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Market movers today

Following the recent hawkish comments from dovish FOMC members, today's single most important event is Fed Chair Janet Yellen's speech tonight. Given the relatively strong data, easy financial conditions and calm markets with record-high stocks, it seems likely to us that the Fed will hike at the upcoming meeting (despite the softer signals from the latest minutes), especially now that markets more or less expect the Fed to do so (markets have priced in over a 70% probability of a March hike). Still, we would like to hear it from Yellen herself to get the final confirmation and it is likely that she echoes the other FOMC members saying an increase is coming ‘soon'. Also Fed Vice Chair Stanley Fischer and Charles L. Evans are also due to speak tonight.

We have a busy calendar in terms of economic data releases today. We get final PMI service indices for February from Europe and the US and the UK index, in particular, should be interesting, as services confidence has been on the weaker side in recent months. Also, look out for retail sales for January in both Germany and the euro area.

In Sweden, both industrial and service production data for January are due. In Norway, we get both unemployment and house price data for February. For more see page 2.

Selected market news

US stocks closed lower yesterday with S&P500 falling 0.6%, the most in a month, as investors took profit from the solid gains recently and the Fed has talked up the probability of a hike at the upcoming meeting. Also Asian equities are trading lower this morning. EUR/USD is trading more or less unchanged at 1.05.

Danmarks Nationalbank sold DKK4.7bn in FX intervention in February to cap the EUR/DKK lower bound. The Danmarks Nationalbank reaction indicates that we have reached the lower bound of EUR/DKK for now, which looks to be around 7.4330. We forecast EUR/DKK at 7.4350 in 1-3M and 7.4400 in 6-12M and that the key policy rate will stay unchanged at -0.65% in 12M. Read our take here.

In the euro area, HICP inflation hit the ECB's 2% target in February – it is the first time since January 2013 that it has been at 2%. It is worth noting that HICP core inflation was unchanged at 0.9%, well below the 2% target, meaning the ECB is not about to exit its accommodative monetary policy (see also our latest ECB review: Draghi remains dovish until core inflation rises, 19 January). The ECB is meeting again next week.

In France, presidential candidate François Fillon continues to suffer as his own party members are abandoning his campaign and the police searched his home in Paris (see also Bloomberg). According to the average probability implied by betting odds, the probability of a Fillon win is only 14%, while the probability of an Emmanuel Macron win has surged to 54%. The probability of a Marine Le Pen win is unchanged at 33%.

Weekly

• Last Candlesticks pattern: Hammer
• Time of formation: 19 Sep 2016
• Trend bias: Down

Daily

• Last Candlesticks pattern: Hammer
• Time of formation: 9 Nov 2016
• Trend bias: Near term up

EUR/JPY – 120.12

Although the single currency fell to as low as 118.24 late last week, the subsequent strong rebound suggests a temporary low is possibly formed there and consolidation with mild upside bias is seen for a test of the Kijun-Sen (now at 120.78), however, a daily close above there is needed to add credence to this view, bring test of previous resistance at 121.34, once this level is penetrated, this would provide confirmation and extend the rebound from 118.24 low for retracement of recent decline to 122.00 and then 122.50-55 but price should falter well below resistance at 123.31, bring retreat later.

On the downside, whilst initial pullback to 119.70 and then the Tenkan-Sen (now at 119.37) cannot be ruled out, reckon 118.80 would contain downside and bring another rebound later. A drop below 118.80 would suggest the rebound from 118.24 has ended instead, bring retest of this level but break there is needed to signal recent erratic decline from 124.10 top has resumed for further fall to 118.00, then 117.50, however, still reckon downside would be limited and price should stay above 116.90-00.

Recommendation: Buy at 119.40 for 121.40 with stop below 118.40.

On the weekly chart, the single currency has continued finding good support right above the Kijun-Sen (now at 118.09) and has staged a rebound, a white candlestick looks set to be formed this week, suggesting consolidation above this level would be seen and test of the Tenkan-Sen (now at 120.99) cannot be ruled out, however, a sustained breach above resistance at 121.34 is needed to signal the fall from 124.10 has ended, then a stronger rebound to 122.00 would follow but break of 122.52 is needed to retain bullishness, bring test of indicated resistance at 123.31. Looking ahead, only above this level would signal recent rise from 109.49 low has resumed for retracement of early decline to 125.25-30 (50% Fibonacci retracement of 141.06-109.49), having said that, reckon resistance at 126.47 would cap upside and price should falter below resistance at 128.23, bring retreat later.

