Daily Pivots: (S1) 1.3916; (P) 1.3965; (R1) 1.4007; More...

EUR/AUD's pull back indicates temporary topping at 1.4014. Intraday bias is turned neutral for consolidation. We're holding on to the view that a short term bottom was formed at 1.3624, on bullish convergence condition in 4 hour MACD. And, the cross could have defended 1.3671 key support level successfully and is staging trend reversal. Above 1.4014 will target 1.4289 resistance first. Break will affirm this case and target 1.4721 resistance for confirmation. On the downside, below 1.3835 minor support will dampen this bullish view and turn bias back to the downside for 1.3624 low.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. We'd expect strong support from 1.3671 key level to contain downside and bring rebound. Up trend from 1.1602 should not be finished and will resume later. Break of 1.4721 resistance will indicate completion of such correction and turn outlook bullish for retesting 1.6587 high. However, sustained break of 1.3671 will invalidate our bullish view and would turn focus back to 1.1602 long term bottom.

'The dollar is not likely to gain further against the yen, with an expected range around 111 to 115 yen during March.' – BBH (based on Reuters)

Pair's Outlook

The USD/JPY currency pair remained almost completely flat on Monday, unable to reclaim the 114.00 major level. The pair remains on the back foot, with the cluster around 113.30 representing the lower boundary of today's intraday trade and the cluster circa 114.60—the upper border. The Buck is expected to remain within this trading range, but with risks skewed to the downside, as the exchange rate recently jumped away from the ascending channel's upper boundary. Ultimately, a retest of the 112.30/00 area is expected, which would reconfirm the channel's support line. Technical studies, however, are unable to confirm either the positive or the negative scenario.

Traders' Sentiment

Today 61% of traders are long the Buck (previously 59%), while the share of buy orders slid from 56 to 54% during the last 24 hours.

'We expect the precious metal to have a bumpy ride the rest of the week as we await further economic indicators from the U.S.' – Mihir Kapadia, Sun Global Investments (based on Reuters)

Pair's Outlook

During the early hours of Tuesday's trading session the yellow metal had paused the decline, which occurred during Monday's trading. The bullion stopped just below the 1,225 level and attempted to regain some of its value. However the attempt failed, and the commodity price still remains positioned to fall to the 1,219.20 level, where the 38.20% Fibonacci retracement level is located at. The Fibonacci retracement level is also supported by the weekly S1, which is located at 1,216.60 level.

Traders' Sentiment

For the third consecutive trading session SWFX traders remain 54% long regarding the bullion. In addition, 58% of trader set up orders are to buy the metal.

Daily Pivots: (S1) 0.8623; (P) 0.8646; (R1) 0.8668; More...

EUR/GBP's rebound form 0.8402 is still in progress today and reaches as high as 0.8676 so far. As noted before, rise from 0.8402 is viewed as the third leg of the corrective price actions from 0.8303. EUR/GBP should be targeting 0.8851 resistance and above. However, whole price actions from 0.8303 are viewed as the second leg of the correction from 0.9304. Hence, we'd expect strong resistance from 100% projection of 0.8303 to 0.8851 from 0.8402 at 0.8950 to limit upside. On the downside, below 0.8546 minor support will turn bias back to the downside for 0.8402 support.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. Deeper fall cannot be ruled out yet. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside. Overall, the corrective pattern would take some time to complete before long term up trend resumes at a later stage. Break of 0.9304 will pave the way to 0.9799 (2008 high).

EUR/USD

Current level - 10584

Yesterday's failure at 1.0630 resistance area signals a negative outlook, for a break through 1.0570 support, towards 1.0490 lows.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 113.89

The rebound above 113.50 low is corrective in nature, thus preceding another slide towards 113.37, en route to 112.80 support area.

GBP/USD

Current level - 1.2227

The overall bias remains negative, for a slide towards 1.2116 static support. Initial resistance lies at 1.2325.

Daily Pivots: (S1) 1.0687; (P) 1.0704; (R1) 1.0724; More...

A short term bottom is likely in place at 1.0629 on bullish convergence condition in 4 hour MACD. Intraday bias stays on the upside for 1.0749 resistance next. Also, current development is raising the change of larger trend reversal after defending 1.0620 key support level. Decisive break of 1.0749 should affirm this bullish case and target 1.0897. On the downside, though, below 1.0683 minor support will turn bias back to the downside for 1.0629 instead.

