Sunrise Market Commentary

• Rates: Implied probability of March rate hike hits 50%
  US Treasuries sold off after European trading after voting FOMC member Kaplan said that the Fed should hike rates sooner rather than later which means in the near future. Odds of a March rate hike hit 50% for the first time. Today, investors will probably take a wait-and-see approach ahead of President Trump's speech in Congress.
• Currencies: USD still in a limbo, even as Fed rate expectations rise
  The dollar struggles to move away from short-term lows even as markets discount a rising probability of a Fed rate hike. EUR/USD is holding in the 1.06 area. USD/JPY struggles not to drift back lower in the established trading range. Will Trump's statement be convincing enough to support Fed rate hike expectations and trigger renewed USD buying?

The Sunrise Headlines

• US equities ended marginally higher going into today's key Trump speech before Congress. Overnight, the majority of Asian stock markets also trades with minor gains.
• President Trump, in an address to Congress tonight, will call for a $20B boost in current military spending and sharp cuts in other programs, and insist on raising budget caps that call for future cuts to defence outlays.
• Industrial output in Japan staged an unexpected reversal in January (-0.8% M/M) and contracted for the first time in six months. Japanese retail sales (0.5% M/M) returned to growth in January giving the best result since November.
• Australia boasted the smallest current account deficit in 15 years last quarter as booming resource exports delivered a whopping turnaround of A$8 billion to the nation's finances, boosting company profits and economic growth.
• Dallas Fed Kaplan reiterated his view that policy makers should raise interest rates “sooner rather than later”, which “means in the near future”, and without paying excessive attention to market expectations.
• The odds that the Fed will lift rates at its next meeting hit 50% in an indication that there is an increasing likelihood the central bank will tighten policy next month, according to calculations on federal funds futures by Bloomberg.
• Today's eco calendar heats up in the US with the second reading of Q4 2016 GDP, trade balance, Chicago PMI, consumer confidence and Richmond Fed manufacturing index. US President Trump addresses Congress.

Currencies: USD Still In A Limbo, Even As Fed Rate Expectations Rise

Dollar stays soft even as Fed rate expectations rise

On Monday, investors kept mostly side-lined ahead of the testimony of US president Trump before Congress today. Investor caution initially held the dollar near the recent lows. Later in US dealings, a rise in US yields reinstalled a cautious USD bid. The release of some details on Trump's budget plans and comments from Fed Kaplan probably caused this bid. Whatever the reason, EUR/USD dropped from 1.06+ levels and closed the session at 1.0587. USD./JPY finished the day at 112.70 (after trading in the low 112 area for most of the day).

Overnight, Asian equities basically stay in wait-and see modus and are divided between small gains and limited losses. Japanese eco data were mixed (retail data) to soft (production), but had no lasting negative impact on the yen. USD trading still faces conflicting signals. Futures are discounting a 50 % of a March Fed rate hike. Still, investors are uncertain whether Trump will provide enough details to continue to reflation trade. The dollar is trading off the overnight highs against the yen and, to a lesser extent, against the euro. USD/JPY is again trading in the 112.50 area. EUR/USD changes hands just below 1.06.

Today, the US eco calendar is well filled, but probably only of moderate importance for markets. US Q4 GDP is expected to be upgraded to 2.1% from 1.9%, a small change and outdated. The Chicago PMI dropped sharply in January. A rebound to 53 is expected. For the Richmond Fed business sentiment, a small decline is expected. These business sentiment surveys fall a bit short with other surveys (NY/Philly Fed, Kansas). Even so, they won't really change the broader picture ahead of the key ISM confidence tomorrow. Consumer confidence (Conference board) is expected to have declined from 111.8 to 111, still a very high level. Markets will also keep a close eye at the price indicators of the surveys. In globo, US eco data shouldn't question the continuation of the reflation trade or the scenario of a Fed rate hike in the near future. In theory that should help to put a floor for the dollar. Of course, the focus for markets will remain on Trump's appearance before Congress. For US yields and for the dollar, we look out whether Trump's message will be strong/convincing enough to keep the probability of a March rate hike at 50% (or higher). Of late, investors reduced USD longs. So, there is probably room for some USD buying on dips if Trump gives a reasonable prospect on a pro-growth policy.

