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Next week's market movers

• In Eurozone, we expect the ECB to remain on hold and maintain its dovish bias amid non-accelerating underlying inflationary pressures.
• The Reserve Bank of Australia is forecast to stand pat as well. We share this view, following recent comments from Governor Lowe and mixed economic data.
• In the US, the final employment report before the Fed's March meeting is likely to add the finishing touch to market expectations regarding a hike at that gathering.
• We also get key economic data from China, the US, Canada, and Norway.

On Monday, we have a relatively light calendar, with no major events or indicators due to be released.

On Tuesday, during the Asian morning, the Reserve Bank of Australia will announce its rate decision. The forecast is for the Bank to remain on hold, a view we share following strong hints from Governor Lowe last week that the bar for any further easing is high. The Governor said that the officials are concerned with the high levels of household debt being a risk to financial stability, and that any more rate cuts could amplify that risk. In addition, the Bank has maintained a neutral bias in all of its recent communications, and in its latest policy statement, it even disregarded the softness in recent Australian data as being transitory. Considering that economic data have been mixed since that gathering, with GDP growth rebounding strongly in Q4 but the labor force participation rate falling in January, we do not expect the Bank to change its neutral tone. The fact that iron ore prices have remained elevated in recent months and have risen even further since the latest gathering, supports our view as well.

On Wednesday, during the Asian morning, we get China's trade data for February. The forecast is for the nation's trade surplus to have narrowed significantly, possibly because imports are expected to have risen much faster than exports in yearly terms. The case for further progress in exports is supported by the nation's Caixin manufacturing PMI for the month, which indicated the fastest increase in new export business since September 2014. A significant acceleration in imports is supported by the yuan's recovery since January, as it may have increased the purchasing power of Chinese consumers.

In the US, the ADP employment report for February is due out. The private sector is expected to have added 180k jobs, less than the robust 246k in January, but still a solid number that could raise speculation for the NFP figure to meet its forecast of 180k as well. What's more, we think that following the new administration's freeze on public sector hiring in late January, we are likely to see the ADP print coming in closer to the NFP number moving forward, considering the NFP figure will now include far fewer public employees, which are not measured in the ADP report.

On Thursday, the highlight of the day will be the ECB policy decision, followed by a press conference from President Draghi. The Bank was surprisingly dovish at the latest meeting, in our view. Although the bloc's headline inflation rate for December surged to a level last seen in 2013, President Draghi downplayed the importance of that improvement. He pointed out that he sees no convincing upward trend in underlying inflation, and that the latest progress in the CPI is mainly due to energy-related effects. He implied that until there is material progress in the core CPI rate, the Bank is likely to keep its policy stance unchanged. Considering that February's CPI data showed more of the same, i.e. a rising headline rate but a flat core rate, we doubt that the Governing Council will shift away from its dovish bias at this meeting. As such, we think that this meeting may be a repetition of the previous one. Like last time, President Draghi may try to balance the recent progress in forward-looking indicators such as the PMIs, with the fact that underlying inflationary pressures have not begun to pick up yet.

Earlier in the day, during the Asian morning, China's inflation data for February are due out. In the absence of any forecast, we expect both the CPI and the PPI rates to have remained more or less unchanged, with risks skewed to the upside. We base our view on the February Caixin manufacturing PMI survey, which showed that the rate of input price inflation remained sharp, prompting firms to raise their final-product prices. Both the CPI and the PPI rates rose sharply in recent months, which was undoubtedly a pleasant development for the PBoC. The Bank has been tightening its policy in past weeks following the US election results, in order to halt some of the depreciation pressure on the yuan. As such, we think that further acceleration in inflation gives the Bank even more room to continue tightening its policy in the foreseeable future, if deemed necessary. What's more, the steady surge in the PPI rate from well-within the negative territory to +6.9% yoy in January is likely to be also welcomed by foreign central banks facing weak underlying inflationary pressures, such as the ECB and BoJ. Considering that falling Chinese producer prices between 2012 and 2016 may have held down imported inflation in the Eurozone and Japan, the turnaround in that dynamic may actually support the inflation prints of those nations.

