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Dollar rebounds further today as US markets are returning from holiday. Mild strength is seen in US yields with 10 year yield back pressing 2.9 handle. DOW futures point to triple digit loss at open. In the currency markets, Dollar is leading the way higher, followed by Sterling for today. Swiss Franc and Yen are trading as the weakest ones. Technically, there is generally no change in outlook as most pairs are bounded in range. In particular, EUR/USD is held above 1.2205 support while USD/JPY is well below 108.27 resistance. Dollar remains bearish in spite of the rebound.

German ZEW pulled back from record high

German ZEW economic sentiment dropped to 17.8 in February, down from 20.4 record high but beat expectation of 17.9. Current situation gauge dropped to 92.3, down from 95.2 and missed expectation of 94.0. Eurozone ZEW economic sentiment dropped to 29.3, down from 31.8, above expectation of 28.4. ZEW President Achim Wambach noted in the release that "the latest survey results continue to show a positive outlook for the German economy." And, "the assessment of the current economic situation is still on a very high level and the economy is expected to improve in the coming six months."

Receding political uncertainty in Germany would likely help business sentiments ahead. Over 450k members of the Social Democratic party start voting on reforming the grand coalition with Chancellor Angela Merkel's Christian Democratic Union. They will have until March 2 to submit their votes. Result is expected to be announced on March 4. The result is still open but favors are on getting the notion passed eventually. Newspaper Bild am Sonntag polled the mayors of the 35 biggest towns and cities ruled by the SPD. 26 of them said they back coalition.

Spanish de Guindos becomes ECB Vice

Spanish economic minister Luis de Guindos will become the vice president of ECB as the overhaul of the board starts. That came after the only other candidate, Irish central bank governor Philip Lane pulled out from the race yesterday. Eurozone finance ministers made the decision of the appointment in Brussels de Guindos will replace Vitor Constâncio when his eight year term expires in May.

Also from Europe, Swiss trade surplus narrowed to CHF 2.09b in January. UK CBI trends total orders dropped to 10 in February.

RBA cautiously neutral

RBA minutes showed that policymakers are maintaining the cautiously neutral stance. The low interest rate is helping to bring down unemployment rate and keep inflation inside target band. But it echoed recent comments from officials that "further progress on these goals was expected over the period ahead but the increase in inflation was likely to occur only gradually as the economy strengthened." The minutes also warned that "there was still a risk that growth in consumption might turn out to be weaker than forecast if household income growth were to increase by less than expected." It's generally expected that RBA will be on hold throughout 2018. But views on whether it will hike in early 2019 are divided.

Also from down under, New Zealand PPI input rose 0.9% qoq in Q4, PPI output rose 1.0% qoq.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2372; (P) 1.2403 (R1) 1.2439; More....

EUR/USD's fall from 1.2555 extends lower today but it's staying well above 1.2205 key support so far. Intraday bias remains neutral at this point. 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.

Economic Indicators Update

Daily Pivots: (S1) 106.21; (P) 106.46; (R1) 106.84; More...

USD/JPY's rebound from 105.54 extends higher today but upside is limited well below 108.72 support turned resistance. Intraday bias remains neutral with near term outlook staying bearish. Below 105.54 will extend the larger fall from 118.65 and target 100% projection of 118.65 to 108.12 from 114.73 at 104.20 next.

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) 0.9261; (P) 0.9290; (R1) 0.9318; More...

USD/CHF's rebound from 0.9186 extends higher today but it's staying well below 0.9469 resistance. Intraday bias remains neutral and outlook stays bearish for another decline. 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 0.9545) and above.

In the bigger picture, fall from 1.0342 is developing into 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) 1.3954; (P) 1.4001; (R1) 1.4045; More....

GBP/USD is staying in consolidation below 1.4144 temporary top and intraday bias remains neutral. As noted before, pull back from 1.4345 should have completed with three waves down to 1.3764. Above 1.4144 will target 1.4345 first. Break will resume larger up trend and target long term trend line resistance (now at 1.5105). On the downside, below 1.3764 will extend the correction 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) 1.2372; (P) 1.2403 (R1) 1.2439; More....

