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The Aussie remains within short-term congestion, shaped in three consecutive weekly long-legged Dojis, unable so far to clearly break higher, despite repeated probes above pivotal 0.7700 barrier. However, overall bullish structure remains intact, with price action being supported by rising 20SMA (currently at 0.7659) that keep alive hopes of renewed attack at recent highs at 0.7730/39 and possible stretch toward target at 0.7776 (08 Nov high). The pair is awaiting Wednesday's release of Australian Q4 GDP data, which could boost the pair on release at/above forecasts. Meantime, extended consolidation is expected to hold above 20SMA and prevent deeper dips that would expose next strong support at 0.7600 higher base.

Res: 0.7687, 0.7700, 0.7739, 0.7758
Sup: 0.7659, 0.7624, 0.7600, 0.7575

Strong bearish acceleration from 113.76 (21 Feb lower top) extended to 111.90 today and hit the base of rising daily cloud.

Strong bearish setup of daily studies pressures the pair for final push towards key short-term supports at 111.60 (06/09 Feb base/2017 lows) and 111.36 (weekly cloud top) in extension.

Near –term price action may show hesitation before firm break below daily cloud base (reinforced by rising 100SMA), with recovery attempts expected to remain below falling hourly cloud (spanned between 112.86 and 113.08).

Res: 112.59, 112.86, 113.08, 113.42
Sup: 111.90, 111.60, 111.36, 111.00

Pound extended last Friday's fall in Asian session today and cracked strong support at 1.2400 (converged 55/100SMA's), after Thursday's strong rally was capped by Fibo 61.8% barrier at 1.2567.

Fresh weakness came on renewed talks about Scotland's independence referendum, with investors also focusing on Tuesday's speech of US President Donald Trump for more clues about expected tax reform.

Near-term focus has turned lower again, with daily cloud top (1.2379) being under pressure.

Daily technical studies are returning to bearish setup that increases risk of further weakness.

Close below 55/100 SMA is seen as initial trigger for fresh extension lower, with break below next set of pivotal supports at 1.2379 (daily cloud top) and 1.2345 (weekly Tenkan-sen), needed to confirm bearish scenario.

Meantime, consolidation above 1.2400 handle should stay capped by daily Tenkan-sen at 1.2475, to keep negative sentiment in play.

Alternative scenario requires break and close above 1.2475 barrier for renewed attempts at upper breakpoints at 1.2567/80.

Res: 1.2433, 1.2457, 1.2475, 1.2500
Sup: 1.2400, 1.2379, 1.2345, 1.2300

The Euro is at the back foot in early Monday's trading and is holding around daily cloud base at 1.0557, following strong bearish acceleration and close below converged 10/55SMA's after last Friday's strong upside rejection.

Daily 55SMA (currently at 1.0587) marks strong barrier (10/55SMA bear cross is forming here) and capped the action in past five days.

Firm break below daily cloud base would generate stronger bearish signal, with completion of H&S pattern that is forming on hourly chart (neckline lies at 1.0545), needed to confirm resumption of fresh weakness from 1.0617 upside rejection (Friday's high) and look for return to 1.0492 (22 Feb low).

Bearishly aligned daily studies support scenario.

Conversely, break and close above 10/55SMA's would signal fresh strength and focus 20 SMA barrier at 1.0649.

Res: 1.0587, 1.0649, 1.0678, 1.0694
Sup: 1.0557, 1.0545, 1.0522, 1.0492

The British pound tumbled during the Asian morning Monday, following media reports over the weekend regarding Brexit and immigration control, as well as the prospect of a second Scottish independence referendum. Firstly, according to the Telegraph, PM May is expected to announce that EU citizens who travel to Britain after the triggering of Article 50 in March will no longer have the automatic right to stay in the UK permanently. This is a significant development because prior to this, the UK was expected to keep the free movement of people principle intact until it exited the EU in roughly two years. In our view, the fact that PM May wants to take full control of Britain's borders as soon as when the exit negotiations begin, confirms that the government's top priority is immigration and not access to the single market, and enhances our view that we may be headed for a "hard Brexit". The other story over the weekend that may have weighed further on sterling was that the Scottish National Party raised the issue of a second Scottish independence referendum at a private meeting with May's administration last week. Although this prospect is not new, the report added that according to government sources May could agree to a new Scottish vote, but on condition it is held after the UK departs from the EU.

