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Market movers today

We face a very thin data calendar, so focus – apart from the ECB minutes – will primarily be on markets evaluating the last days' strong US data and coinciding rally in risky assets.

Traditionally, the ECB minutes have contained very little new information, however, that was not the case in January where a lot of detail on QE considerations was revealed. This time around an interesting insight could be the degree of diverging views within the governing council. Concerns regarding the QE impact on the German repo levels in particular would also attract market attention.

In the Scandies focus will be on the Swedish labour market report and on Norges Bank's Governor Olsen's annual address. For more info see ‘Scandi Markets' on page 2.

Selected market news

Yesterday's bunch of US releases were all on the strong side (see below) boosting market expectations of when the next Fed hike is due: we now estimate the implied probabilities at c. 30% for March and 60% for May while markets more than fully price one hike in June and an accumulated 2.3 hikes for 2017. When should we expect the next Fed hike? Arguably recent data has been better-than-expected, but given Yellen's recent communication deferring from talking about a rate hike ‘soon' and instead referring to an ‘adjustment' (singular) of the Fed funds target at the ‘upcoming meetings', we still think June is the most likely time even if March and May have become increasingly probable.

US CPI surprised on the upside with the core measure beating expectations by rising 2.3% y/y. The headline measure also surprised, as the largest monthly headline rise in four years drove the yearly rate to 2.5% resulting in zero real wage growth (measured against average hourly earnings) in January; the first time since June 14. Meanwhile, the coinciding release of January retail sales did not suggest any purchasing power headwinds for consumers, as the control group rose 0.4% m/m with positive revisions. Manufacturing production also confirmed the highest quarterly growth rate in two years.

Despite the monthly Treasury International Capital System (TICS) data revealing that China returned as a net-buyer of US Treasuries in December, the release still confirmed that 2016 marked the largest annual Chinese disposal of Treasuries. China held USD 1.06tn worth of treasuries at the end of 2016 compared to USD 1.25tn one year ago. With a holding worth USD 1.09tn, Japan maintained its position since October as the world's largest owner of Treasuries.

In oil markets, data from the US Energy Information Administration showed that US crude stocks rose 9.5mb last week, i.e. in line with the 9.9mb increase reported in the API data reported Tuesday. Hence, the upwards trend in crude stocks continue. The rise in US crude stocks seen in recent weeks is likely a result of average-to-mild winter weather in the US and thus lower than normal seasonal demand for heating oil and hoarding of oil towards the end of last year in response to the OPEC, non-OPEC decision to cut output.

The monthly labour market report released in Australia gave mixed emotions, as the higherthan- expected employment print was driven by a rise in part time employment, while full time employment fell

China FDI falls for the first time in over 2 years

Asia Mid-Session Market Update: China FDI falls for the first time in over 2 years; Australia employment data mixed

US Session Highlights

(US) FEB EMPIRE MANUFACTURING: 18.7 V 7.0E (highest since Sept 2014)

(US) JAN ADVANCE RETAIL SALES M/M: 0.4% V 0.1%E; RETAIL SALES EX AUTO M/M: 0.8% V 0.4%E; prior revised higher

(US) JAN CPI M/M: 0.6% V 0.3%E; CPI EX FOOD AND ENERGY M/M: 0.3% V 0.2%E; CPI INDEX NSA: 242.839 V 242.479E

(US) JAN INDUSTRIAL PRODUCTION M/M: -0.3% V 0.0%E; CAPACITY UTILIZATION: 75.3% V 75.4%E

(US) Fed Chair Yellen: there is no unique level of how high interest rates must be before Fed begins cutting balance sheet - House panel Q&A

(US) President Trump: we will simplify the tax code 'greatly'; expects to announce tax reform in not too distant future - comments at meeting with business leaders

US markets on close: Dow +0.5%, S&P500 +0.5%, Nasdaq +0.6%

Best Sector in S&P500: Healthcare

Worst Sector in S&P500: Utilities

Biggest gainers: FLIR +8.1%, ENDP +7.9%, ADI +4.8%, WYN +4.8%, NRG +4.2%

Biggest losers: AIG -9.0%, CF -5.0%, DVN -3.7%, FCX -3.3%, HP -2.7%

At the close: VIX 12.0 (+1.2pts); Treasuries: 2-yr 1.25% (+1bps), 10-yr 2.50% (+3bps), 30-yr 3.09% (+3bps)

US movers afterhours

TIVO Reports Q4 $0.08 (unclear if comp) v $0.54e, R$252.3M v $222Me; increases stock buyback to $150M (6.7% market cap); Initiates $0.18 dividend (implied yield 3.8%); +13.6% afterhours

