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'There isn't much going for the dollar right now and the market will be bracing for its further decline.' – Barclays (based on Reuters)

Pair's Outlook

Even though the GBP/USD pair edged lower on Friday, once again crossing the 1.25 major level to the downside, this decline was just a mere setback in the pair's bullish trend. Broad USD weakness due to Trump's failure to bring down Obamacare is allowing the Sterling to continue climbing higher. Today's intraday high is expected to be the 1.26 handle, with the monthly R1 preventing any attempts to pass beyond this mark. Furthermore, the weekly R1 and the upper Bollinger band around 1.2570 form a relatively strong resistance area as well, which is likely to contribute to limiting the Cable's rally today. Meanwhile, technical studies are in favour of the positive outcome.

Traders' Sentiment

Today 60% of traders hold long positions, barely changed since Friday (61%). The portion of sell orders inched down from 56 to 55%.

'The Trump reflation trade could still reverse course in a more meaningful way, resulting in dollar weakness.' – MUFG (based on Business Recorder)

Pair's Outlook

The Buck succeeded in reversing polarity, but only for a day, as the bearish momentum returned over the weekend. Trade opened with the USD/JPY pair erasing all Friday's gains, with the 111.00 major level getting a full-blown downside breach. The Greenback now risks dropping towards the 110.00 level, with the only support on the pair's path being the lower Bollinger band and the weekly S1 around 110.35. In case the Buck falls under 110.00, the monthly S2 at 109.74 could still save it from further weakness, but a failure would open the door for a plunge to 108.00, being that no political or economical driver triggers a rebound earlier.

Traders' Sentiment

Market sentiment suggests that the US Dollar might be overbought, as 72% of all open positions are currently long.

'Looks like some people are not happy with Trump's failure over his promises and we see that currently there is a very bearish mood about the U.S. dollar.' – Jiang Shu, Shandong Gold Group (based on Reuters)

Pair's Outlook

Not only has the yellow metal begun Monday's trading session more than 400 base points higher than the previous closing price, but also it has managed to surge additional 1250 points during the early hours of the trading session. Moreover, recently the bullion began to pass the resistance put up by the 200-day SMA, which was located at the 1,257.98 level. If that level is passed, the commodity price is most likely going to continue the surge up to the weekly R2, which is located at the 1,267.28 level.

Traders' Sentiment

SWFX trader open positions remain neutral, regarding the bullion. However, 72% of trader set up orders are to buy the yellow metal.

EUR/USD

Current level - 10860

My outlook remains bullish, for a rise towards 1.0940 area. Initial intraday support lies at 1.0828 and crucial on the downside is 1.0760 low.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 110.16

110.75 and crucial on the upside is 111.45 area.

GBP/USD

Current level - 1.2545

The uptrend here is intact, heading towards 1.2570, en route to 1.2620 resistance zone. Crucial on the downside is 1.2470 low.

The Euro is in strong bullish acceleration on Monday as the dollar was hit by increased political risk concerns after Trump's efforts to reform healthcare failed and focus turned towards economic plans for tax cuts and spending.

The pair opened with gap-higher on Monday and subsequent rally is pressuring targets at 1.0872 / 79 (08 Dec spike high / 200SMA).

Strong bullish momentum is likely to drive the price higher, as the pair closed for the fourth straight week in strong bullish mode, amid dollar-negative sentiments and growing hopes that far-right anti-EU candidate will be defeated in French presidential elections.

Price action may show hesitation at 200SMA barrier, as near-term studies are strongly overbought, however, dip-buying strategy remains favored.

Session low at 1.0821, reinforced by broken weekly Kijun-sen, is required to contain dips to keep today's gap intact.

Sustained break above 200SMA would unlock psychological 1.1000 barrier and 1.1067 (weekly cloud base) in extension.

Conversely, loss of 1.0820/00 zone would risk deeper pullback and expose next pivots at 1.0759 (Friday's low) and 1.0736 (daily Tenkan-sen).

Res: 1.0879, 1.0931, 1.0950, 1.1000
Sup: 1.0837, 1.0821, 1.0800, 1.0759

Asia stock indices are looking a little shaky today as the fallout from Friday's healthcare debacle in the U.S. reverberates across the region.

