Weekly

• Last Candlesticks pattern: Shooting star
• Time of formation: 5 Sep 2016
• Trend bias: Down

Daily

• Last Candlesticks pattern: Shooting star
• Time of formation: 8 Sep 2016
• Trend bias: Down

As aussie has retreated after marginal rise to 0.7741, suggesting consolidation below this level would be seen and pullback to 0.7606-18 support area is likely, however, still reckon downside would be limited to support at 0.7512 and bring another rise later, above said resistance at 0.7741 would extend gain to previous chart resistance at 0.7778, however, a break above there is needed to retain bullishness and signal early erratic upmove from 0.6827 (2016 low) has resumed for retest of 0.7835 (2016 high) first. Looking ahead, once this level is penetrated, this would encourage for headway to 0.7890-00 but upside should be limited to 0.7950.

On the downside, although initial pullback to 0.7610-15 cannot be ruled out, reckon downside would be limited to support at 0.7512 and bring another rise later. A daily close below the upper Kumo (now at 0.7452) would abort and suggest top is formed instead, bring weakness to 0.7390-00 and possibly towards 0.7350 but reckon 0.7300-10 would remain intact, bring rebound later.

Recommendation: Buy at 0.7515 for 0.7715 with stop below 0.7415.

On the weekly chart, as aussie has continued trading a firm undertone after staging a strong rebound from 0.7158, suggesting further gain towards resistance at 0.7778 cannot be ruled out, however, as broad outlook remains consolidative, reckon upside would be limited and price should falter below 2016 high at 0.7835. Looking ahead, only above this level would suggest an upside break of recent established broad range has occurred, bring further subsequent rise towards 0.7900.

On the downside, although initial pullback to 0.7600 cannot be ruled out, reckon minor support at 0.7512 would limit downside and bring another rise later. A weekly close below the Kijun-Sen (now at 0.7468) would abort and suggest top is possibly formed, bring weakness to the Tenkan-Sen (now at 0.7427), break there would add credence to this view, bring subsequent weakness to the lower Kumo (now at 0.7331) but break of 0.7285-90 support is needed to signal the rebound from 0.7158 has ended and bring further decline to 0.7200-10, then towards strong support area at 0.7145-58.

EUR/USD

Current level - 10553

The second failure at 1.0630 resistance signals a reversal and the bias is negative, for a slide towards 1.0493, en route to 1.0450. Initial intraday resistance lies at 1.0580.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 113.50

Yesterday's downswing to 111.67 was the final leg of the downtrend from 114.95 and the outlook is bullish, for a break through 113.80, en route to 115.+ area. Key intraday support lies at 112.80.

GBP/USD

Current level - 1.2364

The support zone around 1.2380 has been cleared and the outlook is bearish, for a slide towards 1.2240. Initial intraday resistance lies at 1.2400, followed by the crucial high at 1.2467.

The eyes of the world have been hooked on President Trump overnight as he delivered his first speech to congress. There was an element of surprise for viewers because Trump actually appeared Presidential during his speech, following what has been quite a rough first 40 days in office.

While the US markets slipped lower and there was still no real clarity provided towards how Trump will implement his campaign promises, the shift in tone from the US President was more guided towards how he publically appeared after winning the election back in November where he soothed investor's nerves with messages around the need for partnership and peace. Nevertheless, the undertone of "America First, And Always" was still very much present but the US President was at least not just pushing his far-right agenda on this occasion.

I believe that the USD should now strengthen over the near-term, not because of President Trump's speech but because Federal Reserve officials are providing ongoing clues to the market that a possible interest rate rise in March is not something to completely rule out of the equation. While the markets might not have been pricing in a US interest rate rise this month, US economic data is maintaining its consistent strength and the Federal Reserve is maintaining its public intention towards raising US interest rates around three times in 2017.

Basically my opinion is that the markets will now begin to shift focus away from Trump slightly, and more importantly begin to price in the possibility that the Federal Reserve could pull the trigger in March.

Gold slipping from its highs

Gold has continued its weakness early Wednesday morning and if this momentum continues, it looks like the precious metal will enter a three-day losing streak. The main catalyst for the near three-month high seen late last week was due to investors hedging against political risk, but I believe that Gold is at risk to further losses as investors begin to price in at least the possibility that the Federal Reserve could pull the trigger and raise interest rates this month.

Investors need to be aware to the risks that Federal Reserve officials do appear to be preparing the financial markets for another US interest rate rise fairly soon, even if it does not occur as early as March.

