Daily Pivots: (S1) 1.0508; (P) 1.0541 (R1) 1.0589; More.....

Intraday bias in EUR/USD is turned neutral again on recovery from 1.0493. 4 hour MACD also turned above signal line. Nonetheless, with 1.0678 minor resistance intact, deeper decline is expected. We're viewing fall from 1.0828 as resuming the larger down trend. Below 1.0493 will target 1.0339 low first. Break will confirm our bearish view and target parity. However, break of 1.0678 will dampen our view and turn focus back to 1.0828 resistance instead.

In the bigger picture, whole down trend from 1.6039 (2008 high) is in progress. Such down trend is expected to extend to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Dollar drifts lower in early US session after comments from US treasury secretary Steve Mnuchin. Regarding the long awaited "phenomenal" tax overhaul, Mnuchin just said that the administration is "primarily focused on a middle income tax cut and a simplification for business." He also reiterated that "any tax cuts for the wealthy getting canceled out with closed loopholes." Mnuchin is aiming to pass the reform before Congress' recess in August. However, some analysts doubt the possibility of this due to the complex agenda of Congress. Regarding the economy, he noted that Trump's administration is aiming for "sustainable growth of 3% or more". And the he's exploring 50- and 100-year debt with "very slight premium".

Regarding Dollar, Mnuchin noted that "strength of the he world, the leading reserve currency, and a reflection of the confidence that kind of people have in the U.S. economy." And, "for longer-term purposes, an appreciation of the dollar is a good thing, and I would expect longer-term, as you've seen over periods of time, the dollar does appreciatedollar has a lot to do with kind of where our economy is relative to the rest of the world, and that the dollar continues to be the leading currency in t."

Released from US, initial jobless claims rose 6k to 244k in the week ended February 18, slightly above expectation of 240k. Prior week's figure was revised down by 1k to 238k. That's the 103 straight week of sub 300k reading and suggests solid underlying strength in the job market. Continuing claims dropped 17k to 2.06m in the week ended February 11. Also from US, house price index rose 0.4% mom in December

Elsewhere, UK CBI reported sales rose to 9 in February. German Gfk consumer sentiment dropped 0.2 to 10.0 in March. German GDP was finalized at 0.4% qoq in Q4. Japan corporate service price index rose 0.5% yoy in January. Australia private capital expenditure dropped -2.1% in Q4.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0508; (P) 1.0541 (R1) 1.0589; More.....

Intraday bias in EUR/USD is turned neutral again on recovery from 1.0493. 4 hour MACD also turned above signal line. Nonetheless, with 1.0678 minor resistance intact, deeper decline is expected. We're viewing fall from 1.0828 as resuming the larger down trend. Below 1.0493 will target 1.0339 low first. Break will confirm our bearish view and target parity. However, break of 1.0678 will dampen our view and turn focus back to 1.0828 resistance instead.

In the bigger picture, whole down trend from 1.6039 (2008 high) is in progress. Such down trend is expected to extend to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Economic Indicators Update

Markets appear to be caught in limbo on Thursday, with European equities mixed and US futures pointing to a similar open on Wall Street.

The minutes from the Federal Reserve on Wednesday, which we were hoping would provide additional clarity on its interest rate expectations, instead displayed the uncertainty the central bank has about how to proceed, largely due to the unknown effects of what Donald Trump's stimulus plans will have on the economy and inflation. In effect, the Fed is as much in limbo as investors are because markets have rallied strongly at the prospect of "phenomenal" tax cuts and major spending but as of yet, nothing has been delivered.

The way markets are continuing to grind higher, it would appear investors are unwilling to go against the rally but at the same time, there's little conviction in it either. At some point, in the absence of details on Trump's tax and stimulus plans he rally may run out of steam. Hopefully Treasury Secretary Steve Mnuchin will today offer some insight into what these plans may entail in order to give investors a taste of what's to come and justify the levels we now find ourselves at.

Beyond that I think we can expect the Fed to proceed with caution and come the March meeting, if it has no details on Trump's stimulus plans it will likely wait until May or June. However, as we've seen from recent efforts, it is keen to keep March on the table because should Trump announce substantial measures, the Fed may wish to hike in March in order to avoid falling behind the curve and needing to raise at a faster pace later this year.

