'Gold prices will be a little bit rangebound with some upside bias for the next few weeks or so.' – Barnabas Gan, OCBC (based on Reuters)

Pair's Outlook

The yellow metal traded rather flat during the early hours of Thursday's trading session. However, it is still set to gain, as the bullion was only searching for a support level which could continue to propel it higher. Moreover, the retreat only began due to the commodity price encountering the uptrend line, which has kept the surge steady for the past weeks. It is most likely that the support will be found in the monthly R1, which is located at 1,237.68. In addition, from a fundamental perspective the bullion is also set to surge.

Traders' Sentiment

Traders have become bullish, as 54% of SWFX trader open positions are long. In the meantime, 56% of trader set up orders are to buy the bullion.

'The crude oil inventory build was really terrible for the market but the market does not seem to care because the products inventories were better than expected and are dragging crude oil prices up with it'. - Andrew Lipow, Lipow Oil Associates

US crude oil inventories jumped more than markets anticipated amid a sharp increase in imports and rise in Cushing crude inventories, official figures showed on Wednesday. According to the Energy Information Administration, US crude stockpiles climbed 13.8 million barrels during the week ended February 3, following the preceding week's gain of 6.5 million barrels and surpassing analysts' expectations for a rise of 2.7 million barrels. The EIA reported US crude oil imports averaged 1.1 million barrels per day last week, rising the most at the Gulf Coast, where inventories surged 10.9 million, the record weekly increase, to 267.6 million barrels. Crude stockpiles at Cushing, Oklahoma, jumped 1.1 million barrels. Meanwhile, gasoline stocks dropped 869,000 barrels in the same week, topping forecasts for a 1.1 million-barrel rise. Distillate stocks advanced 29,0000 barrels, whereas analysts anticipated a 300,000 barrel-increase. The EIA also said that refinery utilization rates fell 0.5% to 87.7%, while demand for refinery feedstocks declined 54,000 barrels per day. As a result, the price of West Texas Intermediate futures climbed 0.5% to $52.47 per barrel, up from $51.22 ahead of the release, while Brent futures advanced 0.8% to $55.48 per barrel. Earlier this week, the American Petroleum Institute reported US crude stocks climbed 14.3 million barrels.

'Our economists continue to expect a 25bp cut this year, but the curve remains heavily skewed toward a hike'. - Adam Cole, RBC Capital Markets

New Zealand's Central bank left its benchmark interest rate unchanged on Wednesday and said it would be reasonable to keep the rate at record lows for an attended period of time. The statement caught analysts by surprise, as they widely expected the Reserve Bank of New Zealand to raise rates later this year. The Bank left its Official Cash Rate at a record low of 1.75% but signaled that rates would not go lower. After the policy meeting, he RBNZ Governor Graeme Wheeler said on Thursday the Bank would maintain a neutral stance in 2017, as the upside and downside risks appeared evenly balanced. Even though the New Zealand economy expanded at an annualized pace of more than 3%, Wheeler said that the strong Kiwi, which rose more than 10% in 2016, could continue to put downward pressure on imports, adding that inflation would likely remain below the Central bank inflationary target of 2%. As a result, analysts and investors now expect the rate to be kept at 1.75% until the beginning of 2018. Back in the Q4 of 2016, inflation climbed to 1.3%. The Bank estimated that the inflation rate would hit 2% in the Q2 of 2019. Moreover, the RBNZ said economic growth would rise to 3.7% on an annual basis in the Q1 of 2017. The New Zealand Dollar fell against its US counterpart to trade at 72.70, down 0.3% from ahead of the release.

Kiwi dollar accelerated lower in Asia after New Zealand's Central Bank kept rates unchanged, but signaled neutral policy. Strong pullback from 0.7373 (07 Feb peak of 1 1/2 month long rally) extends for the third straight day and shows signals of further easing. Fresh near-term bears are approaching first strong support at 0.7172 (Fibo 38.2% of 0.6847/0.7373 rally, reinforced by ascending daily Kijun-sen (currently at 0.7160), which lies ahead of plethora of strong supports between 0.7130 and 0.7100 (100/200/55 SMA's / daily cloud top). Correction should be contained above 0.7100 to keep broader bulls in play for fresh attempts higher. Conversely, stronger pressure on negative sentiment on CB would risk extension of the downmove from 0.7373, with break below 0.7100 pivot, to confirm reversal and open way for further downside.

