Overnight, the RBA released the minutes from its February policy meeting. The tone of these minutes was little changed from the statement accompanying the decision, as it echoed similar upbeat comments with regards to the domestic economy. The Bank judged that the negative GDP growth print in Q3 was only temporary, and that despite the downtick in the underlying CPI rate for Q4, the actual figure was more or less in line with the RBA's own forecasts. As for the AUD, the officials did not appear particularly worried with regards to its recent appreciation. The only new comment on the Aussie was that it has strengthened over the past two months, but that was mainly due to rising commodity prices. Given that these minutes simply confirmed much of what we already learned from the statement, the reaction in the Aussie was limited at the release. AUD/USD traded somewhat lower after it hit resistance near the 0.7690 (R1) level. Nevertheless, the rate is still trading above the uptrend line taken from the low of the 13th of January, which keeps the short-term outlook positive. A break above 0.7690 (R1) is possible to open the way for another test near the 0.7730 (R2) barrier, marked by the peak of the 16th of February. For now though, given the negative divergence between our short-term oscillators and the price action, we remain skeptical that further correction could be looming. If the bears manage to push the rate below 0.7650 (S1), then we may experience extensions towards the key support of 0.7600 (S2).

Looking ahead with regards to the Aussie, we see the case for the currency to remain somewhat supported in the foreseeable future. The RBA has shown little appetite for further easing lately, and has shifted to a neutral stance. At the same time, iron ore prices have surged in the past months, something likely to continue to support Australia's commodity-oriented economy. What's more, the fact that Australia's yields are still among the most competitive within the G10, could be another factor that drives flows into AUD. However, we prefer to avoid the USD as a counterpart. Instead, EUR appears a much better play considering that Eurozone's political uncertainties have started to escalate (see below).

French election poll shows Le Pen gaining ground

A new poll on the French presidential election showed a narrowing gap between the two main candidates, Emmanuel Macron and Marine Le Pen. The new poll confirmed that Le Pen is likely to crush her main rivals in the first round of the election, and while she is still expected to lose the second round, the gap between her and Macron is shrinking. Even though the reaction in the euro was not major at the release of this poll, the fact that media headlines have begun to focus increasingly more on this election is important, in our view. We think that incoming polls showing Le Pen gaining even more ground against her main rivals are likely to weigh on the common currency, as investors price in higher risk of European disintegration. EUR/USD edged south and fell 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 the prior upside support line taken from the low of the 16th of January, we believe that the near-term bias remains negative. A clear dip below 1.0560 (S1) is possible to open the way for another test near the 1.0500 (S2) support area.

Any negative reaction in EUR though could be more clearly visible against safe haven currencies, such as JPY and CHF, which may attract safe-haven flows as political uncertainty mounts. That said, we prefer EUR/JPY over EUR/CHF as a proxy for further euro weakness, considering that the SNB remains active in the FX market in order prevent the franc from appreciating materially.

Today is a PMI day

During the European day, we get the preliminary manufacturing and services PMIs for February from several European nations and the Eurozone as a whole. Expectations are for most indices to have declined, albeit marginally. In January, the bloc's composite PMI survey was very optimistic on all economic fronts, indicating strong employment growth, intensifying inflationary pressures, and a relatively robust pace of economic growth. Even though a tick down in February's index may hurt the euro somewhat, as long as it remains at elevated levels, we do not expect such a decline to be a reason for the ECB to consider further easing.

From the US, we get the preliminary Markit manufacturing and services PMIs for February. Both indices are forecast to have ticked up. Even though investors usually pay more attention to the ISM indices, considering that there are no other US data releases throughout the day, and that both figures are expected to rise, we may see a positive reaction in USD on the news.

We have three speakers scheduled for today: BoE Governor Mark Carney, Minneapolis Fed President Neel Kashkari and San Francisco Fed President John Williams.

News and Events:

Swiss exports correct to the downside

After surging to a record level in December (+9.7%m/m), Swiss exports contracted significantly in January, sliding 4%m/m in real terms. Despite the fact that this is not good news for the Swiss economy, it is a normal adjustment for us, especially after such strong growth in December. Looking at the details of the report, we notice that the split among industries is quite uneven. The pharmaceutical and chemical industry had a solid month with exports rising to a record of CHF 9bn (+17%y/y). Outside the pharma industry, the picture is not that bright as exports fell 5%m/m, with the watch industry recording one of its worst months (-11%y/y).