Global context. The dollar corrected lower since the start of January as the reflation trade slowed down. Two weeks ago, the dollar bottomed out, supported by Trump's tax promise. Underlying euro weakness due to political uncertainty in the area is a factor too. We see 1.0874 as solid resistance and favour a sell EUR/USD on upticks approach. 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. Recent Fed comments were USD supportive, but had no lasting impact on yields. We keep a USD positive bias longer term, as the dollar might still get additional interest support if the Fed continues its normalisation process. For now, the momentum of USD/EUR is more convincing than in USD/JPY.

EUR/USD looking for clear guidance as markets await Trump

EUR/GBP

EUR/GBP still going nowhere near 0.85 barrier

Yesterday, sterling traded with a slightly negative bias, as press headlines indicating that the UK government is preparing a strategy to handle a new referendum on Scottish independence. A spokesman of PM May said that there was no need for a new Scottish referendum. EUR/GBP initially gained some further ground on the broader rebound of EUR/USD, but the rally stalled later in US dealings. EUR/GBP closed the session at 0.8509. Cable basically hovered sideways in the 1.24 big figure to close the session at 1.2442.

Overnight, the Lloyds business Barometer remained strong at 40, but was as usual ignored. No further eco data today. End of month repositioning might be slightly supportive for EUR/GBP. The EUR/USD trend will remain important. In the House of lords a detailed review of the Article 50 bill continues. Markets will keep an eye on any headwinds for the PM May's Brexit strategy, but we assume that the impact on sterling will be limited. Earlier last week, the (temporary) acceleration of the euro sell-off pushed EUR/GBP to the 0.84 area. However, a sustained break lower didn't occur. As is the case for EUR/USD (and for several other markets), there is currently no clear driver for sterling trading. Longer term, we have a sterling negative view, as the Brexit will negatively impact the UK economy. A sustained break below 0.8450 opens the way for a return to the 0.8304 correction low. We maintain a neutral bias on sterling short-term.

EUR/GBP: drifting higher from the recent lows, but to sustained trend.

Download entire Sunrise Market Commentary

Today, the market spotlight will be on the US, where President Trump will address a joint session of Congress. This speech is widely anticipated by market participants, primarily because Trump indicated a few weeks ago that he is going to announce a "phenomenal" tax plan soon, and this looks like the perfect occasion to do so. However, following his latest comments on Monday, we think that investors looking for concrete details on tax reform may be sorely disappointed. He stated that his administration's first budget will not include tax changes, and that his tax plan details will be released only after he develops a proposal to replace Obamacare. That does not mean this Congressional address is going to pass unnoticed though. He also said that his speech will include a "big" statement on infrastructure spending, something that has the potential to prove a market mover for both the dollar and US equities. Some clarity on the issue of government spending, such as the potential size and/or timeline of any massive infrastructure plan, could cause the dollar to regain some of its lost glamour as the themes of fiscal expansion and reflation come back into play.

USD/JPY rose yesterday following Trump's remarks that he is going to announce something "big" today, breaking above the resistance (now turned into support) level of 112.40 (S1). Then, the pair found fresh sell orders near the crossroad of the 113.00 (R1) resistance territory and a short-term downtrend line taken from the highs of the 15th of February, and subsequently, it retreated somewhat. During the early European morning Tuesday, the price looks to be headed for another test near 112.40 (S1) as a support this time. In case Trump's comments deliver some clarity regarding the government's future spending plans, the rate could surge. A clear break above the 113.00 (R1) resistance barrier could initially aim for the 113.50 (R2) zone.

On the other hand, a more vague speech that does not include clear details or numbers around infrastructure spending, could lead to downside correction in the greenback. In such a case, an initial break in USD/JPY below the 112.00 (S2) support hurdle, could set the stage for further downside correction towards the 111.60 (S3) level.

Another point of interest for investors, may be any specifics regarding the prospect of a one-time repatriation of corporate cash held abroad at a discounted 10% tax rate, a central theme of the President's campaign. A confirmation of that could boost the dollar as well.

Today's highlights

During the European day, there is not much on the economic calendar. The most noteworthy indicators we get will be Sweden's GDP for Q4 and retail sales for January. GDP growth is forecast to have accelerated from the previous quarter, while retail sales are expected to have rebounded on a monthly basis. Such prints would probably be pleasant news for the Riksbank, and could diminish somewhat the likelihood for any further easing, at least in the near-term. Something like that could reverse some of SEK's recent losses.