On the downside, expect pullback to be limited to 119.30-35 and 118.80 should hold, bring another rebound later. Below 118.80 would suggest the rebound from 118.24 has ended, bring retest of this level, a break there would signal the retreat from 124.10 top is still in progress and near term downside bias remains for this move to bring retracement of recent upmove, hence weakness towards the Kijun-Sen (now at 118.09), however, a weekly close below there is needed to signal the rise from 109.49 has ended, bring further decline to 117.30-35 but previous resistance at 116.29 should contain downside due to near term oversold condition, bring rebound later.

Currency pair EUR/USD

The EUR/USD must break below the previous bottom (green line) before a continuation of the downtrend (waves 3) becomes more likely. If price breaks above resistance (orange) then price could extend the wave 2 (purple).

The EUR/USD is at a bullish bounce or bearish break spot now price has arrived at the previous bottom (green).

Currency pair GBP/USD

The GBP/USD downtrend can be clearly seen by the bearish channel (red lines). Price has reached a bullish bounce or bearish break spot at the bottom of the channel. A break could see price fall towards the Fibonacci levels of waves 3 (green/blues) whereas a bounce could see price head back towards the resistance (orange) and top of the channel.

The GBP/USD retracement is in a wave 4 (orange) which typically retraces back to the 23.6% - 38.2% Fibonacci zone (sometimes 50%). A break above the 61.8% Fib invalidates wave 4 (orange).

Currency pair USD/JPY

The USD/JPY remains in wave 1-2 (blue) unless price breaks below above support (blue) which is the invalidation level. A break above the resistance level (red line) could see the USD/JPY continue with a wave 3 (blue).

The USD/JPY bounce at the resistance (red) level could lead to an ABC (orange) within wave 2 (brown) unless price breaks above the resistance without retracing back to the 38.2% Fib or lower.

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 can be seen from the H4 chart this morning, price failed to sustain gains beyond the H4 mid-way level 1.0550 and concluded the day pushing through both the H4 trendline support extended from the low 1.0340 and January’s opening level at 1.0515.

While the unit is currently seen feeding off of the 1.05 handle at the moment, upside looks incredibly limited from here given that daily action also broke below daily support at 1.0520 (now acting resistance). A H4 close beyond the 1.05 barrier could, according to the H4 structure, trigger another round of selling down to the 1.04 neighborhood.

Our suggestions: Despite both the daily and H4 charts indicating that the bears have a slight edge in this market at the moment, it may be worth noting that weekly price has just entered into a major weekly support area coming in at 1.0333-1.0502!

With the potential for weekly bulls to step in here, would a H4 close below 1.05 really be considered a bearish signal? Should the H4 candles retest the underside of 1.05 and print a reasonably sized H4 bear candle, then we believe the pair will take another dive lower. This is simply because the weekly support zone is nearly 200 pips in size! And since we would only be targeting 1.04, it could still come to fruition as long as the retest and confirming H4 bear candle is seen.

Data points to consider: US ISM-manufacturing PMI at 3pm, FOMC member Evans speaks at 3.15pm, FOMC member Powell speaks at 5.15pm, FOMC member Fischer along with Fed Chair Yellen speaks at 6pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Watch for a H4 close below 1.05 and look to trade any retest seen thereafter ([we would also advise waiting for a reasonably sized H4 bear candle to form following the retest before looking to execute a trade] stop loss: ideally beyond the trigger candle).

GBP/USD

During the course of yesterday’s sessions the GBP/USD chalked up its fifth consecutive bearish candle, which, as you can see, forced the H4 candles into the H4 mid-way point 1.2250. For those who read Thursday’s report you may recall that our desk highlighted the 1.22/1.2250 area as a potential buy zone in this market. 1.2250 fuses with a H4 AB=CD (see black arrows) 127.2% Fib ext. at 1.2244 taken from the high 1.2706, and is currently holding firm as we write. However, we were ideally looking for a slight break into our H4 buy zone before buying, since we did not want to execute a long position too far from 1.22 handle as this number represents a weekly Quasimodo support. And because of this we may have missed the boat!

For any of our readers who managed to pin down a position from here, well done! We would be looking for price to tag the 1.23 level before taking some profits and reducing risk to breakeven.

Our suggestions: Should the bears step in and push price deeper into the above noted yellow H4 zone today, however, we would still look to buy if price pencils in a reasonably sized H4 bull candle, with stops placed below the trigger candle.

Data points to consider: UK services PMI at 9.30am. US ISM-manufacturing PMI at 3pm, FOMC member Evans speaks at 3.15pm, FOMC member Powell speaks at 5.15pm, FOMC member Fischer along with Fed Chair Yellen speaks at 6pm GMT.