SNPS Reports Q1 $0.94 v $0.78e, R$652.9M v $638Me- Guides Q2 $0.85-0.88 v $0.76e, R$655-680M v $638Me; +7.6% afterhours

NTES: Reports Q4 $4.30 v $3.63e, R$1.74B v $1.62Be; +6.9% afterhours

VRX: FDA approves Siliq (brodalumab) to treat adults with moderate-to-severe plaque psoriasis; +4.9% afterhours

NTAP Reports Q3 $0.82 v $0.74e, R$1.4B v $1.39Be; Guides Q4 $0.79-0.84 v $0.76e, R$1.37-1.52B v $1.40Be; +3.7% afterhours

CSCO: Reports Q2 $0.57 v $0.56e, R$11.6B v $11.6Be; Increases dividend 11.5% to $0.29/shr (implied yield 3.5%); +2.1% afterhours

ABX: Reports Q4 $0.22 v $0.21e, R$2.32B v $2.20Be; +2.0% afterhours

KHC: Reports Q4 $0.91 v $0.87e, R$6.86B v $6.77Be; -2.4% afterhours

CF: Reports Q4 -$0.39 v -$0.06e, R$867M v $906Me; -3.6% afterhours

GDDY Reports Q4 -$0.02 v $0.08e, R$486M v $485M; Guides Q1 R$485-490M v $494Me; -4.4% afterhours

SPWR: Reports Q4 -$0.64 v -$0.48e, R$1.09B v $1.08Be; -5.2% afterhours

TRIP: Reports Q4 $0.16 v $0.30e, R$316M v $326Me; -5.6% afterhours

CAR: Reports Q4 $0.15 v $0.16e, R$1.88B v $1.96Be; To repurchase $300M (8.4% of market cap); -6.5% afterhours

MOH Reports Q4 -$1.54 adj v $0.75e (unclear if comp), R$4.46B v $4.52Be; Guides initial FY17 $2.09 v $3.73e, R$19.5B v $19.0Be; -14.0% afterhours

Politics

(US) Senate Judiciary Committee chairman Grassley (IA-R) requesting a briefing and documents on circumstances that led to resignation of NSA head Flynn - press

(US) Andrew Puzder officially withdraws his nomination for Labor Secretary - US press

Asia Key economic data:

(CN) China Jan Foreign Direct Investment (FDI): CNY80.1B v CNY81.4B prior, Y/Y: -9.2% (First decline in 27 months) v +1.4%e

(AU) AUSTRALIA JAN EMPLOYMENT CHANGE: +13.5K V +10.0KE; UNEMPLOYMENT RATE: 5.7% V 5.8%E

(AU) AUSTRALIA FEB CONSUMER INFLATION EXPECTATION: 4.1% V 4.3% PRIOR

(NZ) NEW ZEALAND FEB ANZ CONSUMER CONFIDENCE INDEX: 127.4 V 128.7 PRIOR; M/M: -1.0% V +3.4% PRIOR

Asia Session Notable Observations, Speakers and Press

Second round of somewhat more hawkish Fed chair Yellen testimony, along with hotter CPI data out of the US, continued to pressure US Treasury yields higher even as indices maintained their upward trajectory; US indices set new record highs for the fifth straight session, despite the rise in the VIX; Yield on the US benchmark was also up another 3bps to reach 2.5% for the first time in 2 weeks. Fed funds futures have also seen a more dramatic change toward anticipated rate hikes - March probabilities rose above 30% and May is now above 50%.

Ongoing US political drama saw the formal withdrawal of Laber Sec-nominee Puzder; Separately, Republican head of the Senate Judiciary committee is pressing for a briefing and documents that led to yesterday's resignation of NSA head Flynn, while another US press report alleges intelligence officials have been prone to withhold intel from POTUS due to security concerns.

US TIC data late in US session saw the first net decline in holdings in 3 months, although China holdings of US treasuries rose for the first time in 7 months to $1.06T; Recall last month saw Chinese sell the biggest amount of US debt since late 2011.

China FDI fell for the first time in over 2 years, though MOFCOM officials yet again attributed the decline to high base effects from the timing of Lunar New Year; PBoC official also noted that policy is appropriate after that large rise in lending released earlier this week.

Australia employment data were mixed - unemployment rate was lower than expected and employment change slightly higher. However, data internals showing employment increase dominated by part time workers (58.3K v 5.1K prior) while full-time change contracted (-44.8K v +11.3K prior). Labor participation rate also ticked lower to 64.6% v 64.7% prior; Australia short-term yields retreated, with 3-year down about 3bps in the wake of the release at 2.03%.

