Rising daily cloud base contained bear-leg from 113.02 (21 Feb lower top) at 111.90 for now, with near-term price action consolidating ahead of fresh attempts lower.

Bearish bias is supported by daily MA's and Tenkan / Kijun-sen lines in bearish setup and upside attempts remain limited under pivotal 113.00 resistance zone (converging daily 10/20 SMA's).

The pair is looking for firm break below daily cloud base (currently at 112.33), for extension towards key near-term supports at 111.60 zone and nearby top of thick weekly Ichimoku cloud at 111.36.

Conversely, immediate downside risk would be sidelined on sustained bounce above 113.00 trigger, but lift above 113.76 (21 Feb lower top) is needed to neutralize and shift near-term focus higher.

Res: 112.86, 113.00, 113.47, 113.76
Sup: 112.33, 111.90, 111.60, 111.36

Near-term tone remains bearishly aligned following past two days fall that cracked strong support at 1.2400 (100SMA) and was contained by daily cloud top at 1.2380 for now). Prevailing bearish tone on daily studies, following recovery rejection at 1.2567 Fibo resistance and subsequent fall, keep near-term focus at the downside. However, sustained break below 55/100 SMA's (that now formed bearish cross) and penetration into daily cloud, is needed to generate stronger bearish signal for further retracement of 1.1986/1.2704 upleg. On the flip side, daily Tenkan-sen offers solid resistance at 1.2475, followed by daily Kijun-sen at 1.2525 and upper breakpoints at 1.2567/80. Past two days weakness was driven by news about Brexit/Scottish referendum, with focus turning on the speech of Donald Trump, which may push the pound further down or trigger fresh acceleration higher, if he fails to satisfy traders' expectations.

Res: 1.2448, 1.2460, 1.2475, 1.2525
Sup: 1.2398, 1.2380, 1.2345, 1.2300

The Euro continues to tick higher on profit-taking action from fresh low at 1.0492 (22 Feb), but upside remains limited, as indicated by long upper shadows of daily candles of past two days.

Also, converged 10/55SMA's on daily chart (currently at 1.0590) are still acting as strong resistance, as the pair failed to close above in past three days, despite the price spiking to 1.0620/30 zone (next barrier that marks Fibo 38.2% of 1.0827/1.0492 descend.

Overall bearish daily studies so far offset bullish signal on daily cloud twist, with upticks expected to stay capped under falling 20SMA (1.0639).

Speech of US President Donald Trump is in focus and would likely give stronger direction signals.

Pivotal barriers lay at 1.0639 (20SMA) and 1.0678 (16 Feb lower top), break of which will be bullish, while first downside trigger lies at 1.0550 (yesterday's low) guarding 1.0492 pivot, loss of which will be bearish.

Res: 1.0590, 1.0620, 1.0639, 1.0678
Sup: 1.0568, 1.0550, 1.0520, 1.0492

'Policy noise from the U.S. has evolved into stereo noise from both the left and right side of the Atlantic.' –JP Morgan (based on Bloomberg)

Pair's Outlook

The common European currency continued to appreciate against the US Dollar during the early hours of Tuesday's trading session, and the currency exchange rate was positioned to continue to do so. The rate faced no resistance up to the level of 1.0617, where the 20-day SMA was located at. In addition, the SMA is unlikely going to stop a surge, and the pair will reach for the weekly R1, which is located at 1.0630. If the surge occurs, the Euro might regain the losses, which it suffered against the buck on February 20.

Traders' Sentiment

Traders have not changed their open position proportions, as 52% of open positions are long on Tuesday. Meanwhile, 65% of trader set up orders are set to sell the Euro.

'On top of soft data from the UK recently ... these fresh signals of a 'hard Brexit' and the risk of another Scottish referendum, enhances our view that the broader outlook for sterling remains negative.' – IronFX (based on Business Recorder)

Pair's Outlook

Even though the Cable experienced another leg down on Monday, the support cluster around 1.24 managed to limit the losses and keep the pair elevated once again. The 1.24 itself is providing strong psychological support, and with a number of other significant levels this area appears to be impenetrable. The GBP/USD pair would require a strong impetus, a political event or fundamental event, which could provide sufficient bearish momentum for a drop below 1.24. Such an event could occur today; however, from the technical side the Sterling should edge higher, with the 1.25 mark seen retaken. The bearish trend-line is likely to be the ceiling in case of a positive development.

Traders' Sentiment

Market sentiment remains bullish at 60%, but the portion of buy orders inched higher from 47 to 51% during the last 24 hours.

