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Daily Pivots: (S1) 113.58; (P) 113.85; (R1) 114.16; More...

USD/JPY continues to stay in tight range below 114.74 for the moment. As the pair is bounded in range of 111.58/114.94, intraday bias remains neutral. Near term outlook is a bit mixed as the corrective fall from 118.65 might not be completed yet. But still, in case of another fall, we'd still expect strong support from 38.2% retracement of 98.97 to 118.65 at 111.13 to contain downside and bring rebound. On the upside, decisive break of 114.94 will indicate that it's completed with a double bottom pattern (111.58, 111.68). In such case, intraday bias will be turned to the upside for retesting 118.65.

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.

USD/CAD has edged higher in the Tuesday session. Early in North American trade, the pair is trading just above the 1.34 line. On the release front, Canada's trade surplus edged lower to C$0.8 billion, but this easily beat the forecast of C$0.2 billion. Later in the day, Canada releases Ivey PMI, which is expected to improve to 58.9 points. In the US, the trade deficit jumped to $48.5 billion, higher than the estimate 0f $47.0 billion. On Wednesday, the US releases ADP Nonfarm Employment Change, ahead of the official Nonfarm Payrolls report on Friday.

Canada's labor market has improved, buoyed by strong employment gains. The economy added 48.3 thousand jobs and 53.7 thousand jobs in December and January respectively. This surprised the markets, which had predicted declines for each reading. The unemployment rate has also improved, dropping to 6.8%. A strong US economy 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 2.2% since the end of February. If US nonfarm payrolls beats expectations, the Canadian dollar's slide could continue.

Donald Trump has been in office for over a month but still continues to create controversy on an almost basis, much to the consternation of the markets. Still, the US dollar remains strong, buoyed by a strong economy and the increasing likelihood of a rate hike at the upcoming Fed policy meeting on March 15. The likelihood of a March hike as jumped to 84%, according to the CME group, compared to 33% just a week ago. Why the huge jump in odds? One reason is that Fed policymakers have sent out strong hints that the Fed is leaning towards raising rates next week. Earlier in the year, the Fed sent out signals Fed sent out signals that it would stay on the sidelines until it had a clearer picture of Trump's economic agenda, such as an outline of tax reform or fiscal spending plans. That has changed, as the Fed appears poised to move ahead despite the lack of any details about the administration's economic policy. This week's job numbers will be critically important, as strong numbers will likely boost the odds of a March move as well as push the greenback to higher levels.

Daily Pivots: (S1) 1.2207; (P) 1.2254; (R1) 1.2284; More...

GBP/USD's fall resumes by taking out 1.2213 and reaches as low as 1.2181 so far. Intraday bias remains is back on the downside for retesting 1.1946/86 support zone. As noted before, consolidation pattern from 1.1946 should have completed with three waves to 1.2705 already. Break of 1.1946 will confirm our bearish view and resume the larger down trend. On the upside, break of 1.2346 support turned resistance is needed to invalidate this view. Otherwise, outlook will remain cautiously bearish in case of recovery.

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.

EUR/GBP - 0.8668

 
Recent wave: Major double three (A)-(B)-(C)-(X)-(A)-(B)-(C) is unfolding and 2nd (A) has possibly ended at 0.6936.

Trend: Near term down

Original strategy  :

Buy at 0.8550, Target: 0.8650, Stop: 0.8510

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.8600, Target: 0.8700, Stop: 0.8560

Position : -

Target :  -

Stop : -

 
As the single currency has maintained a firm undertone after recent rally from 0.8403 low and the breach of previous resistance at 0.8640 adds credence to our view that the fall from 0.8857 has ended at 0.8403, then further gain to 0.8705-10 would be seen, however, loss of near term upward momentum should prevent sharp move beyond 0.8740-50, risk from there is seen for a retreat to take place later.

In view of this, would not chase this rise here and we are looking to buy euro on pullback as 0.8600 should limit downside. Below support at 0.8547 would suggest first leg of rebound from 0.8403 has ended, bring weakness to 0.8520-25 but support at 0.8509 should contain downside and bring another rise later. 

Our preferred count is that, after forming a major top at 0.9805 (wave V), (A)-(B)-(C) correction is unfolding with (A) leg ended at 0.8400 (A: 0.8637, B: 0.9491 and 5-waver C ended at 0.8400. Wave (B) has ended at 0.9413 and impulsive wave (C) has either ended at 0.8067 or may extend one more fall to 0.8000 before prospect of another rally. Current breach of indicated resistance at 0.9043 confirms our view that the (C) leg has ended and bring stronger rebound towards 0.9150/54, then towards 0.9240/50.