Levels to watch/live orders:

• Buys: 1.22/1.2250 ([wait for a reasonably sized H4 bull candle to form within the zone before looking to pull trigger here] stop loss: ideally beyond the trigger candle).
• Sells: Flat (stop loss: N/A).

AUD/USD

Across the board, we saw the US dollar gravitate north yesterday and pull the gold market lower. This, as you can see, pushed the Aussie dollar aggressively south going into the London segment. Technically speaking, this move was also bolstered by the fact that the weekly candles are selling off from a weekly trendline resistance stretched from the high 0.8163. Daily support at 0.7609 (now acting resistance) was also taken out during the bearish assault and is now on course to connect with a daily demand zone coming in at 0.7511-0.7543.

Given that the H4 candles are currently seen retesting the underside of February’s opening base at 0.7577, is there scope for a trade short from here? Well, the next downside target on the weekly scale falls in at 0.7524-0.7450: a weekly support area. On the daily chart, a daily demand mentioned above at 0.7511-0.7543 is the next hurdle in the firing range. All of this coupled with the nearby 0.7550 H4 mid-way level gives us a collective target support zone of 0.7524/0.7550.

Our suggestions: So, to answer the question regarding whether there’s scope for a sell trade from 0.7577, we would say probably not, due to the limited downside space seen to the 0.7524/0.7550 neighborhood. Therefore, at least for the time being, our desk remains on the sidelines.

Data points to consider: US ISM-manufacturing PMI at 3pm, FOMC member Evans speaks at 3.15pm, FOMC member Powell speaks at 5.15pm, FOMC member Fischer along with Fed Chair Yellen speaks at 6pm GMT.

Levels to watch/live orders:

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

USD/JPY

In recent sessions, the USD/JPY printed its fourth consecutive daily bullish candle and drove the unit up to within an inch of the daily resistance area coming in at 115.62-114.60. Also of note is the H4 candles recently connecting with the H4 mid-way resistance point at 114.50 (the black arrow represents a H4 Quasimodo left shoulder that converges with the 114.50 number), which is shadowed closely by December’s opening level at 114.68.

Ultimately, we do believe there is enough supporting structure around 114.50 to see price challenge the 114 handle today. However, it does seem we may have missed the boat here!

Our suggestions: On account of the above notes, we will be looking for shorting opportunities on the lower timeframes at current price (see the top of this report), targeting 114 and possibly the H4 demand at 113.47-113.70.

Data points to consider: US ISM-manufacturing PMI at 3pm, FOMC member Evans speaks at 3.15pm, FOMC member Powell speaks at 5.15pm, FOMC member Fischer along with Fed Chair Yellen speaks at 6pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 114.50 region ([wait for a lower-timeframe signal to form before looking to pull the trigger] stop loss: dependent on where one confirms the zone).

USD/CAD

Kicking this morning’s report off with a look at the weekly chart, we can see that weekly price is seen trading within reaching distance of the weekly trendline resistance taken from the high 1.4689, followed closely by the 2017 yearly opening level at 1.3434. Looking down to the daily candles, recent action spiked above daily supply coming in at 1.3387-1.3317 and has potentially cleared the runway north up to daily supply at 1.3461-1.3426.

What’s interesting here is that the 2017 yearly opening level is, as can be seen on the H4 chart, positioned nearby November and December’s opening levels at 1.3419/1.3425 (green zone). In addition to this, the 2017 yearly opening level is situated within the lower limits of the daily supply mentioned above at 1.3461-1.3426.

Our suggestions: Quite simply, keep an eye on the green H4 zone 1.3434/1.3419 for shorting opportunities today. Given the size of the area, however, it may be better to wait for additional confirmation in the form of a H4 bear candle. This will also help avoid any fakeout that may take place!\

Data points to consider: US ISM-manufacturing PMI at 3pm, FOMC member Evans speaks at 3.15pm, FOMC member Powell speaks at 5.15pm, FOMC member Fischer along with Fed Chair Yellen speaks at 6pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.3434/1.3419 ([wait for a H4 bear candle to form before looking to pull trigger here] stop loss: ideally beyond the trigger candle).

USD/CHF

Although the USD/CHF pair advanced north yesterday, the overall structure of this market remains unchanged. As such, our desk continues to focus on the H4 sell zone seen at 1.02/1.0170 (yellow zone). The area comprises of the following converging structures: both December and January’s opening levels at 1.0170/1.0175, a potential H4 AB=CD 127.2% Fib ext. at 1.0185, another potential minor H4 AB=CD symmetrical formation completing also around the 1.0185 region (see black arrows), an upper H4 channel resistance line pegged from the high 1.0044, 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 coming in at 1.0248-1.0168.

