Daily Pivots: (S1) 113.23; (P) 113.50; (R1) 113.94; More...

Intraday bias in USD/JPY remains neutral for the moment as it's bounded in range of 111.58/114.94. Corrective fall from 118.65 could extend lower through 111.58. But we'd still expect strong support from 38.2% retracement of 98.97 to 118.65 at 111.13 to contain downside and bring rebound. On the upside, above 114.94 resistance should confirm completion of pull back from 118.65. In such case, intraday bias will be turned back to the upside for retesting 118.65.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance. Rejection from 125.85 and below will extend the consolidation with another falling leg before up trend resumption.

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Daily Pivots: (S1) 0.7652; (P) 0.7671; (R1) 0.7693; More...

Intraday bias in AUD/USD remains neutral for the moment. Another rise cannot be ruled out with 0.7605 minor support intact. However, considering bearish divergence condition in 4 hour MACD, we'd expect strong resistance from 0.7777/7833 resistance zone to limit upside and bring near term reversal. On the downside, break of 0.7605 support will indicate that rise from 0.7158 has completed already and turn bias back to the downside for 55 day EMA (now at 0.7544) first.

In the bigger picture, we're still treating price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seek to 55 month EMA (now at 0.8186) and above.

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Daily Pivots: (S1) 1.3106; (P) 1.3135; (R1) 1.3172; More...

USD/CAD's recovery lost momentum ahead of 1.3211 resistance and retreated. The pair is still bounded in range of 1.2968/3211 and intraday bias remains neutral. On the upside, break of 1.3211 resistance will argue that fall from 1.3598 has completed at 1.2968. And more importantly, rise from 1.2460 is still in progress. In that case, intraday bias will be turned back to the upside for 1.3598 and above. On the downside, below 1.2968 will revive the case that rise from 1.2460 is completed and turn outlook bearish for this low. Overall, choppy rise from 1.2460 is still seen as a corrective move.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. The second leg could be completed at 1.3598 and fall from there is tentatively seen as the third leg. Break of 1.2460 will target 50% retracement of 0.9460 to 1.4689 at 1.2075 before completing the correction. In case of another rise, we'd look for reversal signal above 61.8% retracement of 1.4689 to 1.2460 at 1.3838.

US indices closed at new record highs again as led by defense and energy sectors. In particular, WTI crude oil surged to as high as 54.68 and is showing sign of range breakout. That helped lift DJIA up 118.95 or 0.58% to close at 20743.00. S&P 500 gained 14.22 pts or 0.60% to close at 2365.38. NASDAQ also rose 27.37 pts or 0.47% to close at 5865.95. Dollar index was lifted by hawkish comments from Fed officials and reached as high as 101.60. However, the index lost momentum ahead of 101.76 near term resistance. Strength in the greenback was limited by lackluster performance in treasury yields. 10 year yield hit as high as 2.461 but pared back nearly all gains to close at 2.427, just up 0.002. Range trading in treasury yield would likely limit momentum in the greenback. Market's focus will turn to FOMC minutes while continue the day after day waiting for Donald Trump's announcement on tax reforms and other fiscal policies.

FOMC minutes to be a non-event

The minutes of January 31 - February 1 FOMC meeting will catch most attention today. Some economists expected the minutes to show that policy markers were getting more comfortable on inflation outlook. That is, as the FOMC statement noted, "inflation will rise to 2 percent over the medium term." But other than that, the minutes could provide little new information. In particular, some FOMC members have openly noted that fiscal policies, due to the lack of details, were not taken into account in their decisions and projections. Today's FOMC minutes release could turn out to be a non-event. Markets would probably have more reactions to comments from Fed governor Jerome Powell. Currently Fed fund futures are pricing in 22.1% chance of a March hike and 74.8% chance of a hike by June.

German Ifo a focus in European session

Elsewhere, Australia Westpac leading index rose 0.0% mom in January. Wage cost index rose 0.5% qoq in Q4 while construction work done dropped -0.2%. German Ifo business climate will be a focus in European session. UK will release Q4 GDP revision, Swiss to release ZEW expectations and Eurozone will release CPI final. Later in the day, Canada will release retail sales while US will release existing home sales.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3106; (P) 1.3135; (R1) 1.3172; More...

USD/CAD's recovery lost momentum ahead of 1.3211 resistance and retreated. The pair is still bounded in range of 1.2968/3211 and intraday bias remains neutral. On the upside, break of 1.3211 resistance will argue that fall from 1.3598 has completed at 1.2968. And more importantly, rise from 1.2460 is still in progress. In that case, intraday bias will be turned back to the upside for 1.3598 and above. On the downside, below 1.2968 will revive the case that rise from 1.2460 is completed and turn outlook bearish for this low. Overall, choppy rise from 1.2460 is still seen as a corrective move.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. The second leg could be completed at 1.3598 and fall from there is tentatively seen as the third leg. Break of 1.2460 will target 50% retracement of 0.9460 to 1.4689 at 1.2075 before completing the correction. In case of another rise, we'd look for reversal signal above 61.8% retracement of 1.4689 to 1.2460 at 1.3838.

