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The pair bounces from fresh three-week low at 112.25 posted yesterday, with daily close below 112.57 (Fibo 76.4% of 111.67/115.49 rally), generating bearish signal and exposing round-figure support at 112.00, ahead of key short-term support at 111.57/67 zone (07/28 Feb lows that formed higher base.

Current move higher could be seen as correction that should be ideally capped under 113.00 (top of hourly Ichimoku cloud).

Extended upticks are expected to stay under strong 113.50 resistance zone (daily cloud base/Kijun-sen / 20/30 SMA’s), before bears resume.

Only firm break here would sideline bears and signal stronger correction.

Res: 112.88, 113.00, 113.34, 113.50
Sup: 112.57, 112.25, 112.00, 111.67

Cable is attempting again into daily cloud, after cloud top (1.2435) capped Monday's action and subsequent dip resulted in daily close below the cloud. The pair came under pressure on announcement that UK will start formal divorce process with the EU on Mar 29, but dips were so far limited and contained by daily Kijun-sen at 1.2337. This keeps in play post-Fed bullish sentiment, seeing scope for renewed attempts through daily Ichimoku cloud (spanned between 1.2379 and 1.2435). Bullish setup of most of daily MA's and fresh momentum, keeps upside scenario favored, ahead of release of UK inflation data (due at 09:30 GMT, forecasted at 2.1% vs 1.8% previous month). Release above the forecast is expected to boost the pair for renewed attempt through 100SMA (1.2410) and attack at daily cloud top pivot (1.2435). Firm break above the cloud would accelerate towards 1.2459 (Fibo 76.4% of 1.2568/1.2107) and would expose psychological 1.2500 barrier. Conversely, repeated failure at daily cloud and repeated close below it, would generate negative signal. Daily Kijun-sen marks next downside trigger, loss of which would increase risk of reversal.

Res: 1.2410, 1.2435, 1.2459, 1.2476
Sup: 1.2379, 1.2337, 1.2309, 1.2271

'The euro rose, approaching a six-week high, as political concerns in the region were seen as easing after a poll showed anti-euro candidate Marine Le Pen losing ground in the French presidential debate.' – Chikako Mogi, Bloomberg

Pair's Outlook

On Tuesday morning the common European currency surged against the US Dollar and managed to break through the resistance put up by the monthly R1, which is located at the 1.0772 level. The currency pair has set its course to the next resistance level, where it is likely to stop or even change direction. Above the rate there is a resistance cluster consisting of two notable levels of significance, as the weekly R1 is located at 1.0814, and the 38.20% Fibonacci retracement level is at the 1.0826 level. Moreover, the Fibonacci retracement level is strengthened by the upper Bollinger band, which is located at 1.0827.

Traders' Sentiment

Traders remain bearish on the pair, as 60% of open positions are short, and 56% of trader set up orders are to sell the Euro.

'Despite the doom and gloom hanging over sterling, it has held up well this year – if so traders are to be surprised with some sort of plan or minor victory from the UK government, we could in fact see GBP trading higher in a relief rally.' – ThinkMarkets (based on Reuters)

Pair's Outlook

On Monday, the GBP/USD currency pair experienced a small bearish correction, after having surged for three consecutive days last week. The situation mostly remains unchanged, with the exception of the immediate resistance area now being slightly stronger, as the 55-day SMA is now bolstering the 100-day one. However, technical studies are now giving bearish signals in the daily timeframe, suggesting that Cable could struggle to appreciate again. Ultimately, the Pound is required to stabilise above the 1.24 level in order to reach the nine-month down-trend. In case bears take over the market, the 1.23 mark is expected to hold, as it is reinforced by the weekly PP and the 20-day SMA.

Traders' Sentiment

Today 67% of traders holding long positions (previously 68%), whereas pending orders are still equally divided between buy and sell ones.

'Among safe haven currencies, investors extended their JPY short exposure by about 30% before the BOJ policy meeting.' – Deutsche Bank (based on FXStreet)

Pair's Outlook

Even though the USD/JPY pair remained relatively unchanged yesterday, a small bearish development was still sufficient for the exchange rate to stabilise below the ascending channel's support line. Nevertheless, the Buck still has the opportunity to recover and, thus, preserve the pattern. However, a rally beyond 113.00 is unlikely to occur, as a tough resistance cluster is located beyond that area. Since technical studies are unable to confirm the possibility of the positive outcome, we should not rule out the risk of a seventh consecutive decline taking place, with the nearest area to limit the losses located only around 111.80.

Traders' Sentiment

There are 68% of traders being long the Greenback today (previously 56%), while the share of buy orders surged from 47 to 59%.

'There is no other way than looking bullish at gold for the moment. There are extended positions in dollar. We are going to see this dollar correction running for a while, which will support gold.' – Jaffrey Halley, OANDA (based on Reuters)

Pair's Outlook

During the early hours of Tuesday's trading session the yellow metal's price declined and fell below the 1,230 mark. This seems to be a consolidation of positions in the aftermath of a steady surge of more than three percent since the start of last Tuesday's trading session. It is most likely that the bullion will soon make an attempt of breaking the monthly PP, which is located at the 1,236.39 level. However, it is also possible that the commodity price will first retreat down to the 20-day SMA, which was located at 1,222.94 on Tuesday morning.

