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Daily Pivots: (S1) 1.3101; (P) 1.3127; (R1) 1.3153; More...

USD/CAD is staying below 1.3165 minor resistance for now and intraday bias remains neutral. Break of 1.3068 will extend the fall from 1.3664. But we'd stay cautious on bottoming as USD/CAD is close to channel support (now at 1.3061). On the upside break of 1.3165 will turn bias to the upside for rebounding towards 1.3375 resistance. Firm break there will confirm that fall from 1.3664 has completed. However, sustained break of the channel support will pave the way to 100% projection of 1.3664 to 1.3180 from 1.3375 at 1.2891.

In the bigger picture, structure of the medium term rise from 1.2061 (2017 low) to 1.3664 is not clearly impulsive. Hence, we'd stay cautious on strong resistance from 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685 and 1.3793 resistance to limit upside, and bring medium term topping. But in any case, medium term outlook will stay bullish as long as channel support (now at 1.3049) holds. Sustained break of 1.3793 will pave the way to retest 1.4689 (2015 high). Firm break of the channel support should confirm reversal target 1.2061 low again.

Daily Pivots: (S1) 0.7198; (P) 0.7232; (R1) 0.7269; More...

AUD/USD's sharp fall and break of 0.7180 minor support today suggests that rebound from 0.6722 has completed at 0.7295 already. Intraday bias is turned to the downside for 0.7076 cluster support (38.2% retracement of 0.6722 to 0.7295 at 0.7076). Decisive break there should confirm this bearish case and target 61.8% retracement at 0.6941 next. On the upside, break of 0.7295 will extend the rebound. but we'd expect strong resistance from 0.7393 key resistance to limit upside to complete the rebound.

In the bigger picture, as long as 0.7393 resistance holds, we'd treat fall from 0.8135 as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

Australian Dollar is again the focus in Asian session today. It drops sharply on surprised turn in RBA Governor Philip Lowe's stance. To him, the next interest rate move is no longer more likely a hike, but evenly balanced. Aussie reversed all of yesterday's gains and it's now trading as the weakest one for today and the week. New Zealand and Canadian follow as second and third weakest. On the other hand, Yen is the strongest one for now, followed by Sterling and then Swiss Franc.

Technically, AUD/USD's break of 0.7180 minor support is taken as the first sign that recent rebound from 0.6722 flash crash has completed. Focus will turn to 0.7076 support for confirmation. EUR/AUD also jumps today and focus will be on 1.6038 resistance to align the outlook with AUD/USD. EUR/USD's breach of 1.1407 minor support suggests that rebound from 1.1289 has completed. Now, outlook in EUR/USD, GBP/USD, USD/CHF and AUD/USD suggests more upside in the greenback. 1.3165 minor resistance in USD/CAD will be watched to confirm the come back of Dollar.

In other markets, Nikkei is closed up 0.15% at 20875.63. Japan 10-year JGB yield is down -0.0062 at -0.015, staying negative. China, Hong Kong and Singapore are still on lunar new year holiday. Overnight, DOW rose 0.68%. S&P 500 rose 0.47%. NASDAQ rose 0.74%. 100year yield dropped -0.022 to 2.702, defended 2.7 handle.

RBA Lowe: Evenly balanced chance of hike or cut in next move

Australian Dollar drops sharply after RBA Governor Philip Lowe dropped the rhetoric that the next move in interest rate is more likely a hike than a cut. Instead, he said the probabilities of hike and cut are now more "evenly balanced". That is, rate cut is now back on the table.

Lowe delivered a speech "The Year Ahead" to the National Press Club of Australia today. Lowe maintained the view that " tighter labour market and reduced spare capacity will see underlying inflation rise further towards the midpoint of the target range." And given that, RBA "maintained a steady setting of monetary policy" yesterday.

However, he also noted given the uncertainties "it is possible that the economy is softer than we expect, and that income and consumption growth disappoint." In particular,  "in the event of a sustained increased in the unemployment rate and a lack of further progress towards the inflation objective, lower interest rates might be appropriate at some point.

Thus, on the scenarios of next-move-is-up and next-move-is-down, "the probabilities appear to be more evenly balanced." Though Lowe also maintained that RBA "does not see a strong case for a near-term change in the cash rate".

USTR Lighthizer to travel to China next week for trade talks

It's reported that US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing for the another round of trade talks next week, following the Lunar New Year break. The scope of discussions extended beyond trade balance to intellectual property theft, forced technology transfer and China's state own enterprises. And Lighthizer has repeatedly emphasized the word "enforcement", regarding the implementation of the agreement.