Coming on top of Q4 GDP data showing falling business investment and a BoE that appears to be in absolutely no rush to raise rates, these fresh signals of a "hard Brexit" and the risk of another Scottish referendum amplify our view that the broader outlook for GBP remains negative. What's more, given the uncertainty surrounding fiscal policy in the US, we would avoid exploiting GBP weakness through Cable. Instead, our favorite proxy for any potential sterling softness in the foreseeable future is still GBP/JPY, considering that the looming political risks in Eurozone could strengthen the yen due to its safe haven status.

GBP/JPY traded lower on Friday to break below the support (now turned into resistance) territory of 140.00 (R1) and the upside support line drawn from the low of the 16th of January. The rate slid further during the Asian morning Monday, before finding fresh buy orders marginally above the 138.90 (S1) area and subsequently rebounding somewhat. The fact that the rate has exited a triangle formation to the downside confirms that the short-term outlook of the pair is negative. As such, even though the latest rebound may continue for a while and perhaps test the 140.00 level (R1) as a resistance, we would expect the bears to take control again at some point and push the price lower for another test at 138.90 (S1). A clear break below that zone could set the stage for further declines towards the 138.50 (S2) territory.

Today's highlights

During the European day, the data calendar is very light. The only noteworthy indicator we get is Eurozone's final consumer confidence index for February.

In the US, durable goods orders for January are due to be released. The forecast is for the headline rate to have rebounded from previously, while the core figure is expected to have risen for the 5th consecutive month, indicating that despite some softness in civilian aircraft orders, the underlying trend in durable goods continues to be to the upside. The case for solid durable goods orders is supported by the nation's ISM manufacturing PMI for the month, where the new orders sub-index, already at an elevated level, rose for the 5th straight month. Something like that could bring USD under renewed buying interest.
EUR/USD traded lower on Friday, falling below the support (now turned into resistance) barrier of 1.0600 (R1). Given that the pair has resumed its downfall after testing as a resistance a short-term downtrend line taken from the highs of the 6th of February, we believe that the short-term bias remains negative. Strong US durable goods orders today could be the catalyst for further declines, perhaps for an initial test of our 1.0530 (S1) support level. Nevertheless, with not much else on the economic calendar today and with investors focus being on Trump's address (see below), we would expect any declines to stay more or less limited near the 1.0500 (S2) psychological barrier.

We have only one speaker scheduled for today: Dallas Fed President Robert Kaplan.

As for the rest of the week

On Tuesday, the highlight of the day will be US President Trump's address to a joint session of Congress. Following Trump's recent pledge that he is going to announce a "phenomenal" plan on tax reform within the next weeks, market participants will be on the edge of their seats for any details regarding the new administration's fiscal plans. As for the US data, we get the 2nd estimate of Q4 GDP.

On Wednesday the Bank of Canada rate decision will take center stage. The forecast is for the Bank to remain on hold. In such a case, market focus will quickly turn to the statement accompanying the decision for any forward guidance, as there is no press conference by Governor Poloz. Given the progress in economic data since the latest BoC meeting, the tone of the statement could remain neutral overall. As for the economic data, we get Australia's GDP for Q4, Germany's preliminary CPI for February, and the UK's manufacturing PMI for the same month. What's more, we get personal income and spending data for January from the US, as well as the core PCE price index for that month.

On Thursday, Eurozone's preliminary CPI for February and Canada's GDP data for Q4 are coming out.

On Friday, during the Asian morning, we get Japan's CPI figures for January. During the rest of the day, we get the UK services PMI for February, and from the US, the ISM non-manufacturing PMI for the same month.

'At 1.06 versus the U.S. dollar, the euro is undervalued.' - Mark Haefele, UBS Wealth Management (based on Bloomberg)

Pair's Outlook

The common European currency started the week higher against the US Dollar than the Friday's closing price. With a new week the new levels of significance have been calculated, and the weekly PP at 1.0562 began to provide support to the currency exchange rate. As a result of the before mentioned facts, the currency pair began a surge. The Euro is set to surge up to the closest notable resistance level at 1.0591, which is represented by the 55-day SMA. The simple moving average is likely to hinder the pair's surge, if not even reverse it.