'It remains to be seen how much the dollar can gain from Trump's speech, as specifics regarding tax reforms, which is of key interest to the market, may not be available until March.' – Barclays (based on Reuters)

Pair's Outlook

There were no surprises in the USD/JPY pair's performance on Monday, being that the Buck easily outperformed the Yen, with volatility limited by the immediate resistance area. The Buck still has room for another rally, with the main target being the supply cluster around 113.32, represented by the two-month bearish trend-line and the weekly R1. Trump's highly anticipated speech today could provide the US currency with sufficient impetus for a surge beyond this target, but with the third resistance cluster most likely limit those possible gains. Meanwhile, the support remains unchanged, namely the three-month zone circa 111.75.

Traders' Sentiment

Today 65% of traders hold long positions, while 48% of all pending orders are to buy the Buck (previously 61% and 59%, respectively).

'The Fed will likely pass on a rate move in March.' - Edward Meir, INTL FCStone (based on Reuters)

Pair's Outlook

The yellow metal on Tuesday morning was regaining some of the losses, which it suffered during Monday's trading. However, the losses suffered on Monday were most likely just a consolidation in the aftermath of the breakout to the upside, which occurred at the end of last week. It is most likely that the bullion will make another attempt at the resistance cluster, which it faces on Tuesday. The cluster is made up of the upper Bollinger band at 1,257.69 and the 200-day SMA at 1,260.23. On the other hand, the metal might seek more support in the 50.00% Fibo at 1,248.96 level.

Traders' Sentiment

SWFX traders remain long on the metal, as 53% of open positions are bullish. In addition, 59% of set up orders are set to buy the bullion.

US Durable Goods Surge 1.8% In January On Strong Demand For Commercial And Military Planes

'My view on business investment remains that there is a good deal of pent-up energy that had been held back by an adverse and uncertain policy environment.' - Stephen Stanley, Amherst Pierpont Securities

New orders for US-made capital goods advanced more than expected in January due to strong demand for passenger airplanes and new bookings for fighter planes and related military equipment. According to the Commerce Department, total durable goods orders spiked 1.8% in the past month compared with a downwardly revised 0.8% reading registered in December. The main driver for the jump was a significant increase in orders for transportation goods which surged 6.0% in January. Orders excluding aircraft fell 0.2%, missing expectations for a 0.5% rise on the month. Moreover, there were notable decreases in orders for electrical equipment, appliances and components as well as computers and electronic products. In the meantime, non-defense capital goods orders went down 0.4%, following an upwardly revised 1.1% gain in December, while machinery orders soared 0.5%, giving a 4.3% annual gain which is likely to heighten confidence in manufacturing outlook. Overall, strong durable goods report followed recent growth in consumer spending and home sales as the Greenback stabilised and oil prices resumed growing. In addition, the Trump administration plans to cut corporate taxes and diminish regulations are set to help businesses, though surrounding uncertainty might prevent proceeding with investments in the near term.

The GBP/USD might attract fresh sellers within POC 1.2455-70 zone targeting 1.2360 and 1.2330. The POC (38.2, inner trend line, EMA89, H3, ATR pivot, right shoulder) has been formed within the context of leaned head and shoulders pattern and it looks a bit bearish. Traders should pay attention to either positional or continuation trades short term as long as 1.2510 holds. 1h momentum or 4h close below 1.2415 suggest continuation towards above mentioned targets.

Sunrise Market Commentary

• Rates: Implied probability of March rate hike hits 50%
  US Treasuries sold off after European trading after voting FOMC member Kaplan said that the Fed should hike rates sooner rather than later which means in the near future. Odds of a March rate hike hit 50% for the first time. Today, investors will probably take a wait-and-see approach ahead of President Trump's speech in Congress.
• Currencies: USD still in a limbo, even as Fed rate expectations rise
  The dollar struggles to move away from short-term lows even as markets discount a rising probability of a Fed rate hike. EUR/USD is holding in the 1.06 area. USD/JPY struggles not to drift back lower in the established trading range. Will Trump's statement be convincing enough to support Fed rate hike expectations and trigger renewed USD buying?

The Sunrise Headlines

• US equities ended marginally higher going into today's key Trump speech before Congress. Overnight, the majority of Asian stock markets also trades with minor gains.
• President Trump, in an address to Congress tonight, will call for a $20B boost in current military spending and sharp cuts in other programs, and insist on raising budget caps that call for future cuts to defence outlays.
• Industrial output in Japan staged an unexpected reversal in January (-0.8% M/M) and contracted for the first time in six months. Japanese retail sales (0.5% M/M) returned to growth in January giving the best result since November.
• Australia boasted the smallest current account deficit in 15 years last quarter as booming resource exports delivered a whopping turnaround of A$8 billion to the nation's finances, boosting company profits and economic growth.
• Dallas Fed Kaplan reiterated his view that policy makers should raise interest rates “sooner rather than later”, which “means in the near future”, and without paying excessive attention to market expectations.
• The odds that the Fed will lift rates at its next meeting hit 50% in an indication that there is an increasing likelihood the central bank will tighten policy next month, according to calculations on federal funds futures by Bloomberg.
• Today's eco calendar heats up in the US with the second reading of Q4 2016 GDP, trade balance, Chicago PMI, consumer confidence and Richmond Fed manufacturing index. US President Trump addresses Congress.