Trump is expected to meet with Chinese President Xi Jinping to seal the deal before March 1 dead line. But for now, there is no set dates for the meeting yet. In his state of Union Address, Trump said China has target US industries for their intellectual property for years. And, he emphasized the new trade deal must end trade practices, reduce our chronic trade deficit, and protect American jobs.

Also, Trump announced to meet North Korean leader Kim Jong Un again in Vietnam on February 27 and 28.

On the data front

Germany will release factory orders in European session. Later in the day, Canada will release building permits and Ivey PMI. US will release non-farm productivity and unit labor costs.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7198; (P) 0.7232; (R1) 0.7269; More...

AUD/USD's sharp fall and break of 0.7180 minor support today suggests that rebound from 0.6722 has completed at 0.7295 already. Intraday bias is turned to the downside for 0.7076 cluster support (38.2% retracement of 0.6722 to 0.7295 at 0.7076). Decisive break there should confirm this bearish case and target 61.8% retracement at 0.6941 next. On the upside, break of 0.7295 will extend the rebound. but we'd expect strong resistance from 0.7393 key resistance to limit upside to complete the rebound.

In the bigger picture, as long as 0.7393 resistance holds, we'd treat fall from 0.8135 as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

Economic Indicators Update

EUR/USD started a major downside move and traded below the 1.1430 support level. USD/CHF is trading nicely above the 0.9980 support and it could trade further higher.

Important Takeaways for EUR/USD and USD/CHF

• The Euro faced an increased selling pressure and declined below the 1.1420 support against the US Dollar.
• There is a major bearish trend line formed with resistance near 1.1415 on the hourly chart of EUR/USD.
• USD/CHF climbed higher and broke the 1.0000 resistance level.
• There is a major bullish trend line formed with support at 0.9980 on the hourly chart.

EUR/USD Technical Analysis

The Euro failed to hold gains above the 1.1500 level and started a downside move against the US Dollar. The EUR/USD pair broke the 1.1450 and 1.1420 support levels to enter a bearish zone.

It seems like the trimmed most of its gains after it formed a high at 1.1513 on FXOpen. It even settled below the 1.1420 support level and the 50 hourly simple moving average. During the drop, there was a break below the 76.4% Fib retracement level of the last wave from the 1.1389 low to 1.1513 high.

Therefore, there are chances of more losses below the 1.1389 low. The next stop for sellers could be near the 1.1360 support and the 1.236 Fib extension level of the last wave from the 1.1389 low to 1.1513 high.

On the upside, there are many resistance near the 1.1415 and 1.1420 levels. The previous support at 1.1420 is likely to act as a strong resistance in the near term.

There is also a major bearish trend line formed with resistance near 1.1415 on the hourly chart of EUR/USD. A break above the channel resistance could push the pair towards 1.1430 and the 50 hourly simple moving average.

To start a fresh upward move, the pair needs to break the 1.1420 and 1.1430 resistance levels. However, the main resistance is near the 1.1435-1.1440 zone in the near term.

USD/CHF Technical Analysis

The US Dollar formed a solid support near the 0.9910 level and started a strong upward move against the Swiss franc. The USD/CHF pair traded above the 0.9940 and 0.9950 resistance levels to start an uptrend.

Buyers gained momentum and broke the 0.9980 and 1.0000 resistance levels. A high was formed at 1.0020 before the pair started a downside correction. It declined below the 23.6% Fib retracement level of the last wave from the 0.9922 low to 1.0020 high.

However, there is a strong support formed near the 0.9980 level and the 50 hourly simple moving average. Moreover, there is a major bullish trend line formed with support at 0.9980 on the hourly chart.

Therefore, if the pair corrects lower, it is likely to find a strong buying interest near 0.9980 and the 50 hourly simple moving average, below which the next support is at 0.9950.

On the upside, an initial resistance is near the 1.0015 and 1.0020 levels. If there is an upside break above 1.0020, the USD/CHF pair could trade towards the 1.0050 level in the near term.

Overall, the price action is positive and it seems like the US Dollar buyers are in control versus the Euro and the Swiss Franc.

Key Highlights

• Gold price rallied and broke the $1,300 resistance before correcting lower against the US Dollar.
• There is a short term bearish trend line formed with resistance at $1,318 on the 4-hours chart of XAU/USD.
• The US Services PMI in Jan 2019 declined from 54.4 to 54.2.
• The US Trade Balance for Nov 2018 will be released today, which could post a deficit of $-54.0B.

Gold Price Technical Analysis

During the past few days, there was a solid rise in gold price above the $1,295 resistance against the US Dollar. The price surpassed the $1,300 and $1,320 resistance levels before starting a downside correction.

The 4-hour chart of XAU/USD indicates that the price traded as high as $1,326 and later corrected below the $1,320 and $1,315 support levels. There was a break below the 50% Fib retracement level of the last major upside from the $1,297 low to $1,326 high.