Traders' Sentiment

SWFX traders are neutral on the metal, as 50% of open positions are long. However, 65% of trader set up orders are to buy the bullion.

The Euro is in fresh acceleration higher and posts new, marginally higher highs after two-day consolidation was contained above 1.0700 handle.

The single currency received strong support from news of French presidential candidate Macron is leading the election race after winning French TV presidential debate on Monday that eased fears about potential France exit from the EU.

Friday's long red candle and Monday's Doji with long upper shadow, did little as bearish signals to intensify downside pressure, as strong post-FED bullish sentiment remains firmly in play.

The pair is eyeing psychological 1.0800 barrier and key resistance at 1.0827 (02 Feb peak, also near 50% retracement of larger 1.1298/1.0339 descend) in extension.

Sustained break here would signal bullish continuation of broader recovery rally from 1.0339 (2017 low).

Overbought slow stochastic on daily chart suggests that the pair may show hesitation ahead of 1.0827 pivot, but no firmer bearish signal seen so far.

Hourly Ichimoku cloud (spanned between 1.0743/50) marks initial support, guarding Monday's low at 1.0719 and 1.0700 handle.

Rising 10SMA continues (currently at 1.0680) to underpin and should contain extended downticks.

Res: 1.0800, 1.0827, 1.0872, 1.0931
Sup: 1.0758, 1.0743, 1.0719, 1.0700

Daily Pivots: (S1) 0.8664; (P) 0.8685; (R1) 0.8712; More...

Consolidation from 0.8786 is still in progress and intraday bias stays neutral in EUR/GBP further. In case of another fall, we'd expect support from 38.2% retracement of 0.8402 to 0.8786 at 0.8639 to contain downside. Break of 0.8786 will target 0.8851 resistance and above. Price actions from 0.8303 are seen as the second leg of the corrective pattern from 0.9304. Hence, we'd expect strong resistance from 100% projection of 0.8303 to 0.8851 from 0.8402 at 0.8950 to limit upside. On the downside, sustained trading below 0.8693 will bring deeper fall to 61.8% retracement 0.8549 and below.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. Deeper fall cannot be ruled out yet. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside. Overall, the corrective pattern would take some time to complete before long term up trend resumes at a later stage. Break of 0.9304 will pave the way to 0.9799 (2008 high).

Daily Pivots: (S1) 1.3857; (P) 1.3909; (R1) 1.3946; More...

EUR/AUD is still holding on to 1.3874 minor support for the moment and intraday bias stays neutral first. We'd slightly favoring the case of trend reversal after defending key support level at 1.3671, on bullish convergence condition in daily MACD. On the upside, above 1.4183 will turn bias to the upside for 1.4289 resistance next. Break will affirm our view and target next key resistance level at 1.4721. However, break of 1.3874 minor support will invalidate our view and turn bias back to the downside for retesting 1.3624 low.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. We'd expect strong support from 1.3671 key level to contain downside and bring rebound. Up trend from 1.1602 should not be finished and will resume later. Break of 1.4721 resistance will indicate completion of such correction and turn outlook bullish for retesting 1.6587 high. However, sustained break of 1.3671 will invalidate our bullish view and would turn focus back to 1.1602 long term bottom.

Sunrise Market Commentary

• Rates: More consolidation ahead?
  In a data-poor session, US Treasuries rallied, confirmed recent positive sentiment. We suspect that technicals are at play since the FOMC cleared the way with a rate hike. Today, the calendar is nearly empty. So, we expect more consolidation of core bonds. Macron's good performance in the election debate may result in an outperformance French bonds.
• Currencies: Dollar still looking for a solid bottom
  Yesterday, the post-Fed decline of the dollar slowed, but there was sustained rebound yet. This morning, the picture of the dollar remains mixed as the euro rebounds on a good performance of Macron in the French election debate. More USD consolidation might be on the cards. Sterling traders will keep an eye on the UK price data

The Sunrise Headlines

• US equities ended yesterday's listless session narrowly mixed. The NASDAQ tried to break all-time highs but this attempt failed. Asian equities trade constructive.
• RBA, Australia's central bank, is becoming more concerned with the state of the national property market, amid a leap in investment borrowing and strong price growth in the nation's most populous cities (Minutes). Aussie dollar lost marginal ground.
• Greek bailout talks made progress in Brussels. Discussion will continue to resolve outstanding issues, Mr. Dijsselbloem said. Greece's FM Tsakalotos said negotiators will stay in Belgium for a few days to try and wrap up an agreement
• Emmanuel Macron fared best in the five-way French presidential debate, according to an early poll. The 39-year-old attacked anti-euro, anti-immigration candidate Marine Le Pen for her lack of ethics and lifelong presence in politics. The euro trades a bit stronger overnight.
• FBI Director Comey dealt Trump a stinging rebuke before the House Committee. He confirmed that Russia's interference in the presidential election is being investigated and said there is no evidence to back the president's charge his predecessor had wiretapped him. Markets shrugged off these comments.
• Metals led declines in commodities, with copper falling for a second day and gold retreating from a two-week high, amid 'dollar strength'.
• Today, the eco calendar only contains UK data: CPI, PPI, public finance figures and CBI orders. Fed governors Dudley, Mester and George speak. The Ecofin will meet in Brussels.