In all honesty, it could have been worse after President Trump threw in the towel on health care reform and decided to move on. Perhaps the legacy of the nature of Mr.Trump's win last year is coming back to haunt him. Having upstaged the establishment choices and crashed the party, he did not ever have the chance to build a meaningful power base of alliances across the Houses of Congress, despite both of them also swinging to Republican majorities.

That said he might have played a sublime blinder against the aforementioned parts of his very fractured party. By effectively sending them all to the naughty corners for not being able to share the toys, and moving on to tax reform instead of health, he is effectively putting the onus on the Senate and House of Representatives to get their act together. In pushing forward to the next items on his agenda, he is effectively saying it all won't fail because of me and nor will I be blamed. Perversely, therefore, he may actually find Congress much more cooperative going forward.

This realisation may be why the fallout has not continued with as much impetus in Asia today as it did Friday. Stocks are lower following on, and bond yields have dropped. The U.S. Dollar gapped lower on the open this morning and has stayed heavy against the G.10's and regionals, but has yet to make another serious leg lower in the short term. Asia stocks have been negative but not much so. Nevertheless, most indices are trading towards the lower end of their recent ranges, and further losses could not be ruled out.

ASX

Last week's 7% drop in iron ore plus an impending interruption by a super cyclone added to the bearish tone following on from the U.S. on Friday.The ASX has closed mid-range in Sydney but with a definite heavy tone are recovering some initial losses.

A well-defined top in the 5820 area has been tested a number of times. Most likely we will need to see new highs in the United States and a recovery in resource prices to give it new legs above for now.

Support is at 5665, a triple bottom on the daily chart, with the 100-day moving average behind this at 5620.

Japan 225

Life is looking a bit worse for the Nikkei from a technical perspective. Anchored near its daily lows, it is in danger of having a daily close below its 100-day moving average (dma) at 18980. This would be a bearish signal and could preface a test of supports at 18800 and 18662. A close below there could signal a move to 18218.

Up above initial resistance is at Thursday's high and the 55-dma at 19257. A break here could mean a move back towards the 19720 area. This is now a massive topping formation and will be a formidable level to break.

The Nikkei's fate probably relies on the USD/JPY finding some friends and arresting its sell-off. A stronger Yen weighs heavily on Japan's very export driven corporate sector.

Hong Kong

Closing towards the lower end of an admittedly very tight recent range near 24320.

Resistance is at 24470 and then the recent high at 24686.

Support is at the 24225 area with a daily close below opening up a technical move to the ascending support line at 23850.

China A50

The China A50 composite index looks solidly rangebound. Today's better than expected Chinese Industrial Profits number gave mainland traders something to cheer above and offset the disapointments of Friday in the U.S.

The China A50 has resistance at the 10508 area where it has failed three times recently. A close above opens 10648 and then 10697, the December high.

Key support sits at the 100-dma at 10251 which is also a series of daily lows. Below here the next support level is 10178.

Summary

The USD aside, the fallout in Asia of Friday's legislative failure has been modest although some indices are nibbling at their supports. The news may not have been as bad as first thought at a closer look, with President Trump having cleverly put the onus on the Republican Congress to get it's act together and support his legislative programme going forward. Further correction of a strong USD and eye-watering equity valuations cannot be ruled out, but in the bigger picture, President Trump may have lost a battle but could be on track to win the war.

Sunrise Market Commentary

• Rates: How strong is market's faith in reflation trade?
  Asian risk sentiment deteriorated after the initial tepid reaction to the Republican health care downfall. This failure could signal problems ahead for Trump's economic agenda and might falter markets' faith in the reflation trade. That could underpin US Treasuries. In yield terms, the US 10-yr yield could be up for a test of 2.3% support this week.
• Currencies: Dollar correction continues after failed Trumpcare vote
  The dollar is fighting an uphill battle in Asia this morning after Friday's failure of the Republicans to repeal Obamacare in a House vote. USD/JPY dropped below support. EUR/USD is challenging the important 1.0829/74 resistance. The day-to-day momentum is clearly dollar negative. However, we expect any further gains of EUR/USD to be modest and gradual

