After a very busy week of central banks meetings, economic data outcomes, and earnings across the globe, investors' attention will shift again to politics – A move that is likely to remain the major market moving factor for months to come.

While the dollar has been struggling for the past six weeks, Friday's Non-Farm Payrolls reported a rise of 227,000 jobs. Even though the rise has been the largest in the last four months, this has done did very little to buck the trend because the average hourly earnings rose by only 0.1% and unemployment ticked up slightly suggesting that slack in the labor market still exists. As a result traders lowered their bets for a March rate hike to 13%.

For the new U.S. administration solely analyzing economic data won't be enoughin what seems to be declaring a currency war. In a non-traditional fashion, the officials in the U.S. including the president himself have been repeatedly saying the dollar is over-valued and accusing countries like China, Germany, and Japan for manipulating their currencies,

This will become more interesting as Japan's Prime Minister visits Washington on Friday. Shinzo Abe told parliament that suggestions of Japan devaluing the yen were off the mark, emphasizing that his country is abiding by G20 agreements to refrain from competitive currency devaluation, and that monetary policy easing is a tool to accelerate growth, not manipulate the currency. Well, he can also remind Mr. Trump of who started QE1, QE2, and QE3 programs.

On the U.S. data front, there's only Tier 2 economic data to be released next week including trade balance, and University of Michigan consumer sentiment. However, the trade deficit in the U.S. will become an important figure to monitor as Trump's trade policies are taking center stage.

Similarly, in the Eurozone, the calendar is light with only German trade balance and couple of industrial production numbers from the rest of area, which makes again politics, especially in France of more importance to the Euro. Marine Le Pen kicked off her presidential campaign on Saturday with a promise to shield voters from globalization and make France free again. The chances of the far-right leader to win the elections is very slim according to opinion polls, but I think markets have learnt the lessons from the UK and the US.

China also returns from a long holiday with lot of data to digest. Foreign exchange reserves, services PMI, Foreign Direct Investments and Trade Balance figures are all due to release.

Daily Pivots: (S1) 1.0729; (P) 1.0763 (R1) 1.0818; More.....

Intraday bias in EUR/USD remains neutral for the moment as it's bounded in tight range below 1.0828. 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 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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Daily Pivots: (S1) 1.2445; (P) 1.2491; (R1) 1.2526; More...

GBP/USD is staying in range below 1.2705 and intraday bias remains neutral for the moment. As noted before, rise from 1.1986 is seen as the third leg of the consolidation pattern from 1.1946. Hence, in case of another rise, we'd expect upside to be limited by 1.2774 resistance and bring down trend resumption. On the downside, below 1.2411 minor support will argue that rise from 1.1986 is completed and turn bias to the downside for 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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Daily Pivots: (S1) 0.9889; (P) 0.9935; (R1) 0.9966; More.....

USD/CHF is still staying in consolidation from 0.9860 and intraday bias remains neutral at this point. Upside of recovery is expected to be limited by 1.0043 resistance and bring another decline. 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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Daily Pivots: (S1) 112.09; (P) 112.77; (R1) 113.22; More...

USD/JPY is staying in consolidation above 112.04 and intraday bias stays neutral for the moment. Outlook is unchanged that choppy decline from 118.65 is seen as a corrective move. Below 112.04 will bring deeper fall but we'd expect strong support from 38.2% retracement of 98.97 to 118.65 at 111.13 to contain downside and bring rebound. Meanwhile, on the upside, above 115.36 resistance will argue that such correction is finished and turn bias to the upside for 118.65. Break will resume whole rise from 98.97 and target 125.85 key resistance.

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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Daily Pivots: (S1) 0.7634; (P) 0.7664; (R1) 0.7711; More...

At this point, AUD/USD's rebound from 0.7158 could still extend higher. But we'd expect strong resistance from 0.7777/7833 resistance zone to limit upside and bring near term reversal. On the downside, break of 0.7510 minor support will indicate that rise from 0.7158 has completed already and turn bias back to the downside for this key near term support level.

In the bigger picture, we're still treading 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 0.8205) and above.

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Daily Pivots: (S1) 1.2985; (P) 1.3029; (R1) 1.3065; More...