Currencies: USD Still In A Limbo, Even As Fed Rate Expectations Rise

Dollar stays soft even as Fed rate expectations rise

On Monday, investors kept mostly side-lined ahead of the testimony of US president Trump before Congress today. Investor caution initially held the dollar near the recent lows. Later in US dealings, a rise in US yields reinstalled a cautious USD bid. The release of some details on Trump's budget plans and comments from Fed Kaplan probably caused this bid. Whatever the reason, EUR/USD dropped from 1.06+ levels and closed the session at 1.0587. USD./JPY finished the day at 112.70 (after trading in the low 112 area for most of the day).

Overnight, Asian equities basically stay in wait-and see modus and are divided between small gains and limited losses. Japanese eco data were mixed (retail data) to soft (production), but had no lasting negative impact on the yen. USD trading still faces conflicting signals. Futures are discounting a 50 % of a March Fed rate hike. Still, investors are uncertain whether Trump will provide enough details to continue to reflation trade. The dollar is trading off the overnight highs against the yen and, to a lesser extent, against the euro. USD/JPY is again trading in the 112.50 area. EUR/USD changes hands just below 1.06.

Today, the US eco calendar is well filled, but probably only of moderate importance for markets. US Q4 GDP is expected to be upgraded to 2.1% from 1.9%, a small change and outdated. The Chicago PMI dropped sharply in January. A rebound to 53 is expected. For the Richmond Fed business sentiment, a small decline is expected. These business sentiment surveys fall a bit short with other surveys (NY/Philly Fed, Kansas). Even so, they won't really change the broader picture ahead of the key ISM confidence tomorrow. Consumer confidence (Conference board) is expected to have declined from 111.8 to 111, still a very high level. Markets will also keep a close eye at the price indicators of the surveys. In globo, US eco data shouldn't question the continuation of the reflation trade or the scenario of a Fed rate hike in the near future. In theory that should help to put a floor for the dollar. Of course, the focus for markets will remain on Trump's appearance before Congress. For US yields and for the dollar, we look out whether Trump's message will be strong/convincing enough to keep the probability of a March rate hike at 50% (or higher). Of late, investors reduced USD longs. So, there is probably room for some USD buying on dips if Trump gives a reasonable prospect on a pro-growth policy.

Global context. The dollar corrected lower since the start of January as the reflation trade slowed down. Two weeks ago, the dollar bottomed out, supported by Trump's tax promise. Underlying euro weakness due to political uncertainty in the area is a factor too. We see 1.0874 as solid resistance and favour a sell EUR/USD on upticks approach. The downside test of USD/JPY was rejected. USD/JPY 111.60/111.16 (Range bottom/38% retracement of the 99.02/118.66 rally) remains key support. Recent Fed comments were USD supportive, but had no lasting impact on yields. We keep a USD positive bias longer term, as the dollar might still get additional interest support if the Fed continues its normalisation process. For now, the momentum of USD/EUR is more convincing than in USD/JPY.

EUR/USD looking for clear guidance as markets await Trump

EUR/GBP

EUR/GBP still going nowhere near 0.85 barrier

Yesterday, sterling traded with a slightly negative bias, as press headlines indicating that the UK government is preparing a strategy to handle a new referendum on Scottish independence. A spokesman of PM May said that there was no need for a new Scottish referendum. EUR/GBP initially gained some further ground on the broader rebound of EUR/USD, but the rally stalled later in US dealings. EUR/GBP closed the session at 0.8509. Cable basically hovered sideways in the 1.24 big figure to close the session at 1.2442.

Overnight, the Lloyds business Barometer remained strong at 40, but was as usual ignored. No further eco data today. End of month repositioning might be slightly supportive for EUR/GBP. The EUR/USD trend will remain important. In the House of lords a detailed review of the Article 50 bill continues. Markets will keep an eye on any headwinds for the PM May's Brexit strategy, but we assume that the impact on sterling will be limited. Earlier last week, the (temporary) acceleration of the euro sell-off pushed EUR/GBP to the 0.84 area. However, a sustained break lower didn't occur. As is the case for EUR/USD (and for several other markets), there is currently no clear driver for sterling trading. Longer term, we have a sterling negative view, as the Brexit will negatively impact the UK economy. A sustained break below 0.8450 opens the way for a return to the 0.8304 correction low. We maintain a neutral bias on sterling short-term.

EUR/GBP: drifting higher from the recent lows, but to sustained trend.

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