Market movers today

There are no major events for the market today, so focus is once again on any news from the new US administration.

The market will also scrutinize any polls from France that could give an idea of whether Marine le Pen has gained following the Francois Fillon scandal. Greece is also back in the limelight after the harsh comments by the IMF earlier in the week.

Oil prices have been under pressure this week and today’s weekly oil stock numbers from the DOE will be scrutinized.

Selected market news

The sentiment in financial markets and especially in the European government bond market improved yesterday after the strong sell-off on Monday. The battered French bond market saw a small spread tightening to Germany for a change. It seems that despite the recent focus on Republican candidate Francois Fillon and his derailed campaign, he is still not out of the race and, importantly, the polls are still pointing to a significant lead for both Emmanuel Macron and Fillon versus Le Pen in a possible second round in the French presidential election.

A daily poll by the pollster Ifop showed that Le Pen’s lead in the first round had increased to 26% of support, that Macron is at 21% and that Fillon is now steady at 18.5%. However, importantly, the poll also showed that in the second round, Macron is forecast to get 64% versus 36% for Le Pen. Hence, the probability of Le Pen actually becoming President is still relatively low, according to the polls.

Greece has also attracted attention this week after the IMF earlier this week said the surplus targets are unrealistic and that Greece needs more substantial debt relief. Yesterday, Jeroen Dijsselbloem, president of the Eurogroup of finance ministers, said that the EU disagrees and that the IMF has an outdated view of the Greek economy and that it ‘must be honest’ in its assessments. The IMF’s comments and its disagreement with the EU weighed heavily on Greek short-term debt, and the 2Y Greek benchmark bond yesterday rose 66bp to 9.2%.

Dow Jones touched an all-time high yesterday evening as the market was expecting news from the Trump administration on tax cuts and fiscal spending. However, nothing was revealed and as oil prices dropped for a second day, sentiment turned and the major indices ended the day more or less unchanged.

The lower oil price and a ‘Trump reflation’ case running a bit out of steam, coupled with disappointing consumer credit data and dovish comments from the Fed’s Kashkari (voting member) supported US treasuries, and 10Y yields dropped below 2.40% for the first time since mid-January. After the lower wage growth in the labour market data released on Friday, we have become even more convinced that the FOMC will leave rates unchanged at the March Fed meeting. In the currency market, the sterling once again attracted attention as two Bank of England members called for a rate hike as early as March. It supported the otherwise battered pound.

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

The EUR continued to sag against its US counterpart yesterday, as the US dollar advanced against the majority of its trading peers. H4 demand at 1.0684-1.0709 along with the 1.07 psychological handle housed within, were both wiped out, allowing price to clock a low of 1.0656 and retest the aforementioned H4 broken demand as a resistance area.

From a technical perspective, the weekly timeframe is trading with a reasonably strong downside bias at the moment. With the weekly resistance at 1.0819 holding firm, the next support target on tap falls in at around a weekly support area drawn from 1.0333-1.0502. While this may be true, we also have to take into consideration the fact that the daily candles are now seen checking in with a daily demand base at 1.0589-1.0662.

Our suggestions: Although weekly price indicates further selling may be on the cards, we really like the look of the H4 mid-way support at 1.0650. This level boasts a H4 AB=CD 161.8% ext. at 1.0637, a deep 88.6% retracement at 1.0644, a H4 trendline support etched from the low 1.0589 (yellow zone) and is seen positioned within the above noted daily demand area. One could also say that there’s a possible H4 three-drive approach in play as well. Ideally, we’ll be looking to enter just above 161.8% ext. today, with stops placed 2-3 pips below the H4 Quasimodo support at 1.0621. That way, should a fakeout be seen beyond the 161.8% ext. there’s another H4 trendline seen just below (1.0579) to support our trade. Just to be clear here, we are not looking for a reversal off this area. A bounce is all that’s expected due to what’s been noted on the weekly timeframe.

Data points to consider: There are no scheduled high-impacting news events on the docket today relating to these two markets.

Levels to watch/live orders:

• Buys: 1.0637/1.0650 ([an area that can, dependent on the time of day, possibly be traded without additional confirmation] stop loss: 1.0619).
• Sells: Flat (stop loss: N/A).