Res: 0.7240, 0.7277, 0.7300, 0.7331
Sup: 0.7172, 0.7132, 0.7100, 0.7048

The Aussie is in red on Thursday but holding above strong support at 0.7600 zone. Pullback from fresh high at 0.7694 was so far held by daily Tenkan-sen at 0.7600, which was seen as ideal reversal point to keep overall bulls intact.

On the other side, daily RSI that reversed from overbought territory shows more room at the downside, which may signal extended correction.

Next solid support below 0.7600 handle is offered by rising 20SMA (currently at $0.7577) and guarding plethora of strong supports between 0.7510 and 0.7490 (higher base / Fibo 38.2% / 100 SMA / and Golden Cross of 55/200SMA’s that is currently forming).

All these strongly underpin the action and should contain extended pullback from 0.7694 high.

Only firm break here would generate stronger bearish signal for deeper correction of 0.7159/0.7694 rally.

The pair is eyeing RBA’s monetary policy statement, due on Friday, for stronger signals.

Res: 0.7644, 0.7664, 0.7694, 0.7730
Sup: 0.7604, 0.7577, 0.7510, 0.7490

The pair remains neutral in the near term and holding within 100-pips range, following failure to sustain break below key 112.00 level.

Mixed near-term studies confirm directionless mode, however, daily technicals remain bearishly aligned and keep the downside at risk.

Daily Tenkan-sen and Kijun-sen lines turned south after sideways period and signal renewed pressure.

Break below 112.00 and fresh lows at 111.60 is needed to trigger bearish acceleration that would extend towards the base of thick daily cloud at 109.91.

Congestion tops at 112.50 zone mark initial resistance ahead of descending daily Tenkan-sen which marks the upper pivot (currently at 113.25) and break here would signal stronger recovery.

Res: 112.50, 112.75, 113.25, 113.45
Sup: 111.97, 111.57, 111.34, 110.83

Cable remains supported in the near term and extend bounce of past two days on strong downside rejection at 1.2345.

Fresh upside extension after close above first pivot at 1.2525 (daily Tenkan-sen), hit target at 1.2567 (Fibo 61.8% of 1.2704/1.2345 pullback), break of which would trigger further upside.

Daily indicators are heading north andalong with series of daily MA’s bull-crosses, support bullish scenario.

Corrective dips are expected to hold above hourly higher base at 1.2470 zone, while stronger downside risk could be expected on violation of 1.2442 pivot (daily cloud top / 100SMA).

Res: 1.2567, 1.2619, 1.2671, 1.2704
Sup: 1.2545, 1.2500, 1.2470, 1.2442

The pair is neutral near-term mode and holding within 1.0700 zone, following yesterday’s downside rejection at 1.0641( Fibo 38.2% / daily Kijun-sen) support.

Broken daily Tenkan-sen (currently at 1.0723), below which the pair closed for two consecutive days, caps the action for now and keeps the downside vulnerable.

While the latter is holding, fresh attempts towards 1.0641 pivot could be expected, with break here to expose next strong supports at 1.0550/25 (daily cloud base / Fibo 61.8% of 1.0339/1.0827 upleg).

Alternatively, sustained break above 1.0723 would signal higher low formation and open way for retest of key near-term dynamic barrier, falling 100SMA that capped upside attempts during past week and currently lies at 1.0768.