The Sunrise Headlines

• US stock markets closed mixed and didn't suffer a late setback as the vote on a new Republican health care bill was pulled just before the close. Overnight, Asian stock markets lose up to 0.5% as risk aversion takes the upper hand.
• House Republicans stumbled in their first major attempt to reshape the US government under President Trump, as their long-promised health-care bill failed despite days of personal lobbying by the president and Speaker Paul Ryan.
• With the corpse of Republican's failed efforts to pass healthcare legislation still warm, President Trump says he is already preparing to move on to the next item on his policy to-do list: tax reform.
• German Chancellor Merkel's CDU scored a clear victory in the small state of Saarland, dashing hopes among her contenders that the election would signal a change of political sentiment ahead of a national vote in September.
• China will substantially cut the number of sectors closed to foreign investment, PBOC governor Zhou Xiochuan said. He added though that as his country opens wider, "we want China to get fair treatment overseas".
• A joint committee of ministers from OPEC and non-OPEC oil producers has agreed to review whether a global pact to limit supplies should be extended by six months. Brent crude hovers just above the psychological $50/barrel mark.
• Today's eco calendar is thin with German Ifo business sentiment and EMU M3 money supply data. ECB Praet and Fed Evans are scheduled to speak. The US Treasury starts its refinancing operation with a $26B 2-yr Note auction

Currencies: Dollar Correction Continues After Failed Trumpcare Vote

USD selling persists after failed Trumpcare vote

On Friday, trading in major USD cross rates remained in wait-and-see modus, ahead of the vote on the US healthcare bill. EUR/USD gained slightly ground on strong EMU PMI's. The House not voting on the bill to replace Obamacare initially had only a modest impact. Markets apparently concluded/hoped that tax reform would become a priority for the Trump administration. EUR/USD finished the session at 1.0798 (from 1.0783). USD/JPY even closed the session off the intraday lows at 111.34 (from110.94).

Overnight, Asian markets don't share the relative resilience of the US markets late on Friday evening. US Treasury yields and the dollar are declining. Regional equities ex Japan trade with modest losses. The weaker dollar is a mixed factor for regional equities. USD/JPY is taking the lead in the USD decline. The pair trades currently in the 110.30 area. So, the 111.60/39 range bottom is really broken. The loss of the dollar against the euro is more moderate. The pair trades in the 1.0845 area.

Today, the market calendar is light, but German IFO business sentiment is worth mentioning. The market expects a stabilization of the headline composite index at 111.1. Following Friday's stronger than expected PMI, we put the risks on the upside of consensus. If correct, it would bring the index to the tops registered in 2007 and 2010. We will also scrutinize quotes from ECB's Peter Praet, whether he will push back on rising market expectations that the stronger eco data might accelerate the exit policy.

In a day-to-day perspective, a good Ifo confidence might a be slightly euro supportive (as was the case for the PMI's on Friday). However, the focus will be on the political impact of the failure to replace Obamacare. The dollar will probably stay under pressure in early Europe as investors adapt positions further after the failed Trumpcare vote. US equity futures also show substantial losses, indicating a further correction on the reflation trade. Will this correction accelerate in the US? The daily momentum on US equities and on the dollar is clearly negative, but maybe the correction shouldn't go that far. US bond yields are nearing important support levels that probably won't give away that easily. At the same time, the Trump administration might step up its efforts to cling a victory on other key policy topics like taxes. So, the USD momentum is negative and we don't row against the tide at this stage. However, we don't expect an aggressive USD sell-off.

From a technical point of view, the picture of USD/JPY is worrisome as it clearly dropped below the 111.60/36 support. Next support is coming in at 108.84 (50% retracement of the MT up-move). EUR/USD jumped above the 1.0829 level (2017 top) with the next key reference coming in at 1.0874. A break beyond this level would deteriorate the MT picture for the dollar. Chances on a break of this level are growing. However, we don't expect a real protracted rally of the euro and the dollar already at this stage. The absolute interest rate differential between the US and Germany/European makes EUR/USD long costly. At the same time, we also don't see the euro as the perfect safe haven yet.

EUR/USD: topside test of 1.0829/74 resistance after failed 'Trumpcare' vote

EUR/GBP

Sterling rebound to slow?

