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Daily Pivots: (S1) 1.0716; (P) 1.0747 (R1) 1.0769; More.....

Intraday bias in EUR/USD remains on the upside as rise from 1.0494 continues. Break of 1.0828 will target 100% projection of 1.0339 to 1.0828 from 1.0494 at 1.0983. However, as rise from 1.0339 is seen as a corrective move. We'd expect upside to be limited by 1.0983 to complete the correction. On the downside, break of 1.0718 minor support will turn bias to the downside for 1.0494 support first.

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to resume later. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115.

Daily Pivots: (S1) 0.9905; (P) 0.9953; (R1) 0.9985; More.....

USD/CHF's fall from 1.0169 is still in progress and intraday bias remains on the downside. The pair should now target 0.9860 support next. Whole decline from 1.0342 is likely resuming and break of 0.9860 will target 100% projection of 1.0342 to 0.9860 from 1.0169 at 0.9687. Nonetheless, on the upside, break of 1.0002 minor resistance will turn bias back to the upside for 1.0169 resistance instead.

In the bigger picture, USD/CHF is staying in medium term sideway pattern between 0.9443/1.0342. In any case, decisive break of 1.0342 resistance is needed to confirm underlying strength. Otherwise, we'll stay neutral in the pair first. In case of another fall, we'd expect strong support from 0.9443/9548 support zone.

Daily Pivots: (S1) 1.2381; (P) 1.2437; (R1) 1.2535; More...

Intraday bias in GBP/USD remains on the upside as rise from 1.2108 continues. Their pair would target 1.2569 resistance first and break will target 1.2705/74 resistance zone. But still, price actions from 1.1946 are seen as a consolidation pattern. Hence, we'd expect strong resistance from 1.2705/2774 to limit upside and bring down trend resumption. On the downside, break of 1.2340 support will turn bias back to the downside for 1.2108 support. Though, sustained break of 1.2774 will extend the rise towards 1.3444 key resistance level.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There is no sign of medium term bottoming yet. Sustained trading below 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 will target 100% projection at 0.9532. Overall, break of 1.3444 resistance is needed to confirm medium term bottoming. Otherwise, outlook will remain bearish.

Daily Pivots: (S1) 0.7666; (P) 0.7707; (R1) 0.7733; More...

AUD/USD's sharp decline and break of 0.7662 minor support argues that rebound from 0.7490 might be completed. Intraday bias is back to the downside for retesting 0.7490 support first. Break will confirm completion of whole rise from 0.7158. Above 0.7748 will resume such rally. But at this point, we'd expect upside to be limited by 0.7849/50 cluster resistance to limit upside and bring reversal. That level represents 61.8% projection of 0.7158 to 0.7740 from 0.7490 at 0.7850 and key long term retracement level at 0.7849.

In the bigger picture, we're still treating price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seek to 55 month EMA (now at 0.8169) and above.

Key Points:

• ABC wave could spell near-term losses and medium-term gains for the pair.
• The long-term trend line should see the EURGBP back at 0.8879.
• Brexit negotiations will play a key role in the pair's future.

In light of the escalating political tension between the EU and the UK, it may be worth taking a look at the EURGBP's technical forecast in order to get a better feel of what could be next for the pair. Furthermore, we may need to take a look at what is due out on the economic data front in order to avoid being caught out by any rouge releases.

First and foremost, the medium-term outlook for the EURGBP looks to be moderately bullish, even if we are expecting some additional near-term downsides. Specifically, it currently looks as though we are mid-way through a corrective ABC pattern in the wake of the rather torrid downtrend which started late last year. As a result, we should see losses extend to the 0.8585 mark over the coming sessions before buying pressure returns to push the pair up to the 0.8879 level.

The argument for a near-term slip is supported by a number of technical instruments including, but not limited to, the Parabolic SAR and the MACD oscillator. More precisely, the Parabolic SAR retains its bearish bias whilst the recent signal line crossover on the MACD oscillator is suggestive of further downside risk. Moreover, it is expected that the turning point around the 0.8585 level eventuates as this coincides with the 100 day moving average which should provide dynamic support. Although, depending on fundamentals, the pair could test the long-term ascending trend line before reversing.

Once we have seen the EURGBP end its decline, the ensuing rally could lead to some sizable gains for the recently embattled pair. Such a rally is forecasted not only as a result of the ABC wave but also due to the EMA bias and the long-term ascending trend line, shown above. However, as is also made clear in the above chart, the uptrend will run into trouble around the 0.8879 mark. Largely, we expect to see resistance hold here due to the presence of the 61.8% Fibonacci level and some rather robust historical resistance.