However, the decline was protected by the $1,308-1,310 support and pivot zone. The price tested and found support near the 61.8% Fib retracement level of the last major upside from the $1,297 low to $1,326 high.

It recovered above $1,312, but it is still facing a solid resistance near the $1,318-1,320 area. There is also a short term bearish trend line formed with resistance at $1,318 on the 4-hours chart of XAU/USD.

A clear break above the trend line might push the price back towards the $1,325 and $1,330 resistance levels. On the downside, there are many supports, including $1,310, $1,308 and $1,302. Therefore, only a daily close below $1,300 might start a major decline in gold price.

Recently, the US Services Purchasing Managers Index (PMI) for Jan 2019 was released by Markit Economics. The market was looking for no change from the last reading of 54.2.

However, the result was mixed as the US Services PMI came in at 54.2, but the last reading was revised up from 54.2 to 54.4. Therefore, there was a decline from 54.4 to 54.2.

Overall, gold price remains supported on dips as long as there is no daily close below the $1,300 support level in the near term.

Economic Releases to Watch Today

• German Factory Orders for Dec 2018 (MoM) – Forecast +0.3%, versus -1.0% previous.
• US Trade Balance Nov 2018 – Forecast $-54.0B, versus $-55.5B previous.
• Canada’s Ivey PMI Jan 2019 – Forecast 56.0, versus 59.7 previous.

Australian Dollar is under broad based pressure today after surprised turn in RBA Governor Philip Lowe's stance. To him, the next interest rate move is no longer more likely a hike, but evenly balanced. Aussie reversed all of yesterday's gains and is indeed the weakest one for the week too. New Zealand Dollar follows as the second weakest for today and then Canadian.

Meanwhile, Yen jumps broadly today even though there is no sign of risk aversion. It's probably more due to the selloff in Aussie again. Sterling is recovering some ground too. Dollar follows as the third strongest while Trump's State of Union Address is largely ignored by the markets.

For the week, Dollar is so far the strongest one, followed by Kiwi and then Yen. Aussie is the weakest, followed by Sterling and then Euro.

In Asia:

• Nikkei is currently up 0.27%.
• Japan 10-year JGB yield is down -0.0082 at -0.017, staying negative.
• China, Hong Kong and Singapore are still on lunar new year holiday.

Overnight:

• DOW rose 0.68%.
• S&P 500 rose 0.47%.
• NASDAQ rose 0.74%.
• 100year yield dropped -0.022 to 2.702, defended 2.7 handle.

STOCKS

Global indices like the Dow Jones and DAX have gained strength and are looking bullish in the short term. Asian indices on the other hand, though inching higher, the pace of move is slow as they head towards their respective key resistance levels. The Asians look vulnerable for a fall in the coming days while their resistances hold.

Dow Jones (25411.52, +172.15, +0.68%) has surged giving confirmation on its break above 25,000. It can test 25,600 in the near term a break above which will pave way for the next target of 26,000.

DAX (11,367.98, +191.40, +1.71%) has risen sharply after a few days of muted movement and has turned bullish. A test of 10,500-10,550 looks is possible on a strong break above 10,400.

Nikkei (20,957.37, +112.92, +0.54%) seems to lack fresh buyers to take it beyond the key resistance level of 21,000. The index has come-off from the high of 20,981.23. While this resistance holds, a pull-back move to 20,700 and 20,450 cannot be ruled out in the coming days.

Sensex (36,616.81, +34.07, +0.09%) and Nifty 50 (10,934.35, +22.10, +0.20%) inched further higher and are heading towards their respective resistance levels of 36,850 and 10,985. The price action indicates that the indices seems to lack strength. Inability to gain momentum in the coming sessions will see the indices reversing lower going forward. In such a scenario, the Sensex can fall to 36,000 and 35,500 and the Nifty 50 can test 10,700-10,600 in the coming weeks.

COMMODITIES

Gold and Silver are managing to hold above its supports and are trying to bounce. They can consolidate for a few sessions before reversing higher. Copper is retaining its strength. Oil on the other hand seems to have failed to strong follow through buying and might see further dip in the coming days.

Gold (1,314) has bounced from its support at 1308 and can consolidate sideways between 1308 and 1325 before we see a fresh rally targeting 1350-1360.

Silver (15.85), though sustaining above its support level of 15.6, looks little weaker than gold. It can dip to revisit 15.7 and 15.6 levels in the near term.

Copper (2.81) continues to remain bullish for a test of 2.83 and 2.85 while it trades above 2.80.

Brent (62.10) can dip to test 61.5 and 61. A break below 61 can take the prices further lower to 60. WTI (53.75) has supports at 53 and 52.6 a below which can drag it to 52 and 51 in the coming sessions.