On Friday, the US employment report will take center stage. Nonfarm payrolls are forecast to have risen by 180k, less than the 227k in January, but still a solid number that is consistent with further tightening in the labor market. The unemployment rate is expected to have ticked down, while average hourly earnings are forecast to have accelerated on both a monthly and a yearly basis. This would be a sign that the softness in January's earnings was just an outlier and may amplify even further speculation regarding a March rate hike by the Fed. As things currently stand, our view is still that June is a more likely candidate for a hike than March, despite the recent string of optimistic comments by various Fed officials that the case for a near-term rate increase has strengthened. We think that the greater than 50% probability for a March hike is overly optimistic, mainly because there has not been a phenomenal change in the economic outlook following the February meeting to justify such a shift in Fed rhetoric. Let's not forget that the minutes of that meeting showed many officials held a cautious stance, judging that the Fed would have "ample time" to respond if inflation emerged. At the time of writing, Yellen and Fischer are yet to speak. In order to reassess our non-consensus view, we would like to see hawkish signals from both Yellen and Fischer, as well as a rebound in the average hourly earnings rate of this employment report.

We also get Canada's employment data for February, though no forecast is available yet. Our own view is that the labor market probably tightened further during the month. We base our expectations on the nation's Markit manufacturing PMI for the month, which showed that greater business confidence contributed to the strongest increase in employment for 27 months. Even though this is likely to be a pleasant development for the BoC, we doubt that it will lead to a significant change in the Bank's cautious tone. At its policy meeting on Wednesday, the BoC signaled that it is worried about a strengthening Loonie muting the outlook for exports. As such, although economic data are improving on the whole and oil prices remain elevated, we think that the BoC is likely to maintain its somewhat cautious tone in the foreseeable future, as it prefers to prevent CAD from strengthening too much.

From Norway, we get CPI figures for February. In January, both the headline and the core rates declined by much more than expected, though the headline rate still remained above the Norges Bank target of 2.5%. At its latest policy gathering, the Bank maintained a neutral tone overall. The officials noted that although there are prospects for inflation to be lower than projected, any potential easing to offset that would likely boost further the already-elevated housing prices, thereby amplifying financial stability risks. This suggests that the bar for easing is quite high, making us conclude that the Bank may be tolerant for some more slowdown in inflation before it turns its sight on the easing button.

EUR/GBP - 0.8627

Recent wave: Major double three (A)-(B)-(C)-(X)-(A)-(B)-(C) is unfolding and 2nd (A) has possibly ended at 0.6936.

Trend: Near term down

Original strategy :

Buy at 0.8500, Target: 0.8600, Stop: 0.8460

Position : -

Target : -

Stop : -

New strategy :

Buy at 0.8550, Target: 0.8650, Stop: 0.8510

Position : -

Target : -

Stop : -

As the single currency has surged again after brief pullback, adding credence to our view that the rise from 0.8403 low is still in progress and mild upside bias remains for this move to extend further gain to resistance at 0.8646, break there would encourage for subsequent rise to 0.8680-85 but reckon upside would be limited and price should falter well below 0.8710, risk from there is seen for a retreat to take place later.

In view of this, would not chase this rise here and we are looking to buy euro on pullback as 0.8550 should limit downside. Below support at 0.8509 would abort and signal top is formed instead, risk weakness to 0.8460-65 break there would add credence to this view and further fall to 0.8435-40 would follow.

Our preferred count is that, after forming a major top at 0.9805 (wave V), (A)-(B)-(C) correction is unfolding with (A) leg ended at 0.8400 (A: 0.8637, B: 0.9491 and 5-waver C ended at 0.8400. Wave (B) has ended at 0.9413 and impulsive wave (C) has either ended at 0.8067 or may extend one more fall to 0.8000 before prospect of another rally. Current breach of indicated resistance at 0.9043 confirms our view that the (C) leg has ended and bring stronger rebound towards 0.9150/54, then towards 0.9240/50.

Market movers ahead

• The US labour market report for February will be scrutinised intensively following the recent speculation about the prospect of a Fed hike in March. We estimate a non-farm payroll of 190,000 and some reversal in average hourly earnings after weakness in wages in financial activities dragged them down in January.
• In the euro area, the ECB meeting will reveal whether the rise in inflation to the ECB's 2.0% target has resulted in a more hawkish monetary policy stance. Despite the higher inflation, there are still no signs of an upward trend in underlying prices. Hence, we expect the ECB to stick to its dovish communication.
• In China, the National People's Congress this weekend will reveal the new economic targets for growth and inflation for this year.
• In Scandinavia, focus is on the Norwegian regional survey, which is Norges Bank's preferred economic indicator and particularly important as it is forward looking.

