Daily Pivots: (S1) 1.0633; (P) 1.0648; (R1) 1.0656; More...

Intraday bias in EUR/CHF remains neutral as range trading continues. With 1.0706 resistance intact, outlook stays mildly bearish. Break of 1.0620 key support level will extend the larger decline from 1.1198 to 1.0485 fibonacci level. However, considering bullish convergence condition in 4 hour MACD, break of 1.0706 minor resistance will raise the chance of medium term reversal. In that case, focus will be turned back to 1.0749 and then 1.0897 key resistance.

In the bigger picture, the decline from 1.1198 is seen as a corrective move. Such correction is still in progress. Sustained trading below 38.2% retracement of 0.9771 to 1.1198 at 1.0653 will target 50% retracement at 1.0485. On the upside, break of 1.0897 resistance is needed to confirm completion of such fall. Otherwise, outlook will stay bearish.

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Currency pair EUR/USD

The EUR/USD broke above the multiple key resistance levels (dotted lines) of the bearish trend channel. Price seems to have completed a bearish wave 1 (purple) and is now retracing back for a wave 2 (purple). The Fibonacci levels of wave 2 (purple) could therefore act as resistance. A break above the 100% level of wave 2 vs 1 invalidates the wave 1-2 (purple).

The EUR/USD could continue with its bullish momentum this morning towards the Fibonacci targets of wave C vs A. In that case a bullish 5 wave could be part of a larger bullish ABC zigzag. A bearish bounce at this spot could see price test and potentially bounce at the Fibonacci levels of wave X vs W (blue).

Currency pair GBP/USD

The GBP/USD is testing the resistance trend line (red) and a bullish breakout could see price test higher resistance (red/brown). A break below the support (blue) invalidates the wave 1-2 (orange)

The GBP/USD could build a bearish ABC zigzag (grey) towards the Fibonacci levels of wave 2 (purple) if price bounces at resistance. A break below the 100% Fib level of wave 2 vs 1 (purple) invalidates the wave structure. A bullish breakout could see price move towards the Fibonacci targets of wave 3 vs 1 (orange).

Currency pair USD/JPY

The USD/JPY broke the support trend line (dotted green) which makes it more likely that a bullish 5 wave (brown) pattern has been completed for a wave 1 (blue). Price could now be retracing back to the Fibonacci levels of wave 2 vs 1.A break below the 100% level invalidates this wave structure.

The USD/JPY is probably building a deep bearish zigzag correction within wave 2 (blue). Price could bounce at the Fibonacci levels of wave B vs A (brown), especially if the resistance trend line (red) breaks with a 3 wave ABC pattern. A bearish bounce could see price move lower within wave 2 (blue). A break above the 100% level of wave B vs A invalidates it.

Reflation rally pauses as safe haven flows recover

US Session Highlights

(US) JAN HOUSING STARTS: 1.25M V 1.23ME; BUILDING PERMITS: 1.29M V 1.23ME

(US) FEB PHILADELPHIA FED BUSINESS OUTLOOK: 43.3 V 18.0E (highest since Jan 1984); New Orders: +38.0 (highest since Feb 2000) v +26.0 prior (44% of firms reported increases, 6% reported decreases)

(US) Fed's Lockhart (moderate, non-voter): we are moving towards the Fed's inflation target sooner than thought - press interview

(US) Atlanta Fed raises Q1 GDP forecast to 2.4% from 2.2% on 2/15

US markets on close: Dow flat, S&P500 -0.1%, Nasdaq -0.1%

Best Sector in S&P500: Utilities

Worst Sector in S&P500: Energy

Biggest gainers: SRCL +7.7%, NTAP +4.2%, IFF +4.1%, ETR +2.8%, DUK +2.8%

Biggest losers: TRIP -11.0%, COTY -5.5%, RRC -5.3%, MDLZ -4.8%, SWN -4.7%

At the close: VIX 11.8 (-0.2pts); Treasuries: 2-yr 1.22% (-3bps), 10-yr 2.45% (-5bps), 30-yr 3.05% (-4bps)

