Sample Category Title

Daily Pivots: (S1) 1.2277; (P) 1.2316 (R1) 1.2355; More....

EUR/USD is still bounded in range of 1.2205/2555 and intraday bias remains neutral. On the upside, break of 1.2555 will revive the bullish case of up trend resumption and target 100% projection of 1.0569 to 1.2091 from 1.1553 at 1.3075. However, break of 1.2205 will confirm rejection by 1.2516 key fibonacci level and trend reversal.

In the bigger picture, key fibonacci level at 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516 remains intact despite attempts to break. Hence, rise from 1.0339 medium term bottom is still seen as a corrective move for the moment. Rejection from 1.2516 will maintain long term bearish outlook and keep the case for retesting 1.0039 alive. However, sustained break of 1.2516 will carry larger bullish implication and target 61.8% retracement of 1.6039 to 1.0339 at 1.3862.

Daily Pivots: (S1) 1.3905; (P) 1.3988; (R1) 1.4048; More....

GBP/USD is still bounded in range of 1.3764/4144 and intraday bias strays neutral. On the upside, break of 1.4144 will extend the rise from 1.3764 and target a test on 1.4345 resistance. Break there will resume larger up trend and target long term trend line resistance (now at 1.5056). On the downside, below 1.3764 will extend the correction from 1.4345 to 1.3651 resistance turned support instead.

In the bigger picture, as long as 1.3038 support holds, medium term outlook in GBP/USD will remains bullish. Rise from 1.1946 is at least correcting the long term down from 2007 high at 2.1161. Further rally would be seen back to 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466. However, GBP/USD fails to sustain above 55 month EMA (now at 1.4279) so far. Break of 1.3038 support, will suggests that rise from 1.1946 has completed and will turn outlook bearish for retesting this low.

Daily Pivots: (S1) 0.9339; (P) 0.9365; (R1) 0.9405; More...

Consolidation from 0.9186 is still in progress and intraday bias remains neutral. Also, outlook in USD/CHF stays mildly bearish with 0.9469 resistance intact and another decline is in favor. On the downside, break of 0.9186 will extend the larger down trend to 0.9115 medium term projection level next. However, considering bullish convergence condition in 4 hour MACD, break of 0.9469 will indicate near term reversal and turn outlook bullish for 55 day EMA (now at 0.9517) and above.

In the bigger picture, fall from 1.0342 is seen as a medium term down trend. Deeper decline should be seen to 100% projection of 1.0342 to 0.9420 from 1.0037 at 0.9115. Break will target 161.8% projection at 0.8545. In any case, sustained trading above 55 day EMA is needed to be the first sign of medium term reversal. Otherwise, outlook will stay bearish even in case of strong rebound.

Daily Pivots: (S1) 106.48; (P) 106.83; (R1) 107.28; More...

Consolidation from 105.54 is still in progress and intraday bias stays neutral in USD/JPY. Also, with 108.27 resistance intact, outlook remains mildly bearish and deeper fall is expected. On the downside, break of 105.54 will extend the larger decline from 118.65 and target 100% projection of 118.65 to 108.12 from 114.73 at 104.20 next. However, break of 108.27 will be the first sign of near term reversal and will target 110.47 resistance for confirmation.

In the bigger picture, current development argues that the corrective pattern from 118.65 is extending. The solid break of 61.8% retracement of 98.97 to 118.65 at 106.48 now suggests that the pattern from 125.85 high is possibly extending. Deeper fall could be seen through 98.97 key support (2016 low). This bearish case will now be favored as long as 110.47 resistance holds.

Daily Pivots: (S1) 0.7821; (P) 0.7857; (R1) 0.7889; More...

Intraday bias in AUD/USD remains neutral at this point. On the downside, below 0.7758 will resume the fall from 0.8135 and target 0.7500 key near term support. On the upside, above 0.7988 will extend the rebound to retest 0.8135. so far, there is no sign of range breakout yet and 0.7500/8135 could hold for a while.

