Sample Category Title

Sunrise Market Commentary

• Rates: ECB doesn't have to follow Fed's playbook
  ECB Nowotny said after European trading that the ECB doesn't have to follow the Fed's playbook when normalizing monetary policy. He suggests that the ECB could hike (deposit) rates before ending QE. This could weigh on the Bund in the opening. Today's eco calendar only contains second tier US eco data, suggesting consolidation ahead of the weekend.
• Currencies: From dollar softness to euro strength
  The dollar initially stabilized yesterday after the post-FOMC setback. Later in the session, hawkish comments from ECB's Nowotny propelled EUR/USD to the highest level in one month. We look out how far the post-FOMC USD correction has to go. Will today's US consumer confidence be strong enough to block the USD correction?

The Sunrise Headlines

• US equities returned part of the FOMC-gains and closed slightly lower on the day. Overnight, most Asian stock markets trade positive with Japanese stocks underperforming (-0.4%).
• The ECB might move away from loose monetary policy in a different way than the Fed, ECB Nowotny said. The US model was to finish bond purchases first, but this model might not transfer well to Europe.
• Moody's improved to outlook on Brazil's Ba2-rating from negative to stable driven by expectation that downside risks are abating and macroeconomic conditions stabilizing, with the economy showing signs of recovery, inflation falling and the fiscal outlook clearer.
• The Czech central bank is likely to end a regime to keep the crown weak around the middle of the year, Vice-Governor Hampl was quoted as saying, adding a later exit was also possible.
• Greece and its international creditors remain divided over the terms of a review of the country's bailout programme, a senior euro zone official said, a gap that will prevent Athens from getting fresh financial aid at Monday's Eurogroup.
• Conservatives in Congress are pushing Donald Trump to block the IMF from participating in a European-led bailout of Greece, as his administration signalled it would take a tougher line with global institutions.
• Today's eco calendar is uneventful with only US industrial production and University of Michigan consumer confidence. G20 finance chiefs gather in Germany and Donald Trump meets Angela Merkel

Currencies: From Dollar Softness To Euro Strength

Euro extends gains on Nowotny comments

Yesterday, the dollar initially stabilized versus euro and yen, following substantial losses in the aftermath of the FOMC decision. European equities started strongly, but gave back half of the initial gains. So, no full-blown risk-on session. Late in the session, the euro was propelled by comments ECB's Nowotny who said rates could be raised before the end of the APP. The comments were soon dismissed by ECB's Praet, but the euro maintained its gains. EUR/USD closed the session at 1.0766 (from 1.0734). The swings in USD/JPY were much more modest. USD/JPY finished the session at 113.31 (from 113.38).

Overnight, Asian equities are mostly slightly higher. Post-Fed dollar correction and expectations that Fed policy normalisation will continue in a very gradual way is supporting regional equities ex-Japan. USD/JPY is holding yesterday's post-Fed consolidation pattern (lower half of the 113 big figure). EUR/USD maintains the gains recorded on the Novotny comments and trades in the 1.0775 area, near a one month high.

Today, there are only second tier eco data in Europe. In the US, production and Michigan consumer sentiment have some market moving potential. US February industrial production is expected to have rebounded (0.2% M/M) following a weather-related 0.3% M/M drop. Michigan consumer sentiment is expected slightly higher at 97 from 96.3. A strong labour market, strong equities and lower gasoline prices support sentiment. So, we see upside risks. Yesterday, the dollar stabilised after the post-Fed correction, but failed to regain ground. On the contrary, the US currency lost further ground against euro as markets ponder the chances of an early change in the ECB policy. In a longer term perspective, policy divergence between the Fed and the ECB will probably remain big enough to support further USD gains. Yellen suggested that, considering the eco developments, the Fed policy might be relatively close to the ‘dot-path'. The dayto- day USD momentum remains soft though and the euro is in better shape. So we look out/wait for strong enough US data that might put a floor on the current USD correction. Interesting to see whether a strong consumer confidence can help this process

Global context. EUR/USD 1.0874 resistance remains the line in the sand with intermediate resistance at 1.0829. We maintain the view that a sustained break of EUR/USD above this area will be difficult, even after Wednesday's Fed message. The US/German (EMU) interest rate differential remains at an absolute high level. Especially at the short end of the curve, the differential might even rewiden. The fundamentals/ interest rate differentials are also supportive for USD/JPY, but of late the momentum/technical picture is not really convincing. We maintain the working hypothesis that the 111.60 range bottom should hold.

