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In a speech titled "Issues for U.S. Monetary Policy", Cleveland Fed President Loretta Mester expressed her support for further rate hike. She noted that "the medium-run outlook supports the continued gradual removal of policy accommodation; it seems the best strategy for balancing the risks to both of our policy goals and avoiding a build-up of financial stability risks.

Regarding inflation, she noted that it will take a year or two to stabilize around the 2% target. And, she added that "we want to give inflation time to move back to goal ... this argues against a steep path" on tightening. But, "as the expansion continues, it could be that in order to maintain our policy goals, we may need to move the fed funds rate, for a time, a bit above the level of the funds rate that is expected to prevail over the longer run".

She also pointed to Fed's March economic projections that fed funds rates could move a bit above the longer-run level at 3% by 2020. She noted that "2020 is a long time away and the policy path actually followed will be responsive to changes in the outlook.

The decision from Malaysia to call a two-day public holiday and close trading following the unexpected election shock seems to have worked in its favour, with the Malaysian markets showing low signs of investor panic as trading reopened today.

While there has been some weakness in the Ringgit, this will likely fizzle out and is considered as marginal losses in comparison to the shock seen in the offshore markets last week when it became clear that Mahathir Mohamad would win the general election. The Ringgit had only declined 0.9% during early morning trade, which can be considered as small losses for the local note when factoring in that it was not priced into the market that a coalition that had ruled the country for six decades would be defeated.

The relatively smooth transition of power for Mahathir Mohamad being sworn in as Prime Minister is a likely catalyst behind the losses in the Ringgit being smaller than expected. This reduced anxiety that Malaysia would come under a period of uncertainty, and the likelihood that the uncertainties around the election outcome will continue to fade will present an opportunity for the Ringgit to recover.

Towards the end of the week we would expect for the market to begin refocusing on the macro aspect of the Malaysian economy. The GDP reading scheduled for Thursday 17 will probably continue to highlight that the Malaysian economy is growing at a robust pace.

Although there is a distinct possibility that headline growth will not be able to keep up with the overwhelming out-performance seen last year, a headline growth number somewhere around the 5% level will highlight to international investors that the domestic economy is still consistently performing far beyond the economic growth seen in the developed world.

ECB Governing Council member, Bank of France Governor Francois Villeroy de Galhau said today that "the time when our net asset purchases will end is approaching". Currently, ECB's EUR 30B per month asset purchase program is set to end after September. Villeroy de Galhau said whether it will end in September, or December is not "a deep existential question".

Regarding interest rates, he added that "we could give additional guidance on its timing--well past meaning at least some quarters but not years--and its contingency on the inflation outlook."

Daily Pivots: (S1) 0.8792; (P) 0.8809; (R1) 0.8830; More...

Intraday bias in EUR/GBP remains neutral first. On the upside, break of 0.8844 will revive the case of bullish trend reversal. Intraday bias will be turned back to the upside for 0.8967 cluster resistance (50% retracement of 0.9305 to 0.8620 at 0.8963) to confirm. On the downside, however, below 0.8727 will target a test on 0.8620 low instead.

In the bigger picture, for now, the decline from 0.9305 is seen as a leg inside the long term consolidation pattern from 0.9304 (2016 high). Such consolidation pattern could extend further. Hence, in case of strong rally, we'd be cautious on strong resistance by 0.9304/5 to limit upside. Meanwhile, in another decline attempt, we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside.

Daily Pivots: (S1) 1.5781; (P) 1.5816; (R1) 1.5855; More....

EUR/AUD recovers ahead of 1.5773 support and intraday bias is turned neutral first. Consolidation pattern from 1.6189 could extend further. And break of 1.5773 cannot be ruled out But downside should be contained above 1.5621 support to bring rebound. On the upside, above 1.5962 will turn bias to the upside for 1.6139 resistance and above.

In the bigger picture, while there is bearish divergence condition in daily MACD, there is no clear sign of reversal yet. Current rally from 1.3624 could extend to 1.6587 key resistance (2015 high). Nonetheless, we'd expect further loss of upside momentum, and strong resistance from 1.6587 to limit upside and bring reversal. On the downside, sustained break of 1.5621 support should confirm reversal and turn outlook bearish for 1.5153 support and below.

Daily Pivots: (S1) 1.1925; (P) 1.1941; (R1) 1.1958; More...

EUR/CHF's rebound from 1.1864 is still in progress and could extend higher. But still, as long as 1.2004 holds, the consolidation will extend with risk of deeper pull back. But in that case, we'd expect strong support from 38.2% retracement of 1.1445 to 1.2004 at 1.1790 to contain downside and bring rebound. Nonetheless, decisive break of 1.2004 will confirm up trend resumption.

In the bigger picture, long term up trend in EUR/CHF is still in progress. Prior SNB imposed floor at 1.2000 was already met but there is no sign of reversal yet. As long as 1.1445 support holds, we'd expect the up trend to extend to 2013 high at 1.2649 next. However, considering bearish divergence condition in daily MACD. Break of 1.1445 will be an indication of medium term reversal and will turn outlook bearish.

XAUUSD (1320.61): Gold prices rallied to test the resistance level at 1325 last week by Friday's close. However, this quickly resulted in prices easing back strongly. The near-term range is likely established within 1325 resistance and 1311 support. A breakout off this level is required to establish further direction. In the near term, we expect gold prices to potentially push lower but price action could be support back near 1311. This is seen from the hidden bearish divergence on the 4-hour Stochastics as well.

Daily Pivots: (S1) 0.7519; (P) 0.7543; (R1) 0.7563; More...

Intraday bias in AUD/USD remains mildly on the upside as rebound from 0.7411 short term bottom is in progress. Further rally could be seen to 38.2% retracement of 0.8135 to 0.7144 at 0.7688. But we'd expect strong resistance from there to limit upside to bring decline resumption. On the downside, break of 0.7411 will resume the fall from 0.8135 and target cluster support at 0.7328 (61.8% retracement of 0.6826 to 0.8135 at 0.7326).

In the bigger picture, medium term rebound from 0.6826 is seen as a corrective move. Decisive break of 0.7500 key support suggests that such correction is completed at 0.8135. Deeper decline would be seen back to retest 0.6826 low. In case of another rise, we'd expect strong resistance from 38.2% retracement of 1.1079 to 0.6826 at 0.8451 to limit upside to bring long term down trend resumption eventually.

GBPUSD (1.3567): The British pound remained stuck near the 1.3530 level which marks a whole week of consolidation at the price level. Given the fact that the GBPUSD has failed to rebound off this level or break down below this level, we expect to see a near term direction being established. To the upside, price action could post a strong correction with the dynamic trend line acting as resistance all the way to the horizontal resistance at 1.3900. To the downside, a break down below 1.3530 could trigger GBPUSD to test the 1.3500 level of support

EURUSD (1.1963): The EURUSD closed on Friday on a bullish note marking a second consecutive day of gains. However, price action remains stuck near the key resistance level of 1.1959 - 1.1920 level. This could potentially trigger a modest pullback in the near term. The 4-hour chart also signals a possible correction to the downside with the hidden bearish divergence. Price action could possible post a higher low or decline below the previous lows established at 1.1848. However, in the near term, we expect to see a minor bottom being established at the current levels.