Our suggestions: In light of this confluence, our team will, dependent on the time of day, look to sell from the H4 127.2% Fib ext. level, with stops placed a few pips above 1.02.

Data points to consider: US ISM-manufacturing PMI at 3pm, FOMC member Evans speaks at 3.15pm, FOMC member Powell speaks at 5.15pm, FOMC member Fischer along with Fed Chair Yellen speaks at 6pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.0185 region ([an area one could possibly trade at market] stop loss: 1.0205).

DOW 30

US stocks fell from record highs yesterday, as the dollar’s recent advance and declines seen in the gold market bolsters the likelihood of further interest rate hikes in the near future. The descent, as you can see, forced the H4 candles back below the 21000 neighborhood, and has potentially opened up the gates for price to challenge the H4 demand coming in at 20837-20869. This H4 demand sits a few points above the daily demand seen at 20714-20821, so for traders looking to go long from here, you may want to note the possibility of a slight fakeout being seen through the current H4 demand.

Our suggestions: Right now, we have absolutely no intention of looking to sell this market beyond 21000. We would rather look to buy from the above noted H4 demand, or even the H4 demand seen below it at 20769-20801, which happens to be positioned within the walls of the aforementioned daily demand zone!

Data points to consider: US ISM-manufacturing PMI at 3pm, FOMC member Evans speaks at 3.15pm, FOMC member Powell speaks at 5.15pm, FOMC member Fischer along with Fed Chair Yellen speaks at 6pm GMT.

Levels to watch/live orders:

• Buys: 20837-20869 ([wait for a reasonably sized H4 bull candle to form before looking to pull trigger here] stop loss: ideally beyond the trigger candle). 20769-20801 ([wait for a 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

In recent trading, weekly action has pushed itself back below the weekly support at 1241.2 and looks on course to form a nice-looking bearish engulfing candle! Before this can be achieved, nevertheless, the daily support area drawn from 1232.9-1224.5 will need to be taken out.

Turning our attention to the H4 candles, we can see that price is on the verge of connecting with a H4 demand base drawn from 1225.7-1229.7. Apart from this area being positioned within the above noted daily support area, it may be worth noting that it also converges with a H4 AB=CD completion point (see black arrows) as well!

Our suggestions: While there is a possibility that price could engulf the current H4 demand base today, given what we’ve noted on the weekly chart, we still feel a bounce is likely to be seen from this zone in view of its confluence. As a result, should price strike this zone today, we will switch down to the lower timeframes and watch how the action behaves. Assuming that we are able to pin down a lower-timeframe buy signal here (see the top of this report), we will look to enter long, targeting the H4 resistance area at 1235.7-1238.1 as an initial take-profit target.

Levels to watch/live orders:

• Buys: 1225.7-1229.7 ([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).

European equity markets are expected to open a little lower on Friday, following the cue from the US and Asia overnight where markets ended in the red following a phenomenal run over the last month, particularly across the pond.

While the weekend is nearing and we may be seeing some profits being taken off the table, the week is far from over with four Fed officials – including the Chair and vice Chair – all speaking throughout the day prior to the blackout period. We'll also get a scattering of services PMI data from across Europe and the US as the day goes on which should ensure the end of the week is anything but a dull affair.

Investors have spent the last week in a frenzy trying to position themselves for a possible rate hike in March, having only a couple of weeks ago written one off almost altogether. We've now almost swung entirely the other way, with the probability above 75% from below 20% previously.

With Janet Yellen, Stanley Fischer, Charles Evans and Jerome Powell all making appearances today, there will be ample opportunity for officials to make any final tweaks to expectations before blackout period begins tomorrow, at which point we won't hear from any Fed policy makers again until 15 March.

Given the intention was clearly to ensure the markets see this meeting as being live, I think the message today will be broadly consistent with what we've heard over the last week. The risk is that the Fed raises expectations too high for March and doesn't deliver which will once again have people questioning its credibility. Whether markets fully buy into March could hang on the subtlest of hints today from Yellen, for example whether she talks about the prospect of a hike in March as opposed to upcoming meetings. The latter would give the Fed some leeway heading into the meeting.

