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Daily Pivots: (S1) 1.2272; (P) 1.2324; (R1) 1.2408; More...

Intraday bias in GBP/USD remains on the upside as rebound from 1.2108 continues. Whole consolidation pattern from 1.1946 is still in progress. Stronger rise could be seen to 1.2705/2774 resistance zone next. On the downside, below 1.2240 minor support will turn bias back to the downside for 1.2108 instead.

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) 1.0722; (P) 1.0746 (R1) 1.0787; More.....

EUR/USD dips notably after hitting 1.0781. But intraday bias stays on the upside for the moment first. Further rally is in favor to 1.0828 resistance and above. Overall, rise from 1.0339 is seen as a corrective move. Hence, we'd upside to be limited by 100% projection of 1.0339 to 1.0828 from 1.0494 at 1.0983 to bring larger down trend resumption. On the downside, break of 1.0599 will turn bias back to the downside for 1.0494 support.

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. 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.

The forex markets are relatively quiet today as the week is heading to a close. There have been talks about Euro strength around. While the common currency did jump against Dollar, it's indeed the second weakest major currency for the week. There are speculations that ECB could lift interest rate before ending the quantitative easing program. There are also talks that results of the Dutch elections showed a defeat for populism and anti-Euro sentiments. However, the lifts from those factors to Euro were rather brief. Cross price actions could be a factor as the currency markets are always a tug war of relative strengthens. But in such situations, we'll always look at EUR/CHF for more guidance on the performance of Euro.

EUR/CHF suggests underlying weakness in Euro

The strong rebound in EUR/CHF last week triggered our bullish view that the medium trend in the cross is reversing. However, the sharp decline since hitting 1.0823 earlier this week is quickly dampening this view. In particular, the rebound from 1.0689 support looks rather short lived. The pair is heading back to this near term support level as and could have a break on it before weekly close. From another angle, EUR/CHF breached 55 week EMA (now at 1.0809) for just a very brief period of time. The rejection from this falling EMA indicates that underlying bearishness is persisting. We'll pay close attention to the overall developments in related Euro pairs. But for now, it's getting likely that EUR/CHF will revisit 1.0620 key support level again next week. And that could be accompanied by weakness in EUR/GBP and EUR/AUD.

FTSE 100 to extend record run

The strength in Sterling would have been seen as a surprise before BoE announcement. But policymaker Kristin Forbes' vote rate hike now suggests that there is realistic, even still remote, chance of a hike around early 2018. The announcement was also well received by other investors. FTSE 100 closed at record high yesterday and is pushing for another one today. It's still very earlier to talk about a reversal in the pound's trend. But the developments suggest that things are not as bad as it seem in UK in spite of Brexit and the talks about another Scottish referendum.

G20 meeting watched over the weekend

G20 meeting in Baden-Baden, Germany will be a focus for the weekend. German Finance Minister Wolfgang Schaeuble said the group is yet to have consensus of global trade and open markets. He said that "I don't know the exact wording but nobody has raised the issue of protectionism yet and I don't believe that we have to deal with this a lot." And, "it's about finding the right wording, it's about how we phrase the openness of the world trade system in the final communique."

On the data front...

US industrial production rose 0.0% in February. Capacity utilization dropped to 75.4%. Canada manufacturing shipments rose 0.6% mom in January. Eurozone trade surplus narrowed to EUR 15.7b in January. New Zealand business NZ manufacturing index rose to 55.2 in February.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0722; (P) 1.0746 (R1) 1.0787; More.....

EUR/USD dips notably after hitting 1.0781. But intraday bias stays on the upside for the moment first. Further rally is in favor to 1.0828 resistance and above. Overall, rise from 1.0339 is seen as a corrective move. Hence, we'd upside to be limited by 100% projection of 1.0339 to 1.0828 from 1.0494 at 1.0983 to bring larger down trend resumption. On the downside, break of 1.0599 will turn bias back to the downside for 1.0494 support.