GBPUSD still at risk

While it might appear like the GBPUSD is attempting to consolidate after suffering three days of successive losses, there are still risks ahead for the British Pound and it wouldn't surprise me if the Cable dipped even lower.

When it comes to the technicals, I am going to keep my eye out for whether the GBPUSD closes below 1.2350 in trading today because this would be seen as a possible signal that the Pound is at risk to falling back towards 1.20.

From a fundamental basis, the impending delivery of Article 50 from Theresa May and the reemergence of a Scottish Referendum round 2 threat later in the future does favour a negative outlook for the Pound.

Australia avoids recession!

Australia has managed to continue its remarkable run of 25 years recession free after it was confirmed early this morning that the Australian economy has not slipped into a recession.

The AUDUSD has popped higher on the news, but I still feel that the Australian currency is likely to surrender some more of its gains over the past couple of weeks.

India GDP reading exceeds expectations

This might not have been viewed as the most critical data release of the week by any means, but the GDP reading from India has defied expectations with the economy growing at 7%. Although this represents a slowdown from the previous level at 7.4%, it has defied the forecast just below 6.5% and counters the fears that the controversial note ban from the government last year was going to derail the outstanding economic progress that India has made over the past couple of years.

Perhaps it will take more time and there will be a bit of a lag before it can really be analysed what impact the completely unexpected, and controversial decision to withdrawal highdenomination banknotes as part of an anti-corruption drive is going to have on the Indian economy.

Overnight, President Trump delivered his joint address to Congress. Overall, the speech gave an overview of Trump's accomplishment so far and what he wants to focus on throughout his presidency and thus the speech included little new information. The speech was not only about economics but also about crime, immigration, border control and Obamacare.

From a market perspective, it was most interesting to hear what Trump had to say on his tax reform and infrastructure, as we have not had much new information since his election victory. However, as somewhat expected, the speech was scant on details on his economic policy. Trump repeated that he is working on a 'historic tax reform', which will lower taxes significantly for both corporates and persons. He also hinted that the US needs to fix its taxation of imports and exports without being specific about whether we should expect border adjustment taxation (as suggested by Paul Ryan) or old-style tariffs.

On infrastructure, Trump said the time has come for 'a new program of national building' and that he will ask 'Congress to approve legislation that produces a $1 trillion investment in the infrastructure of the United States'.

In the speech, Trump also said that he believes in free but fair trade. Yesterday, we wrote that there is a risk that the US will take protectionist measures against WTO rules and a new story on Reuters supports this. The story says that the US administration is looking to simply ignore WTO rules going forward, as the US is only 'subject to laws and regulations made by the US government'.

On foreign policy, Trump repeated that the US 'strongly supports NATO' but that member countries 'must meet their financial obligations'.

In a recent interview, Treasury Secretary Steven Mnuchin said that the administration hopes to see the economic plan passed before Congress' August recess but that it is an ambitious deadline and it could easily slip further into the year. He also said that he expects the biggest growth impact from next year, supporting our long-held view.

While the market reaction after Trump's speech was fairly muted as expected, markets reacted to hawkish Fed comments by Williams and Dudley before the speech sending US yields higher and EUR/USD lower. Dudley (voter, dovish) said that the case for tightening has become 'a lot more compelling' and that the 'risks to the outlook are now starting to tilt to the upside'. Williams (non-voter, neutral) said that he expects the Fed to consider a March hike seriously. Both were on the hawkish side compared to the minutes, which signalled that only 'a few' FOMC members seem ready to hike already in March. This only makes Janet Yellen's speech on Friday more interesting, as we have had mixed signals from the Fed recently. Our base case is still that the Fed skips March. Markets now price in a March hike by nearly 70%, a May hike by nearly 85% and 1.3 hikes are priced in by June.

'The strong Swiss franc is still a challenge for a very large number of companies.' - Swissmem (based on Investing.com)

Data released on Tuesday revealed that the Swiss KOF leading indicator surged markedly over the month of February, pointing to better-than-expected growth in the country's economy. The KOF Swiss Economic Institute reported the KOF index added 5.2 points in February, which is strongly above its long-term average, jumping to 107.2 from an upwardly revised reading of 102.0 registered in the preceding month. The upmove was mainly driven by the positive trend established in the manufacturing and hospitality sectors coupled with favourable signals from the financial, exporting and construction industries. Furthermore, the KOF said that the upgraded sentiment in manufacturing came mainly from paper, textile, architects and machine-building sectors, whilst other industries posted almost no change over the observed period. Apart from that, the report revealed the KOF had also revised upwards its confidence in the country's manufacturing on the back of generally more optimistic assessment of incoming orders along with a positive outlook for production and employment. Overall, the KOF report suggested that the Swiss economy should expand at an above-average growth pace in the months to come.