From a fundamental perspective, the main risk events for the EURGBP in the week ahead will come from the UK data. Notably, the bevy of retail sales figures due out could spark some solid buying and selling pressure which could either help or hinder the technical forecast. However, on the less tangible or measurable news front, anything to do with Brexit is also likely to be weighing on one or both sides of this pair. Furthermore, the seemingly escalating tension between the EU and the UK, specifically regarding the tug of war over London's financial industry, could impact the EURGBP substantially so keep an eye out for any developments in the saga.

Ultimately, the bias remains near-term bearish and medium-term bullish for this pair regardless of fundamental interference. Notably, the combination of a number of technical readings and the influence of the long-term trend line seem to be in agreement with this assessment. As a result, expect to see the bears run low on momentum as they approach the terminus of the B leg and keep an eye out for the eventual return of the bulls currently in the wings

Key Points:

• U.K. consumer price index exceeds forecasts and rises to 2.3% y/y.
• Economists are predicting a 3.0% y/y gain in inflation in near term.
• Bank of England may act to raise rates during their MPC meeting in May.

The latest round of U.K. CPI figures have proved a surprise to the market as rising food and energy prices have pushed the key inflation metric to 2.3% y/y. The result far exceeds the expected 2.1% gain and now places the metric well above the 2.00% range desired by the Bank of England (BoE). The result is the strongest seen in many years and now places increasing the pressure on the BoE to act on interest rates in the medium term.

The immediate response from the release of the inflation data was a sharp rise in the value of the Pound against most of the cross pairs. The Cable rose to a high of 1.2475, breaking through the 100EMA, which suggests that we could see prices creeping back above the key 1.25 handle in the near term. Much of the bullish activity is due to rising speculation that the Bank of England is going to have to raise rates to fight of the growing inflationary pressures in the short run.

However, the one metric that is still lagging behind is wage growth as the latest figures show stagnation in this regard. In fact, despite unemployment falling to its lowest levels in over 30 years, wage gains have slowed and real pay rates have started to slip. Subsequently, inflationary pressures and the requisite cycle of interest rate rises are likely to be unwelcome news to the vast majority of Britons.

Regardless, the reality is that the central bank will view the latest CPI result as a stark warning of the building inflationary pressures within the economy. Although the historically low Pound has certainly had an impact on import prices and purchasing parity it has largely been the global rise in crude oil prices that has led to the recent rises in both food and the CPI. Subsequently, many professional economists are now forecasting inflation to rise to 3% within the U.K. over the coming months. This is something that will be relatively unpalatable to the central bank and could spur action sooner, rather than later.

Ultimately, given the historically low official bank rate, the BoE was always going to have to act to counteract inflation eventually. Unfortunately, the decisive moment has arrived and the central bank is likely taking notice of the rising pressures. The monetary policy committee is not due to meet again until the middle of May but the meeting is set to be a ‘live’ event and there is a very real risk of a 25bps hike to rates, especially if the CPI figures keep rising in the near term.

Daily Pivots: (S1) 1.3289; (P) 1.3327; (R1) 1.3390; More....

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. The second leg is likely still in progress and could target 61.8% retracement of 1.4689 to 1.2460 at 1.3838. We'd look for reversal signal there to start the third leg. Break of 1.2968 wold at least bring at retest of 1.2460 low. However, sustained trading above 1.3838 would pave the way to retest 1.4689 high.

US equities suffered the steepest decline for the year overnight. Doubts over US president Donald Trump's ability to push through his policies are seen as the major factor driving stocks down. In particular, some economists pointed out that there is simply not enough money in the government to allow for a tax cut, nor the fiscal stimulus programs. DJIA dropped -237.85 pts, or -1.14% to close at 20668.01. S&P 500 lost -29.45 pts or -1.25% to close at 2344.02. Financials led the way, dropping more than -2.5%. Treasury yield also suffered with 10 year yield extending the near term fall from 2.615 to close at 2.436, down -0.037. Dollar index broke 100 handle to as low as 99.66. In the currency market, risk aversion boosted Yen to be the strongest major currency for the week. Commodity currencies are the weakest with Aussie leading the way down. Sterling and Euro are relatively resilient.