Res: 1.0700, 1.0723, 1.0768, 1.0810
Sup: 1.0669, 1.0641, 1.0603, 1.0583

Sunrise Market Commentary

• Rates: US Note future tests key resistance, but no break higher
  The US Note future ran into key resistance yesterday (125-09/16), but a disappointing 10-yr Note auction averted a break higher. Today's eco calendar remains uninspiring, suggesting more technical and sentiment-driven trading. Speeches by Fed governors Bullard and Evans are wildcards for trading.
• Currencies: Dollar hovering sideways. Keep an eye on core bond yields
  Yesterday, the dollar showed no clear trend. Over the previous days, the dollar showed tentative signs of bottoming after the recent correction. However, the ongoing decline in core yields is a risk. Sterling stabilizes after the Brexit debate in House of Commons

The Sunrise Headlines

• US equities ended an uneventful session narrowly mixed. Overnight, most Asian stock markets manage to eke out some gains with Japan underperforming.
• US President Trump has broken the ice with Chinese President Xi Jinping in a letter that said he looked forward to working with him to develop constructive relations, although the pair haven't spoken directly since Trump took office.
• Japan's core machinery orders (excl. ships and utilities orders), a sometimes volatile proxy for the corporate sector's willingness to invest, returned to growth in December (6.7% M/M vs. 3% M/M expected).
• Members of the British Parliament's lower house overwhelmingly gave PM May a green light to begin the country's formal withdrawal from the EU, leaving the government on course to begin Brexit as planned by the end of March.
• The north-eastern US is bracing for a powerful, fast-moving snow storm. Forecasters say the Thursday snowstorm likely will snarl workday commutes across the densely populated region.
• Oil prices turned intra-day positive yesterday, as investors took their cue from an unexpected drop in gasoline stocks and ignored the headline number in the latest US crude stockpile report. Brent closed though virtually unchanged.
• Far-right leader Marine Le Pen looks set to win the first round of France's presidential election in April, according to a new survey issued, with other polls indicating she will lose the runoff to centrist Emmanuel Macron.
• Today's eco calendar remains thin with only US weekly jobless claims. Ireland and the US supply the market while Fed governors Bullard and Evans are scheduled to speak

Currencies: Dollar Hovering Sideways. Keep An Eye On Core Bond Yields

Dollar still looking for a clear driver

On Wednesday, technical considerations dominated various markets. The dollar initially advanced further against the euro, but it couldn't gain ground versus the yen. In US trading, the fortunes of the dollar turned. The dollar ceded ground against the euro and the yen. The decline in core bond yields was partially responsible for USD softness. EUR/USD finished the session at 1.0698 (from 1.0683 on Tuesday). USD/JPY closed the session at 111.93 (from 112.39). The broader picture for both cross rates didn't change.

Overnight, there is no high profile story to guide Asian trading. Equities trade narrowly mixed with Japanese equities underperforming even as USD/JPY (112.15 area) stabilizes. BOJ Deputy Governor Nakaso stressed that maintaining monetary stimulus is of utmost importance. So, no yield rise in the near future. The Reserve Bank of New Zealand as expected left its policy rate unchanged. The Bank warns that the Kiwi dollar remains higher than is sustainable for balanced growth and wants a weaker currency. NZD/USD lost about a full big figure and trades in the 0.72 area. EUR/USD shows no clear directional bias and hovers in the high 1.06 area.

Today, eco calendar is again thin. US initial jobless are expected sliglty higher in the most recent week to 249K from 246K. Regarding events, we get speeched of Fed's Bullard and Chicago Fed's Evans. The latter has recently spoken and thus should bring no new info. The Bank of Italy monthly report on money and banks might get some attention too, given the problems in the banking sector. So technical considerations and global risk sentiment will continue to guide FX trading. We keep a close eye at the developments in the bond markets as core yields have declined substantially of late. Over the previous days, the correction of the dollar against the euro and the yen halted. USD bulls even migh see tentative signs of a bottoming out proces. Especially, the topside in EUR/USD looks well protected. However, the dollar might again come under pressure (especially USD/JPY) if core bond yields would extend their decline. The meeting between PM Abe and President Trump on Friday remains a wildcard for USD/JPY trading.

Global context. The dollar is in a corrective downtrend against most majors since the start of January. The USD rally on the Trump reflation trade petered out. Interest rate differentials in favour of the dollar narrowed. Trump politics/communication became a sources of uncertainty, also for the dollar. A break above EUR/USD 1.0874 (next resistance) would question the short-term USD positive outlook. At some point, absolute interest rate support should provide a USD floor, especially as the Fed is expected to continue its policy normalisation. Price action earlier this week showed that that euro weakness might still be a factor too. As we see the 1.0874 level as solid resistance, a sell EUR/USD on upticks might be considered. USD/JPY is trading well off the post-Trump highs (118.60/66). The test of the 112 area continues. USD/JPY 111.16 (38% retracement of the 99.02/118.66 rally) is the next key support. A break below this area is clearly USD negative.

