Sample Category Title

Daily Pivots: (S1) 1.0528; (P) 1.0572 (R1) 1.0619; More.....

EUR/USD extends the post-ECB rally today and breaches 1.0630 resistance again. The development suggests that pull back from 1.0828 has completed at 1.0493 already. More importantly, corrective rise from 1.0339 is possibly still in progress for another rising leg. Intraday bias is mildly on the upside for 1.0678 resistance first. Break will send EUR/USD through 1.0828 resistance.

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.

Dollar weakens against Euro, Aussie and Canadian in early US session despite solid non-farm payroll report. The selloff is, at this point, seen as a sell-on-news move. Canadian dollar is supported by its own job data. The set of NFP should have done nothing to alter Fed's decision to hike interest rate next week. Nonetheless, without a surge in wage growth, the report doesn't add to the case for more than three hikes this year. Focus will turn to next week's FOMC meeting, with new economic projections.

NFP showed 235k growth in the US job market in February, above expectation of 190k. Prior month's figure was revised up from 227k to238k. Unemployment rate dropped 0.1% to 4.7% as expected. Average hourly earnings rose 0.2% mom in February, missing expectation of 0.3% mom. Nonetheless, prior month's wage growth was revised up from 0.1% mom to 0.2% mom. Canadian job market grew 15.3k in February, way better than expectation of -15.5k. Unemployment rate also unexpectedly dropped to 6.6%, versus consensus of 6.8%.

UK inflation expectations climbed to three year high

The BoE's quarterly Inflation Attitudes survey released today showed inflation expectation surged to highest level in three years. The consumer medium expectation for price growth over the next 12 months was at 2.9%, highest since 2013. That was up from prior 2.8% at prior survey back in November. Five year inflation expectations jumped to 3.2%, up from prior 3.1%. Meanwhile, 42% of respondents expected interest rates to rise over the next 12 months. 28% said interest rate would stay unchanged. Only 6% expected inflation rate to fall.

Released from UK, industrial production dropped -0.4% mom, rose 3.2% yoy in January. Manufacturing production dropped -0.9% mom, rose 2.7% yoy. Construction output dropped -0.4% mom. Visible trade deficit narrowed to GBP -10.8b. Also from Europe, German trade surplus widened slightly to EUR 18.5b in January.

Short term JGB yields rose

In Japan, short term JGB yields rose today as BoJ reduced the size of purchase of corresponding maturities. The one- to three- year JGB purchase was lowered to JPY 300b, JPY 20b lower than prior purchase last week, and was the smaller amount since September 2014. Purchase of discount bills was lowered to JPY 250b, smallest since 2015. Two year JGB yield rose 1.5 basis points to -0.255%. Three-month bill yields rose 1.5 basis points to -0.399%. Japan's BSI large manufacturing index dropped to 1.1 in Q1.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0528; (P) 1.0572 (R1) 1.0619; More.....

EUR/USD extends the post-ECB rally today and breaches 1.0630 resistance again. The development suggests that pull back from 1.0828 has completed at 1.0493 already. More importantly, corrective rise from 1.0339 is possibly still in progress for another rising leg. Intraday bias is mildly on the upside for 1.0678 resistance first. Break will send EUR/USD through 1.0828 resistance.

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.

Economic Indicators Update

USD/CHF - 1.0130

Original strategy :

Buy at 1.0100, Target: 1.0200, Stop: 1.0070

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0100, Target: 1.0200, Stop: 1.0070

Position : -

Target :  -

Stop : -

As the greenback found good support at 1.0092 and has staged a strong rebound, suggesting low is possibly formed there and consolidation with mild upside bias is seen for gain to 1.0145-50, however, break of resistance at 1.0171 is needed to signal recent erratic rise from 0.9861 low has resumed and extend further gain to 1.0200-10 but near term overbought condition should limit upside to 1.0220-25 and price should falter below previous chart resistance at 1.0248.

