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The Japanese yen has posted losses on Friday, continuing the upward movement which marked the Thursday session. Currently, USD/JPY is trading at 112.80. The week wraps up on a quiet note. There are no Japanese events on Friday, and the sole US indicator is CB Leading Index, with an estimate of 0.5%.

Federal Reserve Chair Janet Yellen is in the enviable position of having to decide how the Fed should respond to a strong US economy. Earlier this week, she made her semi-annual appearance before Congress. In her testimony, Yellen was upbeat about the economy. She noted that inflation is moving towards the Fed’s 2 percent target, the labor market remains red-hot and consumer spending is strong. A rate hike appears to be just a question of time, as Yellen warned that “waiting too long to remove accommodation would be unwise”. If the US economy stays on track in 2017, analysts expect two or three small rate hikes. At the same time, the Fed needs to take into account the economic stance of the new administration, which remains unclear. President Trump has promised to outline a tax reform plan in a few weeks, but has left the Fed and the markets in the dark regarding economic policy. Barring an unexpected tailspin from the economy, the Fed is likely to raise rates in the first half of 2017.

The Japanese economy is showing improvement, with real GDP expanding one percent in 2016. The economy has recorded four consecutive quarters of growth and inflation continues to point upwards, although it remains well below the BoJ target of two percent. At the same time, the new Trump administration could pose a serious challenge for Japan. Trump has paraded the motto of “America first” and withdrew the US from the Trans-Pacific Partnership, a trade agreement in which Japan is a major partner. Trump has charged that Japan is manipulating its currency to gain an unfair trade advantage, and this disputed threatened to sour the recent meeting between Prime Minister Shinzo Abe and Trump in Washington. However, the potential crisis was quickly defused, as the two leaders agreed that their finance ministers would conduct bilateral talks to discuss currency policy. Abe has dodged a bullet for now, but if USD/JPY pushes above the 120 level, the war of words over exchange rates could be renewed. As well, Trump remains concerned about the huge US trade imbalance with Japan and will want to make changes in the US-Japan trade relationship. Japan is heavily dependent on its export sector, and any protectionist moves by the US, such as import taxes, could hurt the Japanese economy.

EUR/USD has recorded slight losses in the Friday session, as the pair trades at 1.0650. The week wraps up with two minor events. Eurozone Current Account dropped to EUR 30.1 billion, compared to EUR 36.1 billion. Still, this figure beat the estimate of EUR 28.7 billion. Over in the US, CB Leading Index improved to 0.5% in December, its best level since April. The estimate for January remains at 0.5%.

The US economy continues to perform well, as underscored by sharp economic data on Thursday. Unemployment claims were slightly higher at 239 thousand, but beat the forecast of 245 thousand. On the manufacturing front, the Philly Fed Manufacturing Index soared to 43.3 points, crushing the estimate of 18.5 points. This marked its highest level since 2011. Earlier in the week, the Empire State Manufacturing Index also climbed sharply, with a reading of 18.7, compared to the forecast of 7.2 points. The surprisingly strong data is welcome news from the manufacturing sector, which like other industrialized countries, has been battered by globalization. President Trump has promised to bring manufacturing jobs back to the US and invigorate the struggling sector. There was more good news from the inflation front, as PPI and CPI posted respectable gains of 0.6% in January, above their estimates.

Federal Reserve Chair Janet Yellen is in the enviable position of having to decide how the Fed should respond to a strong US economy. Earlier this week, as she made her semi-annual appearance before Congress. In her testimony, Yellen was upbeat about the economy. She noted that inflation is moving towards the Fed’s 2 percent target, the labor market remains red-hot and consumer spending is strong. A rate hike appears to be just a question of time, as Yellen warned that “waiting too long to remove accommodation would be unwise”. If the US economy stays on track in 2017, analysts expect two or three small rate hikes. At the same time, the Fed needs to take into account the economic stance of the new administration, which remains unclear. President Trump has promised to outline a tax reform plan in a few weeks, but has left the Fed and the markets in the dark regarding economic policy. Barring an unexpected tailspin from the economy, the Fed is likely to raise rates in the first half of 2017.