DJIA: Correction from 21169.11 medium term to extend

The sharp selloff in DJIA suggests that 21169.11 is a medium term top. This is supported by bearish divergence condition in daily MACD. The correction from there would now likely extend to 55 day EMA (now at 20393.33) and below. At this point, we'd expect support from 38.2% retracement from 17883.56 to 21169.11 at 19914.03 to contain downside and bring rebound. Based on current outlook, there is little chance for up trend resumption in near term. And correction/consolidation from 21169.11 should extend for a while.

AUD/JPY: heading to 83.73 support

AUD/JPY is now trading as the biggest mover for the week. The break of 85.84 support confirms resumption of the fall from 88.21. Considering bearish divergence condition in daily MACD, 88.21 is seen as a medium term top. AUD/JPY show now head lower to 83.73 support, or possibly to medium term channel (now at 83.09). From a medium term point of view, we'd expect strong support from 38.2% retracement of 72.39 to 88.21 at 82.16 to contain downside.

BoJ members rejected lifting bond yield targets

The minutes of BoJ January 30/31 showed that "a few members" believed that CPI "would not reach around 2 percent during the projection period". And, "many members" believed "there was still a long way to go" to achieve that target. Some members acknowledged market speculations that BoJ would raise target level of long term interest rate in response to US rate hikes. But they rejected that and emphasized "monetary policy decisions should be made solely based on the viewpoint of aiming to achieve the 2 percent price stability target." After that meeting, BoJ lifted GDP forecast for 2017 fiscal year from 1.3% to 1.5%. Inflation forecast for the same period was kept unchanged at 1.5%.

Released from Japan today, trade surplus widened to JPY 0.68T in February, above expectation of 0.55T. Exports jumped 11.3% yoy, fastest since January 2015. Exports to China jumped 28.2% yoy, accelerated from 3.1% yoy in the prior month. Some analysts noted that even stripping out the Lunar New Year effects, exports still picked up as a trend.

Elsewhere...

Australia Westpac leading index dropped -0.1% mom in February. Eurozone will release current account in European session. US will release house price index and existing home sales.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3289; (P) 1.3327; (R1) 1.3390; More....

USD/CAD dipped to 1.3263 but quickly recovered. The breach of 1.3377 minor resistance argues that the corrective fall from 1.3534 has completed already. Intraday bias is turned back to the upside for retesting 1.3534 high. Break there will target 1.3598 high. On the downside, in case of another fall, we'd expect strong support from 1.3211 cluster level (61.8% retracement of 1.3008 to 1.3534 at 1.3209) to contain downside and bring rebound. Overall, we're still expecting the medium term rise from 1.2460 to resume later.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. The second leg is likely still in progress and could target 61.8% retracement of 1.4689 to 1.2460 at 1.3838. We'd look for reversal signal there to start the third leg. Break of 1.2968 wold at least bring at retest of 1.2460 low. However, sustained trading above 1.3838 would pave the way to retest 1.4689 high.

Economic Indicators Update

Short term Elliott Wave view in USDJPY suggests that rally to 115.48 on 3/10 ended Intermediate wave (X). Decline from there is unfolding as a zigzag Elliott wave structure in which the first leg Minor wave A is subdivided in 5 impulsive waves. Down from 3/10 high, Minute wave ((i)) ended at 114.46, Minute wave ((ii)) ended at 115.195, Minute wave ((iii)) ended at 112.88 and Minute wave ((iv)) ended at 113.56. Cycle from 3/10 high is mature and Minor wave A has enough extension to be called complete, but more downside towards 110.088 – 111.12 area can’t be ruled out to complete Minor wave A. Afterwards, pair should bounce in Minor wave B in 3, 7, or 11 swing to correct cycle from 3/10 high before the decline resumes. We do not like buying the proposed bounce in Minor wave B and expect sellers to appear when Minor wave B bounce is done in 3, 7, or 11 swing later for another extension lower.

USDJPY 1 Hour Chart

EUR/USD

Dollar's bearish run extended to fresh 1-month lows against its European rivals, which rallied on positive news coming from the region. The common currency got a boost from the outcome of the first French presidential debate, as Emmanuel Macron was the most convincing. Still Marine Le Pen leads vote intention polls, with 28%, followed by Macron, who gained some points and now has 24%. The far-left right losing the Dutch election, and now suffering a modest defeat in France brought some relief to EUR's bulls, who rushed to push the pair higher in a weakening-dollar environment. Despite the American currency remained under pressure during Wall Street's trading hours, with stocks plunging and Treasuries soaring, the EUR/USD pair was unable to advance beyond 1.0820, a major Fibonacci resistance, paring gains at 1.0818 and settling for the day not far below this last.