Imports continued to shrink in January, falling 5.3%m/m in January after sliding -0.6% in the previous month. All in all, the trade balance reached an all-time high to CHF 4.73bn, the highest level since September 2016. The constantly improving Swiss trade activity is a thorn in the side for the SNB as it is lifting the bank’s foreign exchange reserves. The 12-month trade balance average hit CHF 3.22bn in January, compared to 3.06bn a year ago.

For now, the Swiss franc is still appealing for investors who want to take shelter from the ongoing uncertainty - especially ahead of the parliamentary and presidential elections across EU countries. However, the Swiss economy will continue to suffer from the situation and the outlook is not that great should political uncertainty in the European Union further deepen. In spite of the probable intervention of the SNB on the FX market last week, EUR/CHF hit 1.0635 this morning, suggesting that the marginal effect of the intervention has dwindled.

Aussie suffers against the dollar ahead of RBA meeting minutes

The minutes from the Reserve Bank of Australia only provided a minor update from the February statement on monetary policy.

The discussions were around the surprising 0.5% contraction in real GDP for the third quarter of 2016. Officials account that the decline was due to short-term factors such as bad weather, which had a strong impact on the construction sector, and on the coal supply weakness.

What remains concerning for Australian policymakers are the consumption forecasts. Indeed, the savings rate is not falling and wages growth remains low. Uncertainties remain strong regarding labour data and unemployment rate forecasts are mixed. Yet there are expectations for better job market conditions, which should add upside pressures on inflation.

There is certainly nothing really surprising about these minutes and we continue to believe that the official cash rate will remain unchanged this year. Financial markets are only pricing in a 25% likelihood a rate hike before year-end. As a result, markets were slightly disappointed this morning and sent the AUD lower against the greenback. We target 0.76 over the next few weeks.

Watching for March hints

Traders will be watching today's FOMC early February meeting minutes especially vigilantly for any signal of a March interest rate hike. Fed Chair Yellen made it clear in her testimony to the US congress last week that March will be a live meeting. Investors have been pulling in expectations for an earlier rate hike due to an upward surprise in both growth and inflation data. US headline CPI rose 0.6% in January at its fastest pace since Feb 2013, while the annual pace quickened to 2.5%. However, with the real focus in stronger then anticipated inflation, volatile components (gasoline, new car sales and clothing) indicted that part of the price surge will normalise in the coming months. Despite the read clearly in Yellen's discomfort zone (and hawks Lacker and Rosengren's aggressive comments), it is unlikely to force a hike in our view. In broader terms, we suspect that the lack of wage growth suppressed by the low participation rate will keep the Fed from jumping the gun. Fed members will also like to stay prepared to adjust for disruptive incoming fiscal and trade policy. Fed funds are pricing in approximately a 20% hike in March and 47% in June. We remain our outlook for two 25bp increase in 2017 (June and September) and two additional 25bp hike in 2018. This subdued rate path will fail to excite the USD bulls, while giving other nations' central banks time to shift to less accommodating monetary policy and therefore lessening the US yield advantage. Markets will also be reading for hints as to discussion among Fed policymakers about timing on shrinking the Fed’s massive, $3 trillion plus, balance sheet. Traders should watch for USD to firm ahead of report but likely sell off should our outlook materialise.

Today's Key Issues (time in GMT):