Dollar maintains overall gain in early US session in spite of weak trade data. Trade deficit widened to USD -48.5b in January versus expectation of USD -47.0b. That's a 9.6% rise from December's USD -44.3b and the largest figure in five years. Imports jumped 2.3% totalling USD 240.6b. Export, one the other hand, rose 0.6% to USD 192.1b. From Canada, trade surplus widened to CAD 0.81b in January. In the currency markets, Aussie remains the strongest major currency for today but momentum is unconvincing. Fresh selling is seen in Sterling as markets are starting to position for the Brexit negotiation, which should be triggered by the end of the month by prime minister Theresa May.

OECD: Economic nationalism could derail modest recovery

The Organization for Economic Cooperation and Development warned in its latest economic outlook report that protectionism could derail the world's modest recovery. OECD chief economist Catherine Mann said that "the economic nationalism is a much bigger wildcard because we don't know how the language translates into policy at this point." In the report, OECD noted that there were evidence of pick-up in confidence but consumption, investment, trade and productivity remain weak. More importantly, "disconnect between financial markets and fundamentals, potential market volatility, financial vulnerabilities and policy uncertainties could, however, derail the modest recovery."

In addition, "financial market expectations imply that a large divergence in short-term interest rates between the major advanced economies will open up in the coming years. This raises the risk of financial market tensions and volatility, notably in exchange rates, which could lead to wider financial instability." Also, "an increase in trade barriers in the major global trading economies - Europe, the United States and China - roughly equivalent to an average increase of tariffs to the bound tariff rates in 2001, the year when the trade negotiations under the Doha Development Round started, would have a major adverse impact on trade and GDP, particularly for those economies that imposed new trade barriers."

German FM Schaeble: ECB is doing a good job

Ahead of ECB meeting this Thursday, German finance minister Wolfgang Schaeuble hailed that the central bank is doing a good job. He noted that the 2% inflation in February "did not surprise me" and "the development indicates that the economic recovery in Europe continues." Released from Eurozone, German factory orders dropped -7.4% mom in January, below expectation of -2.5%. Eurozone Q4 GDP was finalized at 0.4% qoq, unrevised. From Swiss, foreign currency reserves rose to CHF 668b in February. From UK, BRC retail sales monitor dropped -0.4% yoy in February.

BoJ Masai: Large swing in exchange was would hurt business sentiment

BoJ board member Takako Masai expressed her concerns on the large swings in exchange rate. She pointed to the volatility seen back last week when Yen surged against the greenback during the first half and dropped during the second half. She noted that "there is concern that these kinds of large swings in the exchange rates, if they continue, might have a negative impact on business sentiment." Regarding inflation outlook Masai said that "although the momentum toward achieving the 2 percent price stability target has been maintained, it continues to lack firmness."

RBA stands pat

RBA left the cash rate unchanged at 1.50% as widely expected. Policymakers turned more upbeat on the economic outlook. as noted in the accompanying statement, "most measures of business and consumer confidence are at, or above, average", whilst "consumption growth was stronger towards the end of the year, although growth in household income remains low". The statement, however, added that "with growth in labour costs remaining subdued, underlying inflation is likely to stay low for some time". RBA also mentioned that the Fed is "expected to increase further" and it is less likely for other major central banks to add more monetary policy easing. More in RBA Maintains Neutral Bias In March. Fed Funds Rate Hike Alleviates Pressure On Aussie Appreciation

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2207; (P) 1.2254; (R1) 1.2284; More...

GBP/USD's fall resumes by taking out 1.2213 and reaches as low as 1.2181 so far. Intraday bias remains is back on the downside for retesting 1.1946/86 support zone. As noted before, consolidation pattern from 1.1946 should have completed with three waves to 1.2705 already. Break of 1.1946 will confirm our bearish view and resume the larger down trend. On the upside, break of 1.2346 support turned resistance is needed to invalidate this view. Otherwise, outlook will remain cautiously bearish in case of recovery.

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.