Traders' Sentiment

SWFX traders have decreased their bullish sentiment, as 52% of open positions are long on Monday, compared to 54% on Friday. Meanwhile, 61% of trader set up orders are set to sell the Euro.

'The GBP slides this morning against all major currencies after the Times reports that UK Prime Minister Theresa May is preparing for Scotland to potentially call an independence referendum in March to coincide with triggering of Article 50. The referendum may be allowed but only after the UK leaves the EU.' – Nordea Markets (based on PoundSterlingLive)

Pair's Outlook

Friday ended with the Cable erased most of that week's gains, with the bearish momentum persisting through the weekend. The main gauge of such bearish developments were concerns over another possible Scottish independence referendum; Brexit turmoil keeps weighing on the Pound. The GBP/USD pair still faces a tough demand cluster around 1.24, which is expected to limit the losses as it has done through all of February so far. A close below 1.2380 could lead to the Sterling slumping back to 1.20, with political factors driving this weakness. However, a close above still brings hope for a potential recovery towards at least 1.27.

Traders' Sentiment

There are 60% of traders holding long positions today, while 53% of all pending orders are to sell the British Pound.

'Our basic stance is that the correction in the USD/JPY will halt at ¥110-115, but we should be paying closer attention to downside risk at least for the short term.' – Deutsche Bank (based on FXStreet)

Pair's Outlook

The less favourable for the US Dollar scenario prevailed on Friday, causing the pair to edge lower once again. Nevertheless, the USD/JPY pair managed to retain its position above the 112.00 handle, which in turn is supported by the 100-day SMA, the lower Bollinger band and the weekly S1, while the 111.75 mark also acts as a tough psychological support. Consequently, another bearish development is unlikely, despite technical indicators suggesting so. The Greenback could easily reach the 113.00 level today, should the fundamentals provide a sufficient boost later during the day; however, disappointing data could still cause a downside reaction.

Traders' Sentiment

Market sentiment remains bullish, now at 61% (previously 54%). Meanwhile, the portion of buy orders edged down from 67 to 59%.

'The biggest driver of gold has been the relatively weak U.S. dollar.' – Jiang Shu, Shandong Gold Group (based on Reuters)

Pair's Outlook

During the last trading session the yellow metal stopped the jump, which was the result of a breakout out of a triangle pattern. The surge stopped at the 1,260 level, where the 200-day SMA was and still is located at. As a result with a new week a decline has begun, and the bullion's price is set to decline to the 1,248.96 level, where the 50.00% Fibonacci retracement level is located at. In addition, the Fibo is also supported by the newly calculated weekly PP, which is located at the 1,247.55 level.

Traders' Sentiment

Traders remain long on the metal, as 54% of SWFX open positions are long. In addition, 61% of trader set up orders are set up to buy the bullion.

'Markedly weakening consumer fundamentals, likely mounting caution over making major spending decisions, and elevated house price to earnings ratios are likely to weigh down on house prices.' - Howard Archer, HIS Markit

Official data released on Friday revealed that the number of mortgage approvals in the United Kingdom jumped to a 12-month high in January. The British Bankers' Association reported mortgage approvals rose to 44,657 in January, compared with December's 43,581 reading. The reported month's figure was the highest since January a year ago, when mortgage approvals climbed to 45,794. Furthermore, the BBA reported its gross mortgage borrowing surged 6.3% year-over-year to £13.8B in January, while net mortgage borrowing was 2.4% higher in the same month in 2015. In addition, remortgaging approvals grew nearly 16%, being mainly influenced by record-low interest rates in the UK. Moreover, the unsecured consumer borrowing increased to an annually adjusted rate of 6.7% in spite of weaker retail sales. Consumer credit growth remained mainly driven by an increase in personal loans amid slowdown in credit card loans.

Overall, the Bank of England is likely to observe closely tendencies of borrowing more as household income is set to terminate growth this year.