In the bigger picture, medium term rebound from 0.6826 is seen as a corrective move. It might still extend higher but 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. On the downside, break of 0.7500 support will now be an important signal that such corrective rebound is completed.

Daily Pivots: (S1) 1.2628; (P) 1.2670; (R1) 1.2725; More....

USD/CAD is staying in tight range below 1.2757 and intraday bias remains neutral first. On the upside, above 1.2757 will resume the rebound from 1.2246 and target a test on 1.2919 key resistance. We'd be cautious on strong resistance from there to limit upside. On the downside, below 1.2450 will turn bias back to the downside for 1.2246 support.

In the bigger picture, the rebound from 1.2246 is mixing up the medium term outlook. Nonetheless, USD/CAD is staying below falling 55 week EMA (now at 1.2771), hence, the bearish case is in favor. That is, fall from 1.4689 is not completed yet. Sustained break of 1.2061 key support will carry larger bearish implication and target 61.8% retracement of 0.9406 to 1.4689 at 1.1424. However, firm break of 1.2919 will revive the case of medium term reversal and turn outlook bullish.

Risk sentiments are generally positive this week so far. DOW gained 399.28 pts or 1.58% to close at 25709.27 overnight. The rebound from 23360.29 resumed with solid momentum and is set to extend to retest 26616.71 record high. Comparatively, NASADAQ was even strongly, up 11.15% to 7421.46, just inches below 7500.61 record high. Asian markets follow with Nikkei trading up over 300 pts, or 1.4%, at the time of writing. Pull back in treasury yields was a factor helping stocks as 10 year yield dipped -0.012 to 2.859 after recent rally lost momentum. The currency markets are mixed though, with major pairs and crosses stuck in range. Euro is mildly firmly against the others but there is no clear momentum.

Things to watch in Fed Powell's testimony

Fed Chair Jerome Powell's first Congressional testimony will be the major focus today. While Powell is not expected to deviate much from Fed's FOMC minutes and Monetary Policy Report last week, there are still a few points of interest to note. Firstly, the January FOMC meeting was held before the Congress passed the two year budget with USD 300b increase in federal outlays. Powell might offer his view on how the fiscal stimulus would give another boost to the economy.

Secondly, one of the key arguments of Fed doves against tightening is that after a few hikes, policy rate would be closer to neutral rates. And by then, policy will be restrictive. The markets would like to know Powell's view on where the neutral rate stands, and whether the neutral rate has moved up again after sustained recovery in the economy. Thirdly, there have been talks about so called price-level targeting in recent markets. The markets would like to know more about the discussion within Fed on this topic.

But after all, for now, the markets should be firmly expecting three Fed hikes this year. The question is on whether there will be a fourth hike. If Powell doesn't offer any clue, we'll have to wait for new economic projections to be published at the March FOMC meeting before having a conclusive expectation.

Fed Quarles offered upbeat outlook

Fed Governor Randal Quarles offered an optimistic view on the economic outlook of the US. He said that "Some of the factors that have been holding back growth in recent years could shift, moving the economy onto a higher growth trajectory." He also pointed to the tax cuts and said they "will also likely boost investment and increase the capital stock." He supported gradual removal of monetary policy accommodation. And he added that "this higher policy path would be motivated by sustained stronger growth and improved economic conditions, not a greater desire to slow the economy."

On the other hand, Fed dove St. Louis Fed President James Bullard warned again that "if the Committee raises the policy rate substantially from here without other changes in the data, the policy setting could become restrictive." And he's concerned that FOMC "goes too far too fast" in tightening.

ECB Draghi sounded cautious again

ECB President Mario Draghi sounded cautious again in his comments yesterday. He warned that "given the uncertainty surrounding the measurement of economic slack, the true amount may be larger than estimated, which could slow down the emergence of price pressures." And therefore, the "right blend" of stimulus measures is still needed.

Nonetheless, he said "these factors should wane as the economic expansion continues and unemployment further declines." "The relationship between growth and inflation remains largely intact, even if it has temporarily weakened in recent years to the extent that the speed of adjustment in inflation towards our aim has been affected." But he remained confident that " headline inflation will resume its gradual upward adjustment, supported by our monetary policy measures."