China:

(CN) PBOC Dep Gov Yi Gang: Credit data and policy are appropriate - Chinese press

(CN) China CSRC said to be considering new curbs on secondary share sales, which may mean available only one time a year

(CN) China PBoC's Zhao Yang: China has a lot of room to open capital markets - Financial News

Japan:

(JP) Bank of Japan (BOJ) Gov Kuroda: Risk of another global financial crisis has fallen a lot, but cant deny a different kind of crisis could happen

(JP) Japan MOF official: Japan Fin Min Aso spoke with US Treasury Sec Mnuchin by phone today

(JP) Former BOJ member Shirai: QQE corrected the overvaluation of the yen; If yen depreciates below 125-130 may become a problem

Australia/New Zealand:

(AU) RBA's Assistant Gov Ellis: Need to be aware of pockets of potential mortgage stress

(NZ) New Zealand Fin Min Joyce: Economic outlook is positive

Asian Equity Indices/Futures (00:00ET)

Nikkei -0.6%, Hang Seng +0.4%, Shanghai Composite +0.3%, ASX200 +0.1%, Kospi -0.2%

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

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

EUR 1.0590-1.0625; JPY 113.75-114.30; AUD 0.7705-0.7730; NZD 0.7210-0.7240

Apr Gold +0.2% at $1,236/oz; Mar Crude Oil -0.1% at $53.05/brl; Mar Copper +0.5% at $2.76/lb

SPDR Gold Trust ETF daily holdings rise 2.6 tonnes to 843.5 tonnes; 9th consecutive increase; Highest since Dec 14th

(CN) PBOC SETS YUAN MID POINT AT 6.8629 V 6.8632 PRIOR; Strongest Yuan setting since Feb 7th

(CN) PBOC to inject combined CNY250B v CNY120B prior in 7-day, 14-day and 28-day reverse repos

(NZ) New Zealand sells NZ$200M Apr 2025 bonds, avg yield 3.2252%, bid-to-cover: 2.76x

Asia equities/Notables/movers by sector

Consumer discretionary: TTS.AU Tatts Group Ltd -3.8% (H1 result); SYD.AU Sydney Airport -2.1% (FY16 result); SGH.AU Slater & Gordon Ltd -24.1% (trading update); 2502.JP Asahi Group Holdings +2.3% (FY16 result)

Financials: MFG.AU Magellan Financial Group -5.1% (H1 result)

Industrials: 753.HK Air China +0.5% (Jan result)

Technology: 6502.JP Toshiba Corporation -3.3% (demoted to lower tier of TSE, to delay chip stake sale); 6724.JP Seiko Epson Corp +1.6%

Materials: 1091.HK CITIC Dameng Holdings -5.5% (FY16 result); 486.HK RUSAL -0.7% (Q4 result); SGM.AU Sims Metal Management +4.0% (Macquarie raises rating); EVN.AU Evolution Mining +0.4% (H1 result); S32.AU South32 Limited -1.5% (H1 result)

Energy: 1381.HK Canvest Environment Protection Group +2.6% (guidance); ORG.AU Origin Energy -2.5% (H1 result)

Telecom: TLS.AU Telstra Corp -6.2% (H1 result)

The Loonie is fast approaching a critical point where it must decide where exactly it wants to end up. On the one hand, it could finally break free of the ascending channel that has largely constrained its movements over the past months. On the other hand, a breakout from the near-term wedge could mean we see a rally back to the centre of this long-standing channel. As a result, it's worth delving into some of the technicals to get a feel for what we can expect moving forward.

Key Points:

• A breakout is likely and this should be to the upside.
• Long-term channel should remain intact.
• The pair should reverse to the centre of the channel.

The Loonie is fast approaching a critical point where it must decide where exactly it wants to end up. On the one hand, it could finally break free of the ascending channel that has largely constrained its movements over the past months. On the other hand, a breakout from the near-term wedge could mean we see a rally back to the centre of this long-standing channel. As a result, it's worth delving into some of the technicals to get a feel for what we can expect moving forward.

First and foremost, it's quite clear on the daily chart that the narrowing price action of the falling wedge should lead to a breakout in one direction or the other in the very near-term. As a result of this particular wedge, the pair should be predisposed to breaking out on the upside which would also respect the downside constraint of the long-term channel. Due to this coincidence, a rally is looking much more likely than a downside breakout from a technical perspective at least.

Moreover, moving higher would, generally speaking, be inline with some of the other technical signals. Specifically, the MACD oscillator remains bullish and it wouldn't take much in the way of buying pressure to invert the Parabolic SAR's bias to follow suit. Additionally, both the RSI and stochastics are in neutral territory which means there is plenty of room to rally before fears that the Loonie is becoming overbought would arise.