USD/CAD is staying in consolidation from 1.2968 and intraday bias stays neutral for the moment. Overall development affirmed the view that corrective rise from 1.2460 has completed at 1.3598 already, after hitting 50% retracement of 1.4689 to 1.3838. Therefore, deeper decline is expected as long as 1.3168 minor resistance holds. Break of 1.2968 should pave the way to retest 1.2460 low. However, on the upside, break of 1.3168 will mix up the near term outlook and turn focus back to 1.3387 resistance first.

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 could be completed at 1.3598 and fall from there is tentatively seen as the third leg. Break of 1.2460 will target 50% retracement of 0.9460 to 1.4689 at 1.2075 before completing the correction. In case of another rise, we'd look for reversal signal above 61.8% retracement of 1.4689 to 1.2460 at 1.3838.

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The forex markets are generally staying in tight range today with Dollar, Euro and Aussie trading with a soft tone. Recent developments in the US is prompting some analysts to push back their expectations on Fed's hike this year. According to a Reuters poll of dealers, all 14 respondents expected Fed to stand pat in March meeting too. 12 our of 14 expected Fed to hike 0.25% by the end of second quarter. 10 expected interest rate to hit 1.00-1.25% by the end of the year. But only 2 expected interest rate to hit 1.25-1.50%. That is, the majority is expecting Fed to hike only twice this year.

However, San Francisco Fed president John Williams offered some hawkish comments. He noted that "from a risk management point of view, there's an argument to move sooner, rather than wait." And, he maintained that three hikes is "a reasonable guess, a reasonable perspective to have as a base case." And he noted that "there's a lot of potential that this economy is going to perhaps get more of a boost than the base case." Chicago Fed president Charles Evans said Friday that while he expected 2 hikes when he submitted his projections back in December, now, he "could see three hikes" and he "could be comfortable with that." As of Friday, fed fund futures were pricing in only 13.3% chance of a March hike and 68.3% change of a hike by June.

In Eurozone, German finance minister Wolfgang Schäuble blamed ECB for making Euro's exchange rate "too low" and monetary polices that are "too loose" for Germany. He said that "when ECB chief Mario Draghi embarked on the expansive monetary policy, I told him he would drive up Germany's export surplus.... I promised then not to publicly criticise this [policy] course. But then I don't want to be criticized for the consequences of this policy." Last week, Peter Navarro, the head of Donald Trump's new National Trade Council, criticized that Germany exploited the US and EU partners by using a "grossly undervalued" euro.

On the data front, Japan labor cash earnings rose 0.1% yoy in December, below expectation of 0.4% yoy. Australia retail sales dropped -0.1% mom in December versus expectation of 0.3% mom growth. China Caixin PMI services dropped 0.3 pt to 53.1 in January. The economic calendar is relatively light today with German factory orders, Eurozone retail PMI and Sentix investor confidence featured. Looking ahead, RBA and RBNZ rate decisions are the main focuses of the week and both central banks are expected to stand pat. Here are some highlights for the week:

• Tuesday: RBA rate decision, Japan leading indicators; Swiss foreign currency reserve; German industrial production; Canada trade balance, building permits, Ivey PMI; US trade balance
• Wednesday: Japan current account, Eco watcher sentiments; Canada housing starts
• Thursday: RBNZ rate decision; Japan machine orders; Australia NAB business confidence; UK RICS house price balance; Swiss unemployment rate; German trade balance; US jobless claims
• Friday: Japan PPI; Australia home loans; China trade balance; Japan tertiary activity index; UK industrial and manufacturing productions; Canada employment; US import price index, U of Michigan sentiment

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2985; (P) 1.3029; (R1) 1.3065; More...

USD/CAD is staying in consolidation from 1.2968 and intraday bias stays neutral for the moment. Overall development affirmed the view that corrective rise from 1.2460 has completed at 1.3598 already, after hitting 50% retracement of 1.4689 to 1.3838. Therefore, deeper decline is expected as long as 1.3168 minor resistance holds. Break of 1.2968 should pave the way to retest 1.2460 low. However, on the upside, break of 1.3168 will mix up the near term outlook and turn focus back to 1.3387 resistance first.

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 could be completed at 1.3598 and fall from there is tentatively seen as the third leg. Break of 1.2460 will target 50% retracement of 0.9460 to 1.4689 at 1.2075 before completing the correction. In case of another rise, we'd look for reversal signal above 61.8% retracement of 1.4689 to 1.2460 at 1.3838.