EUR/USD: Topside test rejected. Dollar tries to build a bottom after recent correction

EUR/GBP

Sterling stabilizes after Brexit debate

Yesterday, EUR/GBP followed the intraday pattern of EUR/USD in a session without history. EUR/GBP slid slightly in the morning in sympathy with EUR/USD, but the amplitude was smaller. In the afternoon EUR/USD rand cable rebounded. BoE Cunliffe brought no new info, while Therese PM received approval from the House of Commons on the Brexit law. She conceded that parliament would get a vote on the final pact. EUR/GBP closed the session at 0.8531 (from 0.8538). Cable ended the day at 1.2541 (from 1.2509).

Overnight, the RICS house price balance improved slightly from 24% to 25% (22 was expected). No further UK data today. BoE governor Carney speaks in London, but we don't expected him to bring a different view from last week's policy assessment. After the debate in the House of Commons, Brexit might temporary become less important for GBP trading. We see no strong new driver for sterling trading. On Tuesday, sterling rebounded as the UK Parliament was allowed to vote on the final Brexit agreement. We don't see this ‘agreement' as a reason for further sterling strength. Last week's balanced BoE approach capped the topside of sterling and helped a cautious bottoming out process for EUR/GBP. The EUR/GBP 0.8450 support looks again better protected. The sterling momentum is waning a bit, but euro weakness might still be an issue. A cautious EUR/GBP buy-on-dips approach is preferred.

EUR/GBP still struggles to rebound off the 0.8450 support area

Download entire Sunrise Market Commentary

A note on lower timeframe confirming price action…

Waiting for lower timeframe confirmation is our main tool to confirm strength within higher timeframe zones, and has really been the key to our trading success. It takes a little time to understand the subtle nuances, however, as each trade is never the same, but once you master the rhythm so to speak, you will be saved from countless unnecessary losing trades. The following is a list of what we look for:

• A break/retest of supply or demand dependent on which way you're trading.
• A trendline break/retest.
• Buying/selling tails – essentially we look for a cluster of very obvious spikes off of lower timeframe support and resistance levels within the higher timeframe zone.
• Candlestick patterns. We tend to only stick with pin bars and engulfing bars as these have proven to be the most effective.

EUR/USD

In Wednesday's report you may recall that our desk highlighted the possibility of a bounce materializing from the H4 mid-way support at 1.0650. Our rationale behind this approach came from seeing a selection of different structures converging at this point: a H4 AB=CD 161.8% ext. at 1.0637, a deep H4 88.6% retracement at 1.0644, a H4 trendline support etched from the low 1.0589 (yellow zone) and was also seen positioned within daily demand at 1.0589-1.0662. Unfortunately, we missed this entry by a few pips as we were looking to jump aboard just ahead of the H4 161.8% ext. around the 1.0638ish region. Well done to any of our readers who managed to lock down a position here!

As of current prices, we can see that the pair recently caught an offer around the 1.0700 neighborhood. This level – coupled with a nearby daily resistance seen just 10 pips above the psychological level at 1.0710, may call for the single currency to withdraw from this point today.

Our suggestions: With the daily confluence seen around the 1.0700 region, and taking into account that the weekly timeframe is currently trading with a reasonably strong downside bias at the moment (the next support target on tap falls in at around a weekly support area drawn from 1.0333-1.0502), our team would consider an intraday short from 1.0700 today. However, this will only be possible on the condition that we are able to pin down a lower-timeframe sell signal (see the top of this report for ideas on how to use the lower-timeframe candles to enter the market). The first take-profit target, for us personally, would be the above noted H4 trendline support.

Data points to consider: US Jobless claims at 1.30pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.0700 ([wait for a lower-timeframe signal to form before pulling the trigger] stop loss: dependent on where one confirms this level).