GBP/USD

The GBP/USD, as you can see, came under pressure going into the early hours of yesterday’s European session, consequently walloping its way through the 1.24 handle and a H4 trendline support taken from the high 1.2432. However, this downside move was a relatively short-lived one, as the buyers managed to recover from lows of 1.2346 relatively quickly, and aggressively lift prices into positive territory by the closing bell.

In addition to the above, we can also see that daily price came within an inch of clipping the top edge of a daily demand area at 1.2252-1.2342, along with weekly action just missing the 2017 yearly opening level at 1.2329, before advancing north.

Our suggestions: As we write, the H4 candles are seen interacting with a rather interesting H4 area of resistance. Comprised of a psychological number at 1.25, December’s opening base at 1.2514, a H4 50% retracement at 1.2525, a H4 trendline resistance drawn from the low 1.2260 and a H4 mid-way resistance level at 1.2550 (yellow zone), this area could possibly halt buying today. Granted, there is little higher-timeframe convergence seen here, but given the H4 confluence in play, a short from this zone could be considered. Still, we would recommend waiting for a H4 close beyond 1.25 before initiating a sell, since beyond this number there’s very little standing in the way of price challenging the 1.24 vicinity.

Data points to consider: MPC member Cunliffe speaks today at 1pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.2550/1.25 ([wait for a H4 close to be seen beyond 1.25 followed up with a retest to the underside of this number, before pulling the trigger] stop loss: ideally beyond the trigger candle).

AUD/USD

With the US dollar advancing across the board yesterday the AUD/USD tumbled lower, bottoming just ahead of the 0.76 psychological barrier. In view of this, we’re currently drawn to the 0.7577/0.76 H4 support area today. Supporting a bounce from this zone we have the following converging structures:

• A H4 AB=CD 127.2% ext. at 0.7586.
• 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 0.7586 mark is feasible. To be on the safe side, stops may want to be placed beyond the H4 161.8% ext. at 0.7560 (0.7558).

Data points to consider: There are no scheduled high-impacting news events on the docket today relating to these two markets.

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: 0.7558).
• Sells: Flat (stop loss: N/A).

USD/JPY

Starting from the top this morning, weekly action recently bottomed just ahead of a weekly support area registered at 111.44-110.10. To our way of seeing things, this could have something to do with the fact that a daily demand at 111.35-112.37 is also currently in play at the moment. Of particular interest here are Monday and Tuesday’s daily candles, as combined they resemble a strong buying tail!

Looking over to the H4 chart, we can see that yesterday’s advance brought the unit up to a H4 supply coming in at 112.77-112.55, which did in fact hold firm. Should this area continue to remain in motion, we may see the H4 candles complete the D-leg of an AB=CD bull pattern, terminating just ahead of a H4 demand area seen at 110.85-111.35.

Our suggestions: Should the above come to fruition, we would not be looking to enter long until price connects with 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 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, waiting for a H4 bull candle to take shape beforehand could help to eliminate this (a slightly different approach to Tuesday’s analysis).

Data points to consider: There are no scheduled high-impacting news events on the docket today relating to these two markets.

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 below the H4 demand at 110.85-111.35).
• Sells: Flat (stop loss: N/A).

USD/CAD

From the weekly chart this morning, we can see that the weekly bulls continue to bid price higher from weekly demand at 1.3006-1.3115. This could, assuming the bulls remain in the driving seat here, force price to challenge the weekly trendline resistance taken from the high 1.4689. In conjunction with the weekly chart, the daily candles recently closed above a daily supply area at 1.3169-1.3116 (now acting support area), potentially clearing upside towards a daily supply at 1.3387-1.3317.

In spite of the above notes, to become buyers in this market we would like to see the H4 candles close above the 1.32 handle. Not only would this further confirm the recent break above daily supply, but it would also open up the path north to H4 supply at 1.3299-1.3265.

Our suggestions: Assuming that a H4 close is seen above 1.32 today, this would be our cue to begin watching for price to retest this number as support. Providing that this is followed-up with a lower-timeframe buy signal (see the top of this report for more info on confirming price action), this would be a viable long setup, targeting the aforementioned H4 supply zone.

Data points to consider: Crude oil inventories at 3.30pm GMT.

Levels to watch/live orders:

• Buys: Watch for a H4 close above 1.32 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

The USD/CHF, as you can see, stabilized around parity (1.0000) yesterday, following a wave of buying from just ahead of the 0.99 handle. With parity being a closely watched juncture in this market, as well as being reinforced with a H4 trendline resistance taken from the low 0.9960, it was no surprise to see price had reacted so well from this neighborhood. However, as we write, price seems to be stalling around a nearby H4 support area coming in at 0.9966-0.9949.