With regards to the US data, we get the 2nd estimate of Q4 GDP. Expectations are for economic growth to have been revised upwards, albeit slightly. This would likely be encouraging news for FOMC policymakers, who in their February policy statement noted that economic activity continued to expand at a moderate pace. Sustained strength in US economic data could bring forth market expectations regarding the timing of the next Fed hike, and thereby support the dollar somewhat, though the main market focus will be on Trump's speech. EUR/USD surged yesterday, breaking above the 1.0600 (R1) barrier and a short-term downtrend line taken from the 6th of February. Then the rate hit resistance near the 1.0630 (R2) hurdle and pulled back below the 1.0600 (R1) territory and the aforementioned downtrend line. In case of an upward GDP revision today and optimistic comments from President Trump, the latest pullback in the pair may continue. If the bears manage to overcome the 1.0550 (S1) support, we could see further declines towards the psychological 1.0500 (S2) area. We also get the Chicago PMI and the Conference Board consumer confidence index for February, as well as the S&P/Case-Shiller house price index for December, though none of these indicators is usually a major market mover.

As for the speakers, prior to his Congressional address, US President Trump will also appear in a televised interview. Besides Trump, we have one more speaker scheduled for today: San Francisco Fed President John Williams.

Currency markets are moving in a relative tight range early Tuesday, as traders prefer to sit on the sidelines andrefrain from taking any big bets ahead of the U.S. President's Congressional address later today in what seems to be the key market driver for the week.

Whether the risk play which sent U.S. stocks to record highs and the U.S. dollar to a 14-year high early in January will resume depends mostly on his tax agenda.

Trump's promise of a 'phenomenal' tax plan on February 9 should be translated into more details for markets not to be disappointed. For equity traders, proposed corporatetax cuts to 20% from the current 35% will be key for stocks to continue moving higher.Meanwhile,the dollar will likely move more on signals of implementing border-adjustment tax. Although border-adjustment tax seems protectionist by nature and many fear it may lead to a trade war; it remains to be the biggest source of government revenues if implemented, and thus the dollar will benefit from it.

Expectations are very high on delivering some concrete plans this timeand if President Trumpfailsto do so, many investors will beready to push the sell button.

From the monetary perspective, fed officials seem to be achieving what they're aiming for, which ismaking markets accept the fact that a rate hike might come as soon as March. According to Bloomberg's interest rate probability tool, chances of a rate hike increased to 50% from 34% a week ago, however CME's Fedwatch tool is indicating only a 31% chance of a rate increase and this explains why the dollar didn't respond strongly.

On the data front, U.S. Q4 GDP is expected to be revised slightly higher to 2.1% from the previous reading of 1.9%, while trade deficit is expected to widen to $66 billion. Chicago's PMI and the Consumer Sentiment Index are also scheduled for release today but given the big event later today, expect economic datato have little or no impact on markets.

Market movers today

Donald Trump's speech to Congress today will be monitored closely, as a few weeks ago he promised that he would announce ‘something phenomenal in terms of tax'. His speech has potential ramifications across both rates, FX and commodity markets.

In the Scandies, we will see Danish Q4 preliminary GDP growth today. In mid-February, Statistics Denmark's GDP indicator showed healthy growth of 0.4% q/q. Swedish Q4 GDP data is also on the calendar for today. We estimate an outcome around or a little above 2% y/y in calendar-adjusted terms.

Selected market news

Overnight, industrial production figures in Japan were published. In January, industrial production fell 0.8% m/m, while consensus was for it to grow 0.4% m/m. That ends a five-month streak of increases. Although one should not over interpret one observation, it does point to slow growing evidence that the global industrial cycle could be nearing a peak.

Yesterday, US President Trump said he would talk about his budget in his address to congress later today. Earlier he has said he would announce something spectacular in terms of taxes. In a series of tweets he hinted further that he would also address the issue of public infrastructure spending. His speech today could potentially have implications across markets. A big announcement on fiscal policy could refuel the reflation theme, which has lost a bit of momentum recently. If that includes spending on infrastructure, it is likely to have ramifications for base metal prices. Finally, if he mentions a border adjustment tax it would have implications for USD. Markets are likely to be hesitant ahead of the speech tonight.

There has been some speculation over whether Scotland would be allowed a second referendum on independence following a UK withdrawal of EU membership. Yesterday, UK Prime Minister Theresa May was clear there should be no second referendum. Nevertheless, the renewed speculation of an independence vote weighed on GBP yesterday.

Iran expressed some satisfaction with overall OPEC compliance to cuts implemented from 1 January. Furthermore, Iran said it is too soon to talk about extending a deal to cut oil output in the second half this year. Iran thus seems to join the apparent consensus within OPEC, hesitant over the prospect of extending output cuts another six months.