In view of this, we are looking to buy dollar on dips as 1.0100 should limit downside and bring such rise. Below support at 1.0073 would abort and signal top has been formed instead, risk weakness to 1.0040-45 but reckon support at 1.0009 would remain intact. 

GBP/USD - 1.2150

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As cable has recovered after holding above support at 1.2135, suggesting consolidation above this level would be seen and corrective bounce to 1.2210-15 is likely, however, reckon upside would be limited to 1.2245-55 but price should falter well below resistance at 1.2301, bring another decline later.

In view of this, would not chase this fall here and would be prudent to stand aside in the meantime. Below said support at 1.2135 would signal recent decline has once again resumed and extend weakness to 1.2100, however, loss of near term downward momentum should prevent sharp fall below 1.2070-75 and price should stay above 1.2050, risk from there is seen for a rebound later.

EUR/USD - 1.0603

Original strategy  :

Buy at 1.0560, Target: 1.0660, Stop: 1.0525

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0560, Target: 1.0660, Stop: 1.0525

Position : -

Target :  -

Stop : -

Yesterday’s strong rebound after finding support at 1.0525 suggests the retreat from 1.0640 has ended at 1.0525 and consolidation with mild upside bias is seen for further gain towards said resistance at 1.0640, however, break there is needed to retain bullishness and signal another leg of the erratic rise from 1.0493 low is underway for retracement of early decline to 1.0660-65 (50% Fibonacci retracement of 1.0829-1.0493) and possibly towards resistance at 1.0680 but price should falter well below 1.0700-05 (61.8% Fibonacci retracement).

In view of this, we are looking to buy euro on dips as 1.0560 should limit downside and bring another rise later. Below said support at 1.0525 would abort and risk test of 1.0493-96 but only break there would shift risk back to the downside and signal recent decline from 1.0829 has resumed for further selloff to 1.0470 and then towards previous support at 1.0454.

USD/JPY - 115.43

Original strategy  :

Buy at 114.90, Target: 115.90, Stop: 114.55

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 114.90, Target: 115.90, Stop: 114.55

Position :  -

Target :  -

Stop : -

As the greenback has surged again today and broke above indicated previous resistance at 115.38, adding credence to our bullishness for recent upmove to extend further gain to another previous resistance at 115.62, however, near term overbought condition should prevent sharp move beyond 115.90-00, risk from there has increased for a retreat to take place later.

In view of this, would not chase this rise here and we are looking to buy dollar on pullback as 114.90-00 should limit downside and bring another rise. Below previous resistance at 114.75-76 would defer and risk test of 114.50-55 but break of support at 114.26 is needed to signal top is formed instead.

USD/CAD is unchanged in the Friday session. In North American trade, the pair is trading at the 1.35 line. On the release front, employment numbers will be on center stage on both sides of the border. The US will release three key indicators – Nonfarm Payrolls, Average Hourly Earnings and the unemployment rate. The Nonfarm payrolls report is expected to drop to 200 thousand, while wages are forecast to improve to 0.3%. Canada will publish Employment Change and the unemployment rate. The markets are expecting the economy to add a negligible 0.6 thousand jobs. Given the host of key events, traders should be prepared of volatility from USD/CAD during the North American session.

Canada's labor market has improved in recent months. Job creation numbers were much higher than expected in the fourth quarter, and this continued into 2017, as the economy added 48.3 thousand jobs. However, the impressive trend may peter out in February, with a forecast of only 0.6 thousand new jobs. The strong US economy, buoyed by a red-hot employment market, has been good news for Canada, which is heavily dependent on its southern neighbor. At the same time, speculation of an imminent rate hike by the Fed has boosted the US dollar, which has jumped 3.5% against the Canadian currency in 2017. On Thursday, USD/CAD pushed above the 1.35 line, which last occurred on at the end of December.