China Services PMI prints 4-month low

Asia Mid-Session Market Update: China Services PMI prints 4-month low; Hong Kong PMI contraction deepens

US Session Highlights

(RU) Russia Energy Min Novak: too soon to say if a global deal on oil output cuts will be extended

(US) INITIAL JOBLESS CLAIMS: 223K V 245KE (lowest since Mar 1973); CONTINUING CLAIMS: 2.07M V 2.06ME

(US) CNBC's Harwood: Treasury Sec Mnuchin said to have told Senate Banking Republicans that he opposes border adjustment tax

(US) Feb ISM New York: 51.3 v 57.7 prior

(US) WEEKLY EIA NATURAL GAS INVENTORIES: +7 BCF VS. -3 TO -5 BCF EXPECTED RANGE

(US) Fed's Powell (moderate, voter): Rate hike in March is on table for discussion

US markets on close: Dow -0.5%, S&P500 -0.6%, Nasdaq -0.7%

Best Sector in S&P500: Utilities

Worst Sector in S&P500: Financials

Biggest gainers: MNST +12.8%, BBY +6.4%, URBN +5.7%, GPS +3.3%, AES +2.5%

Biggest losers: FCX -4.9%, KR -4.3%, CAT -4.3%, ENDP -4.1%, MUR -3.9%

At the close: VIX 11.8 (-0.7pts); Treasuries: 2-yr 1.31% (+2bps), 10-yr 2.49% (+3bp), 30-yr 3.08% (+1bps)

US movers afterhours

HABT: Reports Q4 $0.07 v $0.04e, R$73.9M v $73.3Me; Guides initial FY17 R$338-342M v $338Me; SSS +2%; Capex $44-47M; +10.9% afterhours

GWRE: Reports Q2 $0.28 v $0.14e, R$115.6M v $110Me; Guides Q3 -$0.05 to -$0.02 v +$0.09e, R$102-106M v $111Me; +2.4% afterhours

MRVL: Reports Q4 $0.22 v $0.19e, R$571M v $571Me; +2.0% afterhours

ADSK: Reports Q4 -$0.28 v -$0.33e, R$479M v $473Me; -1.4% afterhours

COST: Reports Q2 $1.17 v $1.35e, R$29.1B v $30.0Be; To increase membership fees by $5; -4.3% afterhours

WING: Reports Q4 $0.15 v $0.14e, R$24.8M v $24.9Me; -6.8% afterhours

AOBC: Reports Q3 $0.66 v $0.54e, R$233.5M v $234Me; Guides Q4 adj EPS $0.32-0.42 v $0.56e, R$200-220M v $242Me; -7.0% afterhours

BBG: Reports Q4 -$0.18 adj v -$0.12e, R$51.6M v $63.6Me- Guides initial FY17 production 6.0-6.5 MMboe; Guides initial FY17 capex $255-285M; -10.3% afterhours

NTNX: Reports Q2 -$0.28 v -$0.35e, R$182.2M v $179Me; Guides Q3 -$0.48 to -$0.45 v -$0.34e, R$180-190M v $187Me, gross margin 57-58%; -13.8% afterhours

KPTI: Interim Analysis of Phase 2 SOPRA study evaluating Selinexor in Relapsed/Refractory Acute Myeloid Leukemia determines SOPRA will not reach statistical significance for overall survival (OS); -15.1% afterhours

SCYX: Delays initiation of new clinical studies using the IV formulation of SCY-078 at FDA’s request; Ongoing and future clinical development using the oral formulation of SCY-078 are unaffected; -26.6% afterhours

Politics

(US) President Trump: has 'total confidence' in Attorney General Sessions - press

(US) Attorney General Sessions: To recuse himself from any investigations related to the Trump campaign

(US) AG Sessions: Talked with US ambassador about a number of issues, including Ukraine; Did not discuss Trump campaign - Fox interview