GBP/USD:  

Cable is marginally stronger today after finding support around the 1.25 handle and conquering December's opening base at 1.2514. While the pair chalked up its second consecutive daily gain yesterday, alongside both the weekly and daily timeframes showing room for the pair to continue advancing north this week, the H4 chart unfortunately does not share the same view at this time. Not only is there a mid-way resistance at 1.2550 currently in motion, there's also the nearby February opening level at 1.2586 and a H4 resistance area at 1.2611-1.2589. Collectively, these H4 structures could potentially throw a spanner in the works in regards to the possibility of further buying today.

Our suggestions: On the account that the H4 shows very little ‘wiggle room' to the upside this morning, despite the higher timeframes suggesting that higher prices could be on the cards, we will not be looking to trade this unit today. The risk/reward would clearly not be in our favor!

Data points to consider: BoE Gov. Carney speaks at 6.30pm. US Jobless claims at 1.30pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Flat (stop loss: N/A).

AUD/USD

While the commodity-linked currency managed to record a small gain during the course of yesterday's segment, breaking a two-day bearish phase, there has been very little change seen to the structure of this market. As a result of this, our desk remains drawn to the 0.7577/0.76 H4 support area (yellow zone) today. Supporting a bounce from this zone we have the following converging structures:

• A H4 AB=CD 127.2% ext. at 0.7589.
• A H4 61.8% Fib support at 0.7582.
• February's opening level at 0.7577.
• Round number 0.76.
• We also have the top edge of a daily support area at 0.7581 bolstering the above noted H4 support zone.

Our suggestions: Based on the above confluence, we feel a long from the 0.7589 mark is feasible. To be on the safe side though, stops may want to be placed beyond the H4 161.8% ext. at 0.7564 (0.7562).

Data points to consider: Australian quarterly business confidence report at 12.30am. US Jobless claims at 1.30pm GMT.

Levels to watch/live orders:

• Buys: 0.7577/0.76 ([an area that can, dependent on the time of day, possibly be traded without additional confirmation] stop loss: 0.7562).
• Sells: Flat (stop loss: N/A).

USD/JPY:  

As you can see from the weekly chart this morning, the current weekly candle is trading within a stone's throw away from a weekly support area drawn from 111.44-110.10. Looking down to the daily candles, however, the pair continues to trade within the walls of a daily demand area seen at 111.35-112.37. Should this zone give way, the next barrier of interest falls in at a nearby daily broken daily Quasimodo line at 110.58.

Over on the H4 chart, yesterday's decline in value pulled the market beyond the 112 handle and ended the day in the red. Should 112 continue to hold as resistance, we may see the H4 candles complete the D-leg of an AB=CD bull pattern (see black arrows), terminating just ahead of a H4 demand area seen at 110.85-111.35.

Our suggestions: Should the H4 AB=CD formation complete, we would consider entering long just ahead of the H4 AB=CD 127.2% ext. at 111.25. The safest position for stops, in our opinion, would be beyond the above noted H4 demand. This trade is effectively based on the premise that price will, at that time, also be teasing the top edge of the aforementioned weekly support area. To avoid the possibility of a fakeout through this H4 demand to the daily broken Quasimodo line at 110.58, nevertheless, waiting for a H4 bull candle to form out of the current H4 demand could help to eliminate this.

Data points to consider: US Jobless claims at 1.30pm GMT.

Levels to watch/live orders:

• Buys: 111.25 region ([wait for a H4 bull candle to form before looking to execute a trade] stop loss: ideally beyond the trigger candle or alternatively below the H4 demand at 110.85-111.35).
• Sells: Flat (stop loss: N/A).

USD/CAD:  

The 1.32 psychological level, as can be seen from the H4 chart, held ground for a second time in the early hours of yesterday's segment. From this point on the USD/CAD spent the day grinding lower, likely fueled further by a rally in oil prices, which eventually saw the loonie engulf the H4 mid-way support level at 1.3150. For those looking to short based on price currently retesting this mid-level number, it may be worth noting that the daily candles are seen trading within a daily support area at 1.3169-1.3116, which happens to be bolstered further by a weekly demand area currently in play at 1.3006-1.3115.