In the bigger picture, the decline from 1.1198 is seen as a corrective move. There is no confirmation of completion yet. Sustained trading below 38.2% retracement of 0.9771 to 1.1198 at 1.0653 will target 50% retracement at 1.0485. However, strong rebound from 1.0620 and break of 1.0897 resistance will indicate trend reversal and turn outlook bullish.

Weekly

• Last Candlesticks pattern: Shooting star
• Time of formation: 5 Sep 2016
• Trend bias: Down

Daily

• Last Candlesticks pattern: Long black candlestick
• Time of formation: 24 Jun 2016
• Trend bias: Down

GBP/USD – 1.2432

As cable has remained under pressure after breaking indicated previous support at 1.2347, adding credence to our view that the fall from 1.2706 top is still in progress and mild downside bias remains for further weakness to 1.2200, then towards 1.2150. Looking ahead, below 1.2150 would signal the rebound from 1.1986 low has ended, then further fall to 1.2100 would follow, however, still reckon downside would be limited and price should stay well above support at 1.1986, bring rebound later.

On the upside, although initial recovery to 1.2300 cannot be ruled out, reckon said previous support at 1.2347 would turn into resistance and cap cable’s upside, bring another decline later. A daily close above the Tenkan-Sen (now at 1.2392) would defer and risk a stronger rebound towards the Kijun-Sen (now at 1.2460) but only a sustained breach above there would signal the fall from 1.2706 has ended instead, risk a stronger rebound to 1.2500 but price should falter well below resistance at 1.2570.

Recommendation: Sell at 1.2350 for 1.2150 with stop above 1.2450. 

On the weekly chart, last week’s selloff formed a black candlestick and mild downside bias remains for the fall from 1.2706 to extend weakness to 1.2200, then 1.2150, however, if our view that a temporary low formed at 1.1986 is correct, downside should be limited to 1.2100 and reckon 1.2050 would hold, bring another rebound later. In the event cable drops below support at 1.1986, this would shift risk back to downside for medium term downtrend to extend weakness to 1.1900-10, then 1.1850.

On the upside, whilst initial recovery to 1.2300 cannot be ruled out, renewed selling interest should emerge around previous support at 1.2347 (now resistance) and bring another decline later. Above the Kijun-Sen (now at 1.2412) would bring test of last week’s high at 1.2479 but break there is needed to suggest low is formed, bring a stronger rebound to 1.2570, however, a weekly close above there is needed to signal the retreat from 1.2706 has ended, bring further gain to 1.2650-60, then retest of 1.2706. 

Weekly

• Last Candlesticks pattern: Doji
• Time of formation: 26 Sep 2016
• Trend bias: Sideways

Daily

• Last Candlesticks pattern: Shooting star
• Time of formation: 25 Oct 2016
• Trend bias: Near term up

USD/CHF – 1.0115

Despite rising marginally to 1.0146, lack of follow through buying and the subsequent retreat suggests consolidation below this level would be seen and pullback to 1.0065-70 cannot be ruled out, however, reckon downside would be limited to the Kijun-Sen (now at 1.0004) and bring another rise later. A break of said resistance at 1.0146 would extend the erratic rise from 0.9861 (Jan’s low) to 1.0195-00, having said that, reckon key resistance at 1.0248 would cap upside and bring retreat later. Only a daily close above this level would signal recent correction from 1.0344 top has ended at 0.9861, bring further gain to 1.0300 and later retest of 1.0344 which is is likely to hold from here.

On the downside, whilst test of the Tenkan-Sen (now at 1.0078) cannot be ruled out, reckon support at 1.0009 would hold and bring another rise later. Only a daily close below the Kijun-Sen (now at 1.0004) would abort and suggest top is formed, bring weakness to indicated support at 0.9967, a drop below there would add credence to this view and suggest the rebound from 0.9861 has ended, bring further fall to 0.9935-40 but said support at 0.9861 should hold. A drop below this level would revive bearishness and extend erratic decline from 1.0344 top for retracement of early upmove to 0.9850-55 (61.8% Fibonacci retracement of 0.9550-1.0344) and possibly towards 0.9800.

Recommendation: Stand aside for this week.

