The Aussie is trading around the mid-point of 0.7600/0.7700 congestion after quick reversal from fresh high at 0.7730 (posted on 16 Feb) signaled false break above range tops.

Pullback from 0.7730 was so far held by 10SMA (0.7658) but near-term risk is turning lower after slow stochastic formed bearish divergence pattern and reversed from overbought territory.

Next strong support, daily 20SMA (currently at 0.7626) that tracks the uptrend since early Jan) is in focus, with break here to generate stronger bearish signal.

Extension and close below consolidation range floor at 0.7600 would confirm reversal and open way for stronger correction of 0.7160/0.7730 rally.

Break back above 0.7700/30 is needed to neutralize downside threats and signal bullish continuation.

Res: 0.7688, 0.7700, 0.7730, 0.7755
Sup: 0.7658, 0.7626, 0.7600, 0.7584

The pair is consolidating above 112.60 (low of strong three-day fall from 114.94 (15 Feb high).

Near-term action remains biased lower following strong upside rejection at 114.94 that left daily candle with long upper shadow and subsequent strong acceleration lower.

Near-term action is holding below bearishly aligned daily Tenkan-sen / Kijun-sen lines (113.28 / 113.59) with the latter expected to cap extended upticks, ahead of fresh push lower.

We need to see clear break below cracked 112.86 support (Fibo 61.8% of 111.57/114.94 upleg) to confirm bearish stance.

Loss of 112.60 handle would open psychological 112.00 support and expose key support and near-term base at 111.60.

Conversely, break and close above daily Kijun-sen would sideline persisting downside risk, in favor of stronger correction of 114.94/112.60 downleg

Res: 113.28, 113.59, 113.77, 114.05
Sup: 112.60, 112.37, 112.00, 111.60

Top of falling daily Ichimoku cloud is for now holding attempts through strong support zone between 1.2422 and 1.2404 (55/100 SMA's/daily cloud top). Series of lower lows from 1.2580 (09 Feb high/recovery rejection), keep near-term bias at the downside, together with weakening daily studies that support negative scenario. Upticks are facing strong barrier, thick hourly cloud (spanned between 1.2451/91) that is expected to cap upside attempts. Clear break below 1.2400 is needed to signal fresh weakness towards 1.2345 (50% of 1.1986/1.2704 upleg/daily Kijun-sen), with 1.2282/60 ( daily cloud base/Fibo 61.8%) in extension. Conversely, sustained break above hourly cloud and 20 SMA (1.2514) would shift focus higher and expose upper pivots at 1.2550/80.

Res: 1.2433, 1.2463, 1.2480, 1.2508
Sup: 1.2404, 1.2386, 1.2345, 1.2282

Near-term risk turned lower and pressures 55SMA support at 1.0600, following Friday's strong close in red after repeated upside rejection at 1.0675 zone, where daily Kijun-sen capped. Falling 10SMA (currently at 1.0633) is expected to cap consolidation above 1.0600 handle, before bears resume. Clearing supports at 1.0600/1.0580 (55SMA/Fibo 61.8% of 1.0520/1.0678 upleg) would open way towards next key support at 1.0520 (15 Feb spike low/daily Ichimoku cloud base). To neutralize bear pressure, the price needs to break and close above 1.0675/86 barriers (30 /20 SMA's).

Res: 1.0633, 1.0647, 1.0675, 1.0686
Sup: 1.0600, 1.0580, 1.0560, 1.0520

'Germany has a significant bilateral trade surplus with the U.S., a material current account surplus, but it has not engaged in persistent one-sided intervention in the foreign exchange market.' – Mario Draghi, ECB (based on Bloomberg)

Pair's Outlook

The common European currency had retreated to the 1.06 level against the US Dollar on Monday morning. At that level the currency exchange rate managed to find support, as the 55-day SMA, which is located exactly at 1.06, is now also supported by the weekly PP at 1.0604. It is highly possible that the currency pair will surge during the session up to the monthly PP, which is located at 1.0650. The monthly PP, which previously failed to play a notable role, on Monday is strengthened by the 20-day SMA at 1.0654. Due to that reason it is unlikely that the resistance will be broken.

Traders' Sentiment

SWFX traders remain neutral bullish on the pair, as 51% of trader open positions are long on Monday. Meanwhile, 63% 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 Cable edged lower on Friday, with the psychological support around 1.2460/40 failing to limit the losses, but the demand cluster circa 1.2420 succeeding. However, the GBP/USD pair opened with a small bearish gap today, causing the mentioned demand area to be pierced. This does not imply the Sterling is doomed to keep falling; the price is still expected to recover, with the nearest meaningful resistance being at 1.2449, represented by the weekly PP. Nevertheless, the weekly PP is unlikely to hold the Pound for long, even though technical studies are unable to confirm a recovery is due.