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. 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.

Economic Indicators Update

The DAX Index has edged higher in the Friday session. Currently, the DAX is at 12,091.00. On the release front, it's a quiet end to the week. Eurozone Trade Balance slipped to EUR 15.7 billion, well short of the estimate of EUR 22.3 billion.

As widely expected, the Federal Reserve raised rates by a quarter-point on Wednesday. The rate hike, the second in just three months, raised the benchmark lending rate to a 0.75%-1% range. The dollar reacted negatively, declining broadly against its major rivals, including the euro. This was largely due to disappointment with the Fed, which sent a more dovish message than the markets wanted to hear. Leading up the rate announcement, there had been speculation that a red-hot US economy would propel the Fed to accelerate its pace of monetary tightening, with possibly four rate hikes this year. Instead, Fed Chair Janet Yellen reiterated that further rate hikes would be "gradual" and left its "dot plot" unchanged, with a projection for three rate hikes in 2017. As well, the US dollar may have lost ground due to traders and investors acting on "buy on rumor, sell on fact". This large-scale selling of US dollars after the Fed hike has sent the US dollar broadly lower, and gold has taken advantage with impressive gains of 2.5 percent since the Fed announcement.

European governments can breathe a sigh of relief following the results of the election in the Netherlands. The centre-right coalition of Prime Minister Mark Rutte won the most votes, handily defeating the anti-EU Freedom Party, headed by Geert Wilders. The election was closely watched across Europe, as it was viewed as a bellwether of populist sentiment on the continent. Leaders in France and Germany, who are also facing tight races due to rising anti-EU sentiment, are hopeful that they can copy Rutte's recipe for electoral success. The election results have helped push the euro to its highest level February 5.

USD/CAD is unchanged in the Friday session. In North American trade, the pair is trading slightly above the 1.33 line. On the release front, Canadian Manufacturing Sales gained 0.6% in January, marking a third straight gain. In the US, today's highlight is US Preliminary UoM Consumer Sentiment, which is expected to improve to 97.1 points.

As widely expected, the Federal Reserve raised rates by a quarter-point on Wednesday. The rate hike, the second in just three months, raised the benchmark lending rate to a 0.75%-1% range. The dollar reacted negatively, declining broadly against its major rivals. This was largely due to disappointment with the Fed, which sent a more dovish message than the markets wanted to hear. Leading up the rate announcement, there had been speculation that a red-hot US economy would propel the Fed to accelerate its pace of monetary tightening, with possibly four rate hikes this year. Instead, Fed Chair Janet Yellen reiterated that further rate hikes would be "gradual" and left its "dot plot" unchanged, with a projection for three rate hikes in 2017. As well, the US dollar may have lost ground due to traders and investors acting on "buy on rumor, sell on fact". This large-scale selling of US dollars after the Fed hike has sent the US dollar broadly lower, and the Canadian dollar has taken advantage, gaining 1.1 percent this week.

Oil remains under pressure, and weak crude prices could weigh on the Canadian dollar. West Texas crude plunged 8.7 percent last week and dipped below the $47 level this week. US Crude Oil Inventories finally reversed directions, posting a drawdown of 0.2 million barrels, compared to an estimate of 3.3 million. This decline comes after the indicator posted 11 surpluses in the past 12 weeks, reflective of increasing US shale production. OPEC cobbled together a deal to cut production which began on January 1, but the expected jump in oil prices has failed to materialize, as the increase in US production has more than offset the OPEC cutbacks.

The "dovish hike" powered stock market rally slightly cooled off during Friday's trading session with investors turning cautious ahead of the anticipated G20 meeting. Asian shares were mostly mixed as participants weighed on the prospects of fewer US interest rates increases this year. In Europe, the defensive trading mood slightly pressured equities and the bearish contagion could limit gains on Wall Street this evening. An explosively volatile trading week is slowly coming to an end with investors turning their attention towards the G20 finance meeting which could offer some insights on how world leaders feel about key topics such as protectionism and global growth. With some discussions of currencies also being a possibility, the Greenback could turn volatile if leaders start to discuss the impacts of its resurgence since Trump's presidential victory.