On Friday, dovish comments from BoE's Vlieghe caused some profit taking on the recent sterling rally. Admittedly most of the correction occurred in (thin) Asian trading. Cable settled in a tight range close to, mostly slightly below the 1.25 barrier. The rebound of EUR/GBP continued during the morning session due to broader euro gains after the strong EMU PMI's. EUR/GBP returned to mid-0.86 area and closed the session at 0.8657 (from 0.8612).

Overnight, EUR/GBP opened stronger in Europe, as a cautious risk sentiment and a broader bid for EUR/USD supported the pair. However, for now there are no follow-through gains. There are no important eco data in the UK today. So, sterling will probably be driven by global factors (risk-off). Markets will also look forward to the next steps in the Brexit-procedure. Two weeks ago, sterling found a better bid after the early March decline. Some time ago, EUR/GBP cleared 0.8592 resistance, improving the MT technical picture. However, a (substantially) higher than expected UK inflation probably put a decent floor for sterling short-term. We changed our short-term bias on EUR/GBP from positive to neutral. Some further consolidation in the 0.85/0.88 area might be on the cards. Longer term, Brexitcomplications remain a potential negative for sterling, but this issue isn't in the spotlights right now. We are not convinced that the BoE will raise rates anytime soon, even not after this months' higher inflation data

EUR/GBP: sterling rebound to show tentative signs of slowing?

Download entire Sunrise Market Commentary

Aussie is currently making a sharp decline from around the 0.7749 level, where a possible top for wave C) of E may have been found. This sharp decline is a confirmation that the previous five wave rise within wave C) is completed and that a minimum three wave reversal may now be in the cards. At the moment we see price sharply declining into wave 3, that may extend its weakness towards the 0.7539 region.

AUDUSD, 4H

U.S. equities suffered their worst weekly performance since the U.S. election back in November. The S&P 500 declined 1.44% while the Dow Jones industrial average lost 318 points and the heavy tech Nasdaq index fell 1.22%.

The fall in equities was largely attributed to failure of Trump's first test when his own party leaders pulled legislation to replace Obamacare. The lesson learned last week is that a Congress controlled by the Republicans doesn't necessarily mean the President will be able to pass laws or his negotiation may work in business deals. Unfortunately for him, it seems politics is going to be a different type of game that requires a different form of art.

Although investors didn't like the news, markets quickly managed to recover most of their losses on Friday after Trump signaled they would move on to the next phase of cutting taxes - the key contributor to the market's rally.

I believe that few knew replacing the health care would be this complicated, and it's becoming more apparent that tax reforms and fiscal stimulus won't be any easier especially that many Republicans don't support massive deficits. Given that investors have been pricing in the expected changes in fiscal policies for almost five months, I find it somehow difficult to keep buying into this market based only on promises.

Investors might begin reassessing their positions and for those who were completely ignoring market valuations it's time to reconsider looking at some important metrics. Most valuation metrics are indicating overstretched prices, whether it is P/E, Price/Book, Free cash flow yield, cyclically adjusted P/E, and the list goes on. However, in a momentum trade, driven by very optimistic expectations very few care about current valuations. But if you believe that Trump's honeymoon is over and last week's experience is just a guide on what to expect next, I believe markets will sell off sharply, probably up to 10% correction.

The VIX index sent its first warning signal on Friday, jumping above 14 for the first time in 2017. Meanwhile, the fall in U.S. Treasury yields are also indicating that many investors wanted to be in a safe place. I'll be mostly worried on the financial sector, which is likely to take the biggest hit in case of a market correction. So be prepared for a bumpy road ahead, and make sure you fasten your seatbelts.