Global macro and market themes

• Reflation, Trump and European populism remain the dominant drivers of markets.
• The USD and US yields should head higher near term.
• German yields have bottomed and should rise in coming months.
• We remain bullish on US equities as Donald Trump's policy agenda is growth supportive despite all the noise.

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USD/CAD - 1.3404

Recent wave: Only wave v of c has ended at 0.9407 and wave C of major A-B-C correction is underway for headway to 1.4700

Trend: Near term down

Original strategy :

Buy at 1.3255, Target: 1.3425, Stop: 1.3195

Position: -

Target: -

Stop: -

New strategy :

Buy at 1.3300, Target: 1.3450, Stop: 1.3240

Position: -

Target: -

Stop:-

The greenback has continued edging higher and near term upside risk remains for the rise from 1.2969 low to extend further gain to resistance t 1.3461, however, loss of near term upward momentum should prevent sharp move beyond 1.3500-10 and price should falter well below 1.3558, risk from there is seen for a retreat to take place later.

In view of this, would not chase this rise here and would be prudent to buy on pullback as 1.3300-10 should limit downside and bring another rise later. Below 1.3250 would defer and risk correction to indicated previous resistance at 1.3212 (now support) but only break there would suggest top is formed, bring weakness to 1.3165 first.

To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.

GBP/USD has posted losses in Friday trade. Currently GBP/USD is trading at 1.2220. On the release front, British Services PMI dipped to 53.3, short of the estimate of 54.4 points. In the US, today's highlight is ISM Manufacturing PMI, which is forecast to remain unchanged at 56.5 points. The markets will be listening closely as four FOMC members deliver remarks on Friday, including Federal Reserve Chair Janet Yellen.

Market sentiment continues to heat up regarding a Fed rate hike. Federal Reserve policymakers continue to sound hawkish about a rate move on March 15, when the Fed next meets for a policy meeting. Earlier in the week, FOMC members William Dudley and John Williams both hinted at an imminent hike by the Fed. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for "serious consideration" at the March policy meeting. The markets are taking these statements at face value, as the odds of a March move have increased dramatically. The likelihood of a rate move has soared to 80%, compared to 33% just a few days ago. Why the huge jump in odds? One reason is that policymakers are now saying they don't need to wait for Donald Trump to outline tax reform or other economic packages before making a monetary move. This is a significant departure from a few weeks ago, when the Fed sent out signals that it would stay on the sidelines until it had a clearer picture of the economic stance of the new administration.

The pound's troubles continue, as the currency has fallen 1.4 percent this week. Earlier on Friday, GBP/USD dropped to a low of 1.2214, marking its lowest level since January 17. The pound has responded negatively to this week's key PMI reports. Manufacturing and Services PMIs both missed expectations, and Construction PMI continues to point to weak expansion. The softer Services PMI reflects more cautious spending by British consumers, who remain concerned about the ramifications of Brexit on the economy and their pocketbooks.

USD/CAD continues to head lower in the Friday session. Currently, the pair is trading at 1.3420. On the release front, there are no Canadian releases on the schedule. In the US, today's highlight is ISM Manufacturing PMI, which is forecast to remain unchanged at 56.5 points. The markets will be listening closely as four FOMC members deliver remarks on Friday, including Federal Reserve Chair Janet Yellen.

It's been a week to forget for the Canadian dollar this week, as USD/CAD has gained 2.2 percent. The pair has punched above the 1.34 line, as the Canadian dollar has slipped to its lowest level since January 4. Market sentiment continues to heat up regarding a Fed rate hike. Federal Reserve policymakers continue to sound hawkish about a rate move on March 15, when the Fed next meets for a policy meeting. Earlier in the week, FOMC members William Dudley and John Williams both hinted at an imminent hike by the Fed. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for "serious consideration" at the March policy meeting. The markets are taking these statements at face value, as the odds of a March move have increased dramatically. The likelihood of a rate move has soared to 80%, compared to 33% just a few days ago. Why the huge jump in odds? One reason is that policymakers are now saying they don't plan to wait for Donald Trump to outline tax reform or other economic packages before making a monetary move. This is a significant departure from a few weeks ago, when the Fed sent out signals that it would stay on the sidelines until it had a clearer picture of the economic stance of the new administration.