EUR/USD extends post-Fed rebound on hawkish comments from ECB's Nowotny

EUR/GBP

EUR/GBP: Balance of sterling rebound and euro strength

EUR/GBP and cable held very tight ranges yesterday as investors awaited the BoE's policy decision. The BoE as expected left its policy unchanged. However, Kristin Forbes dissented in favour of a rate hike and the Minutes contained a note of concern on inflation. 'Some members noted that it would take relatively little further upside news on the prospects of activity or inflation for them to consider that a more immediate reduction in policy support might be warranted.” This took sterling traders awry and triggered some frenetic sterling buying. EUR/GBP dropped from 0.8740 to about 0.8680/70. Later in the session, EUR/GBP regained some ground on the Nowotny comments. EUR/GBP closed the session at 0.8710 (from 0.8732). The combination of USD softness and GBP strength propelled cable to close the session at 1.2360 (from 1.2291).

There are no important eco data in the UK today. Both sterling and the euro were in good shape yesterday. This balance might persist and some EUR/GBP consolidation might be on the cards. Despite yesterday's somewhat more hawkish BoE approach, we don't see a real risk for BoE tightening anytime soon. So, any rebound of sterling shouldn't go too far.

Over the previous day, the decline of sterling took a breather. EUR/GBP cleared 0.8592 resistance, improving the MT technical EUR/GBP picture. We don't expect a sustained EUR/USD rebound, but a combination of temporary euro consolidation and ongoing sterling softness, as the Brexit negotiations are nearing, might trigger some more ST EUR/GBP gains. The 0.8854 correction top is the next key resistance. The nervous swings over the previous days suggest that a clear break beyond 0.8854 will be difficult without important (UK negative) news.

EUR/GBP: euro strength and sterling rebound keeping each other in balance

Download entire Sunrise Market Commentary

Daily Pivots: (S1) 0.7655; (P) 0.7686; (R1) 0.7708; More...

Intraday bias in AUD/USD remains on the upside for 0.7740 resistance. Current development suggests that rise from 0.7158 is likely resuming. Break of 0.7740 will target 61.8% projection of 0.7158 to 0.7740 from 0.7490 at 0.7850 next. That coincides with key long term retracement level at 0.7849. On the downside, outlook will stay bullish now as long as 0.7490 support holds, in case of retreat.

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 0.8185) and above.

Daily Pivots: (S1) 1.3279; (P) 1.3315; (R1) 1.3355; More...

Intraday bias in USD/CAD remains on the downside as the pull back from 1.3534 could extend lower. We'd expect strong support at 1.3211 cluster level (61.8% retracement at 1.3209) to contain downside and bring rebound. At this point, we'd still expect larger rise from 1.2460 to extend through 1.3598 resistance. However, sustained break of 1.3211 will dampen this view and target 1.2968 key support level next.

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, started from 1.2460, is likely still in progress and could target 61.8% retracement of 1.4689 to 1.2460 at 1.3838. We'd look for reversal signal there to start the third leg. Break of 1.2968 wold at least bring at retest of 1.2460 low. However, sustained trading above 1.3838 would pave the way to retest 1.4689 high.

Daily Pivots: (S1) 1.0722; (P) 1.0746 (R1) 1.0787; More.....

Intraday bias in EUR/USD remains on the upside for 1.0828 resistance and above. Overall, rise from 1.0339 is seen as a corrective move. Hence, we'd upside to be limited by 100% projection of 1.0339 to 1.0828 from 1.0494 at 1.0983 to bring larger down trend resumption. On the downside, break of 1.0599 will turn bias back to the downside for 1.0494 support.

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115.

Daily Pivots: (S1) 1.2272; (P) 1.2324; (R1) 1.2408; More...