With the eurozone economy showing signs of recovery in recent months, ECB President Mario Draghi can sleep easier. The economy is expanding at a moderate rate and inflation is pointing higher. This is good news for the ECB, which can now focus on whether to tighten monetary policy. If the ECB feels that the economic numbers will continue to point in the right direction, the central bank could taper its asset-purchase program or raise interest rates, which are currently at zero. ECB head Mario Draghi will likely remain cautious, with Brexit negotiations looming and elections in France and Germany coming up. Still, if the eurozone economy continues to grow and inflation levels move higher, we could see the ECB change its monetary stance later in the year. The ECB hold its next policy meeting on March 9, but is not expected to make any moves. Still, any hints towards a tighter monetary stance would likely boost the euro.

News and Events:

Risk rally on hold ahead of the weekend

After rallying strongly during the first couple of weeks of February, the US dollar suffered a substantial sell-off as investors ended the week on the back foot. The reflation trade that has been fuelled by Donald Trump’s announcement regarding a “phenomenal” tax plan is now running out of steam as investors lose faith amid a serious lack of details. Indeed, President Trump has been back-pedaling on many of his campaign promises and/or early announcements as president. There are therefore growing concerns among investors that he will significantly under-deliver.

After losing 1% against the single currency, the greenback stabilised above 1.06 ahead of the weekend. The dollar index rose 0.20% as the GBP and the EUR slid 0.24% and 0.27% respectively. Only the Japanese yen was able to hold ground - rising 0.28% - as investors seek safe haven assets. Gold was also gaining ground, climbing 0.15% to 1,240.

On the equity side, shares across the globe fell sharply on Friday. The Nikkei slid 0.58%, while the broader Topix Index was down 0.42%. In Europe, the Euro Stoxx 600 was down 0.40%. US futures were also blinking red on the screen. Treasury yields are moving south as investors rushed into bonds. There is little hope for this dynamic to reverse during the day as the economic calendar is really light and no press conference is expected on either the political or monetary policy fronts.

Strong US data supports stock rally

The Philly Fed manufacturing index failed to significantly correct as many analysts predicted after a strong November. Instead, it rose to a new post financial crisis high. The business confidence index surged to 43.3 against an expected 18. The employment portion of the index was softer than one would have expected give the topline read, especially regional manufacturing labor. However, the overall tone of the labor market was solid. Today's report reinforces our view of a modest improvement in the health of the US economy. We retain our expectations of two 25bp hikes beginning in June but cannot rule out a proactive hike in March (Fed Fund market pricing in 30% probability). The strong growth expectation also supports higher US equity prices despite tailing P/E above historical average. Lower interest rates and global volatility combined with stronger EPS estimates and fundamental data suggest new highers are justified. However, the rally will need Trump to provide promised tax reform in order to trade higher. And on this fact we are concerned. As expressed yesterday we have yet to view Trump as a successful statesman rather than just a bully, indicating that all policy will be challenged (even policy with bi partisan support). Our expectations for a sustained USD rally remain weak and we see USD buying as an opportunity to reload USD shorts (especially in select EM currencies).

Today's Key Issues (time in GMT):

• Feb 10 Money Supply Narrow Def, last 8.67t RUB / 08:00
• Jan CPI MoM, exp -0,70%, last 0,50% SEK / 08:30
• Jan CPI YoY, exp 1,50%, last 1,70% SEK / 08:30
• Jan CPI CPIF MoM, exp -0,70%, last 0,50% SEK / 08:30
• Jan CPI CPIF YoY, exp 1,70%, last 1,90% SEK / 08:30
• Jan CPI Level, exp 317,54, last 319,68 SEK / 08:30
• Dec ECB Current Account SA, last 36.1b, rev 36.4b EUR / 09:00
• Dec Current Account NSA, last 40.5b, rev 40.8b EUR / 09:00
• Dec Current Account Balance, last 4640m EUR / 09:06
• Jan Retail Sales Ex Auto Fuel MoM, exp 0,70%, last -2,00%, rev -2,20% GBP / 09:30
• Jan Retail Sales Ex Auto Fuel YoY, exp 3,90%, last 4,90%, rev 4,70% GBP / 09:30
• Jan Retail Sales Inc Auto Fuel MoM, exp 1,00%, last -1,90%, rev -2,10% GBP / 09:30
• Jan Retail Sales Inc Auto Fuel YoY, exp 3,40%, last 4,30%, rev 4,10% GBP / 09:30
• Feb IGP-M Inflation 2nd Preview, exp 0,13%, last 0,76% BRL / 10:00
• Jan Current Account Balance, exp -$5350m, last -$5881m BRL / 12:30
• Jan Foreign Direct Investment, exp $9500m, last $15409m BRL / 12:30
• Dec Int'l Securities Transactions, last 7.24b CAD / 13:30
• Jan Leading Index, exp 0,50%, last 0,50% USD / 15:00
• Jan PPI MoM, exp 0,80%, last 0,60% RUB / 23:00
• Jan PPI YoY, exp 9,10%, last 7,40%, rev 7,40% RUB / 23:00
• Jan Tax Collections, exp 136850m, last 127607m BRL / 23:00
• SURVEY: Private Capital Expenditure 2017-18 A$84.8b AUD / 23:00