Gold elevated by Feds caution

Gold has staged a sharp rebound this week with prices springing above $1230 after the Federal Reserve signaled a more gradual pace of monetary tightening in 2017 then what markets anticipated. The "dovish hike" and caution displayed by the Fed simply disappointed many hawks consequently exposing the Dollar to downside shocks. Although bulls have exploited Dollar's weakness to elevate Gold, gains could be limited in the longer term if the Fed readopts an aggressive stance. With sentiment towards the U.S economy firmly bullish, the Greenback remains supported consequently capping gains on Gold in the medium to longer term. From a technical standpoint, although prices are turning bullish on the daily charts, the $1240 regions could act as a checkpoint for bears to attack prices lower.

Currency spotlight - Dollar

The Greenback was under intense selling pressure this week after the Federal Reserve's cautious attitude to future rate hikes left the hawks empty handed. Although the depreciation this week has sent the Dollar Index towards 100.20, prices may remain buoyed in the longer term amid the bullish sentiment towards the U.S economy. Much attention may be directed to how the Dollar Index reacts around the 100.00 psychological support which could be a real game changer for the bulls or bears.

Commodity spotlight - WTI

The rapidly diminishing optimism over the OPEC production cut deal has heavily dented buying sentiment towards Oil with the commodity struggling below $49.50 as of writing. Although U.S Crude stockpiles have eased from record levels last week, concerns still remain elevated over the high global inventories. With concerns lingering over the compliance of some OPEC and non-OPEC members to cutting production, the upside on oil seems limited. While some remain cautiously optimistic towards OPEC renewing their six-month supply cut to sustain the recovery in oil prices, the resurgence of U.S shale and lingering fears of members not following compliance could obstruct the extension. From a technical standpoint, WTI is heavily bearish on the daily charts. Bears remain in firm control below $50.

FTSE opened lower on Friday, pressured by fresh strength of pound, after BoE's policy voting on Thursday hinted possible earlier rate hike.

The index dipped to 7329 (near 61.8% of 7254/7444 09/16 Mar upleg) after posting fresh all-time high at 7444 on Thursday.

Near-term studies weakened on today's fall and see increased risk of deeper pullback, as pound continues to rally.

While today's gap remains unfilled, immediate risk is expected to stay shifted lower, with close below Fibo support at 7326, seen as another bearish signal.

Rising daily Kijun-sen marks next good support at 7306, loss of which would increase risk of return to 7254 (09 Mar correction low).

Conversely, filling today's gap would generate positive signal and keep near-term focus at the upside.

Res: 7368; 7389; 7424; 7444
Sup: 7329; 7306; 7298; 7254

There is a lot to absorb after this week's market sensitive events.

It's been a busy week on the central bank front. Aside from the Fed and the PBoC, many have stood pat (Norges, BoE, BoJ), but their tone and statements have changed a tad, which is supporting their own currencies.

The defeat in this week's Dutch elections of anti-immigration candidate Geert Wilders is being seen as a blow to populist political leaders, easing concerns ahead of next months French Presidential election – the French/Bund spread has narrowed to its lowest level in sometime.

On Wednesday, the Fed hiked as expected, but the dollar has taken a beating, and is poised for its first monthly loss in a month, as investors re-price three rate hikes for 2017, rather that last weeks four.

The ECB's Nowotny (Austria) has suggested that their strategy for tightening policy would be different from the Feds. The EUR (€1.0770) has seen a significant move higher, supported by the possibility that the ECB could start to raise rates before its QE program is complete.