Economic Indicators Update

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Australia retail sales disappoint ahead of tomorrow's RBA decision

Asia Mid-Session Market Update: China Caixin Services PMI edges lower; Australia retail sales disappoint ahead of tomorrow's RBA decision

Friday US markets on close: Dow +0.9%, S&P500 +0.7%, Nasdaq +0.5%

Best Sector in S&P500: Financials

Worst Sector in S&P500: Basic Materials

Biggest gainers: MTD +6.7%; M +6.4%; MS +5.5%

Biggest losers: HBI -16.4%; FCX -5.8%; CMG -4.5%

At the close: VIX 11.0 (-1.0pts); Treasuries: 2-yr 1.20% (flat), 10-yr 2.49% (+2bps), 30-yr 3.11% (+3bps)

Weekend US/EU Corporate Headlines

Dow and DuPont to offer sale of R&D capability to ease antitrust concerns - FT

Board Unanimously Rejects Unsolicited Proposal from Frontline Ltd.

Politics

(US) Defense Secretary Mattis: not considering increasing US forces in the Middle East in response to Iran's misbehavior, but US will not ignore Iran's activities

(US) Homeland Security has "suspended any and all actions" related to implementing Pres Trump's immigration ban on 7 Muslim-majority countries

(US) President Trump: Will not attend May meeting with NATO leaders in Europe

Key economic data:

(CN) CHINA JAN CAIXIN PMI SERVICES: 53.1 V 53.4 PRIOR (first sequential decline in 4 months)

(AU) AUSTRALIA DEC RETAIL SALES M/M: -0.1% (First m/m decline since Aug 2015) V 0.3%E; Q4 Q/Q: 0.9% V 0.9%E

(AU) AUSTRALIA JAN ANZ JOB ADVERTISEMENTS M/M: 4.0% (2-year high) V -2.2% PRIOR

(JP) JAPAN DEC LABOR CASH EARNINGS Y/Y: 0.1% V 0.4%E ; REAL EARNINGS (EX-INFLATION) Y/Y: -0.4% V 0.0% PRIOR; 2016: 0.5% (biggest increase since 2010)

Asia Session Notable Observations, Speakers and Press

Asian markets tracking the Friday rally on Wall St, where low wage growth component of the monthly jobs data eases the pressure on the Fed to deliver on its promise of higher rates in the most immediate term; Australia markets underperforming as commodity prices retreat.

Political standoff in the US between the DOJ and the Courts remains tense after a Washington State judge temporarily blocked the administration's travel ban and Homeland Security dept suspended all implementation; White House plans to appeal the order.

China Jan Caixin services PMI eased for the first time in 4 months after hitting a multi-month high in Dec. Economists noted the contrast of employment components in manufacturing vs services, with the former reducing employment and the latter hiring faster. Rising input prices were also cited, along with expectations of decelerating economy after Q1 given decreasing propensity for restocking.

Ahead of tomorrow's RBA decision, where expectations are largely for a rate hold, today's Australia retail sales were disappointing registering first sequential decline in over a year. Some economists see that as a one-off given some recent liquidation activity in the industry, others expect the reduced activity to give RBA pause while also monitoring the price developments.

Japan wage growth slowed in December, though 2016 wage inflation was still the highest since 2010.

China

(CN) China State Researcher Baoliang: China should assess impact of President Donald Trump’s economic policies and guard against forex market volatility and capital outflows - Chinese press

(CN) China should raise central fiscal deficit to 3.5% of GDP - Chinese press

(CN) China Foreign Min Lu Kang: US should stop "making wrong remarks" about security in the South China Sea - press

Australia/New Zealand:

(AU) JPMorgan economist: Weakness in Australia retail data was heavily concentrated in households good retailing, which may be due to liquidation sales of a major Australian hardware/home improvement retailer - SMH

(NZ) JPMorgan: RBNZ policy statement this week may come across as hawkish as it trumpets recent return of inflation above 1% as evidence price pressure is picking up - press

Asian Equity Indices/Futures (00:00ET)

Nikkei +0.2%, Hang Seng +0.6%, Shanghai Composite +0.4%, ASX200 -0.1%, Kospi +0.2%

Equity Futures: S&P500 flat; Nasdaq flat, Dax flat, FTSE100 -0.1%

FX ranges/Commodities/Fixed Income (00:00ET)