FOREX

Euro, Euro-Yen, Pound and Aussie look bearish just now. US Dollar could have limited scope on the upside before a corrective fall is seen in the near term.

Dollar Index (96.09) has risen to our expected 96.10. On the near term charts, 96.25 is a decent resistance and while that holds, we could see a dip in the Dollar Index back towards 95.50-95.00.

Euro (1.1401) is again headed towards support at 1.1350. 1.15 is an important resistance and while that holds, downside scope could get intensified in the medium term. For now we may see a test of supports at 1.1350 and 1.13 respectively.

Euro-Yen (125.12) came off from 126 itself instead of moving higher to 126.60/80. While below 126, the pair could come off towards 124.40 in the near term. Near term view is bearish.

Dollar Yen (109.72) has 21-day Ma at 110.10 just now from where it has come off a bit. Immediate resistance is seen in the 110.10-110.50 region from where a corrective dip back towards 109.00-108.50 is possible.

Pound (1.2952) has come off in line with our expectation and could test 1.29 or even lower levels of 1.27 in the coming sessions. View is bearish for the near term.

Aussie (0.7168) is also trading lower and while 0.73 resistance holds good, it could come off towards 0.71-0.70 on the downside. Mild support seen near 0.7150 but that could break on the downside as it may hold for a very short term.

Dollar Rupee (71.57) came off sharply yesterday after testing 71.81 on the upside. Immediate downside could be restricted to 71.40 with a possible bounce back towards 71.60/80 or even 72.00 in the medium term. For now while the Euro and Brent Crude trades weak, Rupee could gain some strength over today and tomorrow.

INTEREST RATES

The US yields have dipped a bit. The 2Yr and 5YR yield are down from 2.54% to 2.53% and 2.51% respectively, while the 10yr and the 30Yr are down from 2.73% and 3.06% to 2.70% and 3.03% respectively.

The UK yields also have dipped a bit. The 5Yr, 10Yr and 20Yr are trading at 0.877%, 1.1220% and 1.6590%, down from 0.9180%, 1.1760% and 1.71% respectively. The 20Yr has some support coming up just below current levels while the 5Yr and 10YR could have some more room on the downside before rising again from there.

The Indian 10YR GOI (7.6142%) came off sharply from 7.6817% pulling down Dollar-Rupee also with itself. It would be important to see if the yield re-attempts a rise towards 7.70% or comes off towards 7.58-55%. A break below 7.60% could pull down Dollar-Rupee further in the next few sessions.

GBPJPY tumbles lower on price reversal with further weakness expected in the days ahead. On the downside, support comes in at the 142.00 level where a violation will aim at the 141.50 level. A break below here will target the 141.00 level followed by the 140.50 level. Its daily RSI is bearish and pointing lower suggesting further weakness. Conversely, resistance is seen at the 142.50 level followed by the 143.00 level. A cut through that level will set the stage for a move further higher towards the 143.50 level. Further out, resistance resides at the 144.00 level. All in all, GBPJPY faces further downside pressure on price sell off.

It's reported that US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing for the another round of trade talks next week, following the Lunar New Year break. The scope of discussions extended beyond trade balance to intellectual property theft, forced technology transfer and China's state own enterprises. And Lighthizer has repeatedly emphasized the word "enforcement", regarding the implementation of the agreement.

Trump is expected to meet with Chinese President Xi Jinping to seal the deal before March 1 dead line. But for now, there is no set dates for the meeting yet. In his state of Union Address, Trump said China has target US industries for their intellectual property for years. And, he emphasized the new trade deal must end trade practices, reduce our chronic trade deficit, and protect American jobs.

Also, Trump announced to meet North Korean leader Kim Jong Un again in Vietnam on February 27 and 28.

Australian Dollar drops sharply after RBA Governor Philip Lowe dropped the rhetoric that the next move in interest rate is more likely a hike than a cut. Instead, he said the probabilities of hike and cut are now more "evenly balanced".

Lowe delivered a speech "The Year Ahead" to the National Press Club of Australia today. Lowe maintained the view that " tighter labour market and reduced spare capacity will see underlying inflation rise further towards the midpoint of the target range." And given that, RBA "maintained a steady setting of monetary policy" yesterday.

However, he also noted given the uncertainties " it is possible that the economy is softer than we expect, and that income and consumption growth disappoint." In particular,  "in the event of a sustained increased in the unemployment rate and a lack of further progress towards the inflation objective, lower interest rates might be appropriate at some point.

Thus, on the scenarios of next-move-is-up and next-move-is-down, "the probabilities appear to be more evenly balanced." Though Lowe also maintained that RBA "does not see a strong case for a near-term change in the cash rate".

Lowe's full speech here.