Currencies: Dollar Still Looking For A Solid Bottom

USD still looking for a solid bottom

On Monday, in technical trading deprived of any important news, the post-Fed decline of US yields continued. Interest rate differentials between the dollar and the euro narrowed further. However, these moves had only a limited impact on USD trading. The setback of the dollar petered out. EUR/USD closed the session at 1.0739 hardly changed from Friday. USD/JPY finished day at 112.55 (from 112.70). .

Overnight, Asian equities (ex Japan) are trading constructively. The moderate global reaction to last week's Fed decision (including a soft dollar) is supporting regional markets (ex Japan). The dollar continues to trade mixed. Comments from Fed members didn't change investor perception that the Fed normalisation will be gradual. USD/JPY reversed an early session dip, trading in the 112.80 area. The pattern of EUR/USD is slightly different. The euro regained ground as Macron solidified his lead over Le Pen after a first French election debate. The Minutes of the RBA warns on the rise of house prices in some regions and on rising household debt. At the same time, the RBA still sees spare capacity in the economy. AUD/USD is drifting lower to the 0.77 area.

Today, eco calendar in EMU and the US are empty, but several Fed members are scheduled to speak (NY Fed Dudley, Cleveland Fed Mester and Kansas city Fed George). However, we expect them to defend their 'usual positions' (cf. FI part of this report) and don't expect them to change the picture for USD trading. Last week, USD yields and the dollar drifted south even as the Fed raised rates. At the same time, the euro was well bid as markets pondered the chances of an early change in the ECB policy after hawkish comments from ECB's Nowotny. In a longer term perspective, policy divergence between the Fed and the ECB will probably remain big enough to support further USD gains. Yellen suggested that, considering the eco developments, the Fed policy might follow closely to the 'dotpath' (still 2 rate hikes in 2017). In a day-to-day perspective, the dollar shows no clear trend. The USD/JPY decline looks slowing down. At the same time, EUR/USD is holding near the recent top, partially on relative euro strength. We want more convincing signs that the USD has found a bottom before adding USD long exposure.

Global context. EUR/USD 1.0874 resistance remains the line in the sand with intermediate resistance at 1.0829. We maintain the view that a sustained break of EUR/USD above this area will be difficult. The US/German (EMU) interest rate differential remains at an absolute high level. Especially at the short end of the curve, the differential might even re-widen. The fundamentals/ interest rate differentials are also supportive for USD/JPY, but of late the momentum/technical picture is not really convincing. We maintain the working hypothesis that the 111.60 range bottom should hold.

EUR/USD holding near ST top on dollar softness and euro rebound

EUR/GBP

EUR/GBP to resume rebound?

On Monday, sterling trading was driven by technical considerations. Early in European dealings, sterling gained a few ticks but trading was confined to tight ranges. Around noon, a spokesman of PM May announced that the UK will trigger article 50 of the Lisbon treaty on March 29. The move was no surprise, but sterling reversed the intraday gains against the euro and the dollar as investors realize that a period of heightened political uncertainty is on the horizon. EUR/GBP closed the session at 0.8690 (from 0.8662). Cable finished the session at 1.2358 (from 1.2396).

This morning, cable gains a few ticks, but so does EUR/GBP on a broad-based bid in the euro (Macron). Today, the UK price data (CPI &PPI), the monthly public finance data and the CBI trends orders will be published. Last week, the BoE sounded a bit more attentive to a potential overshoot of inflation. Kristin Forbes voted for a rate hike and some other members are inclined to do so if growth and inflation were to surprise on the upside. We are not convinced that the majority of the BoE is already close to a rate hike. Sterling might get some support from higher rate hike expectations in case of an upward surprise of the inflation data. However, this might be counterbalanced by investor caution on sterling going into the start of the Brexit procedure. We assume that a big deviation from consensus is needed to unlock clear directional move of sterling.

Last week, the sterling decline took a breather. Some time ago, EUR/GBP cleared the 0.8592 resistance, improving the MT technical EUR/GBP picture. We don't expect a sustained EUR/USD rebound, but a combination of temporary euro consolidation and ongoing sterling softness as the Brexit negotiations are nearing, might trigger some more ST EUR/GBP gains. The 0.8854 correction top is the next key resistance. The nervous swings over the previous days suggest that a clear break beyond 0.8854 will be difficult without important (UK negative) news.

EUR/GBP: post-BoE sterling rebound to slow as political uncertainty grows? Euro is also better bid

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