The macroeconomic calendar remained scarce, situation that will repeat this Wednesday, being the most remarkable release US existing home sales. In the meantime, and from a technical point of view, the EUR/USD pair maintains the bullish stance hovering a few pips below the 50% retracement of the post-US election decline at the mentioned 1.0820 level. In the 4 hours chart, the 20 SMA heads sharply higher below the current level, currently at 1.0765, whilst technical indicators have lost their bullish strength and turned flat near overbought readings, but far from indicating an upcoming downward move. A break above 1.0828, February high, could see the pair extending up to December monthly high, en route to 1.0930, the 61.8% retracement of the mentioned slide.

Support levels: 1.0765 1.0730 1.0700

Resistance levels: 1.0830 1.0870 1.0910

USD/JPY

The USD/JPY pair fell below the 112.00 level for the first time since early February, trading as low as 111.68 before bouncing some 20 pips. The pair has spent most of the first half of the day consolidating within its Monday's range, but broke south after Wall Street's opening, as stocks plunged to fresh 4-week lows, whilst Treasury yields followed suit. US government bonds surged as the dollar came under pressure, leading to a sharp retracement in yields. The 10-year note yield sunk to 2.42% from previous 2.47%, while the 30-year benchmark is down to 3.04% from 3.09% previously. Japan will release its February trade balance figures and the Minutes of the latest BOJ's meeting during the upcoming Asian session, which may lead to further gains in the yen. From a technical point of view, the bearish potential remains strong, albeit the pair has a major support around 111.65, from where it bounced several times during the past two months. Nevertheless, and in the 4 hours chart, the price is well below its 100 and 200 SMAs that anyway remain flat, while technical indicators remain within negative territory, with the RSI now consolidating around 28, somehow reflecting easing selling interest. At the same time, the pair is unable to recover above 112.00, the 38.2% retracement of late 2016 rally, now the immediate resistance.

Support levels: 111.65 111.20 110.70

Resistance levels: 112.00 112.50 112.90

GBP/USD

The GBP/USD pair trades at its highest since late February, having extended its intraday advance up to 1.2493 and ending the day some 10 pips below this last. The Pound soared after the release of UK inflation data, as consumer prices rose far beyond expected. Yearly CPI hit 2.3% in February from 1.8% in January, while monthly basis, inflation surged by 0.7& from a previous decline of 0.5%. Core yearly inflation jumped to 2.3%. Producer prices rose less than expected, but remained high in the same month, while the Retail Price Index jumped to 3.2% YoY. The readings came less than a week after the BOE shifted to a hawkish stance, with Christine Forbes voting for a rate hike and with the rest of the MPC not far below her, ending up fueling speculation that the BOE will have to raise rates rather sooner than later. The 4 hours chart shows that technical indicators have lost upward momentum, turning flat in overbought territory, although given that the price holds near its daily high, chances of a downward corrective move are limited. In the same chart, the 20 SMA heads sharply higher some 100 pips below the current level, reflecting the strength of the intraday advance. The pair has settled above 1.2425 the 38.2% retracement of the January rally and the critical support, as the bullish stance will likely persists as long as the price remains above it.

Support levels: 1.2345 1.2300 1.2260

Resistance levels: 1.2425 1.2470 1.2510

GOLD

Spot gold jumped to a fresh 3-week high of $1,247.54 a troy ounce, to settle at 1,244.60 by the end of the US session, as the dollar index plunged to its 99.42, its lowest since February 2nd, while the American currency weakened against most of its major counterparts. Further fueling the advance during US trading hours was Wall Street's slump, with the DJIA down over 200 points. Gold's daily chart presents a bullish stance, as the price held above its 20 SMA on an early slide, while technical indicators maintain upward slopes within positive territory, and particularly the RSI indicator anticipates some further gains, heading north around 63. Still the rallied stalled right below a bearish 200 DMA, currently the immediate resistance at 1,249.25. Above it, the bright metal has scope to retest February high of 1,263.79. Technical readings in the 4 hours chart support an upward continuation as the 20 SMA has extended its advance above the 100 and 200 SMAs, whilst technical indicators continue heading north, easing partially after reaching overbought readings.