The Risk Today:

EUR/USD's buying pressures since the pair failed to hold below former hourly support given at 1.0581 (16/01/2016 low). Hourly resistance is given at 1.0679 (16/02/2017 high). Expected to see further strengthening. 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 still trading below strong resistance given at 1.2771 (05/10/2016 high). The technical structure suggests that the pair should bounce lower 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 pausing after the breakout of the downtrend channel. Key resistance is given at a distance at 1.0344 (15/12/2016 high). Nonetheless, 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.

Markets lacked strong conviction ahead of US holiday

Notes/Observations

Quiet session ahead of US President Day holiday on Monday. Upcoming elections in Europe and uncertainty over Trump's policies providing some decreased risk appetite

UK Jan retail sales data misses expectations

Overnight:

Asia:

Japan Fin Min Aso: Planning to start economic dialogue with Trump administration in April; have not decided on specific contents

US, South Korea and Japan foreign Ministers condemn in strongest terms the recent North Korea's ballistic missile test

Europe:

ECB's Coeure (France): Exit option for countries from Euro Zone would create permanent impairment of ECB's monetary policy transmission mechanism

EU's Juncker: Not confident that agreement can be reached about Brexit conditions in 2 years. At least 20,000 laws had to be changed in Britain before it could leave the bloc

Americas:

(US) President Trump intends to rescind travel order in near future and replace with ‘substantially revised' order; US Appeals Court puts proceedings over current Trump travel ban on hold, pending further developments on new executive order

(US) President Trump's choice as replacement for National Security Adviser, Robert Harward, has turned down the offer; nominates Alexander Acosta as Labor Secretary

Economic data

(SE) Sweden Jan CPI M/M: -0.7% v -0.7%e; Y/Y: 1.4% v 1.5%e

(SE) Sweden Jan CPI CPIF M/M: -0.7% v -0.7%e; Y/Y: 1.6% v 1.7%e

(EU) Euro Zone Dec Current Account (Seasonally Adj): €31.0B v €36.4B prior; Current Account NSA (unadj): €47.0B v €40.8B prior

(ES) Bank of Spain (BOS): Dec Bad loans at 9.1% v 9.2% prior

(UK) Jan Retail Sales (Ex-Auto Fuel) M/M: -0.2% v +0.7%e; Y/Y: 2.6% v 3.9%e

(UK) Jan Retail Sales (including Auto/Fuel) M/M: -0.3% v +1.0%e; Y/Y: 1.5% v3.4%e

Fixed Income Issuance:

(ZA) South Africa sold total ZAR80M vs. ZAR650M indicated in I/L 2025, 2029 and 2033 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 -0.6% at 3289, FTSE -0.2% at 7266, DAX -0.5% at 11702, CAC-40 -0.9% at 4855, IBEX-35 -0.7% at 9484, FTSE MIB -1.0% at 18896, SMI -0.3% at 8444, S&P 500 Futures -0.3%]

Equities

Materials: [Essentra ESNT.UK +2.0% (Earnings)]

Industrials: [Heijmans HEIJ.NL +6.5% (Analysts upgrade)]

Financials: [Allianz ALV.DE +2.7% (Earnings, Buyback)]