Currency pair EUR/USD

The EUR/USD is building a WXY correction (blue/green) within wave 2 (purple) unless price breaks above the 100% level of wave 2 vs 1 (purple) which invalidates the wave structure. The Fibonacci retracement (purple) levels are potential bouncing spot and reversal levels.

The EUR/USD is building an ABC (blue) zigzag correction unless price breaks below the 100% level of wave B vs A (invalidation).

Currency pair GBP/USD

The GBP/USD is still stuck in a larger triangle pattern with support (blue) and resistance (dark red) nearby. A bearish breakout below support (blue) could see price start a wave 3 (green).

The GBP/USD is building an ABC (orange) zigzag correction unless price breaks below the 100% level of wave B vs A (invalidation).

Currency pair USD/JPY

The USD/JPY probably completed an ABC (brown) zigzag correction within a wave 2 (blue) pullback. A break below the bottom of wave 1 (blue line) invalidates the wave structure. A break above resistance (orange line) could indicate that the correction is finished.

The USD/JPY respected the 88.6% Fibonacci retracement level of wave 2. A break above resistance (orange line) could indicate a potential bullish breakout as part of waves 3 (brown/blue).

Australia Current Account hints at stronger Q4 GDP

Asia Mid-Session Market Update: Japan industrial output contracts; Australia Current Account hints at stronger Q4 GDP

US Session Highlights

(US) Jan Building Permits revised higher from 1.285M to 1.293M

(US) JAN PRELIMINARY DURABLE GOODS ORDERS: 1.8% V 1.7%E; DURABLES EX-TRANSPORTATION: -0.2% V +0.5%E

(US) President Trump: defense budget increases will be offset by savings elsewhere; tomorrow's address will have big statement on infrastructure spending

(US) JAN PENDING HOME SALES M/M: -2.8% V +1.0%E; Y/Y: +2.7% V -2.0% PRIOR (falls to one-year low)

(US) White House spokesperson: budget plan to request $54B increase in defense spending; will look for corresponding cuts across other agencies - press

(US) FEB DALLAS FED MANUFACTURING ACTIVITY: 24.5 V 19.4E

US markets on close: Dow +0.1%, S&P500 +0.1%, Nasdaq +0.3%

Best Sector in S&P500: Energy

Worst Sector in S&P500: Telecom

Biggest gainers: ILMN +4.3%, SWN +3.5%, TGNA +3.5%, REGN +3.3%, JWN +3.3%

Biggest losers: AES -6.6%, NEM -5.9%, NRG -4.0%, MDLZ -3.6%, HBI -3.4%

At the close: VIX 12.1 (+0.6pts); Treasuries: 2-yr 1.20% (+4bps), 10-yr 2.37% (+5bp), 30-yr 2.99% (+3bps)

US movers afterhours

NTRI: Reports Q4 $0.29 v $0.22e, R$108.9M v $100Me; Guides Q1 GAAP $0.14-0.19 v $0.10e, R$202-207M v $180Me; EBITDA $11.6-13.6M; +17.9% afterhours

SBY: To be Acquired by Tricon Capital Group Inc. in $1.4B in All-Cash Transaction, or $21.50/shr; +16.9% afterhours

KND: Reports Q4 $0.08 v $0.06e, R$1.75B v $1.73Be; Guides initial FY17 $0.55 v $0.43e, R$7.1-7.3B v $6.8Be, EBITDAR $910-950M; +5.1% afterhours

PCLN: Reports Q4 $13.47 v $13.06e, R$2.35B v $2.33Be; +3.3% afterhours

HTZ: Reports Q4 -$0.71 v -$0.54e, R$2.01B v $2.03Be; +2.0% afterhours

WDAY: Reports Q4 $0.07 v -$0.01e, R$436.7M v $430Me; Guides initial FY18 R$2.01-2.03B v $1.99Be; -2.1% afterhours

FTR: Reports Q4 -$0.12 v -$0.03e, R$2.41B v $2.50Be; approves stock split; Guides initial FY17 Capex $1-1.25B, ~ unch y/y; -8.5% afterhours

PRGO: Reports FY16 $5.6B v $5.44Be; To divest Tysabri royalty stream to Royalty Pharma in $2.9B deal; Guides FY17 adj $7.10-7.25 v $7.21e, R$5-5.2B v $5.51Be; -10.7% afterhours