US movers afterhours

TRUE: Reports Q4 -$0.01 v -$0.05e, R$74.1M v $71.1Me; +14.0% afterhours

COHU: Reports Q4 $0.24 v $0.09e, R$70.7M v $65.1Me; +9.6% afterhours

ANET: Reports Q4 $1.04 v $0.82e, R$328.0M v $316Me; +8.8% afterhours

TMST: Reports Q4 -$1.52 v -$0.46e, R$215M v $213Me; +8.6% afterhours

CYTK: Reports Q4 $0.18 v -$0.27e, R$33.1M v $14.1Me; +7.1% afterhours

CGNX: Reports Q4 $0.43 v $0.30e, R$129.3M v $115Me; +5.7% afterhours

TTD: Reports Q4 $0.33 v $0.21e, R$72.4M v $62.2Me; +3.4% afterhours

BKD: Blackstone interest in Brookdale said to be fading; Reportedly Ventas now in talks to buy all or part of Brookdale - press; -3.2% afterhours

FLS: Reports Q4 $0.72 v $0.65e, R$1.07B v $1.07Be; -4.2% afterhours

PI: Reports Q4 $0.11 v $0.09e, R$33.7M v $33.0Me; SVP sales to leave; -6.0% afterhours

NUS: Reports Q4 $0.69 v $0.80e, R$531M v $552Me; Announces CFO transition, raises dividend 1.4% to $0.36/shr (implied yield 2.6%); -7.5% afterhours

Politics

(US) President Trump's choice as replacement for National Security Adviser, Robert Harward, has turned down the offer - FT

(US) President Trump nominates Alexander Acosta as Labor Secretary - press

Asia Key economic data:

(NZ) NEW ZEALAND Q4 RETAIL SALES (EX-INFLATION): 0.8% v 1.0%E (6-quarter low)

(NZ) NEW ZEALAND JAN BUSINESS MANUFACTURING PMI: 51.6 V 54.2 PRIOR (2-year low)

Asia Session Notable Observations, Speakers and Press

Asian equity markets have retreated modestly going into the weekend after solid gains for much of the week, tracking less upbeat sentiment on Wall St. US stocks paused after the biggest weekly rally in 3 years, as Treasuries rose for the first time in 6 days, safehaven Utilities were favored, and high-beta energy names came in. With US earnings season dwindling and Fed chair Yellen effectively signalling March meeting being live for a rate hike, investors are looking for more concrete fiscal policy action from the ambitious White House agenda, even as the President remains on the defensive about his ties to Russia and cabinet appointments.

FX majors were in narrow ranges in the absence of meaningful data; NZD was somewhat more volatile early after a miss in Q4 retail sales and a 2-year low in PMI, though analysts still see the pair driven by fundamentals of the US given RBNZ's entrenched "very neutral" policy stance. NZ PM English also held talks with his Australian counterpart, discussing possibility of a regional free trade agreement.

Corporate news front was somewhat more active. Australia earnings season saw a positive update from ANZ posting high-single-digit gains in profit and revenue, while expectations for bad debts were more positive. Santos also beat on earnings, though gains are contained by the headwinds in the energy sector. South Korea's Samsung Electronics traded lower after news of arrest of its vice chairman in a bribery case. Japan's Toshiba also remains under heavy pressure, falling another 10% to 1-year lows below ¥200 as management works to rein in costs with freeze on wage hikes, bonuses, overtime, and travel expenses.

China:

(CN) China regulators said to consider tightening measures targeting IPO fraud - Chinese press

(CN) China interbank liquidity said to remain in a tight balance amid keeping monetary policy on a 'neutral and prudent' course - Chinese press

Japan:

(JP) Japan Fin Min Aso: hasn't decided on specific contents of US-Japan economic talks

Australia/New Zealand:

(AU) Fitch: Australia property market to rise 3-5% in 2017

(AU) Australia PM Turnbull: Agreee with NZ PM English to seek TPP trade agreement without US participation - press

Asian Equity Indices/Futures (00:00ET)

Nikkei -0.5%, Hang Seng -0.4%, Shanghai Composite -0.5%, ASX200 -0.2%, Kospi -0.1%

Equity Futures: S&P500 flat; Nasdaq flat; Dax -0.1%; FTSE100 -0.1%

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

EUR 1.0660-1.0675; JPY 113.15-113.50; AUD 0.7685-0.7710; NZD 0.7200-0.7220

Apr Gold -0.2% at $1,239/oz; Mar Crude Oil +0.1% at $53.43/brl; Mar Copper +0.3% at $2.73/lb

(CN) PBOC SETS YUAN MID POINT AT 6.8456 V 6.8629 PRIOR; Strongest Yuan setting since Jan 24th; 4th consecutive firmer setting

(CN) PBOC to inject combined CNY150B v CNY250B prior in 7-day, 14-day and 28-day reverse repos