Support levels: 1,236.80 1,230.10 1,223.15

Resistance levels: 1,249.25 1,255.60 1,263.80

WTI CRUDE

Crude oil prices resumed their declines after a failed attempt to regain the 50.00 threshold, with West Texas Intermediate futures settling at $48.29 a barrel. The commodity has been undermined by oversupply concerns for over two weeks already, whilst this latest decline can be attributed to diminishing hopes that the OPEC will extend its output cut, as half-way into it is proving useless. Ahead of the release of US stockpiles data, the daily chart for the black gold shows that selling interest once again contained the advance around the 200 DMA, while technical indicators have resumed their declines within bearish territory, maintaining the risk towards the downside. In the 4 hours chart, the 20 SMA gains bearish momentum above the current level, whilst technical indicators have decelerated their bearish strength within negative territory, but support further declines anyway, as the RSI indicator heads south around 36.

Support levels: 48.00 47.30 46.65

Resistance levels: 49.20 49.75 50.50

DJIA

Wall Street had its worst day since last October, with the Dow Jones Industrial Average plummeting 237 points or 1.14%, to end the day at 20,668.01, its lowest in a month. The Nasdaq Composite set an all-time high after the opening, but closed the day 107 points lower at 1.2%, while the S&P shed 29 points to 2,344.02. The decline was led financial and industrial equities, disappointed by absence of news on Trump's promised policies. The decline was exacerbated by Fed's Kashkari comments, who suggested that the Central Bank could rise rates just by 0.75% more to reach its comfort neutral level. Within the Dow, only Coca Cola that added 0.76% and Chevron, up 0.35% closed in the green. Goldman Sachs led decliners, shedding 3.77% and followed by Caterpillar that closed 3.11% lower. From a technical point of view, the daily chart presents a strong bearish stance now, with the benchmark settling near its daily low, and breaking well below its 20 DMA, whilst technical indicators have entered bearish territory with sharp downward slopes. In the 4 hours chart the benchmark settled below its 200 SMA the immediate resistance at 20,686, while technical indicators turned flat within oversold levels, reflecting the sudden decrease in volume after the close rather than suggesting the index won't fall further.

Support levels: 20,654 20,610 20,574

Resistance levels: 20,686 20,732 20,783

FTSE 100

The FTSE 100 closed the day at 7,378.34, down 51 points or 0.69%, weighed by a strong Pound that soared after the release of UK inflation data which rose much more than expected. Mining related equities were the worst performers, although Fresnillo led gainers, up by 1.64%, followed by industrial BNZL that added 1.28%. Fresnillo advanced, despite Goldman Sachs reaffirmed its sell rating on the company, underpinned by gold's rally. Glencore was the worst performer, down 4.24%, followed by Rio Tinto that shed 4.12% and BHP Billiton that closed down 3.97%. The benchmark fell further in after-hours trading, tracking Wall Street's decline, heading into Asian opening at 7,348, is lowest for the week. Technically, the daily chart shows that the index is pressuring its 20 DMA, while technical indicators have turned sharply lower with the Momentum crossing its mid-line and the RSI indicator currently at 52. In the 4 hours chart, technical indicators head sharply lower, now approaching oversold readings, whilst the benchmark broke below a now flat 20 SMA. The immediate support comes at 7,331, past week low, with a break below it opening doors for a steeper slide towards 7,262, March 9th daily low.

Support levels: 7,331 7,294 6,262

Resistance levels: 7,367 7,400 7,439

DAX

The German DAX fell 90 points or 0.75%, to end the day at 11,962.13. European equities fell after a solid start to the day triggered by the French presidential debate, weighed by the negative tone of their American counterparts. Within the DAX, only 3 components closed higher, with Deutsche Bank up 3.45%, Commerzbank adding 0.35% and Bayerische Motoren Werke gaining 0.30%. The decline was led by Fresenius Medical Care which lost 3.51%, followed by Deutsche Lufthansa that shed 3.38%. The decline continued after the London's close, with the DAX now trading some 50 points below its close, and poised to extend its slide, given that in the daily chart, the benchmark broke below its 20 DMA for the first time since early February, whilst technical indicators head sharply lower, having entered negative territory. In the shorter term, and according to the 4 hours chart, the benchmark slide extended below the 20 and 100 SMAs, whilst technical indicators pared their decline near oversold territory, but continue favoring a downward extension.

Support levels: 11,895 11,857 11,811

Resistance levels: 11,947 11,987 12,039