The markets originally looked set for a general trend reversal with the synchronized sharp decline in US stocks, yield and the Dollar leading into 2017. Nonetheless, equities staged a strong come back towards the end of last week and helped stabilized both yields and the greenback. The overall solid non-farm payroll report, with strong wage growth, provided some support to sentiments. But it looked more like the trump rally is back in force. While there are still risks of trend reversals, it's much lowered now with S&P 500 and NASDAQ closing at record high at 2276.98 and 5521.06 on Friday. DJIA also just missed 20000 handle by a hair and reached as high as 19999.63 before closing at 19963.80. The coming would be crucial to the overall developments in the markets as Donald Trump's inauguration day on January 20 approaches.

In the currency markets, Dollar ended as the second weakest major currency over the week, just next to Sterling. Nonetheless, the greenback holds on to key near term support level against other major currencies. EUR/USD is kept below 1.0652, GBP/USD below 1.2509. USD/CHF held above 1.0019 and USD/JPY above 114.76. Canadian dollar was the strongest one with the help of resilience in oil price and stellar December job data. Nonetheless, USD/CAD is also held above 1.3080 key near term support. These levels will be closely watched this week to see if the greenback can defend its bullish trend.

Comments from Fed officials could also be part of the determining factors. Chicago Fed president Charles Evans, a known dove, said on Friday that two Fed rate hikes this year is "not an unreasonable expectation. And, with stronger than expected economic data coming in "three is not going to be implausible:". Cleveland Fed president Loretta Mester said that she's been "seeing a little more strength in the economy" and three hikes in 2017 is "probably" appropriate. Richmond Fed president Jerry Lacker said that Fed "may need to increase more briskly than markets appear to expect, depending on developments as the year unfolds." Current, Fed fund futures are pricing in 67.2% chance of another hike by June.

Looking at the technical, S&P 500's pull back proved to be brief and up trend resumed quickly. Outlook will now stay bullish as long as 2233.62 support holds. Current up trend is in progress for 61.8% projection of 1074.77 to 2134.71 from 1810.10 at 2465.14 in medium term term. We'd expect that strength in the stock markets will give room for Fed to hike rates as they protected in December's forecasts. That is, three hikes this year.

10 year yield suffered sharp decline to 2.339 last week before closing at 2.418. The development indicates short term topping at 2.621 and TNX has turned into a corrective phase. Friday's rebound was not strong enough to warrant completion of the correction yet. And we could see another dip to 55 day EMA (now at 2.263) and below. And that would limit Dollar's strength for resuming recent up trend. Though, strong support is expected at 38.2% retracement of 1.336 to 2.621 at 2.130 to contain downside.

Dollar index's sharp fall also indicates short term topping at 103.82, ahead of 61.8% projection of 78.90 to 100.39 from 91.91 at 105.19. Bearish divergence condition in daily MACD also raised the chance of a relatively lengthier consolidation. At this point, we'd expect strong support from 99.43 to contain downside and bring rise resumption. Above 103.82 will target 105.19 next. However, break of 99.43 will indicate that recent rise from 91.91 has completed and deeper pull back would be seen.

Regarding trading strategies, firstly, we're holding on to our AUD/USD short (sold at 0.7550). The rebound from 0.7158 was stronger than we expected. Also, support from 0.7144 seemed strong. The development raised some doubts on our bearish outlook. In our preferred case, fall from 0.7777 is seen as resuming the larger down trend and should be an impulsive move. In the alternate case, price actions form 0.7833 are forming a three wave consolidation pattern with fall from 0.7777 as the third wave. And in that case, fall from 0.7777 should also be an impulsive move. Therefore, we're still expecting another dip at least for a test on 0.7144/7158 support zone. So, we'll hold on to the short position and keep the stop at 0.7450, and pay attention to the structure of the next near term fall to decide to keep or quit. Meanwhile, we'd like to reiterate that strong break of 0.7144 will indicate larger down trend resumption for a new low below 0.7826.

Secondly, we're holding on to our EUR/USD short position (sold at 1.0504). We'd looking at down trend resumption which would extend to parity and even next medium term target at 0.9115. However, downside momentum has been very unconvincing so far. Nonetheless, we'll hold on to the position for the moment and keep our stop at 1.0670, which wasn't hit by the rebound from 1.0652.