On the weekly chart, although dollar edged higher again last week to 1.0146, lack of follow through buying and the subsequent retreat suggest consolidation below this level would be seen initially, however, as long as support at 0.9967 holds, mild upside bias remains for another rise, above said resistance would extend gain to 1.0195-00 but price should falter below key resistance at 1.0248, bring further choppy trading. A sustained breach above this level would signal the retreat from 1.0344 has ended, bring further gain to 1.0335-44 resistance area but break there is needed to signal early upmove has resumed for headway to 1.0400-10 and later 1.0500.

On the downside, expect pullback to be limited to the Tenkan-Sen (now at 1.0055) and support at 1.0009 should hold, bring another rise. Only a weekly close below support at 0.9967 would suggest the rebound from 0.9861 has ended, bring test of the Kijun-Sen (now at 0.9947), break there would add credence to this view, bring further fall to 0.9900, then retest of 0.9861. A break of this level would revive near term bearishness for the fall from 1.0344 to bring retracement of early upmove to 0.9850-55 (61.8% Fibonacci retracement) and possibly towards the Ichimoku cloud bottom (now at 0.9722), however, reckon downside would be limited to 0.9690-00 and price should stay well above support at 0.9550.

The Aussie is outperforming its major peers early Tuesday after the Reserve Bank of Australia held interest rates steady at 1.5%. This move was widely anticipated and many market participants deemed the statement as boring with no fresh signals provided on the future path of interest rates, however, the minor tweaks were enough to send AUD higher.

Governor Philip Lowe seemed to rule out the idea of pulling interest rates lower, although inflation remained well below the 2-3% target at 1.5%. The improved conditions in business and consumer confidence along with higher commodity prices are viewed as positive signs of future inflation, which indicates that the easing cycle is currently in the rear-view mirror.

The Australian dollar has been the best performing currency so far this year, up by more than 5% against the dollar, and although the RBA reiterated that an appreciating exchange would complicate the adjustment from the mining investment boom, AUD/USD still managed to gain 0.6% today. However, I believe that any potential gains should be rather limited from current levels, especially since a series of rate hikes are expected from the Fed.

Elsewhere currencies remained stuck in narrow ranges as traders await the two major events of the week, the ECB meeting on Thursday and U.S. labor report on Friday.

While the first U.S. rate hike in 2017 looks almost certain next week, markets still require a confirmation from Friday's NFP report. However, I don't expect to see any strong rally in the dollar until we receive more clarity from Trump's administration on the fiscal side. Given that the President is still struggling to advance on his travel ban and repealing Obama Care, tax reforms and infrastructure spending will likely take more time than previously anticipated, thus, keeping any rally in the dollar limited for now.

Sunrise Market Commentary

• Rates: Consolidation ahead of ECB and payrolls
  Today's eco calendar contains only second tier eco data suggesting more consolidation on core bond markets with Thursday's ECB meeting and Friday's payrolls in mind. Risk sentiment on stock markets is a wildcard for trading. Will we finally get a real correction in the US, away from dazzling heights?
• Currencies: Has post-Yellen USD correction already run its course?
  Yesterday, the dollar found a bottom as last week's correction petered out. A rebound of EUR/USD was blocked by political uncertainty in Europe. Today's eco data might be mixed for the dollar. If sentiment on risk turns positive again, the dollar might gain slightly ground. EUR/GBP remains on an upward trajectory and is testing a next minor resistance.

The Sunrise Headlines

• US equities closed around 0.3% lower after partially overcoming some of the opening losses in an uneventful session. Overnight, most Asian stock markets eke out small gains with Japan underperforming.
• Australia kept interest rates unchanged as risks from Sydney's soaring property prices outweighed subdued inflation. The RBA left the cash rate at 1.5% amid strong growth and trade performances in Q4 2016.
• British consumers are cutting back on non-essential spending as the impact of last year's Brexit vote pushes up the cost of their day-to-day shopping, two surveys showed this morning (BRC & Barclaycard).
• German factory orders fell a much stronger than expected 7.4% M/M to be down 0.8% Y/Y, the biggest decline since 2009 on investment goods. The Ministry points to less big ticket items and is confident manufacturing remains on upward trajectory.
• China will strictly control local government debt quotas and step up checks on illegal debt guarantees, FM Xiao Jie said, as the country's top officials stepped up assurances that they will keep financial risks under control.
• The IMF warned that high levels of household debt tied up in property are a risk to New Zealand's financial stability and backed the central bank's lobby for new tools to deal with the red-hot housing market.
• Today's eco calendar only contains final Q4 EMU GDP and US Trade balance. Austria, Germany (I/L) and the US tap the market. The OECD publishes its interim eco outlook.