Gold rises as investors question reflation Trump trade after healthcare reform bill failed

Asia Mid-Session Market Update: Stocks and Dollar fall, Gold rises as investors question reflation Trump trade after healthcare reform bill failed

Friday US markets on close: Dow -0.3%, S&P500 -0.1%, Nasdaq +0.2%

Best Sector in S&P500: Utilities

Worst Sector in S&P500: Materials

Biggest gainers: FTR +7.7%; MU +7.4%; CNC +5.2%

Biggest losers: MLM -2.9%; FLR -2.5%; NUE -2.5%

At the close: VIX 12.9 (-0.2pts); Treasuries: 2-yr 1.24% (-4bps), 10-yr 2.40% (-2bps), 30-yr 3.00% (-3bps)

Politics

(US) On Saturday, President Trump tweeted to "Watch @JudgeJeanine on @FoxNews tonight", whose opening segment called for House Speaker Ryan to step down because of failed healthcare bill vote

(US) Rep Ted Poe (R-TX) resigns from House Freedom Caucus because of its opposition to healthcare legislation - CNN

(HK) Hong Kong electoral committee picked pro-China candidate Carrie Lam over John Tsang to be the next leader - financial press

(DE) Chancellor Merkel's CDU party was victorious in Saarland state regional election with 41% of the vote vs 29.5% for SPD; Far-right AfD party received 6% - press

Weekend US/EU Corporate Headlines

MGI: Enters into confidentiality agreement with Euronet Worldwide to further consider Euronet's unsolicited proposal

Key economic data:

(CN) CHINA JAN-FEB INDUSTRIAL PROFITS Y/Y: 31.5% V 2.3% PRIOR

(JP) JAPAN FEB PPI SERVICES Y/Y: 0.8% V 0.5%E (2-year high)

Asia Session Notable Observations, Speakers and Press

Risk-off sentiment is heating up as S&P500 emini futures fell nearly 20 handles, USD/JPY came in by over 100 pips, and Gold rallied over $15 from Friday close. Political risk is the primary culprit as investors worry that GOP failure to get the healthcare bill across the finish line will dampen other pro-business reform agenda items for the Trump White House, namely tax reform and fiscal spending measures. Pundits suggest that the rift between POTUS and GOP congressional leadership may still widen, considering that Trump promised to lower individual middle class taxes and has remained ambivalent on border adjustment tax, while House Speaker Ryan and Ways and Means chair Brady view tax reform as a catalyst for growth and could prioritize tax cuts for the top 1% as well as considering border adjustment as essential.

Nikkei225 is the worst peforming index, dragged down by stronger JPY weighing on exports. Dollar decline against EUR is also noteworthy, with single currency hitting a 3-month high, helped by constructive result for the European Union in German regional elections. Chancellor Merkel's CDU party took 41% of the vote in Saarland, up from 35% in 2012 elections and above 29.5% for SPD and 6% for euro-skeptic AfD.

BOJ Summary of Opinion from the most recent meeting underscored entrenched policy stance for the central bank. Despite progress on growth and inflation, BOJ said there is still a long way to go to achieve the price stability target of 2%. Separately, PM Abe also remarked that it was too early to consider monetary stimulus exit strategy.

In notable economic data, China Jan-Feb industrial profits rose a healthy 31.% v just 2.3% in Dec. Stats Bureau said the growth in profits was mostly due to faster growth in prices of coal, steel, and crude oil, though the overall trend is still one of recovery in the industry. Among top corporates, China's property developer Vanke posted strong profit and sales growth, but also noted some housing price cooling due to govt curbs.

China

(CN) China State Information Center research fellow Fan Jianping: Chinese govt must target badly run financial institutions, or will only make things go from bad to worse

(CN) PBoC Gov Zhou: monetary policy may have reached an end to the quantitative easing path - Boao Forum panel discussion

(CN) China may start carbon trading in July - Chinese press

(CN) China approved 10 IPOs on Friday worth CNY6.1B - Chinese press

Japan

(JP) Japan PM Abe: Too early to consider monetary stimulus exit strategy

Australia

(AU) According to Australia Bureau of Stats, underemployment in 15-24 year old range is at 31.5%, highest in 40 years - Australian press

(NZ) New Zealand PM English: Signed agreement on the Belt and Road Initiative with China; FTA to start in April

Korea

(KR) Bank of Korea (BOK) Q4 regional survey shows South Korean manufacturers are expected to spend more on capital investment this year than they did last year, although those expenditures will be conservative and mostly geared towards maintaining facilities than expansion

Asian Equity Indices/Futures (00:00ET)

Nikkei -1.3%, Hang Seng -0.3%, Shanghai Composite +0.1%, ASX200 -0.2%, Kospi -0.5%