• Feb P Markit France Manufacturing PMI, exp 53,5, last 53,6 EUR / 08:00
• Feb P Markit France Services PMI, exp 53,9, last 54,1 EUR / 08:00
• Feb P Markit France Composite PMI, exp 53,8, last 54,1 EUR / 08:00
• Jan Money Supply M3 YoY, last 3,00% CHF / 08:00
• Feb P Markit/BME Germany Manufacturing PMI, exp 56, last 56,4 EUR / 08:30
• Feb P Markit Germany Services PMI, exp 53,6, last 53,4 EUR / 08:30
• Feb P Markit/BME Germany Composite PMI, exp 54,8, last 54,8 EUR / 08:30
• Feb P Markit Eurozone Manufacturing PMI, exp 55, last 55,2 EUR / 09:00
• Feb P Markit Eurozone Services PMI, exp 53,7, last 53,7 EUR / 09:00
• Feb P Markit Eurozone Composite PMI, exp 54,3, last 54,4 EUR / 09:00
• Jan Public Finances (PSNCR), last 36.3b GBP / 09:30
• Jan Central Government NCR, last 19.3b GBP / 09:30
• Jan Public Sector Net Borrowing, exp -14.4b, last 6.4b, rev 4.2b GBP / 09:30
• Jan PSNB ex Banking Groups, exp -14.0b, last 6.9b, rev 4.7b GBP / 09:30
• BOE Governor Mark Carney Speaks in U.K. Parliament GBP / 10:00
• BOE Chief Economist Andy Haldane Publishes Annual MPC Report GBP / 10:00
• Fed's Kashkari Speaks on Economy in Golden Valley, MN USD / 13:50
• Feb P Markit US Manufacturing PMI, exp 55,3, last 55 USD / 14:45
• Feb P Markit US Services PMI, exp 55,8, last 55,6 USD / 14:45
• Feb P Markit US Composite PMI, last 55,8 USD / 14:45
• Bank of England Bond Buying Operation GBP / 14:50
• Feb 17 Bloomberg Nanos Confidence, last 57,3 CAD / 15:00
• Fed's Harker to Speak on Economic Outlook USD / 17:00
• Fed's Williams Speaks to Students in Boise, Idaho USD / 20:30
• RBA's Lowe Speech in Sydney AUD / 21:30
• Jan Unemployment Rate, exp 5,40%, last 5,30% RUB / 23:00
• Jan Real Disposable Income, exp -2,90%, last -6,10% RUB / 23:00
• Jan Real Wages YoY, exp 2,00%, last 2,40% RUB / 23:00
• Jan Retail Sales Real MoM, exp -27,00%, last 18,30% RUB / 23:00
• Jan Retail Sales Real YoY, exp -5,10%, last -5,90% RUB / 23:00
• Jan Formal Job Creation Total, exp -45324, last -462366 BRL / 23:00
• Jan Tax Collections, exp 137340m, last 127607m BRL / 23:00
• SURVEY: Private Capital Expenditure 2017-18 A$84.8b AUD / 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 is lying within a symmetrical triangle below strong resistance given at 1.2771 (05/10/2016 high). The technical structure suggests that the pair should breakout towards support given at 1.2254 (19/01/2016 low). 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. 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 back to 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.

EUR/USD

Current level - 10583

The outlook remains negative below 1.0600 resistance, for a slide towards 1.0520 low. Crucial on the upside is 1.0630 high.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 113.47

The bias is positive above 113.20 support, for a test of 114.00 resistance area. Crucial on the downside is 113.00 area.

GBP/USD

Current level - 1.2446

The intraday bias is neutral and only a break through the dynamic resistance at 1.2500 could unleash a rise towards 1.2610 resistance.

EURUSD

The EURUSD was indecisive yesterday. Price traded lower earlier today in Asian session hit 1.0578. The bias is bearish in nearest term testing 1.0520/00 area which is a good place to buy with a tight stop loss. Immediate resistance is seen around 1.0600/20 area. A clear break above that area could lead price to neutral zone in nearest term retesting 1.0680 key resistance. On the downside, a clear break and daily close below 1.0520/00 would expose 1.0400 – 1.0350 region. Overall I remain neutral.

GBPUSD

The GBPUSD had a moderate bullish momentum yesterday topped at 1.2482. The bias remains neutral in nearest term. Immediate resistance is seen around 1.2520. A clear break above that area could trigger further bullish pressure testing 1.2580. Immediate support is seen around 1.2435. A clear break below that area could trigger further bearish pressure testing 1.2380/40 area. Overall I remain neutral.

USDJPY

The USDJPY had a bullish momentum earlier today in Asian session hit 113.69. The bias is bullish in nearest term testing 114.00/30 area but overall I still prefer a bearish scenario at this phase and any upside pullback should be seen as a good opportunity to sell. Immediate support is seen around 113.35. A clear break below that area could lead price to neutral zone in nearest term testing 112.65 area.

USDCHF

The USDCHF was indecisive yesterday. Price traded higher earlier today in Asian session hit 1.0060. The bias is bullish in nearest term testing 1.0100 area. Immediate support is seen around 1.0025. A clear break below that area could lead price to neutral zone in nearest term testing 0.9980 area or lower. Overall I remain neutral.

Near-term studies are weakening and risk fresh downside, as the price is probing below 0.7650, where pullback from 0.7730 found footstep.

Upside rejection at 0.7730 that confirmed false break above larger 0.7600/0.7700 congestion, continues to weigh, as daily studies indicate pullback.

Pivots at 0.7630/00 (20 SMA / congestion floor) are eyed for stronger reversal signal.

Past two days highs at 0.7688 mark initial resistance, ahead of 0.7700 and 16 Feb high at 0.7730 (the upper pivot).