Currencies: Has Post-Yellen USD Correction Already Run Its Course?

Has USD correction already run its course?

On Monday, EUR/USD reversed early strength after Alain Juppe said he won't run for president even as Fillion would step out of the election race. At the same time, the dollar gradually found a better bid after tentative early session softness. Even so, USD/EUR and USD/JPY stayed away from last week's recovery top even as a March Fed rate hike is discounted. EUR/USD finished the session at 1.0582 (from 1.0622). USD/JPY closed the day at 113.89 from 114.04.

Overnight, Asian equity indices show modest gains despite a negative close in the US yesterday. The constructive equity sentiment is putting a floor under the dollar, but gains are negligible. EUR/USD is changing hands in the 1.0585/90 area. USD/JPY trades in 113.90 area. The RBA, as expected, left its policy rate unchanged at 1.5%. The bank acknowledged an improvement in global conditions and in domestic activity. So, any expectations for an additional rate cut are unjustified. AUD/USD rebounded from the 0.7580/90 area to the 0.7625 area.

Today, the eco calendar is again thin. The OECD is expected to upwardly revise its growth forecasts. In theory this might be supportive for core bond yields. Usually this supports the dollar more than the euro. Any market reaction will only be of intraday significance. The US trade deficit is expected to widen from $44.3 to $47.0. This has become a politically sensitive issue. A deficit in line or bigger than expected might trigger protection reactions from the Trump administration and weigh on the dollar. Political uncertainty in Europe remains a wildcard. In France, some short-term status quo has been reached as Fillon remains the Republican candidate. This is tentatively negative for the euro, but shouldn't have any immediate further impact. In a daily perspective, the odds for USD trading are mixed. Last week's buy-the-rumour, sell-the fact USD profit taking move looks finished. If sentiment on risk would again turn positive, the dollar might slightly outperform, but no important technical levels in EUR/USD (1.1494) or in USD/JPY (114.95 will be broken today.

Global context: Last week, the focus shifted from US fiscal policy to the Fed's monetary policy, as the Fed prepared markets for a March rate hike. However, the dollar rally petered out as a March rate hike is now discounted. EUR/USD 1.0494 and USD/JPY 114.95 were tested, but no break occurred. Some ST USD consolidation might be on the cards. The payrolls are the next key issue for USD trading. USD/JPY 111.60/111.16 (Range bottom/38% retracement of the 99.02/118.66 rally) remains a key/ solid support. Last week's correction suggests that it is too early for a break. In EUR/USD 1.0829/74 is the short-term line in the sand with intermediate resistance at 1.0679. A sell EUR/USD on upticks approach remains favoured.

EUR/USD: upside(USD) correction blocked. USD waiting for a trigger to resume uptrend?

EUR/GBP

Sterling softness persists

On Monday, EUR/GBP to a large extent copied the price pattern of EUR/USD. The pair spiked higher to the 0.8665/70 early in Europe, but the gain was reversed as the euro declined on Juppé's statement. Still, sterling couldn't fully profit for the euro softness. EUR/GBP closed the session at 0.8648. Cable also traded with a negative bias and finished the day at 1.2236. So, sterling shows a loss of momentum short-term as recent developments suggest that the BoE has a good case to keep a wait-and-see approach

Overnight, the BRC like for like sales declined slightly more than expected. The BRC sees an ‘undeniable trend of cautious spending on non-essential items. Later today, only the Halifax House prices will be published. The House of lords will have the final debate on the Brexit law. Markets will also look forward to the Budget Statement of UK Fin Min Hammond tomorrow. We see the day-to-day context/momentum as slightly sterling negative. Sterling sentiment has softened of late. The euro was in better shape at the end of last week, helping EUR/GBP to break the 0.8592 resistance, which improved the short-term EUR/GBP picture. We don't expect the EUR/USD rebound to go far, but a combination of a temporary improving euro sentiment and ongoing sterling softness might trigger some further ST EUR/GBP gains. A sustained break north of 0.8645 might reinforce the ST positive momentum. Longer term, we keep a sterling negative view, as the Brexit will negatively impact the UK.

EUR/GBP: clears first resistance at 0.8592. 0.8645 resistance under test

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