Asia Key economic data

(CN) CHINA FEB CAIXIN PMI SERVICES: 52.6 V 53.1 PRIOR; 4-month low

(JP) JAPAN FEB SERVICES PMI: 51.3 V 51.9 PRIOR; COMPOSITE PMI: 52.2 v 52.3 PRIOR

(JP) JAPAN FEB TOKYO CPI Y/Y: -0.3% V -0.1%E; CPI EX-FRESH FOOD Y/Y: -0.3% V -0.2%E

(JP) JAPAN JAN NATIONAL CPI Y/Y: 0.4% V 0.4%E; CPI EX FRESH FOOD (CORE) Y/Y: 0.1% V 0.0%E

(JP) JAPAN JAN JOBLESS RATE: 3.0% V 3.0%E

(JP) JAPAN JAN OVERALL HOUSEHOLD SPENDING Y/Y: -1.2% V -0.4%E

(HK) HONG KONG FEB COMPOSITE PMI:49.6 V 49.9 PRIOR; 2nd month of contraction

(SG) SINGAPORE FEB PMI COMPOSITE: 51.4 V 51.6 PRIOR

(KR) SOUTH KOREA FEB CPI M/M: 0.3% V 0.1%E; Y/Y: 1.9% V 1.8%E

(KR) SOUTH KOREA FEB CURRENT ACCOUNT BALANCE: $5.3B V $7.9B PRIOR; GOODS BALANCE: $7.8B V $9.4B PRIOR

Asia Session Notable Observations, Speakers and Press

Asia indices are down heading into the weekend, tracking far more restrained sentiment on Wall St after an outsized rally in the wake of Pres Trump's Congressional address. Concerns over valuations, building expectations of March Fed hike, and political controversy in the White House are being attributed for the decline, as Financials and Materials sold off the most heavily while Utilities rallied. Regionally, ASX200 was pulled lower by mining shares, with Dalian Iron Ore down notably and HSBC warning of potential "massive fall" in the metal. In FX space, USD/JPY and NZD/USD saw more pronounced declines on risk aversion, falling 40 and 35 pips from session highs respectively.

Japan CPI data were mixed, as headline nationwide print ticked up higher while forward looking Tokyo-region dipped deeper in the red. In its regular QE operations, BOJ also pulled back on the purchases of long bonds in an effort to steepen the curve.

In China, Feb Caixin Services PMI slowed to a 4-month low, even as overall Composite improved and composite Employment component rose for the first time in nearly 2 years. Economists noted a rise in new orders along with a sharp rise in input costs in Feb, while the Outlook anticipates growth momentum in Q1 before some slowing in Q2. Hong Kong PMI saw its 2nd straight month of contraction amid receding inflation, biggest contraction in new orders in a year, and rising inventories. Note that China's annual National People’s Congress (NPC) begins on Sunday with anticipated announcement of 2017 economic targets.

China

(CN) Hangzhou City to further restrict housing purchase to curb property market - Xinhua

(CN) China govt urged to offer a preferential rate to small home buyers - Chinese press

(CN) PwC annual CEO survey: 33% of mainland China execs are "very confident" about their 12-month outlook for op income v 25% y/y - Chinese press

Japan

(JP) Japan Fin Min Aso: to determine contents of US-Japan economic dialogue

(JP) Japan Defense Ministry scrambled its fighter jets after about 13 China airplanes were seen flying through Miyako Strait between Japan's southern islands of Okinawa and Miyako - Nikkei

Australia

HSBC: Iron ore prices are set for a "massive fall" - SMH

(AU) OECD: Australia housing market could "develop into a rout" - Australian press

Asian Equity Indices/Futures (00:00ET)

Nikkei -0.7%, Hang Seng -0.7%, Shanghai Composite -0.4%, ASX200 -0.8%, Kospi -1.3%

Equity Futures: S&P500 -0.3%; Nasdaq -0.3%; Dax -0.3%; FTSE100 -0.3%

FX ranges/Commodities/Fixed Income (00:00ET)

EUR 1.0500-1.0525; JPY 114.05-114.45; AUD 0.7545-0.7575; NZD 0.7030-0.7065

Apr Gold +0.1% at $1,234/oz; Apr Crude Oil +0.1% at $52.67/brl; May Copper -0.1% at $2.68/lb

GLD SPDR Gold Trust ETF daily holdings rise 1.8 tonnes to 845.3 tonnes; 2nd straight increase

(CN) PBOC SETS YUAN MID POINT AT 6.8896 V 6.8809 PRIOR; 3rd straight weaker setting; weakest Yuan setting since Feb 13th

(CN) PBOC to inject combined CNY30B v CNY30B prior in 7-day, 14-day and 28-day reverse repos

(AU) Australia MoF (AOFM) sells A$800M in 1.75% 2020 Bonds; avg yield: 2.1076%; bid-to-cover: 5.16x

(JP) BOJ To buy ¥100B in JGBs with maturity over 25-yr (down from ¥120B)

Asia equities/Notables/movers by sector

Consumer discretionary: 9983.JP Fast Retailing +2.0% (Feb Uniqlo SSS); 2685.JP Adastria Holdings Co -1.8% (Feb SSS)

Financials: 337.HK Greenland Hong Kong +3.4% (profit alert); BOQ.AU Bank of Queensland -3.1% (JPMorgan cuts rating); AFG.AU Allco Finance -2.0% (CEO steps down); MPL.AU Medibank -3.1% (Macquarie cuts rating)

Industrials: 6104.JP Toshiba Machine Co +4.9%; 1802.JP Obayashi Corp -4.3% (Credit Suisse cuts rating)

Technology: 300104.CN Leshi Internet Info & Tech Co Beijing -4.9% (easing short-term funding pressure, to exit India); 002465.CN Guangzhou Haige Communications Group Inc Co +2.9% (approval for new shares)