There were no surprises from the Bank of Canada this week, which held rates at 0.50%, where they have been pegged since July 2015. However, the rate statement expressed concern, stating that the economy faces "significant uncertainties", including a lack of clarity over Donald Trump's economic agenda. Trump has called for the NAFTA trade agreement to be scrapped, although he has since backtracked and said that he only wanted to "tweak" the provisions that affect Canada-US trade. Still, Trump's protectionist leanings could hurt the Canadian economy, which sends 80% of its exports to its southern border. Even if NAFTA is left alone, the US could slap import duties on Canadian products, which would have negative ramifications for the Canadian economy.

Daily Pivots: (S1) 1.2235; (P) 1.2271; (R1) 1.2301; More...

GBP/USD's fall from 1.2705 is still in progress and intraday bias remains on the downside for 1.1946/86 support zone. The consolidation pattern from 1.1946 has possibly completed at 1.2705. Break of 1.1946 will confirm our bearish view and resume the larger down trend. Nonetheless, on the upside, above 1.2382 minor resistance will delay the bearish case and turn bias neutral first.

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.

Daily Pivots: (S1) 1.0094; (P) 1.0120; (R1) 1.0157; More.....

Intraday bias in USD/CHF remains cautiously on the upside for the moment. Rebound from 0.9860 is resuming and would target a test on 1.0342 high. Based on neutral medium term outlook, we'd be cautious on topping at around 1.0342. On the downside, break of 1.0008, however, will indicate completion of the rebound from 0.9860. And intraday bias will be turned back to the downside for 0.9860.

In the bigger picture, prior rejection from 1.0327 resistance argues that USD/CHF is staying in a medium term sideway pattern. In any case, decisive break of 1.0342 resistance is needed to confirm underlying strength. Otherwise, we'll stay neutral in the pair first. In case of another fall, we'd expect strong support from 0.9443/9548 support zone. Meanwhile firm break of 1.0342 will target 38.2% retracement of 1.8305 to 0.7065 at 1.1359.

Daily Pivots: (S1) 113.86; (P) 114.22; (R1) 114.77; More...

USD/JPY is still bounded below 114.94 resistance and intraday bias stays neutral first. Outlook is unchanged. Price actions from 118.65 are viewed as a corrective move. Firm break of 114.94 resistance will indicate that it's completed, on a double bottom pattern (111.58, 111.68). In such case, intraday bias will be turned to the upside for retesting 118.65. Also, the whole rise from 98.97 is likely resuming. On the downside, in case of another fall, we'd still 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.

GBP/USD has posted losses in Friday trade. Currently GBP/USD is trading at 1.2220. On the release front, British Services PMI dipped to 53.3, short of the estimate of 54.4 points. In the US, today's highlight is ISM Manufacturing PMI, which is forecast to remain unchanged at 56.5 points. The markets will be listening closely as four FOMC members deliver remarks on Friday, including Federal Reserve Chair Janet Yellen.

Market sentiment continues to heat up regarding a Fed rate hike. Federal Reserve policymakers continue to sound hawkish about a rate move on March 15, when the Fed next meets for a policy meeting. Earlier in the week, FOMC members William Dudley and John Williams both hinted at an imminent hike by the Fed. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for "serious consideration" at the March policy meeting. The markets are taking these statements at face value, as the odds of a March move have increased dramatically. The Fed Rate Monitor Tool (Investing.com) is currently pricing a move at 82%, compared to 18% just a week ago. Why the huge jump in odds? One reason is that policymakers are now saying they don't need to wait for Donald Trump to outline tax reform or other economic packages before making a monetary move. This is a significant departure from a few weeks ago, when the Fed sent out signals that it would stay on the sidelines until it had a clearer picture of the economic stance of the new administration.

The pound's troubles continue, as the currency has fallen 1.4 percent this week. Earlier on Friday, GBP/USD dropped to a low of 1.2214, marking its lowest level since January 17. The pound has responded negatively to this week's key PMI reports. Manufacturing and Services PMIs both missed expectations, and Construction PMI continues to point to weak expansion. The softer Services PMI reflects more cautious spending by British consumers, who remain concerned about the ramifications of Brexit on the economy and their pocketbooks.