Healthcare: [Astrazeneca AZN.UK +1.5% (Lynparza meets primary endpoint) ]

Energy: [Vopak VPK.NL -9% (Earnings)]

Speakers

ECB's Lane (Ireland): No need to give up forward policy guidance and saw n o reason seen to turn off policy accommodation. Monetary policy to target inflation but did not expect to cut Deposit Rate again

Turkey Dep PM Simsek:Jan indicators pointed towards moderate economic growth. Domestic demand seen growing moderately but must create 700-800K jobs to reduce the unemployment rate (**Note: Nov Unemployment Rate: 12.1%)

Iceland Stats Agency saw 2017 GDP growth seen at 4.3%

Japan PM Abe reiterated that US and Japan agreed that G20 and G7 finance ministers should discuss FX; did not discuss topic with Trump at all at recent meeting

China Securities Regulatory Commission (CSRC) adjusted rules for refinancing which would now cap private share sales amount at 20% of total shares outstanding under the new rule

Philippines Central Bank's Guinigundo: Monitoring CPI pressure from weak PHP currency (Peso)

Fitch affirmed New Zealand sovereign rating at AA; outlook stable

Currencies

FX majors were mainly stuck in narrow ranges in the absence of meaningful data with USD index stuck near 1-week lows. US yields brushed off upbeat data which capped the USD uptrend. Dealers noted that upcoming elections in Europe will drive currency volatility in coming weeks and uncertainty over Trump's policies seen capping the USD for the time being

The GBP currency was softer after Jan UK retail sales missed expectations coupled with lower back-month revisions. GBP/USD fell by 0.5% to test 1.2420.

Fixed Income:

Bund futures trade at 164.23 up 39 ticks back above 164 as the curve flattens on risk off trade with French election developments weighing on sentiment. A continued move higher targets 164.94. Support moves to 163.62 then 163.13, 162.92 followed by 162.44.

Gilt futures trade at 126.22 up 32 ticks trading higher with the overall risk off tone as well as weaker Jan Retail sales numbers of out the UK. Resistance moves to 126.70 followed by 127.16. Support stands at 124.91 followed by 124.46. Short Sterling trade flat to up 3 bp with the curve flattening. Jun17Jun18 trades lower to 15/16bp.

Friday's liquidity report showed Thursday's excess liquidity fell to €1.300T down €28B from €1.328T prior. Use of the marginal lending facility falls to €52M from €137M prior.

Corporate issuance saw $800M come to market via 2 issuers in a quiet day, bringing weekly issuance to $23.1B. For the week ending Feb 15th Lipper fund flows reported IG fund net inflows of $3.05B bringing YTD inflows to $20.34B. High yield funds net inflows $157.70M bringing YTD inflows to $890.1M.

Looking Ahead

06:00 (PT) Portugal Jan PPI M/M: No est v 1.0% prior; Y/Y: No est v1.7% prior

06:00 (UK) DMO to sell combined £2.5B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £1.0B respectively)

06:30 (IN) India Weekly Forex Reserves

06:30 (IS) Iceland cancelled planned Bond auction

06:45 (US) Daily Libor Fixing

07:30 (BR) Brazil Jan Current Account: -$5.4Be v -$5.9B prior; Foreign Direct Investment (FDI): $9.3Be v $15.4B prior

08:00 (RU) Russia Jan Industrial Production Y/Y: 3.0%e v 3.2% prior

08:00 (PL) Poland Jan Sold Industrial Output M/M: -3.3%e v -4.3% prior; Y/Y: 8.1%e v 2.3% prior, Construction Output Y/Y: -1.7%e v -8.0% prior

08:00 (PL) Poland Jan PPI M/M: 0.3%e v 1.0% prior; Y/Y: 3.7%e v 3.0% prior

08:00 (PL) Poland Jan Retail Sales M/M: -24.4%e v 21.3% prior; Y/Y: 7.7%e v 6.4% prior, Real Retail Sales Y/Y: 7.2%e v 6.1% prior