Traders' Sentiment

There a 59% of traders with a positive outlook towards the Sterling today, unchanged since Friday. At the same time, the portion of sell orders inched up from 50 to 55%.

'As confidence in the dollar weakens with more articles and headlines like those in recent days and weeks, a tipping-point is on the horizon at which investors collectively realize they are at significant risk of being on the wrong side of a potentially large move.' – A.G. Bisset Associates (based on Bloomberg)

Pair's Outlook

The USD/JPY currency pair followed a less positive for the Greenback path on Friday, having fallen under the 113.00 threshold after successfully maintaining trade above it for a whole week. The given pair still remains in a consolidation trend, meaning there is sufficient room for a decline towards 111.75 today, where the weekly S1 and the lower Bollinger band form support. On the other hand, a rally is also possible, with the 115.00 level being the main target, but with the 20-day SMA and the weekly PP representing immediate resistance circa 113.40 and another obstacle located around 114.40. Meanwhile, technical indicators are unable to confirm the possibility of either scenario.

Traders' Sentiment

Today 57% of all open positions are long (previously 55%), whereas 59% of all pending orders are to acquire the US Dollar, up from 57%

'Gold prices held steady on Monday, with investors looking ahead to a clutch of speeches from U.S. Federal Reserve officials later in the week for clues on the timing of possible interest rate hikes.' – Arpan Varghese, Reuters

Pair's Outlook

The yellow metal remained almost unchanged during the early hours of Monday's trading session, as the bullion's price stayed near the 1,235 mark. However, gold attempted to move higher on Friday, as the commodity price had reached above the 1,240 level. The future direction of the bullion on Monday seemed unclear, but there are two possible way's the session might most likely end. The yellow metal could fall to the newly calculated weekly PP at 1,231.36 or surge up to the monthly R1, which is located at 1,237.68.

Traders' Sentiment

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

On the 4h chart of EURUSD, we are observing a nice bearish reversal taking place, with price turning down from 1.0828 where we think that wave 4) found a top. Reason for a bearish view is a break below the trendline support and push beneath 1.0620 swing which opens door for much lower levels in impulsive manner. That said current bounce is most likely part of a wave 2 correction, which can see limited upside. At the moment we see pair trading in second wave b.

EURUSD, 4H

Sunrise Market Commentary

• Rates: Test of 164.90 resistance on the back of EMU worries?
  US markets are closed today which means that traded volume will be low. The EMU eco calendar only contains EMU consumer confidence which is often ignored. Sentiment-driven trading will be name of the game. EMU worries (Italy, France, Greece) could push the Bund for a new test of 164.90 resistance, but we don't expect a break higher.
• Currencies: Dollar better bid. Euro trading soft on political uncertainty
  On Friday , political uncertainty in Europe weighed temporary on EUR/USD and USD/JPY. Today, US markets are closed and as there are few eco data. Risk sentiment is apparently again improving, supporting USD/JPY. EUR/USD will probably hold near the recent lows as European issues continue to weigh.

The Sunrise Headlines

• US equities finished the week 1.5% higher (S&P), the biggest weekly gain in 6 weeks, led by financials, buoyed by expectations of higher interest rates and hopes of lighter regulation. Today, most Asian stock markets record small gains.
• Moody's became the latest ratings agency to lift its outlook on Russia's Ba1 rating, upgrading it from ‘negative' to ‘stable', citing both a fiscal strategy -lowering the dependence on energy and replenish its savings -and the recovery.
• Fitch confirmed Finland's AA+ rating (stable outlook) and affirmed Malta's A rating (positive outlook). The Maltese debt/GDP ratio is on a downward trajectory, deficit amounted 0.5% of 2017 GDP and the economy outperforms.
• Former Italian PM Renzi quit as leader of Italy's ruling PD party, triggering a re-election battle against minority dissidents that threatens the stability of the centre-left government. Leadership elections are expected in April/May.
• French presidential candidate Francois Fillon, marred by disclosures he put his wife and children on the parliament payroll, will remain in the race even if prosecutors open a formal investigation, reversing his earlier statement.
• Cleveland Fed Loretta Mester said she would be “comfortable” with the central bank raising interest rates now as inflation pressures pick up. Delaying policy tightening will create risks, she added.
• China stops coal imports from N-Korea in a sign it might accept international sanctions against the country.
• Today, US markets are closed, the eco calendar contains only the February euro area consumer confidence and the Eurogroup discusses Greece. Tomorrow, attention goes to euro area PMI business confidence and Fed speakers.