Materials: WGX.AU Westgold Resources -1.2% (Bell Potter cuts rating); FMG.AU Fortescue Metals Group -5.4% (iron ore price may face massive fall)

Energy: RIL.IN Reliance Industries +2.4% (Ruffer raises stake)

Healthcare: 9627.JP Ain Pharmacie -1.6% (9-month result); 4694.JP BML -3.0%, 6849.JPNihon Kohden Corp -1.7% (Jefferies cuts rating)

Telecom: NTC.AU Netcomm Wireless -6.0% (Canaccord Genuity Cuts rating)

Weekly

• Last Candlesticks pattern: Bullish engulfing
• Time of formation: 02 May 2016
• Trend bias: Up

Daily

• Last Candlesticks pattern: Hammer
• Time of formation: 19 Oct 2016
• Trend bias: Up

USD/CAD – 1.3380

The greenback found decent demand at 1.3056 and staged a much stronger-than-expected rebound, dampening our bearishness and suggesting the decline from 1.3599 has ended at 1.2969 bark in January, hence consolidation with mild upside bias is seen for further gain to 1.3450 and then towards 1.3500, however, as broad outlook remains consolidative, reckon upside would be limited to 1.3540-50 and price should falter well below resistance at 1.3599, bring further choppy trading within recent established broad range.

On the downside, whilst pullback to 1.3310-20 cannot be ruled out, reckon the lower Kumo (now at 1.3256) would limit downside and price should stay above the Kijun-Sen (now at 1.3186), bring another rise later. A daily close below the Kijun-Sen would suggest top is possibly formed, bring weakness to 1.3150-60, however, downside should be limited to 1.3100 and said support at 1.3056 should remain intact. Only a drop below 1.3056 support would revive bearishness and signal the rebound from 1.2969 has ended, then test of 1.3009 support would be seen first.

Recommendation: Stand aside for this week.

On the weekly chart, this week's rally looks set to form a long white candlestick, suggesting the fall from 1.3599 has ended at 1.2969 earlier, hence consolidation with mild upside bias is seen for further gain to 1.3400, however, said resistance at 1.3599 should hold from here, bring further consolidation. Only a break of said resistance at 1.3599 would shift risk back to upside and extend the erratic rise from 1.2461 (2016 low) to 1.3700 and later towards 1.3835-40 (61.8% Fibonacci retracement of 1.4690-1.2461) which is likely to cap upside.

On the downside, although pullback to 1.3300-10 cannot be ruled out, reckon downside would be limited to 1.3250 and bring another rebound later. A drop below the Kijun-Sen (now at 1.3211) would risk weakness to 1.3150 and possibly test of this week's low at 1.3083 but break of indicated support at 1.3056 support is needed to revive bearishness and signal the rebound from 1.2969 has ended, then test of 1.3009 support would follow, break there would signal the fall from 1.3599 has resumed for retest of 1.2969, a break of this support would extend such decline to 1.2900 but reckon support at 1.2822 would limit downside and key support at 1.2763 should hold on first testing. Looking ahead, only a drop below 1.2763 would signal the rebound from 1.2461 has ended and bring further fall to 1.2654 support first.

Global Markets:

• Asian stock markets: Nikkei down 0.60 %, Shanghai Composite lost 0.40 %, Hang Seng declined 0.65 %, ASX 200 lost 0.80 %
• Commodities: Gold at $1233 (+0.05 %), Silver at $17.78 (+0.15 %), WTI Oil at $52.70 (+0.10 %), Brent Oil at $55.15 (+0.15 %)
• Rates: US 10-year yield at 2.48, UK 10-year yield at 1.21, German 10-year yield at 0.32

News & Data:

• Japan CPI Jan (YoY): 0.4%
• Japan Services PMI Feb: 51.3 (Prior 51.9)
• Japan Composite PMI Feb: 52.2 (Prior 52.3)
• Japan Household Spending Jan (YoY): -1.2% (Prior -0.30%)
• Japan Household Confidence Feb: 43.1 (Prior 43.2)
• Japan Unemployment Rate Jan: 3.0% (Prior 3.10%)
• Japan Jobs/Applications Ratio Jan: 1.44 (Prior 1.43)
• Australia AIG Services Index Feb: 49.0 (Prior 54.5)
• PBoC Fixes USDCNY Reference Rate At 6.8896 (prev fix 6.8809)

Markets Update:

The US Dollar is showing renewed strength, as the market is clearly expecting a rate hike by the Federal Reserve this month. Several major pairs are approaching key support level. EUR/USD is nearing 1.05 again, while GBP/USD briefly broke below 1.2250 yesterday. A clear break sub-1.2250 would then signal that the downtrend could extend to 1.20. Meanwhile, USD/JPY struggled at 114.50 resistance and reversed. However, demand remains solid and decent buying interest can be expected at 113.80 and again 113.50.