EUR 1.0770-1.0790; JPY 112.20-112.70; AUD 0.7655-0.7685; NZD 0.7295-0.7305; GBP 1.2475-1.2500

Apr Gold +0.4% at 1,225/oz; Mar Crude Oil +0.4% at $54.03/brl; Mar Copper +0.7% at $2.64/lb

SPDR Gold Trust ETF daily holdings rise 3.3 tonnes to 814.5 tonnes; 3rd straight increase; Highest since Dec 31st

(AU) Australia Port Hedland Jan Iron Ore Exports 40.3Mt v 43.9Mt m/m, +19% y/y

(CN) PBOC SETS YUAN MID POINT AT 6.8606 V 6.8556 PRIOR; weakest Yuan setting since Jan 20th

(CN) PBOC skips reverse repo operations v CNY50B on Feb 2nd and raising all offer yields by 10bps

(KR) South Korea sells 3-yr govt bonds; avg yield 1.655%

Asia equities / Notables / movers

7267.JP Honda: Reports 9-month Net ¥521B v ¥438B y/y, Op Profit ¥703B v ¥567B y/y, Rev ¥10.24T v ¥10.94T y/y; +2.0%

5214.jp Nippon Electric: CLSA Raised 5214.JP to Outperform from Underperform; +6.1%

7270.JP Fuji Heavy May report FY16/17 op profit of ¥410B, -28% y/y but above ¥373B prior forecast - Nikkei; -0.6%

NAB.AU NAB: Q1 trading statement; +0.8%

IGO.AU Independence Group: Credit Suisse Raised IGO.AU to Outperform from Neutral; +1.8%

DUE.AU Duet: Establishes A$150B debt facility with Westpac; -1.5%

AWE.AU AWE: Macquarie cut; -1.7%

338.HK Sinopec Shanghai: Nomura cut; -1.0%

610.HK Wai Kee Holdings: Guides FY16 net profit at least +50% y/y; +5.2%

240.HK Build King Holdings; Guides FY16 net profit at least +50% y/y; +11.3%

149.HK China Agri Products: Profit warning; -24.6%

Market movers today

In the US, the data calendar is light and we expect focus to remain on Donald Trump's policies. One game changer may be the confirmation of Steven Mnuchin as Treasury Secretary.

In the euro area, the first release of interest is Sentix investor confidence. Sentix trended upwards in H2 16 and reached 18.2 in January 2017, its highest level since August 2015. The current situation and expectations components have both risen to historically high levels but we have seen a loss of momentum in both ZEW and ifo expectations, which could be a drag on Sentix expectations. Therefore, we expect Sentix to rise marginally to 19.0 in February, possibly dragged down by a declining expectations component.

We are also due to get German factory orders for December today. Factory orders have followed a rising tendency since 2013 but have experienced large fluctuations, with a 5% monthly increase in October and a 2.5% decline in November. We expect a bounce back in December, with monthly growth of 2%. Our view of another increase is supported by the manufacturing PMI in November and December, which showed strength in the new orders indicator.

In the UK, there are no significant data releases. The main event in the UK this week is the House of Commons vote on the Article 50 bill on Wednesday. The vote is expected to be passed and put the government on course to trigger Article 50 on 9 March as planned.

Selected market news

This morning, Asian markets followed US equity markets higher, boosted by the US jobs report on Friday, which revealed surprisingly strong job growth while wage growth remains muted. This is a perfect match for Asian emerging markets as the underlying US economic growth suggests solid global demand, while the risks of a near-term Fed hike (earlier than our expectation of a June rate hike) appears relatively slim given the muted inflationary wage pressures in the US economy. The market is pricing in only about 45% for a rate hike in May, while about 75% for a rate hike in June.

Furthermore, financial sector stocks were buoyed by talks on the possible easing of financial regulation by the Trump administration. The National Economic Council Director Gary Cohn indicated on Friday that the new administration will look at the Volcker Rule and ‘all aspects of the Dodd-Frank legislation' in order to free up capital and stimulate lending to the economy.

Meanwhile, other aspects of Trump's policy agenda remain in doubt. Over the weekend, Trump lost a bid to restart the travel ban while the US appeals court reviews the immigration restrictions. Moreover, the US administration imposed new sanctions on Iran on Friday following the recent missile test by Iran. The sanctions target 13 individuals and 12 entities seen as being linked to terrorism. The policy announcements from the US administration will continue to be closely scrutinised this week, amid a very thin data calendar in the US.