Economic Indicators Update

USD/CAD - 1.3409

 
Recent wave: Only wave v of c has ended at 0.9407 and wave C of major A-B-C correction is underway for headway to 1.4700

Trend:  Near term down

 
Original strategy       :

Buy at 1.3300, Target: 1.3450, Stop: 1.3240

Position: -

Target:  -

Stop: -

 
New strategy             :

Buy at 1.3300, Target: 1.3450, Stop: 1.3240

Position: -

Target:  -

Stop:-

The greenback has remained confined within recent established range and although pullback from 1.3437 (last week’s high) may bring minor correction to 1.3345-50, reckon 1.3300 would limit downside and bring another rise later, above said resistance at 1.3437 would extend recent upmove from 1.2969 low to resistance at 1.3461 but loss of near term upward momentum should prevent sharp move beyond 1.3500-10 and price should falter well below 1.3558, risk from there is seen for a retreat to take place later.

In view of this, would not chase this rise here and would be prudent to buy on pullback as 1.3300-10 should limit downside and bring another rise later. Below 1.3250 would defer and risk correction to indicated previous resistance at 1.3212 (now support) but only break there would suggest top is formed, bring weakness to 1.3165 first.

To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.

USD/CHF - 1.0145

Original strategy :

Buy at 1.0110, Target: 1.0210, Stop: 1.0075

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0110, Target: 1.0210, Stop: 1.0075

Position : -

Target :  -

Stop : -

Dollar’s intra-day breach of previous resistance at 1.0146 confirms recent erratic upmove from 0.9861 has resumed and bullishness remains for this move to extend further gain to 1.0175-80, then towards 1.0200-10, however, near term overbought condition should prevent sharp move beyond previous chart resistance at 1.0248, risk from there is seen for a retreat later.

In view of this, would not chase this rise here and would be prudent to buy dollar on pullback as 1.0100-10 should limit downside. Only break of indicated support at 1.0073 would suggest an intra-day top is formed instead, risk weakness to 1.0040-45 but reckon support at 1.0009 would remain intact. 

GBP/USD - 1.2196

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As cable has remained under pressure after meeting renewed selling interest at 1.2301, suggesting near term downside risk remains for recent decline from 1.2706 to extend further weakness to 1.2170-75 but reckon 1.2150 would limit downside due to loss of downward momentum and 1.2120-25 should hold, bring another rebound later. 

In view of this, would not chase this fall here and would be prudent to stand aside in the meantime. Above the Kijun-Sen (now at 1.2231) would bring recovery to the Ichimoku cloud (now at 1.2261-69), break there would suggest an intra-day low is formed, bring test of said resistance at 1.2301 which is likely to hold from here . 

EUR/USD - 1.0575

Original strategy  :

Buy at 1.0535, Target: 1.0635, Stop: 1.0500

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0535, Target: 1.0635, Stop: 1.0500

Position : -

Target :  -

Stop : -

Although the single currency retreated after rising to 1.0640 yesterday and consolidation with initial downside bias is seen for weakness to 1.0560, reckon downside would be limited to 1.0540-45 and bring another rebound later, above said resistance at 1.0640 would extend the erratic rise from 1.0493 lo for retracement of early decline to 1.0660-65 (50% Fibonacci retracement of 1.0829-1.0493) and possibly towards resistance at 1.0680, however, price should falter well below 1.0700-05 (61.8% Fibonacci retracement).

In view of this, we are looking to buy euro on dips. Below 1.0510 would abort and risk retest of 1.0493 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 - 113.99

Original strategy  :

Sell at 114.50, Target: 113.35, Stop: 114.80

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 114.50, Target: 113.35, Stop: 114.80

Position :  -

Target :  -

Stop : -

As the greenback recovered after finding support at 113.56 yesterday, suggesting consolidation with initial upside bias would be seen and corrective bounce to 114.30-35 cannot be ruled out, however, if our view that a temporary top formed at 114.75 last week is correct, upside should be limited to 114.50-55 and bring another decline later, below said support at 113.56 would bring retracement of recent rise to 113.20-25 (50% Fibonacci retracement of 111.69-114.75), however, downside would be limited to 113.00 and 112.84-86 (previous resistance and 61.8% Fibonacci retracement), bring rebound later.

In view of this, we are looking to sell dollar on recovery for such move as 114.50 should limit upside, bring another decline. Only above said resistance at 114.75 would abort and signal the rise from 111.69 has resumed and extend gain to 114.96 (previous resistance) but price should falter well below resistance at 115.38.