After raising rates in December, the Fed appears ready to make a March move. The odds of a March hike continue to climb, and are currently at 88% percent, according to the CME Group. Fed policymakers have been dropping hints of a March move, and a red-hot labor market and higher inflation levels present further arguments in favor of higher rates. Earlier in the year, the Fed had said that it wanted to wait until it had a clearer idea of President Trump's economic policy before it tightened monetary policy. However, Trump has not backed up his promises to reform the tax code and increase fiscal spending with any details. Some Fed policymakers wanted to raise rates earlier this year, so Fed Chair Yellen is under pressure to make a move, and it appears virtually certain that the Fed will raise rates by a quarter-point on March 15.

Market movers ahead

• We expect the Fed to hike the target range by 25bp to 0.75-1.00% on Wednesday.
• The US debt limit suspension expires on Wednesday.
• The Dutch general election takes place on Wednesday.
• We expect the Trump administration to publish its budget proposal for the 2018 fiscal year (running from Q4 17 to Q3 18) next week.
• In the UK, the next round of the parliamentary 'ping pong' between the Commons and the Lords has been set for Monday. PM Theresa May may trigger Article 50 as early as next week.
• The meeting of G20 finance ministers in Germany at the end of next week may be interesting given the expectations of easier fiscal policy, especially in the US.

Global macro and market themes

• We expect the Fed to hike next week followed by two additional hikes in 2017.
• Equity markets have taken another leap higher as we called for.
• However, the fixed income and oil markets seem less bullish on long-term growth prospects, as the yield curve has flattened in the US and the oil price has plummeted.
• We expect equity markets to lose a bit of momentum in coming months.
• However, an emerging capex boom could provide further momentum for equity markets later in 2017.

Full Report in PDF

The ever-rising expectations of the Federal Reserve raising US interest rates in March have made the Greenback king this trading week. Although the Dollar Index has found itself under some selling pressure below 102.00 during early trading on Friday, this technical correction could simply provide a foundation for bulls to install fresh rounds of buying in the future. With the blockbuster ADP report boosting the bullish sentiment towards the Dollar, further appreciations could be expected if today's NFP exceeds estimates. Bulls remain in firm control moving forward and it may take an extreme anomaly in the pending US jobs report to abruptly cool the heated expectations of the Fed taking action next week.

From a technical standpoint, the Dollar Index is bullish on the daily charts. A weekly close above 102.00 could encourage a further incline higher towards 102.50.

Euro gifted a hawkish lifeline

The vulnerable Euro received a lifeline during trading on Thursday with prices springing above 1.0600 following the hawkish surprise from the European Central Bank that caught markets off guard. Although key interest rates were kept at record lows as expected, the optimism radiating from Mario Draghi regarding the recovery of the European economy simply inspired the Euro bulls. With the central bank no longer seeing a "sense of urgency" to take further action on monetary stimulus, markets may acknowledge this as a potential inflection point for the ECB to gradually change its monetary stance. The fact that policymakers are already anticipating that it will not be necessary to lower interest rates further in the future could signal a gradual end to an era of negative rates if the European economy continues to stabilize.

Although the outlook for Europe is starting to look somewhat encouraging amid the positive economic data, the uncertainty gravitating around the elections in Europe continues to weigh heavily on sentiment. The threat of political developments overshadowing the positive macroeconomic factors could expose the Euro to sharp losses in the short to medium term. While the current upside momentum on the EURUSD is impressive, gains could be swiftly surrendered today if NFP meets or exceeds expectations. From a technical standpoint, the EURUSD remains trapped in a wide 150 pip range. Bears remain in control below the tough 1.0650 resistance.

Commodity spotlight - Gold

Gold has been sold off incessantly this week with prices crashing below $1200 as speculations heighten over the Federal Reserve raising US interest rates this month. Bears have exploited the Dollar's stability to pressure the yellow metal further during trading on Friday as prices currently trade around $1195. With Gold's sensitivity to US interest rate hike expectations reaching shocking levels this quarter, more downside could be expected as expectations mount over the Fed raising US rates repeatedly in 2017. Although risk aversion from the political uncertainty in Europe, Brexit woes and Trump developments could support the metal in the longer term, bears remain in firm control this month. From a technical standpoint, the zero-yielding metal is firmly bearish on the daily charts and a solid NFP report this afternoon could encourage a steeper decline towards $1190 and potentially lower.