Our suggestions: Instead of looking to short from 1.3150, we are watching for a H4 close back above this level. This – coupled with a retest of this number as support, followed up with a lower-timeframe buy signal could, in our humble opinion, be sufficient enough to consider a buy, targeting 1.32 and possibly beyond.

Data points to consider: US Jobless claims at 1.30pm GMT.

Levels to watch/live orders:

• Buys: Watch for a H4 close above 1.3150 and then look to trade any retest seen thereafter ([waiting for a lower-timeframe buy signal to form following the retest is advised before pulling the trigger] stop loss: dependent on where one confirms this level).
• Sells: Flat (stop loss: N/A).

USD/CHF

Beginning with the weekly timeframe this morning, it's pretty clear that the structure is somewhat restricted at the moment. Last week's candle bounced off a weekly trendline support taken from the low 0.9443 and, as a result, is now seen interacting with a weekly resistance base coming in at 0.9943. Turning our attention to the daily timeframe, the daily candles are currently seen loitering mid-range between a daily trendline resistance drawn from the high 0.9956 and a daily support band at 0.9841.

Swinging across to the H4 timeframe, we can see that the H4 support area at 0.9966-0.9949 succeeded in bolstering price in the early hours of yesterday's session. Unfortunately though, the Swissy was unable to muster enough strength to breach parity (1.0000) and from thereon tumbled lower, ultimately closing the day beyond the aforementioned H4 support zone.

Our suggestions: Seeing as how the H4 candles are, at the time of writing, seen retesting the recently broken H4 support area as resistance, would we consider this to be a stable enough zone to sell here with a target objective pegged at the 0.99 handle? Technically speaking, the current H4 resistance area boasts very little confluence and holds no connection to the higher-timeframe structures. Therefore, we would likely pass on sells from this area and expect the unit to advance and tap parity once more today. While shorting from this number carries slightly more weight given the convergence of a H4 trendline resistance extended from the low 0.9959, we would still advise waiting for additional confirmation (see the top of this report) before pressing the sell button, since a rally up to the aforementioned daily trendline resistance could very well take place.

Data points to consider: US Jobless claims at 1.30pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.0000 region ([waiting for a lower-timeframe signal to form is advised before pulling the trigger] stop loss: dependent on where one confirms this level).

DOW 30

During the course of yesterday's sessions the US equity market punched to a low of 20014, which has not only placed price within touching distance of H4 support coming in at 19989, it's also formed the basis for a nice-looking H4 AB=CD bull pattern that completes around the 19982 mark (see black arrows). This – coupled with daily support at 19964, a H4 50.0% retracement level at 19968 and the weekly chart showing little standing in the way of a move higher, forms a strong area of support worthy of attention today, in our opinion.

Our suggestions: Before our team looks to commit to any long positions from the 19964/19989 region (yellow zone), however, we would need to see price strike the H4 161.8% ext. Waiting for H4 price to confirm this area is still recommended, nevertheless, since at least in our view, there is no clear area to place stops.

Data points to consider: US Jobless claims at 1.30pm GMT.

Levels to watch/live orders:

• Buys: 19964/19989 ([wait for a H4 bull candle to form before looking to execute a trade] stop loss: ideally beyond the trigger candle).
• Sells: Flat (stop loss: N/A).

GOLD

Looking at the weekly chart this morning, the yellow metal recently struck the underside of a weekly resistance level seen at 1241.2. While this may be the case, down on the daily chart the bulls convincingly closed above daily supply at 1232.9-1224.5 (now acting support area). This does, of course, create somewhat of a conflict between the two higher timeframes. In our experience, however, it is usually the higher timeframe that leads the way, so we're in favor of a selloff materializing in the not so distant future.

Over on the H4 candlesticks, bullion advanced up to the H4 AB=CD (see black arrows) 161.8% ext. at 1241.9 amid yesterday's segment, which, as you can see, is holding ground for the time being. For those who read Wednesday's report you may recall that we highlighted this zone as a possible reversal area. Given that the weekly resistance level is now in play, our team has shorted on the close of the last bearish H4 candle at 1239.6ish, with a stop logged in at 1245.4. Our first target objective can be seen at the H4 demand area formed from 1227.6-1230.5.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1239.6 ([live order] stop loss: 1245.4).