(CN) China MOF sells 30-yr bond, avg yield 3.77%; sells 91-day bonds, avg yield 2.555%

(AU) Australia MoF (AOFM) sells A$600M in 1.75% 2020 Bonds; avg yield: 2.116%; bid-to-cover: 5.86x

Asia equities / Notables / movers by sector

Consumer discretionary: 2282.HKMGM China -3.4% (H1 result); MTR.AU Mantra Group -5.6% (H1 result); 6808.HK Sun Art Retail Group +6.6% (Alibaba and Tecent show interest); SEK.AU Seek +6.1% (in talks to buy Zhaopin)

Financials: 6837.HK Haitong Securities +1.2%, 6030.HK Citic Securities +2.1% (China to ease curbs on stock index futures trading); LNK.AU Link Administration +6.0% (H1 result); MPL.AU Medibank -3.7% (guidance);23.HK Bank of East Asia -1.7% (FY16 result); ANZ.AU ANZ Bank +1.7% (Q1 result); ASX.AU Australian Stock Exchange -0.7% (H1 result)

Industrial: STE.SG Singapore Technologies Eng +4.7% (Q4 result); 1044.HK Hengan International +4.6% (Morgan Stanley raises rating)

Technology: 005930.KR Samsung Electronics -1.5% (vice Chairman under arrest); 6753.JP Sharp Corp +2.8% (adjusts guidance); 4704.JP Trend Micro Inc +12.2% (FY16 result); RHP.AU Rhipe Limited -16.7% (H1 result); 992.HK Lenovo -2.7% (Bank of China cuts rating)

Materials: RSG.AU Resolute Mining +4.6%, EVN.AU Evolution Mining +2.8%; SAR.AU Saracen Mineral +1.6% (gold bulls); WHC.AU Whitehaven Coal -2.0% (H1 result); 028260.KRSamsung C&T Corp +2.8%

Energy: 1898.HK China Coal Energy -2.8% (Jan result); STO.AU Santos +0.3% (FY16 result); SEA.AU Sundance Energy Australia -2.1% (no further steps to raise funds)

Healthcare: SIP.AU Sigma Pharmaceuticals -4.0% (guidance)

Daily Pivots: (S1) 1.3026; (P) 1.3052; (R1) 1.3097; More...

Intraday bias in USD/CAD remains neutral as it's still bounded in range of 1.2968/3211. Near term outlook remains rather mixed. But, on the upside, break of 1.3211 resistance will argue that fall from 1.3598 has completed at 1.2968. And more importantly, rise from 1.2460 is still in progress. In that case, intraday bias will be turned back to the upside for 1.3598 and above. On the downside, below 1.2968 will revive the case that rise from 1.2460 is completed and turn outlook bearish for this low. Overall, choppy rise from 1.2460 is still seen as a corrective move.

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 could be completed at 1.3598 and fall from there is tentatively seen as the third leg. Break of 1.2460 will target 50% retracement of 0.9460 to 1.4689 at 1.2075 before completing the correction. In case of another rise, we'd look for reversal signal above 61.8% retracement of 1.4689 to 1.2460 at 1.3838.

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Market movers today

Today, we have a relatively light data calendar.

In the UK, retail sales data for January are due to be released.

In Sweden, inflation data is due out, but a variety of factors make the January print notoriously difficult to predict, see next page.

Selected market news

Asian shares paused their rally this morning after a mixed session on Wall Street, as investors took profit due to lingering concerns that protectionist threats under Trump could reverse the recovery, despite upbeat global data on Thursday. Weekly jobless claims in the US remained low and pointed to a continuing strong labour market and the US Philly Fed Index showed manufacturing activity in the Mid-Atlantic region surging to a 33-year high. Oil prices were supported by optimism over reports that OPEC may consider extending its oil supply reduction deal with non-members.

The ECB minutes from the meeting in mid-January showed that the ECB acknowledged that on the capital key purchases distribution, ‘limited and temporary deviations were possible and inevitable'. The immediate market reaction was tighter French and Italian spreads versus Germany, reflecting speculation that the ECB would follow an outstanding debt key distribution, which would benefit France and Italy strongly but result in fewer purchases of German bonds. We think it is highly unlikely that the ECB would follow an outstanding debt key distribution, as it would thereby support countries that do not have sound fiscal policies and the ECB still communicates that significant weight was placed on limiting deviations from the capital key (see Flash Comment: ECB is not about to introduce new QE buying distribution, 16 February).