EUR/USD's fall from 1.2555 extends lower today but it's staying well above 1.2205 key support so far. Intraday bias remains neutral at this point. 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.

The WTI is being held within the upward ascending channel trying to make a positive momentum push above 62.10. The POC zone 61.80-62.00 could reject the price towards 62.60, the confluence of W H3/D H3 camarilla pivot. A 4h candle close above 62.60 will be needed for next possible targets 63.28 and 63.68. However if the price drops below 61.50, bears might get the upper hand and the price might get to 60.57 - W L3 camarilla pivot.

• W H3 -Weekly Camarilla Pivot (Weekly Interim Resistance)
• W L3 - Weekly Camarilla Pivot (Weekly Interim Support)
• W H3 - Weekly Camarilla Pivot (Weekly Interim Resistance)
• W H4 - Weekly Camarilla Pivot (Strong Weekly Resistance)
• D H4 - Daily Camarilla Pivot (Very Strong Daily Resistance)
• D L3 – Daily Camarilla Pivot (Daily Support)
• D L4 – Daily H4 Camarilla (Very Strong Daily Support)
• POC - Point Of Confluence (The zone where we expect price to react aka entry zone)

Here are the latest developments in global markets:

FOREX: The dollar continued to stretch higher, breaking slightly above the 107 key-level versus the yen (+0.51%) and rising towards 89.67 (+0.65%) against a basket of major currencies. Despite risks remaining in the background, including a ballooning US budget deficit and potential policy tightening by other central banks which might attempt to play catch up with the Fed, the dollar finally found support from rising US Treasury yields. Pound/dollar jumped above 1.40 to touch an intra-day high of 1.4014 on the news that the EU parliament was planning to offer Britain a "privileged" single market access and membership in EU agencies. Meanwhile, the Brexit Minister David Davis, talking in Vienna on Tuesday, sounded certain that the UK and the EU could secure an agreement. However, the pair stepped back towards 1.3970 (-0.26%) afterwards as investors remained cautious given that the British Prime Minister wants the UK to operate free of EU laws. Euro/dollar was on the backfoot on the face of a strengthening dollar, last seen at 1.2339 (-0.56%). Aussie/dollar dropped to 0 .7893 (-0.23%) and kiwi/dollar was moving sideways around 0.7350 (-0.12%).

STOCKS: European stocks were mixed on Tuesday following a weak session in Asia where equities closed lower. The pan-European STOXX 600 and the blue-chip Euro STOXX 50 were down by 0.18% and 0.20% respectively at 1030 GMT, driven by losses in the consumer cyclical and non-cyclical sectors. Banking shares were also under pressure after HSBC's earnings missed expectations and the bank reported that it needed $7 billion ( 5 billion pounds) in additional capital. The German DAX 30 declined by 0.17%, the French CAC 40 was up by 0.09% and the Spanish IBEX 35 rose by 0.17%. The British FTSE 100 tumbled by 0.55%, while futures for major US indices were in the red, pointing to a negative open ahead of Wall Street's return from the President's day holiday.

COMMODITIES: WTI crude and Brent continued to follow different directions, with the former touching a fresh two-week high at $62.76 before pulling back to 61.82 (+0.39%), while the latter gave up all its gains made yesterday, falling to $64.87 (-1.22%). A stronger dollar was a drag in the markets, whereas reduced supplies from Canada to the US due to restricted capacity of the Keystone pipeline were said to support WTI crude oil prices. In other news, the Saudi Arabian Energy Minister stated that the OPEC and non-OPEC members including Russia are likely to extend their cooperation beyond 2018 when the supply cut deal expires at their next meeting in Vienna in June. In precious metals, gold was on track to post losses for the third consecutive day, slipping towards $1337.60/ounce.