We'll probably get more of the same rhetoric when we hear from Robert Kaplan and Dennis Lockhart later today. Kaplan – a voting member on the FOMC – has previously kept his cards close to his chest warning that rates should rise sooner rather than later while also driving home the need to tighten gradually. We'll also get jobless claims data today as well as oil inventory data from EIA after API reported a small build on Wednesday.

USD/JPY continues to trade close to the 113 line this week. The pair has dipped on Wednesday and is trading at 112.88. On the release front, Japanese SPPI edged up to 0.5%, above the forecast of 0.4%. In the US, today's highlight is unemployment claims, with an estimate of 242 thousand. As well, Treasury Secretary Robert Mnuchin will speak at an interview with CNBC.

On Wednesday, the Federal Reserve released the minutes of its January policy meeting. However, there were no dramatic nuggets in the minutes. The Fed stated that a rate hike "fairly soon" could be appropriate in order to head off an overheated economy. The minutes indicated that Fed policymakers remain confident that the central bank will raise rates gradually, given the strong performance of the US economy. At the same time, the minutes noted uncertainty about President Trump's fiscal stimulus plan but little concern over the risk of inflation. Bottom line? Although pressure is slowly building towards a rate hike, there does not appear a sense of urgency to raise rates at the next meeting in March. According to the CME Group, the odds of a March hike are only at 17%, while the likelihood of a hike in either May or June stands above 40%.

With the Japanese yen hovering at low levels, imports have become pricier for Japanese consumers. Predictably, the response has been a drop in consumer spending. In its monthly economic report, the government lowered its assessment of consumer spending, the first downgrade in 11 months. Conversely, the weak yen has been a boom for exports, prompting the government to raise its assessment of exports for the first time in four months. The report did not change the overall assessment that the economy is recovering at a moderate clip. Japanese policymakers are concerned about the protectionist stance under President Donald Trump. Japanese Prime Minister Shinzu Abe met recently with Trump in Washington and defused a currency policy crisis. Still, Trump is unhappy with the trade balance between the two countries, so we can expect some disagreements over trade issues to arise.

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Crude oil has been down strongly yesterday but current leg up from 53.36 looks like a new impulse so resumption of a bullish trend has to be considered. That said, we labeled end of a regular flat formation in wave 2 which means that bulls may continue now above 55.00 area.

Crude OIL, 1H

Monday, Feb 20, 2017

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Tuesday, Feb 21, 2017

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Wednesday, Feb 22, 2017

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Thursday, Feb 23, 2017

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Friday, Feb 24, 2017

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EUR/USD is showing limited movement in the Thursday session. Currently, the pair is trading at 1.0540. its lowest level since January 11. On the release front, German numbers were a mixed bag. Final GDP came in at 0.4%, matching the forecast. This figure was unchanged from the Preliminary GDP gain of 0.4%. German GfK Consumer Confidence dipped to 10.0, shy of the forecast of 10.3 points. In the US, today’s highlight is unemployment claims, with an estimate of 242 thousand. As well, Treasury Secretary Robert Mnuchin will speak at an interview with CNBC.

The euro remains under pressure this week. On Wednesday, EUR/USD briefly dropped below the 1.05 line, for the first time since January 11. The euro has endured a rough February, losing 2.4% in value and wiping out the January gains. The struggling continental currency is unlikely to get a lifeline from the ECB, which recently extended its asset-purchase program until December 2017. Although the eurozone is enjoying a moderate spurt in growth and higher inflation, the central bank appears in no rush to tighten monetary policy, which would boost the euro. Analysts note that the ECB does not wish to make any dramatic moves close to crucial elections in Europe (France goes to the polls in April, followed by Germany in September). At the same time, the political turmoil in Europe is affecting investor confidence and appetite for risk. First, there was the stunning Brexit vote which has thrown Britain-EU relations into crisis mode. In France, Marine Le Pen, leader of the far-right National Front, is the front-runner in the first round and could conceivably be elected president. Le Pen wants to take France out of the eurozone and has promised a referendum on French membership in the EU. Germany’s Angela Merkel, a pillar of stability on the continent, is in a tough election fight and voters may choose change rather than hand her a fourth term in office. All of this “political risk” has made it difficult for the ECB to take action, and Mario Draghi could well choose to play it safe and stay on the sidelines for the remainder of the year.