Equity Futures: S&P500 -0.7%; Nasdaq -0.7%, Dax -0.5%, FTSE100 -0.6%

FX ranges/Commodities/Fixed Income (00:00ET)

EUR 1.0825-1.0850 (3-month high); JPY 110.25 (4-month low) -111.05; AUD 0.7615-0.7635; NZD 0.7025-0.7050; GBP 1.2490-1.2530

Apr Gold +0.6% at 1,256/oz; May Crude Oil -0.3% at $47.85/brl; May Copper -1.6% at $2.60/lb

OPEC and non-OPEC producers agree to review whether oil output cuts should be extended by 6 months - press

SPDR Gold Trust ETF daily holdings fall 1.8 tonnes to 832.6 tonnes

(CN) PBoC skips open market operations for 2nd straight session; Bank liquidity is high

(CN) PBOC SETS YUAN MID POINT AT 6.8701 V 6.8845 PRIOR; strongest Yuan setting since Feb 24th

(AU) Ausatralia MoF sells A$500M in 3.0% 2047 bonds; bid-to-cover 2.65x

(KR) South Korea sells KRW0.84T v KRW0.84T offered in 20-yr govt bonds; avg yield 2.3% v 2.215% prior

Asia equities / Notables / movers

Australia

FXJ.AU Fairfax Media +2.5%; TPG Capital could make a bid for Fairfax Media's Domain business as early as this week - AFR

SGP.AU Stockland Corp +1.9; Affirms FY17 FFO +6-7% y/y

BHP.au -2.8%, RIO.au -2.0%, FMG.AU -2.6%; Iron ore falls over 4%

Japan

6502.JP Toshiba -3.5%; Largest creditors are torn over its future strategy as pressure builds for a swift Chapter 11 bankruptcy protection filing by Westinghouse - FT

9602.JP Toho Gas -1.1%; May report FY net profit ¥50B, +23% y/y (prior guidance ¥47B) - Nikkei

1801.JP Taisei +1.0%; Expected to report FY16/17 net profit of ¥100B, +30% y/y and above ¥76B prior forecast; May boost dividend or share buyback program - Nikkei

Hong Kong

1638.HK Kaisa Group Holdings; +62.8%; Resumes trading; Reports FY16 net loss CNY1.29B v profit CNY2.17B y/y; Rev CNY19.6B v CNY19.5B y/y

0842.HK Leoch International Technology +7.0%; Reports FY16 Net CNY232M v CNY106M y/y; Rev CNY6.26B v CNY4.33B y/y

0551.HK Yue Yuen Industrial +5.6%; Reports FY16 Net $534.6M v $390.2M y/y, Rev $8.48B v $8.43B y/y

1114.HK Brilliance China Automotive Holding +4.9%; Reports FY16 Net CNY3.39B v CNY3.28B y/y, Rev CNY5.13B v CNY4.86B y/y

3866.HK Bank of Qingdao Co Ltd +2.5%; Reports FY16 Net CNY2.09B v CNY1.81B y/y; Rev CNY6.0B v CNY5.0B y/y

2202.HK China Vanke -3.3%; Reports FY16 Net CNY21.0B v CNY18.1B y/y, Rev CNY228.9B v CNY184.3B y/y

1072.HK Dongfang Electric Corp -2.4%; Reports FY16 net loss CNY1.8B v profit CNY439M y/y; Rev CNY33.3B v CNY36.0B y/y

0816.HK Huadian Fuxin Energy Corp -4.8%; Reports FY16 Net CNY2.0B v CNY1.9B y/y, Rev CNY15.9B v CNY15.4B y/y

819.HK Tianneng Power International Limited -9.0%; Reports FY16 Net CNY905.5M v CNY627.8M y/y; Rev CNY21.5B v CNY17.8B y/y

951.HK Chaowei Power Holdings Limited -9.1%; Reports FY16 Net CNY619M v CNY488M y/y; Rev CNY21.5B v CNY18.9B y/y

3900.HK Greentown China Holdings -9.9%; Reports FY16 Net CNY1.92B v CNY0.81B y/y; Rev CNY28.9B v CNY26.0B y/y