After a period of low volatility, the Australian Dollar is finally moving again. The broad Dollar strength put the commodity currencies under pressure. AUD/USD broke below 0.76 yesterday and momentum selling brought it to a low of 0.7540. Important support is now seen around 0.7510/20. Should it break below that area, a test of 0.73 seems likely.

Upcoming Events:

• 07:00 GMT – German Retail Sales
• 08:45 GMT – Italian Services PMI
• 08:50 GMT – French Services PMI
• 08:55 GMT – German Services PMI
• 09:00 GMT – Euro Zone Services PMI
• 09:00 GMT – Italian GDP
• 09:30 GMT – UK Services PMI
• 10:00 GMT – Euro Zone Retail Sales
• 14:45 GMT – US Services PMI
• 15:00 GMT – US ISM Non-Manufacturing PMI
• 18:00 GMT – Fed Chair Yellen speaks

Key Points:

• Price action moving in a wave pattern.
• RSI Oscillator close to overbought levels.
• Watch for a breakdown towards the lower channel constrain in the coming days.

The USDCHF has had a fairly strong past few days as the currency pair has reacted to the rampant bullishness of the U.S. Dollar. Largely buoyed by a stronger than expected U.S. Unemployment Claims result of 223k, and announcements of stimulative fiscal policy, price action has climbed steadily higher. In fact, the last few days has seen the pair form a strongly bullish channel and seen the pair move higher in a wave formation. However, despite the near term bullishness, we could be about to see a pullback as price action looks ready to take a wave lower in the coming days.

Taking a look at the various technical indicators also highlights the current conundrum that the pair faces. Currently, price action is nearing the top of the bullish channel whilst the RSI Indicator is running out of steam and is relatively close to overbought territory. In fact, the USDCHF has been doing its best to remain below the near term resistance level at 1.0140 which suggests that the downside move is the most likely scenario in the coming days.

However, there are also some fundamental events that could forestall a short term pullback and change the current playing field. In particular, Janet Yellen is set to speak late on Friday (1800 GMT) and is highly likely to espouse a hawkish view on rates. Given the veritable PR campaign from the central bank of late, it's highly likely that the Fed Chair will want to get out in front of the market and start shaping expectations of a near term rate hike.

Ultimately, the pair has some significant technical factors that are suggesting price action will decline, in a wave formation, back towards the lower channel constraint. Subsequently, watch for the scenario where price action breaks below support at 1.0102 to signal a sharp move lower, towards the bottom of the channel. In extension, we could witness the invalidation of the lower constrain, however, the most likely scenario is a rebound from support. Subsequently, the short push is likely to be only short term in nature, before the pair returns to its bullish predilection.

Key Points:

• Oil prices should recover despite US inventories build.
• Ascending trend line should remain intact.
• EMA’s retain a bullish bias

Oil is setting up for a technical reversal in the coming sessions which might come as somewhat of a surprise given the recent plunge in the spot price to $52.52 and decline in futures of around 2.3%. Specifically, despite the US having a record inventories uptick to 520.2 million barrels, the overarching consolidation pattern should remain largely intact which means upside potential could be back on the menu.

Notably, even with the substantial selling pressure following the US data release, downsides were capped at around the 52.35 handle. This comes predominately as result of that ascending trend line which has proven to be a rather reliable source of support since OPEC began its production freeze. However, the intersection of the 61.8% Fibonacci retracement with this trend line also reinforced support to a significant degree.

As a result of this impasse, a reversal seems to be the logical next step for oil prices. Indeed, a modest recovery would be broadly in line with the daily moving average bias which remains incredibly bullish despite the near constant threat that US oil poses to OPEC’s plan to lessen the global supply glut. What’s more, a move to the upside would help to alleviate the Stochastics which are trending into oversold territory as we speak.

However, it’s worth mentioning that any rallies are almost certainly going to remain beholden to the upside constraint of the triangle formation. More precisely, the interplay of the simultaneous optimism that OPEC can buoy crude prices and the pessimism that the US and Canada can offset much of the falling output also provides a fundamental explanation for why we can expect to see price action consolidate and narrow moving forward.

Ultimately, as both technicals and fundamentals are in line, we should see a nice technical reversal as the commodity seeks to return to its developing central tendency. However, also keep an eye on any reactionary moves from OPEC and Russia who could see this latest slip as evidence that the freeze is failing as this could see the agreement begin to unravel.