On Wednesday, the Federal Reserve released the minutes of its January policy meeting. However, there were no dramatic nuggets in the minutes. The Fed stated that a rate hike “fairly soon” could be appropriate in order to head off an overheated economy. The minutes indicated that Fed policymakers remain confident that the central bank will raise rates gradually, given the strong performance of the US economy. At the same time, the minutes noted uncertainty about President Trump’s fiscal stimulus plan but little concern about the risk of inflation. Bottom line? Although pressure is slowly building towards a rate hike, there does not appear a sense of urgency to raise rates at the next meeting in March. According to the CME Group, the odds of a March hike are only at 17%, while the likelihood of a hike in either May or June stands above 40%.

News and Events:

Less hawkish Fed minutes confuse markets (by Arnaud Masset)

The minutes of the January FOMC meeting did not provide ground breaking information as the essence of the Fed’s message did not change since the previous meeting. Investors were left a little disappointed on reading the transcript as the minutes did not provide further clarity on the institution's thinking about the US outlook under Trump's presidency. The Committee reiterated its view that “it might be appropriate to raise the federal funds rate again fairly soon”, should the current trends in the both the labour market and inflation prove sustainable. Nothing new here. The Committee appeared concerned about the current strength of the dollar that could hamper a still fragile economic recovery.

All in all, the slight retracement of the dollar amid the release of the minutes suggests that investors are still unconvinced about a rate hike at the March meeting. In our opinion, the market is overly optimistic about the real state of the US economy. The election of Donald Trump has boosted confidence and sentiment across the board, sending equities to record levels. However, the true nature of this success has yet to reveal itself. The FX market treaded water on Thursday as market participants were still digesting the minutes. Given today’s light economic calendar, further dollar gains appear unlikely; the dollar index should continue to trade within the 101.00-50 area.

Crude prices are pushing higher on declining inventories (by Yann Quelenn)

The WTI crude oil price is still on the rise. The barrel price has gone up above $54 and is almost at its highest level in less than two years. Recent data has shown a decrease in US crude stocks due to less imports. Indeed, inventories have declined by 884k barrels when consensus expected an increase of 3.5M barrels.

There is definitely a clear trend here. The US rigs count is now topping at 751 which is 46% higher than during the same week last year when it was at 597. It is the fifth consecutive straight week. Moreover, markets seem more optimistic since the OPEC confirmed that the output production deal was on track.

We should not forget that it is a plan of the United States to become energetically independent and that the shale gas industry will certainly benefit from upcoming protectionist measures. Trump seems to try to deliver what he promised, which will have a strong impact on crude oil prices.

We target the WTI to reach $60 within the next few months.

Today's Key Issues (time in GMT):