News that the probe into the fake work scandal surrounding conservative French presidential candidate Francois Fillon will not be dropped by prosecutors weighed further on investors' minds, as concern about Marine Le Pen winning the French presidential election and a possible ‘Frexit' is growing. As we pointed out in Research France: France at the crossroads after presidential elections, 4 January 2017, the political hurdles for holding a referendum on an EU/euro exit would be quite high for Le Pen, even if she is able to secure the presidency, as it would require strong parliamentary backing. Since the corruption scandal broke out, opinion polls have consistently shown the run-off in May taking place between Emmanuel Macron and Le Pen, with the former winning the second round with 62.5% of the votes. A run-off against Macron would weaken Le Pen's chances, as centrist Macron appeals more to voters both on the political right and left than Fillon with his hard-line liberal reform programme. Although Fillon remains determined to continue his election campaign, internal discussion within the Republican Party is growing on whether he should step down.

As expected, the annual speech of Norges Bank governor Øystein Olsen did not contain any signals on monetary policy. However, the Norwegian government announced yesterday that the fiscal policy rule for the use of oil money will be lowered from 4% to 3% and the portfolio of the oil fund changed to holding 70% shares (up from 60%). This could potentially also pave the way for a change in the inflation target from 2.5% to 2.0% later in the spring.

Daily Pivots: (S1) 0.7675; (P) 0.7703; (R1) 0.7723; More...

Intraday bias in AUD/USD remains mildly on the upside for the moment. Bearish divergence condition remains in 4 hour MACD. Thus, we'd expect strong resistance from 0.7777/7833 resistance zone to limit upside and bring near term reversal. On the downside, break of 0.7605 support will indicate that rise from 0.7158 has completed already and turn bias back to the downside for 55 day EMA (now at 0.7530) first.

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 0.8205) and above.

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Daily Pivots: (S1) 1.0616; (P) 1.0647 (R1) 1.0706; More.....

Intraday bias in EUR/USD remains neutral for consolidation above 1.0520 temporary low. As long as 1.0713 minor resistance holds, deeper decline is still expected. We're holding on to the view that fall from 1.0828 is resuming the larger down trend. Below 1.0520 will target a test on 1.0339 low. Decisive break there will confirm our bearish view and target parity. However, above 1.0713 will dampen out view and turn focus back to 1.0828 instead.

In the bigger picture, whole down trend from 1.6039 (2008 high) is in progress. Such down trend is expected to extend to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

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GBP/USD Daily Outlook

Daily Pivots: (S1) 1.2453; (P) 1.2488; (R1) 1.2522; More...

Intraday bias in GBP/USD remains neutral as range trading continues. Price actions from 1.1946 are viewed as a consolidation pattern, with rise from 1.1986 as the third leg. In case of another rise, we'd expect upside to be limited by 1.2774 to bring larger down trend resumption. On the downside, below 1.2346 will revive the case that such consolidation is completed at 1.2705 already. In that case, intraday bias will turn back to the downside for retesting 1.1946 low.

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.

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Daily Pivots: (S1) 0.9938; (P) 0.9996; (R1) 1.0027; More.....

Intraday bias in USD/CHF remains neutral for consolidation below 1.0118 temporary top. Near term outlook stays cautiously bullish as long as 0.9929 minor support holds. Fall from 1.0342 could have finished at 0.9860 already. Above 1.0118 will turn bias back to the upside for retesting 1.0342. However, break of 0.9929 will likely extend the decline from 1.0342 through 0.9860 low.

In the bigger picture, prior rejection from 1.0327 resistance argues that USD/CHF is staying in a medium term sideway pattern. 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. Meanwhile firm break of 1.0342 will target 38.2% retracement of 1.8305 to 0.7065 at 1.1359.

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Daily Pivots: (S1) 112.77; (P) 113.53; (R1) 114.00; More...

The breach of 113.24 minor support dampens the bullish case. Corrective fall from 118.65 could still be in progress. Intraday bias is turned back to the downside to 111.58 or possibly below. However, downside should be contained by 38.2% retracement of 98.97 to 118.65 at 111.13 and bring rebound. Meanwhile, break of 114.94 resistance should now confirm completion of the correction. And in that case, USD/JPY should target a retest on 118.65 high.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance. Rejection from 125.85 and below will extend the consolidation with another falling leg before up trend resumption.

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