USD/CAD Weekly Outlook

USD/CAD's fall from 1.3598 extended to as low as 1.3176 last week. Initial bias stays on the downside this week for 1.3080 support next. As noted before, price actions from 1.2460 are viewed as a corrective move. Decisive break of 1.3080 will indicate that it's completed and turn outlook bearish for retesting 1.2460 low. On the upside, above 1.3330 minor resistance will turn bias neutral again with focus back on 1.3588/98 resistance zone.

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 is possibly finished at 1.3598 too after hitting 50% retracement of 1.4689 to 1.2460 at 1.3575. Break of 1.3080 would likely resume the fall from 1.4689 through 1.2460 to 50% retracement of 0.9406 to 1.4689 at 1.2048. We'd start to look for reversal signal below 1.2460 to complete the correction. In case of another rise, we'll look for topping sign at 61.8% retracement of 1.4689 to 1.2460 at 1.3838.

In the longer term picture, rise from 0.9056 (2007 low) is viewed as a long term up trend. It's taking a breath after hitting 1.4689. But such rise expected to resume later to test 1.6196 down the road.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

EUR/USD rebounded after initial dip to 1.0339 last week. Initial bias stays neutral this week first. As long as 1.0652 holds, outlook stays bearish and another decline is expected. Break of 1.0339 will extend the larger down trend to parity next. However, break of 1.0652 will now confirm short term bottoming and turn near term outlook bullish for stronger rebound to 1.0872 resistance first.

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.

In the long term picture, the down trend from 1.6039 (2008 high) is still in progress and there is no clear sign of completion. We'd expect more downside towards 0.8223 (2000 low) as long as 1.1298 resistance holds.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

USD/JPY stayed in the consolidation pattern from 118.65 last week and outlook is unchanged. Initial bias stays neutral this week first. Outlook stays bullish with 114.76 intact and further rise is expected. Above 118.65 will extend the whole rise from 98.97 to 125.85 key resistance next. However, sustained break of 114.76 will confirm short term topping and bring deeper pull back to 55 day EMA (now at 112.80) and possibly below.

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 125.05 and below will extend the consolidation with another falling leg before up trend resumption.

In the long term picture, the rise from 75.56 long term bottom to 125.85 medium term top is viewed as an impulsive move. Price actions from 125.85 are seen as a corrective move which could still extend. But, up trend from 75.56 is expected to resume at a later stage for above 135.20/147.68 resistance zone.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

GBP/USD recovered last week but stayed in the consolidation pattern from 1.2200. Initial bias remains neutral this week first. In case of another rise, we'd still expect upside of consolidation to be limited by 1.2509 resistance and bring fall resumption. Corrective rise from 1.1946 has completed at 1.2774. Below 1.2200 will target a test on 1.1946 low. Decisive break there will confirm larger down trend resumption.

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.

In the longer term picture, no change in the view that down trend from 2.1161 is still in progress. Current momentum suggests that the down trend will go deeper than originally expected.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

USD/CHF stayed in the consolidation pattern from 1.0342 last week and outlook is unchanged. Initial bias remains neutral this week first. We'd expect strong support from 1.0019 to contain downside and bring rally resumption. Firm break of 1.0342 will confirm up trend resumption. However, sustained break of 1.0019 will indicate near term reversal and could bring deeper fall bring to 0.9443/9548 support zone.

In the bigger picture, the corrective fall from 1.0327 should have completed at 0.9443 already. Rise from 0.9443 could be resuming the long term rally from 2011 low at 0.7065. But decisive break of 1.0327 is needed to confirm. In that case, next medium term upside target will be 38.2% retracement of 1.8305 to 0.7065 at 1.1359. Rejection from 1.0327 will extend the sideway pattern with another fall back to 0.9443/9548 support zone.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

AUD/USD rose to as high as 0.7355 last week but lost momentum since then. Initial bias is neutral this week first. The stronger than expected rebound mixed up the outlook a bit, considering that AUD/USD defended key support level at 0.7144. Nonetheless, deeper fall is in favor a long as 38.2% retracement of 0.7777 to 0.7518 at 0.7394 holds, which is close to the falling 55 day EMA. Firm break of 0.7144 will confirm our bearish view that corrective pattern from 0.6826 has completed and larger down trend is resuming for another low. Though, sustained trading above 0.7394 will turn focus back to 0.7777/7833 resistance zone.

In the bigger picture, AUD/USD is staying inside long term falling channel and it's likely that the down trend from 1.1079 is still in progress. Break of 0.6826 low will confirm this bearish case and target 61.8% projection of 0.9504 to 0.6826 from 0.7777 at 0.6122 next. We'll be looking for bottoming sign again as it approaches 0.6008 key support level. Meanwhile, sustained break of 0.7833 resistance will be a strong sign of medium term reversal.