"The marked improvement in the survey evidence recently suggests that growth will continue at a decent pace in the first half of this year too." - Paul Ashworth, Capital Economics

The US economy grew less than expected in December quarter even in spite of higher consumer spending observed in the reported period. Figures released on Tuesday showed the US economy grew at an annualised pace of 1.9% in the Q4, following a strong 3.5% reading registered in the preceding quarter and falling behind analysts' expectations for a 2.1% rise. In the report, the Commerce Department highlighted that the economic growth was mainly boosted by consumer spending that was revised to 3.0% from 2.5% reported previously. With household spending accounting for no less than 70% of the American economic activity, analysts around the world remained optimistic on the overall growth in the country in the months ahead. Furthermore, the report revealed that the surge in purchases by consumers in the final quarter of 2016 was mainly driven by higher sales of new cars and trucks. Apart from that, Americans were seen to have spent more on health care. On balance, inventory investment was revised down to $46.2B from $48.7B, while spending on equipment rose a more modest 1.9% instead of 3.1% originally estimated. Moreover, there were changes in trade figures, with imports climbing 8.5% along with a sharp 4.0% decline in observed in exports.

'Trump made no suggestions on how he would pay for his plans.' – Bloomberg

Pair's Outlook

The common European currency opened Wednesday's trading against the US Dollar near the 1.0575 level. However, during the first hours of the day's trading the rate moved lower, and passed the closest support level before a large range without any level of significance. Due to that fact the currency exchange rate positioned itself for a major fall, as the closest support was at the 1.0491 level, where the weekly S1 located at. It is likely that the rate will fall to this support soon, and there it will be stopped for at least a while, as the lower Bollinger band is closing in to support the weekly S1.

Traders' Sentiment

SWFX traders still have not changed their opinion regarding the pair, as 52% of open positions remain long. Meanwhile, 61% of trader set up orders are to sell the Euro.

'On top of soft data from the UK recently ... these fresh signals of a 'hard Brexit' and the risk of another Scottish referendum, enhances our view that the broader outlook for sterling remains negative.' – IronFX (based on Business Recorder)

Pair's Outlook

Buck's strength caused the Cable to slide further down, breaching the strong demand cluster at 1.24. From this point on more, more bearish momentum is likely to follow, as the 55-day SMA pierced the 100-day one on Monday, providing a signal to sell the Pound. The breach of the key support cluster also indicates that the Sterling could relatively soon retest the 1.20 mark. A drop that low is yet to occur, but today trade is expected to close circa 1.2320, while being supported by the weekly S2 slightly lower. Meanwhile, technical indicators retain mixed signals, unable to confirm the possibility of the negative outcome.

Traders' Sentiment

Bulls gave in again, as they now take up 59% of the market, compared to 60% on Tuesday. At the same time, the portion of orders to sell the British currency increased from 49 to 57%.

'I think the Fed will get a green light [to raise rates] unless a very bad [U.S.] jobs data comes out next week.' – Yukio Ishizuki, Daiwa Securities (based on Reuters)

Pair's Outlook

Trump's speech yesterday boosted the US Dollar, causing the USD/JPY currency pair to recover from its intraday low of 111.75. However, the Buck was unable to post solid gains against the Yen, thus, the down-trend remains preserved. Following yesterday's events, the Greenback is likely to retain its strength and continue outperforming the Japanese currency. The closest resistance is located around 113.15, formed by the 20-day SMA, the bearish trend-line and the weekly R1, which should technically limit the gains. A breach of this area would open the door for a surge to the cluster circa 114.50, namely the upper border of the bears six-week consolidation trend.

Traders' Sentiment

Today two thirds (66%) of all open positions are long, compared to 65% yesterday. The share of buy orders inched up from 48 to 55%

'There were no new policy announcements there and a lot of it is already built into the U.S. dollar.' - Jeffrey Halley, OANDA (based on Reuters)

Pair's Outlook

During the early hours of Wednesday's trading session the yellow metal was in its third consecutive session of losses, as the bullion's price retreated below the 1,250 mark and it even had touched the 1,242.42 level. Gold is likely to fall until it reaches the support provided by the uptrend line, which has been pushing the commodity price higher since December 21. On Wednesday the line's support was located at 1,240.14 level. However, if that support is passed, the metal will face a strong support cluster, which begins at 1,236.39.

Traders' Sentiment

Traders have not changed their opinion, as 53% of open positions remain long on Wednesday. Meanwhile, 61% of trader set up orders are to buy the bullion.