Day ahead: US Treasury auctions new debt; Kiwi waits for dairy prices

Looking forward, the calendar will be relatively light in terms of economic releases, with investors turning their focus to the bond markets where the US Treasury Department will issue new debt in the order of around $258 billion. This is seen as an effort to fund the recent tax reforms (said to add $1.5 trillion to the federal debt overtime) and the two-year government budget plan (said to increase government spending by $300 billion the next two years).

The Treasury is expected to auction 1-month, 3-month, and 6-month bills at 1630 GMT and a 2-year note at 1800 GMT.

The global dairy auction is also scheduled for today at a tentative time, with changes in prices having the potential to shake the kiwi.

Canada will see the release of monthly wholesale trade data for December at 1330 GMT, while in Eurozone, initial estimates on consumer confidence at 1500 GMT are expected to reflect a drop in February, with the measure seen falling by 0.3 points to +1.0.

Spot Gold continues to move lower on stronger dollar, trading in red for the third straight day. Fresh weakness commenced after strong upside rejection at $1361 on Friday and extended to one-week low at $1336 on Tuesday, where daily Kijun-sen offered temporary footstep. Near-term bears face strong headwinds from $1336 (daily Kijun-sen)/$1334 (daily Tenkan-sen/10SMA) support zone, loss of which would generate another bearish signal and risk weakness towards $1328 (Fibo 61.8% of $1307/$1361 upleg). Stronger greenback keeps reduced demand for safe-haven gold which could keep the price under increased pressure. Close below $1340 (cracked Fibo 38.2% of $1307/$1361) today is needed for bearish signal to maintain pressure on gold price. Failure to clearly break $1340 would ease immediate bearish pressure but the downside is expected to remain at risk while the price stays below pivotal $1350 resistance.

Res: 1344; 1348; 1350; 1352
Sup: 1336; 1334; 1328; 1320

The Canadian dollar has recorded slight losses in the Tuesday session. Currently, USD/CAD is trading at 1.2592, up 0.26% on the day. On the release front, it's a very light date. There are no US releases on the schedule. The sole Canadian indicator, Wholesale Sales, is expected to slow to 0.4%. On Wednesday, the Federal Reserve will release the minutes of its January meeting. As well, the US will release Existing Home Sales.

Federal Reserve chair Jerome Powell has just started his new job, and there is plenty on his plate. Strong US data in recent weeks has raised speculation that the Fed may need to accelerate the pace of interest rate hikes in 2018. The Fed is currently projecting three rate hikes this year, but if inflation continues to move upwards, many analysts are expecting that the Fed could press the rate trigger four or even five times in 2018. Meanwhile, concern over higher inflation and more rate hikes sent the stock markets into a frenzy. Powell sought to reassure the markets that the Fed was monitoring the situation, but it's doubtful that the Fed can do much to prevent volatility in the markets.

Should cryptocurrencies be regulated? Bitcoin has seen wild fluctuations in recent months, ranging from under $1000 to just under $20,000. There are growing calls for these currencies to be regulated, and central banks could play a key role in such a move. However, last week, ECB President Mario Draghi poured cold water on any ECB involvement, saying that it was not the ECB's responsibility to ban or regulate Bitcoin. Draghi added that the ECB was exploring the use of blockchain, a digital technology to monitor bitcoin transactions. Still, with Bitcoin gaining more and more popularity, the Bank of Canada and other central banks will have to pay greater to attention to the impact of Bitcoin on the currency markets.

The British pound has encountered another choppy trading session against the greenback, with ongoing Brexit news the driving force behind today's volatile moves. The GBPUSD pair briefly spiked above the key 1.4000 level on UK supportive Brexit news, but was quickly met with another round of strong selling. Price-action is now consolidating around the 1.3970 level, after earlier finding strong technical support from the 1.3930 region.

The GBPUSD pair is likely to advance higher once the 1.4000 level is clearly breached. Key intraday upside targets remain 1.4036 and 1.4074.

If the GBPUSD pair moves below the 1.3938 support level, we may see sellers attempt to push price-action towards the 1.3901 level.