In the longer term picture, while the down trend from 1.1079 might extend lower, we're not anticipating a break of 0.6008 (2008 low) yet. We'll look for bottoming above there to reverse the medium term trend.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

USD/CAD's fall from 1.3598 extended to as low as 1.3176 last week. Initial bias stays on the downside this week for 1.3080 support next. As noted before, price actions from 1.2460 are viewed as a corrective move. Decisive break of 1.3080 will indicate that it's completed and turn outlook bearish for retesting 1.2460 low. On the upside, above 1.3330 minor resistance will turn bias neutral again with focus back on 1.3588/98 resistance zone.

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 is possibly finished at 1.3598 too after hitting 50% retracement of 1.4689 to 1.2460 at 1.3575. Break of 1.3080 would likely resume the fall from 1.4689 through 1.2460 to 50% retracement of 0.9406 to 1.4689 at 1.2048. We'd start to look for reversal signal below 1.2460 to complete the correction. In case of another rise, we'll look for topping sign at 61.8% retracement of 1.4689 to 1.2460 at 1.3838.

In the longer term picture, rise from 0.9056 (2007 low) is viewed as a long term up trend. It's taking a breath after hitting 1.4689. But such rise expected to resume later to test 1.6196 down the road.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

GBP/JPY stayed in right range above 142.16 last week and outlook is unchanged. Initial bias remains neutral this week first. Rise from 122.36 is seen as a corrective move. Below 142.16 will affirm the case that it's completed at 148.42. In that case, intraday bias will be turned to the downside for 55 day EMA (now at 140.43) and below. Break of 148.42 will extend the rise from 122.36. But we'd expect strong resistance from 150.43 long term fibonacci level to limit upside.

In the bigger picture, the down trend from 195.86 top (2015 high) should have made a medium term bottom at 122.36 after hitting 100% projection of 195.86 to 154.70 from 163.87 at 122.71. Rise from there is now expected to develop into a medium term corrective pattern. Upside should be limited by 38.2% retracement of 195.86 to 122.36 at 150.4 for setting the medium term range.

In the longer term picture, while price actions from 122.36 would develop into a medium term correction, fall from 195.86 is still seen as resuming the down trend from 251.09 (2007 high). Hence, after the correction from 122.36 completes we'd expect another fall through 116.83 low.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

EUR/JPY stayed in the sideway pattern from 124.08 and outlook is unchanged. Initial bias remains neutral this week first. Overall, further rally is in favor as long as 120.90 support holds. Above 124.08 will target 126.09 key resistance next. As rise from 109.20 is still seen as a corrective pattern, we'd be cautious on topping around 126.09. Meanwhile, break of 120.90 will indicate short term topping and turn bias to the downside for 55 days EMA (now at 120.10).

In the bigger picture, price actions from 109.20 medium term bottom are seen as part of a medium term corrective pattern from 149.76. There is prospect of another rise towards 126.09 key resistance level before completion. But even in that case, we'd expect strong resistance between 126.09 and 141.04 to limit upside, at least on first attempt. Sustained trading below 55 day EMA will pave the way to retest 109.20.

In the long term picture, current medium term decline from 149.76 is seen as part of a long term sideway pattern from 88.96. Decisive break of 126.09 will indicate that such decline is completed and EUR/JPY has started another medium term rally already.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

EUR/AUD's fall form 1.4721 extended to 1.4322 last week but recovered. Initial bias stays neutral this week first. On the downside, below 1.4322 will target 1.4702 low first. Break of 1.4072 will extend the correction from 1.6587 towards next key support level 1.3671. Meanwhile, decisive break of 1.4880 resistance will indicate that such correction from 1.6587 is completed and turn near term outlook bullish for 1.5094 resistance next.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a consolidative pattern. 50% retracement of 1.1602 to 1.6587 at 1.4095 was already met. While further fall cannot be ruled out, we'd expect strong support above 1.3671 to contain downside and bring rebound. Up trend from 1.1602 should not be finished and will resume later. Break of 1.5094 will be the first sign of resumption of up trend from 1.1602 and target retesting of 1.6587 resistance first.

In the longer term picture, the rise from 1.1602 long term bottom isn't over yet. We'll keep monitoring the development but there is prospect of extending the rise to 61.8% retracement of 2.1127 to 1.1602 at 1.7488 and above. However, break of 1.3671 should confirm trend reversal and target 1.1602 long term bottom again.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box