• 4Q Industry & Construction Output WDA YoY, last 1,10%, rev 1,00% CHF / 08:15
• 4Q Industrial Output WDA YoY, last 0,40%, rev 0,20% CHF / 08:15
• 4Q Total No. of Employees YoY, last 2,50% SEK / 08:30
• ECB's Praet Speaks in London EUR / 08:55
• Dec Retail Sales MoM, exp 0,20%, last -0,70% EUR / 09:00
• Dec Retail Sales YoY, exp 0,90%, last 0,80% EUR / 09:00
• Jan PPI MoM, exp 1,00%, last 0,50% ZAR / 09:30
• Jan PPI YoY, exp 6,60%, last 7,10% ZAR / 09:30
• Bundesbank Press Conference on Financial Accounts EUR / 10:00
• Feb 22 FGV CPI IPC-S, exp 0,41%, last 0,49% BRL / 11:00
• Feb FGV Inflation IGPM MoM, exp 0,01%, last 0,64% BRL / 11:00
• Feb FGV Inflation IGPM YoY, exp 5,30%, last 6,65% BRL / 11:00
• Feb CBI Retailing Reported Sales, exp 4, last -8 GBP / 11:00
• Feb CBI Total Dist. Reported Sales, exp 24, last 26 GBP / 11:00
• ECB's Praet Speaks in London EUR / 11:00
• Feb 17 Foreigners Net Bond Invest, last -$262m TRY / 11:30
• Feb 17 Foreigners Net Stock Invest, last $121m TRY / 11:30
• ECB's Praet Speaks in London EUR / 13:00
• Jan Outstanding Loans MoM, last 0,10% BRL / 13:30
• Jan Total Outstanding Loans, last 3107b, rev 3106b BRL / 13:30
• Jan Personal Loan Default Rate, last 6,00% BRL / 13:30
• Jan Chicago Fed Nat Activity Index, exp 0, last 0,14 USD / 13:30
• Feb 18 Initial Jobless Claims, exp 240k, last 239k USD / 13:30
• Feb 11 Continuing Claims, exp 2068k, last 2076k USD / 13:30
• Fed's Lockhart to Speak on His 10-Year Tenure at the Fed USD / 13:35
• 4Q House Price Purchase Index QoQ, last 1,50% USD / 14:00
• Dec FHFA House Price Index MoM, exp 0,50%, last 0,50% USD / 14:00
• Feb 19 Bloomberg Consumer Comfort, last 48,1 USD / 14:45
• Feb Kansas City Fed Manf. Activity, exp 9, last 9 USD / 16:00
• Feb 17 DOE U.S. Crude Oil Inventories, exp 3250k, last 9527k USD / 16:00
• Feb 17 DOE Cushing OK Crude Inventory, exp -50k, last -702k USD / 16:00
• Jan Central Govt Budget Balance, exp 7.9b, last -60.1b BRL / 17:30
• Fed's Kaplan Speaks in Fort Worth USD / 18:00
• Feb Consumer Confidence, last 93,3 KRW / 21:00
• RBA's Lowe Testifies to Parliament Committee in Sydney AUD / 22:30
• Jan Formal Job Creation Total, exp -35149, last -462366 BRL / 23:00

The Risk Today:

EUR/USD is back below 1.0600. Hourly resistance is given at 1.0679 (16/02/2017 high) while hourly support can be found at 1.0521 (15/02/2017 low). The technical structure suggests that the current underlying move is a bearish consolidation. In the longer term, the death cross late October indicated a further bearish bias. The pair has broken key support given at 1.0458 (16/03/2015 low). Key resistance holds at 1.1714 (24/08/2015 high). Expected to head towards parity.

GBP/USD has exited symmetrical triangle. However, the pair is still lying below strong resistance given at 1.2771 (05/10/2016 high). Key support is given at 1.2254 (19/01/2016 low) while hourly support is given around 1.2400. The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY's demand is fading after its increase from support given at 111.36 (28/11/2016 low). Bearish pressures arise around hourly resistance given at 115.62 (19/01/2016 high). The technical structure suggests further weakness around former resistance given at 112.57 (17/01/2017 low). We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

USD/CHF's short-term bullish momentum is definitely bullish. The pair lies within an uptrend channel. Hourly resistance is implied by upper bound of the uptrend channel. Key resistance is given at a distance at 1.0344 (15/12/2016 high). We believe that the pair is likely to strengthen again above parity. In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.

Yesterday's fresh attempt above 0.7700 barrier was positive signal, as price continues to hold at the upper side of 0.7600/0.7700 congestion.

Overnight's dip on weaker than expected Australian data was so far contained, with 0.7700 pivot being attacked again on bounce.

Bullishly aligned near-term studies are supportive, along with daily MA's in firm bullish setup.

Rising daily 10SMA offers immediate support at 0.7678, followed by 20SMA that underpins the action and currently lies at 0.7645.

Caution on break of latter, as RSI / slow stochastic bearish divergence continues to weigh.

Stronger signal of pullback seen on break below 0.7600 handle that would risk fresh easing towards 200SMA (0.7509).

Sustained break above 0.7700 barrier and fresh high at 0.7730 (16 Feb high), to signal bullish continuation and expose key short-term barrier at 0.7776 (08 Nov peak).

Res: 0.7712, 0.7730, 0.7755, 0.7776
Sup: 0.7663, 0.7645, 0.7600, 0.7504