Currencies: Dollar Better Bid. Euro Trading Soft On Political Uncertainty

EUR/USD near recent low as political issues weigh

On Friday, European markets were spooked by the prospect that the final vote in the French presidential election might be between far right and far left. Sentiment turned temporary risk-off, which weighed especially on USD/JPY. US equities maintained a cautiously positive momentum, but with little impact on the dollar. USD/JPY finished the session at 112.84 (from 113.24 on Thursday). EUR/USD closed the day at 1.0605 (from 1.0674). So, both pairs traded with a soft bias.

Overnight, Asian equities show modest gains as US equities held Friday near record high levels. The Japanese trade deficit widened more than expected in January as imports (+8.5%) rose much more than exports (1.3% vs 5.0% expected). However, the data didn't prevent an intraday rebound of Japanese equities. The yen is trading slightly softer with USD/JPY changing hands around 113.15. EUR/USD hovers in the 1.0610 area, still within reach of the recent lows. The political debate in France this weekend showed that Presidential election remains highly divisive and diffuse.

Today, the eco calendar is thin. US markets are closed in observance of Presidents' Day. In the Europe, the consumer confidence is expected to stabilize at -4.9. Consumer sentiment is near the highest levels in 15 years. However, (currency ) markets usually hardly react to the report. The Eurogroup meets on Greece and will evaluate its progress in complying with the terms of the third bailout. The review is 1 year behind schedule and no final conclusion will be reached yet. On Friday, political uncertainty in France caused a modest risk-off trade. This investor cautious supported core bonds and weighed both on USD/JPY and EUR/USD. Comments during the weekend suggest that a single left candidate in French presidential elections is no done thing, but we doubt this will remove investor uncertainty on Europe/France. Issues on Greece and Italy stay on the radar too. We have EUR/USD negative bias at the start of the week. The gradual EUR/USD decline might continue. USD/JPY might be better supported in a daily perspective as global equities remain well bid. Even so, we don't expected the USD/JPY rebound to go far as core yields stay low.

Global context. The dollar corrected downward since the start of January as the Trump reflation trade slowed down. Two weeks ago , the dollar showed tentative signs of a bottoming out, supported by the ‘Trump tax promise'. Underlying euro weakness due to political uncertainty in the area is a factor too. We see the 1.0874 as solid resistance and thus still favour a sell EUR/USD on upticks approach. The downside test of USD/JPY is also rejected. USD/JPY 111.16 (38% retracement of the 99.02/118.66 rally) remains key support. The comments of Yellen before Congress (and of other Fed members) were USD supportive, but had little lasting impact on yields and/or on the dollar. We keep cautious USD positive bias, but remain more cautious on the upside potential of USD/JPY compared to USD/EUR.

EUR/USD: Euro softness dominates

EUR/GBP

EUR/GBP: euro and sterling trading soft

On Friday, EUR/GBP weakened a few ticks early in Europe as EUR/USD declined on the uncertainty related to the French Presidential election. However UK January retail sales disappointed again (-0.3% M/M). Of late, sterling didn't react much to activity data, but this negative data surprise was too big to ignore. Sterling was sold and EUR/GBP spiked to the 0.859 area. Cable also fell off a cliff and dropped temporary below 1.24. Selling pressure on sterling eased in the afternoon and a further declined of EUR/USD reversed part of the EUR/GBP gains. EUR/GBP closed the session at 0.8561 (from 0.8546). Cable closed the day in the red at 1.2412 (from 1.2489).

Overnight, Rightmove House prices rose 2.0% M/M and 2.3% Y/Y. There is no noticeable impact on sterling trading. Later today, the CBI trends orders are scheduled for release. A limited decline (4 from 5) at a decent level is expected. Usually sterling doesn't react much to this data series. Even so, in the wake of Friday's poor retail sales, another really negative surprise might be a slightly negative for sterling.

EUR/GBP recently hovered in a tight range north of the 0.8450 support, but a break didn't occur. Sentiment on sterling softened slightly of late as the market feels that a BoE rate hike is still very far away. Euro softness due to political uncertainty is a risk for all euro cross rates, including for EUR/GBP. Longer term, we have a sterling negative view as the negative impact from Brexit still has to impact the UK economy. However, this is no issue at this stage. The test of the 0.8540 support is rejected, but the upside momentum isn't convincing either

EUR/GBP: new test of the 0.8450 support is avoided, but rebound fails to convince

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