Draghi's comments suggested that ECB is still in no rush to exit stimulus. And the comments echoed the January meeting minutes that "changes in communication were generally seen to be premature at this juncture, as inflation developments remained subdued despite the robust pace of economic expansion." ECB is not even ready to change its forward guidance yet.

EU to publish draft Brexit treaty

The EU is set to publish 100-page draft Brexit treaty this Wednesday, detailing how it expects Brexit to happen and the terms of the transition period. That will come just two days before UK Prime Minister Theresa May's speech on future trade relationship with EU. It's believed the EU's document will be sole from EU's perspective for the negotiation ahead. Meanwhile, it draws criticism from UK that EU is only trying to push its agenda, rather than producing something that reflects the positions of both sides.

On the data front

New Zealand trade balance showed NZD -566m deficit in January. Eurozone M3 and confidence indicators will be released in European session. German CPI will also be featured. US will release trade balance, wholesale inventories, durable goods orders, house price indices and consumer confidence.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2628; (P) 1.2670; (R1) 1.2725; More....

USD/CAD is staying in tight range below 1.2757 and intraday bias remains neutral first. On the upside, above 1.2757 will resume the rebound from 1.2246 and target a test on 1.2919 key resistance. We'd be cautious on strong resistance from there to limit upside. On the downside, below 1.2450 will turn bias back to the downside for 1.2246 support.

In the bigger picture, the rebound from 1.2246 is mixing up the medium term outlook. Nonetheless, USD/CAD is staying below falling 55 week EMA (now at 1.2771), hence, the bearish case is in favor. That is, fall from 1.4689 is not completed yet. Sustained break of 1.2061 key support will carry larger bearish implication and target 61.8% retracement of 0.9406 to 1.4689 at 1.1424. However, firm break of 1.2919 will revive the case of medium term reversal and turn outlook bullish.

Economic Indicators Update

Key Highlights

• The Aussie Dollar traded lower recently and moved below the 0.7900 support against the US Dollar.
• There is a crucial contracting triangle forming with support at 0.7805 on the 4-hours chart of EUR/USD.
• The Chicago Fed National Activity Index (CFNAI) declined to 0.12 in Jan 2018.
• Today, the US Durable Goods Orders for Jan 2018 will be released, which is forecasted to decline 2.2%.

AUDUSD Technical Analysis

The Aussie Dollar declined below the 0.7950 and 0.7900 support levels recently against the US Dollar. The AUD/USD pair tested the 0.7790 level and is currently trading in a range.

Looking at the 4-hours chart, it seems like the pair may make the next move. A push above the 0.7900-0.7910 resistance could take the pair towards 0.8000. On the other hand, a break below the 0.7800 support may initiate a fresh downside wave.

The chart points that there is a crucial contracting triangle forming with support at 0.7805. On the upside, the triangle resistance is at 0.7910. Therefore, the 0.7800 and 0.7900 are breakout levels.

The 0.7910 level is significant since it is near the 50% Fib retracement level of the last decline from the 0.7988 high to 0.7790 low. A successful close above the 0.7900 and 0.7910 levels could kick start a fresh rally in AUD/USD in the near term.

Recently in the US, the Chicago Fed National Activity Index (CFNAI) for Jan 2018 was released by Federal Reserve Bank of Chicago. The market was looking the index to rise to 0.15.

The actual result was a bit lower as there was a decline in the index to 0.12 from 0.14. However, there was no negative impact on the US Dollar.

Major pairs such as EUR/USD and GBP/USD traded lower and are currently in a bearish zone. On the other hand, USD/JPY is moving higher towards a major resistance area near 107.10-20.

Economic Releases to Watch Today

Euro Zone Services Sentiment Feb 2018 – Forecast 114.0, versus 114.7 previous.

German Consumer Price Index for Feb 2018 (Prelim) (YoY) – Forecast +1.5%, versus +1.6% previous.

German Consumer Price Index for Feb 2018 (Prelim) (MoM) – Forecast +0.5%, versus -0.7% previous.