Res: 0.7688, 0.7700, 0.7730, 0.7755
Sup: 0.7630, 0.7600, 0.7575, 0.7504

The pair extends recovery from 112.60 (low of three-day fall from 114.94) and cracked pivot at 113.59 (daily Kijun-sen) but without clear break for now.

Last week's strong upside rejection and subsequent fall continue to weigh on near-term action, as daily studies remain bearishly aligned. Current rally is still seen as correction that may extend above Kijun-sen pivot, before bears take control again.

Renewed downside attempts need to clear 112.60 support to open way towards psychological 112.00 level and key near-term support at 111.60.

Upper trigger lies at 114.05 (Fibo 61.8% of 114.94/112.60) and only sustained break here would neutralize bears for renewed attempts towards 115.00 zone.

Res: 113.59, 113.77, 114.05, 114.39
Sup: 113.33, 113.00, 112.60, 112.37

Cable is trading within near-term triangle, entrenched between daily 10 and 100SMA's that mark key near-term levels. The upside is limited by descending 10SMA (currently at 1.2474), while 100 SMA marks the lower pivot (currently at 1.2404). Break of either side is needed to define fresh near-term direction, as daily studies are mixed. Extension below 100SMA would face immediate support at 1.2379 (top of descending daily cloud that so far contained downside attempts), break of which would trigger fresh weakness. Conversely, lift above 10SMA (also upper triangle boundary) would shift near-term focus higher and expose 20SMA (1.2509), which guards upper pivots at 1.2550/80.

Res: 1.2474, 1.2509, 1.2550, 1.2580
Sup: 1.2404, 1.2379, 1.2345, 1.2300

The Euro eventually broke below 55SMA support at 1.0600 zone that held downside attempts in past two days.

Fresh weakness from yesterday's upside rejection at 1.0631 where upside action was capped by falling 10SMA, also probes below double-Fibonacci support at 1.0580 (50% of 1.0339/1.0827 and 61.8% of 1.0520/1.0678).

Near-term focus is at 1.0557 (Fibo 76.4% of 1.0520/1.0678 upleg) which guards strong supports at 1.0520 zone (daily cloud base/15 Feb low/Fibo 61.8% of 1.0339/1.0827).

Daily studies turned into full bearish setup and support scenario.

Broken 55SMA offers immediate resistance (currently at 1.0598), followed by session high/5SMA at 1.0613 and falling 10 SMA (currently at 1.0622) that continues to weigh on near-term action and is expected to cap extended corrective upticks.

Res: 1.0598, 1.0613, 1.0630, 1.0678
Sup: 1.0557, 1.0520, 1.0500, 1.0454

'Hidden under the surface of European bond markets, traders are placing bets that will pay out if the risks in the euro zone severely escalate.' - Stephen Spratt, Bloomberg

Pair's Outlook

The common European currency depreciated on Tuesday morning against the US Dollar, as the currency exchange rate passed the combined support of the weekly PP at 1.0604 and the 55-day SMA at 1.0597. Due to this factor the currency pair is set to continue the fall, as the closest support level to the pair is at 1.0529, where the weekly S1 is located at. Moreover, as the weekly S1 is a lone support level, it is highly possible that it will be also easily passed in the upcoming trading sessions. The closest support below the weekly S1 is the lower Bollinger band, which was near the 1.05 mark on Tuesday.

Traders' Sentiment

SWFX traders are bullish on the pair, as 52% of open positions are long on Tuesday. Meanwhile, 55% of trader set up orders are to sell the Euro.

'GBPUSD is sending mixed signals. The pair briefly dipped under its 50-day average near $1.2410 testing $1.2390 before bouncing back toward $1.2430. While this looks like a successful retest, RSI breaking under 50 suggests momentum turning downward.' – CMC Markets (based on PoundSterlingLive)

Pair's Outlook

The GBP/USD pair erased most of Friday's losses yesterday, successfully climbing over the 1.2450 level, thus, breaching the immediate resistance area. Now the British currency is being supported by a strong demand area around the 1.24 major level, with the weekly PP just being a minor nuisance located at 1.2449. Technically, the Cable should remain above the 1.24 mark today and pave its way towards retaking the 1.25 handle. However, technical indicators are still unable to confirm the possibility of the positive outcome, leaving the door open for another leg down.

Traders' Sentiment

Bullish traders' sentiment remains unchanged at 59% for the third time in a row. At the same time, the share of sell orders inched slightly higher, namely from 55 to 58%.