 support. The break above this level improves the short-term picture of EUR/GBP. We don't expected the EUR/USD rebound to go far, but a combination of a temporary improving euro sentiment and at the same time ongoing sterling softness might trigger some further EUR/GBP gains short-term. A sustained break north of 0.8645 might reinforce the ST positive momentum. Longer term, we have a sterling negative view, as the Brexit will negatively impact the UK.

EUR/GBP: clears first resistance at 0.8592. 0.8645 resistance on the radar

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