FRGI: Reports Q4 $0.27 v $0.27e, R$171.3M v $176Me; Halts strategic alternatives search; -13.3% afterhours

THC: Reports Q4 $0.06 v $0.20e, R$4.86B v $4.97Be; Guides Q1 -$0.60 to -$0.45 v $0.45e, R$4.75-4.95B v $4.95Be, adj EBITDA $475-525M; -14.3% afterhours

Politics

(US) Wilbur Ross confirmed as US Commerce Sec by US Senate in 72-27 vote - press

(US) Former US Ambassador to China Jon Huntsman said to be in talks to become No 2 official at the State Dept - press

Asia Key economic data:

(JP) JAPAN JAN RETAIL SALES M/M: 0.5% V 0.3%E; RETAIL TRADE Y/Y: 1.0% (3rd straight increase) V 1.0%E

(JP) JAPAN JAN PRELIMINARY INDUSTRIAL PRODUCTION M/M: -0.8% (biggest decline since May 2016, first decline in 6 months) V +0.4%E; Y/Y: 3.2% V 4.3%E

(JP) JAPAN JAN VEHICLE PRODUCTION Y/Y: 3.8% V 4.2% PRIOR

(AU) AUSTRALIA Q4 CURRENT ACCOUNT BALANCE (A$): -3.9B V -4.0BE; NET EXPORTS OF GDP: 0.2% V 0.2%E

(AU) AUSTRALIA JAN HIA NEW HOME SALES M/M: -2.2% (First decline in 3 months) V +0.2% PRIOR

(AU) AUSTRALIA JAN PRIVATE SECTOR CREDIT M/M:0.2% V 0.5%E; Y/Y: 5.4% V 5.6%E

(NZ) NEW ZEALAND JAN TRADE BALANCE (NZ$): -285M V -25ME (7th straight deficit)

(NZ) NEW ZEALAND FEB ANZ ACTIVITY OUTLOOK: 37.2 (5-month low) V 39.6 PRIOR; BUSINESS CONFIDENCE: 16.6 (5-month low) V 21.7 PRIOR

Asia Session Notable Observations, Speakers and Press

Asian indices traded mixed after consecutive down days, with funds flowing out of Treasuries and seeking riskier assets. Nikkei is outperforming as USD/JPY broke a string of 3 straight down days with a rally. Reversals in Treasuries and the greenback are construed as technically driven, with all eyes on President Trump's first speech to a joint session of Congress on Tuesday night and hopes of more concrete outline of promised tax cuts and infrastructure spending initiatives.

Also due out tomorrow is Australia's Q4 GDP, and analysts are increasingly more upbeat following today's narrower than expected current account deficit as well as anticipated rise in Exports % of GDP component. This follows strong corporate profits data overnight and mixed CapEx figures last week, leading some analysts to revises their growth targets slightly higher.

Japan industrial output surprised with its first sequential decline in 6 months. While METI raises its Feb forecast to 3.5% m/m v 0.8%, March is seen contracting again at -0.5% as JPY remains stubbornly stronger in the first two months of the year.

China's Vice Premier Yang took a more conciliatory tone ahead of Trump's address tomorrow, calling for Beijing to maintain non-confrontational principle with the US despite the recent press reports of both sides boosting their military spending. Overnight, a PBoC official also called for monetary policy to be more neutral, as China govt looks ahead to Trump's address and any further mention of Beijing being the "grand champion" Of currency manipulation.

Asian Equity Indices/Futures (00:30ET)

Nikkei +0.6%, Hang Seng -0.1%, Shanghai Composite +0.2%, ASX200 -0.2%, Kospi +0.3%

Equity Futures: S&P500 flat; Nasdaq flat; Dax +0.1%; FTSE100 +0.1%

FX ranges/Commodities/Fixed Income (00:30ET)

EUR 1.0570-1.0595; JPY 112.45-112.80; AUD 0.7665-0.7690; NZD 0.7175-0.7195

Apr Gold -0.4% at $1,254/oz; Apr Crude Oil +0.3% at $54.20/brl; May Copper flat at $2.69/lb

(CN) PBOC SETS YUAN MID POINT AT 6.8750 V 6.8814 PRIOR

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

(JP) Japan MoF sells ¥2.09T v ¥2.3T indicated in 2-yr 0.1% JGBs; Avg yield: -0.252% v -0.173% prior; bid to cover: 3.93x (lowest since Sept 29) v 5.19x prior