Economic Indicators Update

STOCKS

The stocks have risen sharply and look bullish for the near term.

Dow (20743.00, +0.58%) has risen sharply and looking at the current momentum, a pause near 20800 looks less likely. A break above 20800 may help the index to extend the current rally towards 21000 in the coming sessions.

Dax (11967.49, +1.18%) has finally moved up after being stuck in the 11677-11930 zone for quite some time. While the rally continues we may see a test of 12100 in the near term.

Nikkei (19344.25, -0.19%) is not able to break above 19600 just now and continues to trade in the broad 19600-19000 region. Resistance near 19600-19620 levels could hold for some more time.

Shanghai (3249.73, -0.11%) looks bullish on the weekly charts and could eventually move up towards 3300-3400 in the longer run. A pause near 3300 is possible before moving higher towards 3400. Trend is up for the medium term.

Nifty (8907.85, +0.32%) has seen sharp rally since the beginning of the year and could test crucial resistance just below 9000 levels over the next couple of sessions. Thereafter a sharp fall towards 8700 could be expected in the medium term. We need to keep a close watch on the price action near 8950-8980 region.

COMMODITIES

Gold (1238) is trading within its sideways channel between 1217-47 with no directional bias. Gold-WTI ratio is also falling and currently at 22.58.

Silver (18.01) is also trading within its previous range of 17.60-18.35 with an immediate resistance at 18.03.

Brent (56.90) and WTI (54.06) both are trading within their respective ranges of 54-59 and 50-56. A close above 57.20(Brent) and 54.40(WTI) could open up higher levels.

Copper (2.74) is hovering around its pivot of 2.76 of its recent trading range of 2.60-83.It is still holding its upward trend line support at 2.68 since October 16. A close above 2.76 could open up its resistance of 2.83.

FOREX

The markets are waiting for the minutes of the last Fed meeting to be released tonight, possibly giving the investors a peek into Trump policies through the eyes of the governors.

Dollar Index (101.28) has corrected from 101.60, close to the upper end of the near term range 100.40-101.70 and now may move according to the Fed minutes coming out tonight. If it fails to rise above 101.70-90 tonight, then the chances of spending the rest of the week in the range of 100.40-101.70 may increase.

Euro (1.0548) retested the previous week low near 1.0520 and took a pause. The upside looks limited to 1.0580-90 in the near term with the lower targets of 1.0500-1.0450 still in play. EURGBP (0.8437) may decline to the major support near 0.83 soon to complete a bearish Head & Shoulders pattern and a break below 0.83 may trigger much deeper downside.

Pound (1.25007) is trying to resolve the range of 1.2375-1.2525 to the upside but it still requires a firm break above 1.2525 to rise further towards 1.2700.

Dollar-Yen (113.40) is consolidating its recent gains made in the last 2 days but may rise to 114.80-115.00 in the coming sessions.

Aussie (0.7692) is stuck in the very narrow range of 0.7650-0.7700 for the last 3 sessions but a break above 0.7700 may take it to a fresh high near the major resistance of 0.7750-0.7800 where it may create a top. On the other hand, a break below 0.7650 right now may open up lower targets of 0.7500. Wait and watch.

Dollar Rupee (66.92) tested the immediate support of 66.90 below which the major support band of 66.70-50 come into play while 67.15-20 can be tested again if 66.90 holds. It remains to be seen in the opening hour today if 66.90 holds or breaks. Bias neutral at this point.

INTEREST RATES

Overall the yields are stable but could face resistances above current levels which could hold in the medium term.

The German-US 2Yr (-2.09%) has fallen further from levels near -2.07% seen yesterday. We could possibly see a bounce from levels near -2.11% indicating that the fall in Euro could be limited just now. Overall the spread has been showing close relation with the Euro and could be a good indicator for near term movements in the Euro. (Refer to FOREX section above)

The US yields are almost stable and could possibly come off in the near term.

The Japanese yields are have started falling slightly and could see some more fall in the near term.

USDJPY - The pair triggered a recovery higher on Monday and followed through on Tuesday leaving risk further higher. On the downside, support comes in at the 113.00 level where a break if seen will aim at the 112.50 level. A cut through here will turn focus to the 112.00 level and possibly lower towards the 111.50 level. On the upside, resistance resides at the 114.00 level. Further out, we envisage a possible move towards the 114.50 level. Further out, resistance resides at the 115.00 level with a turn above here aiming at the 115.50 level. On the whole, USDJPY looks to extend its upside pressure.

Forever Fickle

US equity investors returned from the Presidents day holiday in a very bubbly mood as both the S&P 500 and Dow Industrials closed in on record territory again.