Sterling (£1.2382) is consolidating its post-BoE Thursday spike as the decision mentioned 'price pressures.' This morning, the BoE's sole dissenter, Kristin Forbes, has clarified his surprise call for a hike, noting a change to growth and inflation data suggest that rates should rise. Futures indicate that the next rate move is higher not lower, and are pricing in a +50% probability of a +25 bps rate increase in 2018. Before yesterday's announcement, this figure stood at +30%.

The PBoC China's central bank also raised borrowing costs this week, while the BoJ left its monetary policy setting unchanged. The PBoC's +10bp increase in reverse repo and MLF (medium term lending facility) rates is part of policymakers deleveraging efforts in key sectors of the economy (steel, coal, non-ferrous metals, and real estate) and not a policy shift.

Global stocks are on course for the best week since January after the Fed hiked without accelerating their timetable for future hikes.

Commodities have found support from a weaker dollar. Yesterday, gold futures notched their biggest daily gain in 10-months, as dealers bet the Fed risks letting inflation perk up beyond its +2% desired target.

Crude oil has a record OPEC compliance cut and an IEA statement that H1 supplies would be depleted to support higher prices.

The U.S yield curve has flattened now that the U.S 10-year yield has plummeted to +2.53% away from the markets psychological 'bear bond market' swing point north of +2.60%.

On this Friday morning, despite market volatility retreating somewhat, investors are also weighing if the White House can make good on its fiscal stimulus plan of a new tax regime, business deregulation and infrastructure spending.

There is also the G20 Finance Minister meet in Germany today and tomorrow. Participants are expected to focus on avoiding protectionism and FX devaluations, is that possible? Could make for an interesting open to Australasian markets on Sunday.

After a strong drop below 1.3385 level caused by USD profit taking and Fed being less hawkish than expected, the USD/CAD is stabilizing in a range bound market condition where the price is trapped between 2 POC zones. POC for possible buying is 1.3265-85 (L4, historical buyers, ATR pivot) while sellers should appear at upper POC 1.3375-90 (Ema89,ATR top, H5, weekly L4). At this point the price is in no man's land but Friday profit taking should give boost to volatility and zones should be reached.

EUR/USD is unchanged in the Friday session, as the pair trades at 1.0770. On the release front, it’s a quiet end to the week. Eurozone Trade Balance slipped to EUR 15.7 billion, well short of the estimate of EUR 22.3 billion. In the US, today’s highlight is US Preliminary UoM Consumer Sentiment, which is expected to improve to 97.1 points.

There were no raised eyebrows when the Federal Reserve raised rates by a quarter-point on Wednesday, as the markets had priced a rate hike at over 90%. The rate hike, the second in just three months, raised the raised the benchmark lending rate to a 0.75%-1% range. What was not expected, however, was the sharp drop of the dollar against its major rivals. This was largely due to disappointment with the Fed, which sent a more dovish message than the markets wanted to hear. Leading up the rate announcement, there had been speculation that a red-hot US economy would propel the Fed to accelerate its pace of monetary tightening, with possibly four rate hikes this year. Instead, Fed Chair Janet Yellen reiterated that further rate hikes would be 'gradual' and left its 'dot plot' unchanged, with a projection for three rate hikes in 2017. As well, the US dollar may have lost ground due to traders and investors acting on 'buy on rumor, sell on fact'. This large-scale selling of US dollars after the Fed hike has sent the US dollar broadly lower, and gold has taken advantage with impressive gains of 2.5 percent since the Fed announcement.

European governments can breathe a sigh of relief following the results of the election in the Netherlands. The centre-right coalition of Prime Minister Mark Rutte won the most votes, handily defeating the anti-EU Freedom Party, headed by Geert Wilders. The election was closely watched across Europe, as it was viewed as a bellwether of populist sentiment on the continent. Leaders in France and Germany, who are also facing tight races due to rising anti-EU sentiment, are hopeful that they can copy Rutte’s recipe for electoral success. The election results have helped push the euro to its highest level February 5.