With the daily candles potentially on course to retest the underside of a daily trendline resistance drawn from the high 0.9956 right now, and weekly price reflecting a bullish stance beyond weekly resistance at 0.9943, we feel the current H4 support area has a better than fair chance of holding ground today. Based on this, do we believe that the H4 zone is stable enough to permit a long entry? Probably not, in our opinion. The reason is that from the top edge of this zone up to parity gives one only 30 or so pips to play with. Does this mean that a trade from the H4 support zone will not work? Absolutely not. If one is able to pin down a lower-timeframe buy signal from here (see the top of this report) that allows a trade with a relatively small stop loss, the risk/reward could still be favorable up to 1.0000.

Our suggestions: For us personally, we will remain flat going into today’s segment and look to reassess around tomorrow’s open.

Data points to consider: There are no scheduled high-impacting news events on the docket today relating to these two markets.

Levels to watch/live orders:

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

DOW 30

US equities trimmed an earlier advance on Tuesday, after price spiked through a daily supply area at 20138-20075. Although yesterday’s move recorded fresh all-time highs, we would not be confident (at least in the medium term) buyers until the said daily supply is consumed.

In light of the recent selloff, the H4 candles show little standing in the way of a move lower to 20000. Now, given that 20000 is bolstered by both a H4 support at 19989 and a daily support at 19964, this area could be somewhere to expect price to bounce from, or even potentially reverse.

Our suggestions: Before our team looks to commit to any long positions from the 19964/20000 region, however, we would need to see at least a H4 bull candle take shape within the walls of this area. Although this would not guarantee a winning trade, what it does do is signal buyer interest within a high-probability reversal zone.

Data points to consider: There are no scheduled high-impacting news events on the docket today that will likely affect the US equity market.

Levels to watch/live orders:

• Buys: 19964/20000 ([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

Gold prices are little changed this morning. The H4 candles continue to emphasize overbought conditions, in our opinion, as price remains trading within a H4 AB=CD (see black arrows) sell zone comprised of both the 127.2%/161.8% Fib extensions (yellow area – 1232.9/1241.7). As highlighted in Tuesday’s report, this area is also supported by the fact that the top edge is strengthened by a weekly resistance level pegged at 1241.2. As such, there may be trouble ahead for traders who bought into the breakout above daily supply at 1232.9-1224.5!

Our suggestions: On the account that there’s been very little change to structure in this market, we continue to wait and see if bullion can stretch a little higher into the above noted H4 sell zone, before looking to short. Ideally, the closer the better to the weekly resistance at 1241.2! In addition to this, our trigger to sell will be based on whether or not a reasonably sized H4 bear candle forms. Granted, this will by no means guarantee a winning trade, but what it will do is show seller interest within a high-probability reversal zone.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1241.7/1232.9 ([wait for a H4 bear candle to form within the upper limit of this zone before looking to execute a trade] stop loss: ideally beyond the trigger candle).

Currency pair GBP/USD

The GBP/USD is building a correction between support (green) and resistance) which is most likely a wave 4 (purple). A bearish ABC (orange) seems to be completed within a larger wave B (blue) correction as price bounced strongly at the 50% Fibonacci level.

The GBP/USD bullish momentum is probably a 5 wave (orange) structure, which could mean that price is retracing within wave 4 (orange) as long as price stays above the 50% Fibonacci level.

Currency pair EUR/USD

The EUR/USD break below the support trend line (blue) could spark a continuation of the wave 3 (purple). A break of the resistance trend lines (orange/red) could change the wave structure

The EUR/USD is most likely in a wave 4 (blue) retracement, which would be invalidated if price broke above the resistance (red) and 61.8% Fibonacci. A break below support (green) could see a continuation.

Currency pair USD/JPY

The USD/JPY is building a retracement back to the Fibonacci levels of wave 4 (purple). The 38.2% and 50% are likely support levels to complete a wave 4 (purple).

The USD/JPY could have completed a bearish ABC zigzag (orange) at the 38.2% Fibonacci level of wave 4 (purple). A break above the resistance trend lines could indicate a continuation of the bullish momentum whereas a break below support (green) could see a bearish continuation.