Asia equities/Notables/movers by sector

Consumer discretionary: HVN.AU Harvey Norman +0.3% (H1 result); MBE.AU Mobile Embrace -9.0% (H1 result); VTG.AU Vita Group +7.1% (H1 result)

Financials: 1233.HK Times Property Holdings +6.6%, 388.HK Hong Kong Exchanges & Clearing -0.9% (FY16 result); SPO.AU Spotless -13.7% (guidance); EGH.AU Eureka Group Holdings -14.0% (H1 result)

Industrials: WOR.AU Worley Parsons +30.2% (receives proposal); 7013.JP IHI Corp +3.6% (booked gain); CDD.AU Cardno +11.9% (Morgans Financial raises rating)

Technology: 018260.KR Samsung SDS Co Ltd -1.9% (momentum)

Materials: RSG.AU Resolute Mining -12.8% (H1 result); FMG.AU Fortescue -0.3% (no interest in Wesfarmers coal assets); ORE.AU Orocobre -14.6% (H1 result)

Energy: AWE.AU AWE +3.2% (H1 result)

Healthcare: CAJ.AU Capitol Health -6.1% (H1 result)

Telecom: SDA.AU SpeedCast International -6.0% (FY16 result)

Daily Pivots: (S1) 139.37; (P) 139.86; (R1) 140.73; More...

GBP/JPY is still bounded in range of 138.53/142.79 and intraday bias remains neutral for the moment. Overall, price actions from 148.42 are seen as a corrective pattern. Below 138.53 will bring deeper fall, possibly through 136.44 support. But strong support could be seen at 50% retracement of 122.36 to 148.42 at 135.39 to bring rebound. Above 142.79 will turn bias back to the upside for 144.77 and above.

In the bigger picture, price actions from 122.36 medium term bottom are still seen as a corrective pattern. Main focus is on 38.2% retracement of 195.86 to 122.36 at 150.42. Rejection from there will turn the cross into medium term sideway pattern with a test on 122.36 low next. Though, sustained break of 150.42 will extend the rebound towards 61.8% retracement at 167.78.

Daily Pivots: (S1) 118.54; (P) 119.00; (R1) 119.75; More...

Intraday bias in EUR/JPY is turned neutral with the current recovery. At this point, we're slightly favoring the bearish case that whole rebound from 109.20 has completed at 124.08 already. Sustained trading below 118.45 cluster support (38.2% retracement of 109.20 to 124.08 at 118.39) will confirm. In such case, EUR/JPY should target 61.8% retracement at 114.88 and below. On the upside, though, break of 119.85 minor resistance will indicate short term bottoming and turn bias back to the upside for 121.32 resistance instead.

In the bigger picture, price actions from 109.20 medium term bottom are seen as part of a medium term corrective pattern from 149.76. Current development argues that it's completed at 124.08, ahead of 126.09 key resistance level. Deeper fall would be seen back to 109.20 low. Break there will extend the whole medium term down trend from 149.76 high.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Daily Pivots: (S1) 1.3732; (P) 1.3774; (R1) 1.3836; More...

Intraday bias in EUR/AUD remains neutral for the moment. At this point, we'd still expect strong support from 1.3671 to contain downside to complete the correction from 1.6587. This is supported by bullish convergence condition in 4 hour MACD. Break of 1.3900 resistance will confirm short term bottoming and turn bias back to the upside for 1.4289 resistance. However, sustained break of 1.3671 will invalidate our view.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. We'd expect strong support from 1.3671 key level to contain downside and bring rebound. Up trend from 1.1602 should not be finished and will resume later. Break of 1.4721 resistance will indicate completion of such correction and turn outlook bullish for retesting 1.6587 high. However, sustained break of 1.3671 will invalidate our bullish view and would turn focus back to 1.1602 long term bottom.

Daily Pivots: (S1) 0.8465; (P) 0.8502; (R1) 0.8544; More...

EUR/GBP is staying in corrective trading above 0.8402 and intraday bias remains neutral at this point. With 0.8590 resistance intact, we're holding on to our bearish view. That is, fall from 0.8851 is the third leg of the whole corrective pattern from 0.9304. Below 0.8402 will turn bias to the downside for 0.8303 first. Break will confirm our bearish view and target 0.8116 key cluster support level. However, on the upside, break of 0.8590 resistance will dampen our view and turn bias back to the upside.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. Deeper fall cannot be ruled out yet. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside. Overall, the corrective pattern would take some time to complete before long term up trend resumes at a later stage. Break of 0.9304 will pave the way to 0.9799 (2008 high).