US Durable Goods Orders for Jan 2018 – Forecast -2.2% versus +2.8% previous.

STOCKS

Dow (25709.27,+1.58%) moved up breaking above 25500 and may eventually recover to levels near 26500 in the coming sessions. Near term looks bullish just now with a possibility of a test of previous highs near 26700.

Dax (12527.04, +0.35%) tested 12600 on the upside and if that holds, the index could fall back towards 12400 in the next few sessions. Near term could be bearish while below 12600. A break above 12600 if seen just now, could negate an immediate fall towards 12400 and instead take it higher towards 12800.

Nikkei (22460.85, +1.39%) rose in line with our expectation of a rise towards 22500. There is scope on the upside towards 23000 or aye even higher while support near 21000 holds on the weekly charts. Near to medium term looks bullish.

Shanghai (3295.65, -1.02%) came off from 3335 as expected and may come off towards 3275-3250 levels again in the coming sessions. While immediate resistance on the 3-day candles holds, near term looks bearish.

Nifty (10582.60, +0.87%) has risen from levels near 10400, the support as seen on the 3-day candles. While that holds, a near term rise towards 10800 looks likely in the medium term. Sensex (34445.75, +0.89%) also has similar support and may rise towards 35000 in the near to medium term.

COMMODITIES

WTI (63.87) and Brent (67.50) are almost stable and is likely to move up towards 65 and 68-69 respectively.

Gold (1335.40) looks poised and may rise towards 1360-1370 again in the coming sessions. Near term looks bullish.

Copper (3.2275) is likely to head towards 3.30, the medium term resistance from where another sharp rejection could be expected. Near term is bullish towards 3.30.

FOREX

Some immediate support might be provided to the Dollar Index (89.73) on the daily line chart by 13 days and 21 days moving average lines. Moreover, earlier resistance trend line on the daily line chart could also provide some support near 89.0-89.5. Our earlier projection of ranging between 88.5-90.0 for this week would be incorrect if the above mentioned supports hold.

Euro (1.2338) did see a high near 1.2355 yesterday but closed lower near 1.2317 and is currently trading around 1.233-1.234. Much like the Dollar index, the 21 days moving average line on the daily line chart could provide some resistance near 1.236 to the Euro’s upmove.

Dollar-Yen (106.93) saw a low of 106.38 yesterday, but, as mentioned yesterday, might have found some support near 106.25-106.5 on the 3 day line chart and the weekly candles. It might now test resistance near 107.25 on the daily candles again before dipping further.

The Euro-Yen (131.95), as expected, has bounced from support on daily candles near 131. If resistances for the Dollar Yen (near 107.25) and for Euro (near 1.236) hold (as mentioned above), then the Euro Yen’s upside could be restricted till 132.5-132.6.

As per expectation, Pound (1.3971) did test resistance on daily candles yesterday (at 1.407) and is now dipping towards support near 1.39, from where a bounce could be expected.

Dollar-Rupee (64.7950): Increased chances of fresh rally targeting 65.40.

INTEREST RATES

US 10 Year Yield (2.866), US 30 year Yield (3.1563), US 5 year yield (2.6082), US 2 year yield (2.2179) : Longer term US yields are consolidating around levels seen yesterday while the 2 Year yield has come further down from the 2.25-2.26 levels seen last week. The 10 Yr, 30 Yr and 5 Yr could see another upmove towards 2.9%, 3.2% and 2.65% in this week. US GDP data which would be released tomorrow could be important for how investors react. Decent GDP growth could see investors shift to stock markets, thereby leading to a rise in yields.

(Long term resistance levels for the 4 yields earlier mentioned are as follows: 2.85-2.90, 3.20, 2.7 and 2.2 respectively - we have been expecting these levels to hold in this month.)

Spotlight on Powell

Outside of equity markets where the US stock indexes clocked in gains of 1 %, most asset classes remain parked in neutral as all eyes are on Jay Powell.