The main deterrent that could prevent the bulls from staging a comeback is the EMA bias. As shown above, the 12, 20, and 100 day moving averages are all in a highly bearish configuration which would tend to indicate losses are set to extend moving ahead. However, on the balance of things, there seems to be more evidence suggestive of a reversal back to the centre of the channel rather than a breakout from the lower constraint of this objectively robust structure.

On the fundamental front, despite the USD's rather baffling response to yesterday's strong data, the outlook for the US economy is looking firmer than it has in some time. Combined with optimism over Trump's tax policy and the jump in probability for a US rate hike to 44% in March, the market should continue to move backto the greenback which would be in line with the technical forecast.

Ultimately, keep an eye on this pair as the week draws to a close and early next week as there is likely to be at least one or two sessions remaining before a reversal is required. Furthermore, be alert for any update on that ‘phenomenal' tax plan as it is likely to generate some waves.

Daily Pivots: (S1) 141.79; (P) 142.29; (R1) 142.76; More...

GBP/JPY lost momentum after hitting 142.79 and intraday bias is turned neutral first. At this point, rise from 136.44 is seen as the second leg of the consolidation pattern from 148.42. Above 142.79 will target 144.77 first. Break of 144.77 will target a test on this 148.42 high. On the downside, below 140.67 minor support will turn bias back to the downside and extend the fall fro 144.77 through 138.53.

In the bigger picture, price actions from 122.36 medium term bottom are still seen as a corrective pattern. Main focus is on 38.2% retracement of 195.86 to 122.36 at 150.42. Rejection from there will turn the cross into medium term sideway pattern with a test on 122.36 low next. Though, sustained break of 150.42 will extend the rebound towards 61.8% retracement at 167.78.

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Daily Pivots: (S1) 120.71; (P) 120.99; (R1) 121.27; More...

EUR/JPY is staying in tight range below 121.32 and intraday bias stays neutral. We're holding on to the view that corrective fall from 124.08 has completed at 119.32 already. Above 121.32 will turn bias to the upside for 123.30 resistance. Break of 123.30 will likely extend the whole medium term rise from 109.20 through 124.08 high. Below 119.32 will bring another fall. In that case, downside should be contained by 118.45 cluster support (38.2% retracement of 109.20 to 124.08 at 118.39) and bring rebound.

In the bigger picture, price actions from 109.20 medium term bottom are seen as part of a medium term corrective pattern from 149.76. There is prospect of another rise towards 126.09 key resistance level before completion. But even in that case, we'd expect strong resistance between 126.09 and 141.04 to limit upside, at least on first attempt. Nonetheless, decisive break of 118.45 cluster support (38.2% retracement of 109.20 to 124.08 at 118.39) will argue that rise from 109.20 is completed and turn outlook bearish for 61.8% retracement at 114.88 and below.

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Daily Pivots: (S1) 0.8472; (P) 0.8497; (R1) 0.8528; More...

EUR/GBP recovered after dipping to 0.8455 and intraday bias is turned neutral first. Near term outlook stays cautiously bearish as long as 0.8643 resistance holds. Fall from 0.8851 is seen as the third leg of the corrective pattern from 0.9304. Below 0.8455 will turn bias to the downside for 0.8303 low next. Break will extend the fall from 0.9304 to 0.8116 key cluster support level.

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).

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Daily Pivots: (S1) 1.3710; (P) 1.3757; (R1) 1.3791; More...

EUR/AUD's fall is still in progress and intraday bias remains on the downside for 1.3671 key support level. At this point, we'd expect strong support around 1.3671 to bring rebound. On the upside, above 1.3888 minor resistance will turn bias neutral first. Firm break of 1.4025 support turned resistance will indicate short term bottoming and turn focus back to 1.4289 resistance.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. Deeper fall could be seen but, we'd expect strong support above 1.3671 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 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.

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Daily Pivots: (S1) 1.0642; (P) 1.0653; (R1) 1.0668; More...

EUR/CHF is staying in tight range of 1.0631/0706 and intraday bias remains neutral first. 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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Daily Pivots: (S1) 1.0543; (P) 1.0576 (R1) 1.0631; More.....

EUR/USD lost momentum after hitting 1.0520 and recovered. Intraday bias is turned neutral first. 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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Daily Pivots: (S1) 1.2401; (P) 1.2440; (R1) 1.2499; More...

GBP/USD is still bounded in range of 1.2346/2705 and intraday bias remains neutral at this point. 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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