08:15 (UK) Baltic Dry Bulk Index

08:30 (CA) Canada Dec Int'l Securities Transactions (CAD): No est v 7.2B prior

09:00 (BE) Belgium Feb Consumer Confidence: No est v 0 prior

10:00 (US) Jan Leading Index: 0.5%e v 0.5% prior

10:00 (CO) Colombia Dec Trade Balance: -$0.7Be v -$1.3B prior; Imports: $4.0Be v $4.2B prior

11:00 Potential sovereign ratings (Moody's on Spain and United States Sovereign Debtl Fitch on Finland Sovereign and Canadian rating agency DBRS on Netherlands Sovereign Debt

13:00 (US) Weekly Baker Hughes Rig Count

The ECB minutes from the January policy meeting confirmed much of what we learned from President Draghi at the press conference following that gathering. There was wide agreement among the Governing Council that despite the latest progress in headline inflation, there were no signs yet of a convincing upward trend in underlying inflation and as such, the ECB will continue to "look through" improvements in the headline CPI. Furthermore, the minutes made it crystal clear that there is very little appetite among the officials to begin scaling back asset purchases anytime soon. They indicated that this could put at risk the latest improvement in inflation expectations, as well as the prospect of a sustained uptrend in inflation. These signals amplify our view that the ECB is likely to keep its policy stance intact in the foreseeable future, at least until there is material progress in the bloc's core CPI and the upcoming political risk events in Eurozone are out of the way.

Given that the Bank confirmed what we already know, that it will likely remain dovish, there was little reaction in the euro on the release of these minutes. The currency even managed to outperform most of its major counterparts in the following hours. EUR/USD continued to trade north on Thursday but the recovery was stopped near the 1.0680 (R1) level and the prior upside support line taken from the low of the 16th of January. Although the pair is trading above the short-term downtrend line drawn from the high of the 2nd of February, the fact that it remains below the aforementioned prior upside support line, makes us switch to flat with regards to the short-term picture.

However with regards to the bigger picture, we believe that as we approach the upcoming elections in the Netherlands and France, political developments and uncertainty could begin to weigh increasingly more on the common currency. Even if EUR/USD continues to trade higher for a few more days, as long as it remains below the obstacle zone of 1.0800, the medium-term outlook remains cautiously negative from a technical standpoint as well. We expect the bears to take charge again at some point soon and perhaps aim for another test near the 1.0500 area in the weeks to come. However, given that we still have risks surrounding Trump's fiscal and tax plans, our favorite proxy to exploit any forthcoming euro weakness is EUR/JPY, considering that the yen may enjoy some safe-haven flows should Eurozone's political risks heighten further.

Today's highlights

During the European day, we get UK retail sales for January. The forecast is for both the headline and the core retail sales rates to have rebounded following a very sharp decline in December. The forecasts are supported by the nation's consumer sentiment indicators, such as the TR/IPSOS and the Gfk indices, both of which showed increased optimism in the month. Although a confirmation that UK consumers continue to spend at a robust pace could support the pound on the news, we remain cautious with regards to the future performance of both retail sales and sterling. A strong case can be made that consumers' real income growth is likely to be squeezed by rapidly rising inflation in coming months. This could be a factor that weighs on consumer spending, a concern the BoE outlined in its latest Inflation Report as well.

GBP/USD is currently trading between the upside support line drawn from the low of the 19th of January, and a short-term downside line taken from the peak of the 9th of February. This keeps the short-term bias of the pair flat for now, but strong retail sales today could prove the catalyst for a break above the aforementioned downside line. This is possible to lead to a test at 1.2545 (R1), where a break may trigger extensions towards 1.2600 (R2).

With regards to GBP's broader outlook, we maintain the view that despite the rebound following Theresa May's Brexit speech, as we approach the triggering of Article 50 in late March, the bigger story that drives sterling will be the likelihood of a "soft" versus a "hard" Brexit. For the time being, the signals from both sides suggest we are headed for a "hard" exit. The UK wants control of immigration, while the EU will not allow full access to the single market in such a case. As such, we don't expect any potential short-term rebounds in Cable to lead to a healthy uptrend. After all, the price structure on the daily chart suggests that the medium-term path remains to the sideways. The pair has been oscillating between 1.2100 and 1.2850 since the 7th of October. With that in mind, we expect future rebounds to remain limited below 1.2850, the upper bound of that range.