After yesterday's wave of broader USD weakness during the APAC session, led by USDJPY on the back of mushy US yields, the DXY ended nearly flat on the day, as pre-Humphrey Hawkins position adjustments dominated the NY session.

Investor focus also remains on China after the ruling party will pave the way for President Xi to extend his rule in office, with a proposal to remove the constitutional clause limiting presidents service to two five year terms. And also of significance, Chinese President Xi Jinping's top economic adviser, Liu He, will be visiting the US from Tuesday through Saturday

Removing Xi's term limits is a boon to regional economic sentiment as it guarantees continued market reforms and staying the course on the trade-and-infrastructure program called the Belt and Road Initiative.

Investors will be eying Liu He USA visit where the discussion will centre on Bilateral trade. It comes at a time when the trade tensions are broadening. Liu He is expected to be the next central bank chief so all eyes will be on these trade discussion. In the past high-level talks tackling their enormous trade imbalances produce few if any significant results so while discussion moves forward and the market hopes for some level of cooperation, it is worth preparing for the worst.

Equity Markets

S&P500 powered higher overnight and chalked up it's strongest close for the month as a positive uptrend is reemerging. Investor feel less threatened by US rate hikes as those that were on the road to 3 % US 10 Year yields have temporarily parked at the roadside rest stop.

Investors appear less concerned by US rate hikes than at any point this month, which is what is providing the positive tone in global equity markets

Oil Markets

The confluence of bullish signals has WTI moving above 64.00.But It's the dwindling Cushing inventories that continue to resonate with oil traders while another supply disruption in Libya has provided that extra fillip. Given last weeks Cushing collapse in oil stockpiles, traders are keenly awaiting this week's US inventories data. Keeping in mind, with oil prices trading in backwardation there is less incentive for oil producers to warehouse supply.

Gold Markets

Upbeat equity market and the DXY returning to this weeks opening levels have erased most of yesterday's market gains ( on a weaker USD) as the Gold hedge remains exceptionally correlated to the USD and a lesser degree to US equity markets.

But given the Fed has struggled to surpass their 2 % inflation target it's possible the Fed's could opt to run the economy hotter than expected by keeping interest rates lower for longer. If the market perceives any hint that the Fed will remain behind the curve, Gold could bounce considerably higher.

With that said, the market will trade very neutral ahead of Jay Powell's testimony,

Currency Markets

The Japanese Yen

USDJPY, as expected continues to be the go-to vehicle for G-10 traders. A bit of a topsy-turvy day yesterday as what seemed to be decent dollar demand into the 9:55 Tokyo Fix on the back of active equity markets and a dovish sounding Kuroda turned lower on huge volumes. While US yields were soggy, traders should be cognisant of exporter supply entering the picture for both month and year-end selling. Also, it looks like the market was caught a bit long and wrong at higher levels, and there was a bit of panicked rush for the exits.

Well, that's my view on yesterday, but for today I suspect it will be the case of wait and see. But even dollar bears like me after years dealing with arguably the most dovish sitting Fed Chair of all times; it might be worth positioning for a hawkish surprise after all Powell is highly unlikely to match Yellen on the dovish scale or is he?

The Australian Dollar

The Aussie dollar turned gangbusters yesterday as Iron ore futures in Asia rallied to a 10 month high on news that steel supply curbs in China could go beyond the winter season but have come off overnight highs as the market is prepping for Powell.

The Yuan

Predictably the RMB traders have embraced the Xi' news as the announcement removes any political uncertainty of Xi's successor, and provides a stable political scrim.But it also guarantees that deeper market reforms remain a priority as to does the Belt and Road initiative.

The Malaysian Ringgit

The Ringgit has been trading favourable due to some front.

Oil prices continue to move higher on collapsing US inventories.

Bond and equity inflows picked up as US yields fell and risk on returned to Global equity markets

The positive tone in yesterday local bond market suggests today auction will be fully subscribed and should provide a bounce to the MYR sentiment.

Removing presidential term limits in China not only provides political continuity in the region but guarantees the continuation of the Belt and Road initiative of which Malaysia will be a huge benefactor for decades to come