The dollar put in a wily rally yesterday as the dollar bulls, like their US equity counterparts, put on their happy face after returning from the US long weekend. These markets are very fickle, as last week the dollar could not hold a bid after Yellen's hawkish comments as well as the stellar US economic data, yet it turns on a dime after the Fed's Philadelphia President Patrick Harker mentioned that a March rate hike was still on the table. It is all a bit bewildering, but nonetheless a sign that the market is desperately searching for an opinion while lacking any serious conviction.

I suppose we could make the argument that the March probability is well underpriced, but I suspect it has more to do with the markets storyline shift to a more concerted focus on all things Fed; more so with the plethora of Fed-speak on tap later today, ahead of Thursday's FOMC meeting minutes. If the FOMC has any real intention of guiding the market above a 60% probability for a March liftoff, now would be the time to show their cards. While my market radar is telling me to beware of the dollar bull trap, the stage is indeed set for the Feds to come out firing on all cylinders this week, so it would be wise to tread cautiously until the airwaves clear.

Australian Dollar

The RBA minutes came and went with much ado about nothing. The Aussie dollar momentum was engulfed by a broader US dollar bid, but AUD continued to perform well in the crosses.

After all was said and done, we are back to yesterday levels as traders remain on ‘Lowe' watch. The Aussie bulls are not giving up on the Governor leaning a bit hawkish during his Friday speech, so the Aussie has remained bid on dips overnight.

Oil support was also evident in the commodity block. While we have seen this move before, headlines from OPEC Secretary General Barkindo suggest that there's a solid buy in and a chance of more production cuts to come. Also, he indicated that he expected greater compliance from Non-OPEC producers while adding that oil was not at the equilibrium price yet. All in all, a fairly impressive move higher on WTI prices.

Japanese Yen

I think we see a classic case of pre-Fed Speak and FOMC minutes jitters. We saw this play out before with recent USD bull runs running into serious resistance at the 114.50-115 zone. Some traders are heading for the outside chance the Feds will wax hawkish. However, if history tells us anything about this sitting Fed, they are more likely to obfuscate than flip the rate hike switch early.

While the Feds are grabbing headlines this week, EU politics are still a major play, and the threat of a French election risk aversion will likely cap USDJPY topside momentum in the absence of any definitive economic policy moves from the US administration.

While GBP/USD swiftly bounced from it's brief foray below $1.20, price has once again been capped by the range that you can clearly see in the daily chart below:

GBP/USD Daily:

The upper level of the range is definitely acting as resistance and the way it held again back in the first week of February puts Cable in play for shorts. Just keep in mind that it's a 700 pip range and we're already 250 pips off the highs. If that's too close to the middle and not playing the edges for you, then fair enough.

But as always, I would then look to zoom into an intraday chart and find an area of short term support turned resistance to manage risk around. …But there really isn't any level that is jumping out of the screen telling me I have to short.

GBP/USD Hourly:

This level on the hourly is all I can come up with, and I actually don't like it at all. It's one of those textbook levels that is just too good to be true and always ends up being chopped through.

It all depends how much weight you put on that higher time frame resistance level having held as to whether you short/add to existing shorts from here. There are still clear risk parameters off that HTF level, but for me there's not much else.

Daily Pivots: (S1) 1.0011; (P) 1.0027; (R1) 1.0044; More.....

USD/CHF surges sharply today but stays below 1.0118 temporary top. Intraday bias remains neutral first. Near term outlook stays cautiously bullish as long as 0.9929 minor support holds. Fall from 1.0342 could have finished at 0.9860 already. Above 1.0118 will turn bias back to the upside for retesting 1.0342. However, break of 0.9929 will likely extend the decline from 1.0342 through 0.9860 low.

In the bigger picture, prior rejection from 1.0327 resistance argues that USD/CHF is staying in a medium term sideway pattern. In any case, decisive break of 1.0342 resistance is needed to confirm underlying strength. Otherwise, we'll stay neutral in the pair first. In case of another fall, we'd expect strong support from 0.9443/9548 support zone. Meanwhile firm break of 1.0342 will target 38.2% retracement of 1.8305 to 0.7065 at 1.1359.

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Daily Pivots: (S1) 1.2359; (P) 1.2434; (R1) 1.2482; More...

GBP/USD is still bounded in range of 1.2346/2705 and intraday bias remains neutral. Price actions from 1.1946 are viewed as a consolidation pattern, with rise from 1.1986 as the third leg. In case of another rise, we'd expect upside to be limited by 1.2774 to bring larger down trend resumption. On the downside, below 1.2346 will revive the case that such consolidation is completed at 1.2705 already. In that case, intraday bias will turn back to the downside for retesting 1.1946 low.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There is no sign of medium term bottoming yet. Sustained trading below 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 will target 100% projection at 0.9532. Overall, break of 1.3444 resistance is needed to confirm medium term bottoming. Otherwise, outlook will remain bearish.

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