Daily Pivots: (S1) 1.2386; (P) 1.2466; (R1) 1.2585; More...

GBP/USD rebounded strongly after hitting 1.2346 and intraday bias is turned neutral first. Price actions from 1.1946 are viewed as a consolidation, no change in this view. In case of another rise, we'd expect upside to be limited by 1.2774 to bring larger down trend resumption. On the downside, below 1.2346 will revive the case that such consolidation is completed at 1.2705 already. In that case, intraday bias will turn back to the downside for retesting 1.1946 low.

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.

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EUR/USD Daily Outlook

Daily Pivots: (S1) 1.0641; (P) 1.0695 (R1) 1.0734; More.....

Intraday bias in EUR/USD remains neutral as it's staying in range of 1.0619/0828. As noted before, choppy rise from 1.0339 is seen as a correction. Hence, in case of another rise, upside should be limited by 1.0872 resistance and bring fall resumption eventually. Break of 1.0619 will argue that the corrective rise is completed and turn bias to the downside for retesting 1.0339 low.

In the bigger picture, whole down trend from 1.6039 (2008 high) is in progress. Such down trend is expected to extend to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

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Key Points:

• Fed likely to embark on monetary tightening.
• Industrial Silver demand remains strong.
• Watch for sharp volatility and declines if the central bank hikes rates.

Silver has continued to see concerted selling pressure as price action remains trapped within the confines of the bearish channel. The past few days has seen price action trending strongly towards the upper channel constraint which now threatens a breakout of the medium term bearish trend. However, the question remains as to whether this is a definite breakout or simply a dead cat bounce ahead of the Fed potentially normalising interest rates.

In particular, the metal could potentially be facing a relatively large rout as the US economy continues to gear up for a range of monetary tightening. The risk of the Fed normalising rates was always ever present but as we move towards sustained economic growth and job gains it becomes relatively clear that the central bank will need to take action sooner, rather than later. Subsequently, the market is likely to focus upon the near term risk that a cycle of potential interest rate hikes poses

Any such move by the Fed would potentially send Silver reeling from its current level and forward forecasting shows that 75bps of hikes to the FFR, over the next year, would see the metal trading around the $14.00 an ounce mark. However, that risk might yet to be reflected within the Silver futures curve which is still showing rising prices throughout most of 2017 and 2018. Subsequently, if the Fed does indeed embark upon an adventure it could lead to the air escaping rapidly from the balloon which is currently financial markets.

Fortunately, the one fundamental factor which appears to be holding relatively static is the industrial demand for Silver. Physical demand continued to soar throughout most of 2016 which bodes well for the overall price direction and may be what much of the futures curve is based on. However, this ignores the impact of the waterfall effect as large institutions, such as JP Morgan, seek to continue floating derivative paper to ensure the metal remains depressed. Subsequently, it’s relatively unlikely that any of us will see a fair quote on COMEX any time soon.

Ultimately, Silver is in for a rough few months ahead as the volatility is likely to be fairly severe when the Fed tightening cycle eventually commences. That rate hikes are coming is largely inevitable, especially given some of the gains in inflation and the tightening of the job market, so it is imperative that position holders assess their reaction now before the madness of a ‘live’ FOMC meeting arrives.

Daily Pivots: (S1) 0.9916; (P) 0.9961; (R1) 1.0021; More.....

Intraday bias in USD/CHF remains neutral for the moment as the corrective rise from 0.9860 continues. As long as 1.0043 holds, deeper decline is expected. Current fall from 1.0342 is seen as the third leg of the pattern from 1.0327. Below 0.9860 will target 61.8% retracement of 0.9443 to 1.0342 at 0.9786 and below. On the upside, break of 1.0043 will indicate short term bottoming and turn bias back to the upside.

In the bigger picture, rejection from 1.0327 resistance suggests that consolidation pattern from there is still in progress. Fall from 1.0342 is seen as the third leg and retest of 0.9443/9548 support zone could be seen. But we'd expect strong support from there to contain downside. At this point, we're still expecting the larger rally to resume later to 38.2% retracement of 1.8305 to 0.7065 at 1.1359, after the consolidation completes.

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Key Points:

• Further gains could be realised moving ahead.
• Push above the 100 day EMA shows the metal’s underlying strength.
• Trump-based uncertainty also fuelling the rally.