While the world's attention has been on the drop in Gold this week, we shouldn't forget the fireworks amongst its little brothers and sisters.

All eyes will be on the Non-Farm Payrolls tonight with a print at 200,000 or better ticking the final rate hike box for the Fed at next week's FOMC. Gold, as we know, has suffered this week as its appeal diminishes as an asset with U.S. yields rising and the fading of the safe-haven call underpinning it. The world I suspect has yet to price in what may be a series of Fed rate hikes this year with the U.S. economy firing on all cylinders it seems.

Gold itself is down over 3% for the week, but the action hasn't been confined to just it in the precious metal universe. Platinum and Palladium have also suffered to the same extent, and for Silver, it is a whopping six-plus percent correction. Silver tends to overshoot Gold moves as a function of liquidity or lack there-off. The exit door always being smaller then Golds.

A quick glance at the charts though shows all four of the precious metals groups have broken some interesting downside levels.

GOLD

It's hard to believe that 1262 the 200-day moving average (DMA) was only tested and failed at 11 days ago. In the last two days, Gold has also broken it's 55 and 100 DMA's as well at 1210.30 and 1207.25 which now become resistance.

Gold is trading below 1200 at 1197 as we speak with the last clear support on the daily chart at the 1180 level, the January low. A close below here sees a lot of clear air to these wizened eyes, and a break could open a move to the distant 1122.50 level.

SILVER

Down over six percent for the week, there has been no silver bullet for Silver bulls unless it was one to the heart. Silver failed numerous times at the 18.4500/18.5000 region before an ugly descent through the 200-dma at 18.0400.

Silver has since broken the 55 and 100-dma's as well at 17.2600 and 17.2000 respectively, and these become first resistance.

Like Gold, it has one major support level just below at the 16.6300 area before a hole opens up on the charts to 15.6350.

Palladium

To be fair to Palladium, it has had a stellar year amongst the precious metals group. Palladium at one stage was up 42% from its 2016 lows! Thus in the scale of things, it's pullback is a mere flesh wound. Part of this maybe that Palladium is also a heavily used industrial metal and has benefited from the rise in hard commodities in general over the last 12 months.

Resistance is just above its 745.70 level at 752.60, the 55-dma. After that, we have the formidable 796.50 area where Palladium has failed numerous times but with a relatively small pullback, until now.

There are a lot of technical supports below. The days low and also a double bottom at 741.00. The 100-dma at 725.70. Previous lows at 710.00 with the 200-dma at 688.00 and Decembers low at 653.00 below. Although it has been an ugly few days, from a bigger picture and technical perspective, Palladium is far more constructive than its brother and sisters.

Platinum

Platinum is already 21% lower than its 2016 highs in July. If Platinum's price action were a roller coaster over the last year, it would probably be shut down for safety reason. The chart appears to be showing a giant head and shoulders formation forming which could imply a significant move down is on the cards. I will come back to this next week once I have observed more price action. Watch this space!

Zeroing into the here and now, Platinum has broken its 200,55 and 100-dma at 1006.60, 978.90 and 963.45 respectively, all within the last seven days! These all become resistance now along with 952.40 the original break-up level early January.

With platinum trading at 939.00, the first support is the overnight lows at 933.70. After that, yet again, a lot of clear air opens up on the charts until December's lows at 888.60.

Summary

Although most of the charts look negative from a technical perspective, it is important to note we have come a long way in a short time. That said, the short-term price action will be determined by today's Non-Farm Payrolls and their effect on the FOMC rate decision next week. A big miss to the downside could possibly see some relief for precious metals. A number near to or above could see more downside pain ahead.