Intraday bias in GBP/USD remains on the upside and rebound form 1.2108 continues. Whole consolidation pattern from 1.1946 is still in progress. Stronger rise could be seen to 1.2705/2774 resistance zone next. On the downside, below 1.2240 minor support will turn bias back to the downside for 1.2108 instead.

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.

Daily Pivots: (S1) 0.9940; (P) 0.9975; (R1) 1.0000; More.....

USD/CHF's fall from 1.0169 continues and intraday bias remains on the downside for 0.9860. Corrective rise from 0.9860 should have completed at 1.0169 and fall from 1.0342 is likely resuming. Break of 0.9860 will target 100% projection of 1.0342 to 0.9860 from 1.0169 at 0.9687. On the upside, 1.0018 minor resistance will turn bias neutral. But outlook will now stay bearish as long as 1.0169 resistance holds.

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.

Daily Pivots: (S1) 112.94; (P) 113.24; (R1) 113.58; More...

Intraday bias in USD/JPY remains on the downside for 111.58 low. Current development argues that consolidation from 111.58 has completed with three waves to 115.49. And larger decline from 118.65 is resuming. Break of 111.58 will target 61.8% projection of 118.65 to 111.58 from 115.49 at 111.12. That coincides with 38.2% retracement of 98.97 to 118.65 at 111.13. We'd tentatively expect strong support from there to bring rebound. But firm break there will target 100% projection at 108.42. On the upside, outlook will stays bearish as long as 115.49 holds, in case of recovery.

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.

Daily Pivots: (S1) 0.8665; (P) 0.8712; (R1) 0.8756; More...

EUR/GBP is staying in consolidation below 0.8786 and intraday bias remains neutral first. We'd continue to expect strong support from 38.2% retracement of 0.8402 to 0.8786 at 0.8639 to contain downside. Above 0.8786 will target 0.8851 resistance and above. However, price actions from 0.8303 are seen as the second leg of the corrective pattern from 0.9304. Hence, we'd expect strong resistance from 100% projection of 0.8303 to 0.8851 from 0.8402 at 0.8950 to limit upside.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. Deeper fall cannot be ruled out yet. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside. Overall, the corrective pattern would take some time to complete before long term up trend resumes at a later stage. Break of 0.9304 will pave the way to 0.9799 (2008 high).

Daily Pivots: (S1) 1.3934; (P) 1.3986; (R1) 1.4071; More...

EUR/AUD is holding on to 1.3874 minor support and recovered. Intraday bias remains neutral for the moment. At this point, we're still favoring the case of medium term trend reversal defending key support level at 1.3671, on bullish convergence condition in daily MACD. Above 1.4183 will turn bias back to the upside for 1.4289 resistance. Sustained break there will affirm our bullish view and target 1.4721 key resistance next. However, break of 1.3874 will dampen our view and turn bias to the downside for 1.3624 low.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. We'd expect strong support from 1.3671 key level to contain downside and bring rebound. Up trend from 1.1602 should not be finished and will resume later. Break of 1.4721 resistance will indicate completion of such correction and turn outlook bullish for retesting 1.6587 high. However, sustained break of 1.3671 will invalidate our bullish view and would turn focus back to 1.1602 long term bottom.

Daily Pivots: (S1) 1.0690; (P) 1.0718; (R1) 1.0753; More...

EUR/CHF breached 1.0689 support briefly but recovered quickly since then. Intraday bias remains neutral for the moment. With 1.0689 minor support intact, we continue to favor the case of trend reversal, on bullish convergence condition in daily MACD, after defending 1.0620 key support level. That is, correction from 1.1198 could have completed. Above 1.0823 will target 1.0897 resistance next. However, firm break of 1.0689 support will dampen our view and turn focus back to 1.0629 low again.

In the bigger picture, the decline from 1.1198 is seen as a corrective move. Decisive break of 1.0897 resistance should confirm that it's completed. And in that case, larger up trend is resuming for another high above 1.1198. Meanwhile, sustained trading below 38.2% retracement of 0.9771 to 1.1198 at 1.0653 will target 50% retracement at 1.0485.