From Sweden, we get inflation data for January, and the forecast is for a decline in both the headline and the underlying CPI rates. Considering that the notable surge in both rates in December was fuelled by some temporary factors, such as rising airfare prices, we share the view for a tick down in January. Something like that could bring SEK under renewed selling pressure.

We do not have any speakers scheduled for today.

On the updated chart of USDJPY, we can see a nice and strong bullish turn taking place from around the 111.60 level, where we labeled end of a complex correction. As such, recent recovery gives us an indication for a completed double zig-zag correction and a suggestion that higher levels will now follow while market stays above 111.60. At the moment we see price trading in black wave 2, with possible support coming in at 61.8 Fibonacci ratio.

USDJPY, 4H

'The euro may well survive this year's wave of elections and populist calls for a return to national currencies.' - Jean-Michel Paul, Bloomberg

Pair's Outlook

After unexpectedly jumping during the second half of Thursday's trading session, the common European currency consolidated its position against the US Dollar on Friday morning. The future direction of the currency pair is still unclear. However, there are two possible scenarios for the future. First of all, the rate might break the weekly PP at 1.0680 and surge as far as the 1.0733 level, where the 100-day SMA is located at. On the other hand, the rate might retreat to the monthly PP at 1.0650. To do that, the pair would need to pass the support provided by the 20-day SMA at 1.0663.

Traders' Sentiment

SWFX traders are once more almost neutral, as 51% of trader open positions are long on Friday. Meanwhile, 62% of trader set up orders are to sell the Euro.

'GBP/USD continues to consolidate at its 55 day ma at 1.2426, we maintain a negative bias but patience is needed. A close below here will introduce potential to the 1.2253 the 18th January low.' – Commerzbank (based on FXStreet)

Pair's Outlook

As was anticipated, the GBP/USD pair was able to reach the 20-day SMA on Thursday, however, was unable to maintain trade at its level, ultimately retreating and closing with a 28-pip rally. The Sterling is likely to post more gains, as that would reconfirm the Cable's current consolidation trend today. The 1.2550 level is expected to be the ceiling, assuming the 20-day SMA will be overcome. Technical indicators, on the other hand, are unable to confirm the possibility of the positive outcome, as they are giving mixed signals. Another leg down is possible, but with the 1.2460/40 area, a strong psychological support, remaining intact.

Traders' Sentiment

Today 59% of traders are long the Pound, compared to 61% on Thursday. The buy and the sell order ratio is now equal to one.

'The dollar needs a pretty much strong buying incentive to make certain the Fed's rate increases three times this year.' – Bank of Mitsubishi UFJ (based on Market Watch)

Pair's Outlook

The US Dollar failed to outperform the Japanese Yen on Thursday, despite upbeat US fundamentals. Investors took profit of the recent rally, causing the Buck to erase Monday's and Tuesday's gains. The pair remains on the back foot, risking to drop under the 113.00 major level today, with the weekly pivot point at 112.89 acting as the closest support. Contrariwise, a technical correction could occur after yesterday's relatively sharp decline, with the interim target still being the 115.00 mark, where the upper Bollinger band, the 55-day SMA and the weekly R2 form a tough supply area.

Traders' Sentiment

There are now 55% of traders with a positive outlook towards the US Dollar today (previously 56%). At the same time, the number of orders to acquire the Greenback inched up from 55 to 57%.

'We don't expect much in the way of market movements going into Friday's session, but gold should nevertheless see something of a bid heading into the weekend.' – Edward Meir, INTL FCStone (based on Reuters)

Pair's Outlook

The yellow metal traded rather flat on Friday morning, as it found support in the monthly R1, which is located at 1,237.68. The bullion retreated to that level after it stopped and reversed its surge in the second half of Thursday's trading session. Gold has two possible future scenarios. Either the bullion finds enough strength in the support level to rebound and approach the 1,245 level, or the yellow metal will fail at that and begin a move lower. A move lower would result in a fall to the weekly PP, which is located at 1,232.24.

Traders' Sentiment

Traders are long on the metal, as 55% of SWFX trader open positions are bullish. In addition, 57% of trader set up orders are to buy the bullion.