Gold has been one of the big winners of the past few weeks and, much to the enjoyment of the gold bulls out there, its resurgence could be only partially complete. Notably, a number of technical signals are now in agreement that the metal could be midway to completing a rather sizable rally which could see it touch the post-US-election highs.

Primarily, the EMA bias present on the daily chart provides the clearest indication that upside potential could still be rather substantial. I am speaking of course of gold’s recent push above the relentlessly bearish 100 day average which made the metal’s underlying strength plain. Furthermore, this push higher significantly caps downside risks as the 100 day EMA should now be a source of dynamic support for gold prices.

Aside from the EMA activity, there are at least two other technical readings suggestive of continued gains moving ahead. Firstly, there is the Parabolic SAR reading which is in little danger of switching its trend in the near to medium-term. Secondly, there is evidence that an Elliot wave is forming up which could carry gold significantly higher over the coming weeks.

However, this forecasted push higher is likely to run into a small snag which should mean we see a brief period of moderation this week. Specifically, the 61.8% Fibonacci level appears to be holding firm despite the swell in buying pressure over the past session. Moreover, the RSI reading is verging on overbought which might need to be relieved slightly prior to any further surges for the metal.

Ultimately, it is likely to come down to the fundamentals if we hope to see the 1300.00 handle challenged yet again. Market uncertainty will be the key force among these fundamentals but, as always, finding a measure that captures this sentiment in no small task. However, if you’re not already doing so, keep a close eye on the Trump administration as a little common sense goes a long way in forecasting how the market will react to any given announcement.

Daily Pivots: (S1) 111.78; (P) 112.18; (R1) 112.77; More...

No change in USD/JPY's outlook. The choppy decline from 118.65 could extend lower. But such decline is seen as a correction. Hence, we'd expect strong support from 38.2% retracement of 98.97 to 118.65 at 111.13 to contain downside and bring rebound. Above 113.44 minor resistance will turn bias neutral first. Break of 115.36 resistance will argue that such correction is finished and turn bias to the upside for 118.65 high.

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.

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Global Markets:

• Asian stock markets: Nikkei gained 0.20 %, Shanghai Composite lost 0.30 %, Hang Seng up 0.05 %, ASX 200 gained 0.60 %
• Commodities: Gold at $1235 (-0.10 %), Silver at $17.71 (-0.30 %), WTI Oil at $51.60 (-1.10 %), Brent Oil at $54.65 (-0.75 %)
• Rates: US 10-year yield at 2.39, UK 10-year yield at 1.29, German 10-year yield at 0.36

News & Data:

• Japan BoP Current Account Balance (Dec): JPY 1112.2 Bln (est JPY 1183.3 Bln prev JPY 1415.5 Bln)
• Japan BoP Current Account Balance Adjusted (Dec): JPY 1669.2 Bln (est JPY 1709.4 Bln prev JPY 1799.6 Bln)
• Japan Trade Balance BoP Basis (Dec): JPY 806.8 Bln (est JPY 738.9 Bln prev JPY 313.4 Bln)
• PBoC Fixes USDCNY Reference Rate At 6.8849 (prev fix 6.8604 prev close 6.8861)
• Asia shares down, euro pressured by doubts over Trump's policies, French election – RTRS
• U.S. trade deficit falls as exports hit more than 1-1/2 year high – RTRS

Markets Update:

A relatively quiet session in FX due to a lack of data and news. The Japanese Yen had the largest move overnight, with USD/JPY declining from 112.50 to 112.05. The outlook is still negative, and techs point to further losses. Support is now seen at 111.00.

The Euro is suffering from concerns about the upcoming French election. In Asia, it continued to trade with an offered tone and fell from 1.0690 to 1.0665. Support is noted at 1.0620, while resistance lies at 1.0720 and 1.0780.

The Pound has recovered a bit as the focus switched from Brexit to the political situation within the European Union. GBP/USD rose from 1.2480 to 1.2515 in Asia. However, the recovery looks fragile and tech suggest more losses are ahead.

Gold should continue to benefit from the risk-off sentiment in the markets and there is little resistance until $1252 now.

Upcoming Events:

• 13:15 GMT – Canadian Housing Starts
• 15:30 GMT – US Crude Oil Inventories
• 20:00 GMT – RBNZ Rate Decision
• 20:00 GMT – RBNZ Statement
• 21:00 GMT – RBNZ Governor Wheeler speaks
• 21:45 GMT – New Zealand Building Consents