Daily Pivots: (S1) 1.2483; (P) 1.2511; (R1) 1.2551; More...

GBP/USD dips today but stays in middle of range of 1.2346/2705. 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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Dollar trades generally softer, in particular against commodity currencies today. Some attribute Dollar's weakness to news of resignation of US president Donald Trump's national security advisor Michael Flynn. The developments since Trump came to office raised some doubts on whether his administration is able to push through his expansive policies. But for the time being, Fed chair Janet Yellen's testimony to the Senate is the main focus. Markets will look for hints of the chance of a March hike. Also, Yellen's speech will be scrutinized for her view on Fed's projection of three hike this year. But overall, Yellen would likely sound noncommittal. And the real test for Dollar would be on the economic projections to be released in Fed's March meeting. Released from US, PPI rose 0.6% mom, 1.6% yoy in January. PPI core rose 0.4% mom, 1.2% yoy. Both are above market expectations.

Sterling Plummets on CPI Miss

Sterling tumbles broadly today and pared back much this week's gain. Weaker than expected inflation reading add to the case for BoE to stand pat at least through 2017. UK CPI dropped -0.5% mom in January and rose 1.8% yoy. The annual rate was faster than December's 1.6% yoy but missed expectation of 1.9% yoy. Core CPI was unchanged at 1.6% yoy, missing expectation of 1.7% yoy. RPI dropped -0.6% mom, rose 2.6% yoy. PPI input rose 1.7% mom, 20.5% yoy. PPI output rose 0.6% mom, 3.5% yoy. PPI output core rose 0.5% mom, 2.4% yoy. House price index rose 7.2% yoy in December.

German ZEW economic sentiment tumbled

German ZEW economic sentiment dropped sharply to 10.4 in February, down from 16.6, and missed expectation of 15.1. German ZEW current situation dropped to 76.4, down from 77.3, below expectation of 77.0. Eurozone ZEW economist sentiment also dropped sharply to 17.1, down from 23.2, below expectation of 22.3. ZEW president Achim Wambach noted that "political uncertainty regarding Brexit, the future U.S. economic policy as well as the considerable number of upcoming elections in Europe further depresses expectations." Nonetheless, he talked down the significant of the deterioration. Wambach also said that "the economic environment in Germany has not significantly worsened."

Other economic data released from Eurozone are generally disappointing too. Eurozone GDP grew 0.4% qoq in Q4, below expectation of 0.5% qoq, slowed from prior quarter's 0.2% qoq. German GDP growth accelerated to 0.4% qoq, up from Q3's 0.2% qoq, but missed expectation of 0.5% qoq. Italian GDP growth slowed to 0.2% qoq, down from Q3's 0.3% qoq, below expectation of 0.3% qoq. Meanwhile, Eurozone industrial production dropped -1.6% mom in December. German CPI was finalized at -0.6% mom, 1.9% yoy.

From Swiss, CPI rose 0.0% mom, 0.3% yoy in January. PPI rose 0.4% mom, 0.8% yoy.

China inflation accelerated

On the dataflow, headline CPI in China accelerated to 2.5% yoy in January, beating expectations of 2.1% and December's 2.1%. Core inflation, excluding food and energy, improved to 2.2% yoy, up from 1.9% in December. Food inflation rose to 2.7% yoy from 2.4% previously, while nonfood inflation rose to 2.5% yoy from 2% previously. PPI jumped to 6.9% yoy, compared with consensus of 6.6% and December's 5.5%.Improvement in China's inflation might prompt the government to consider monetary tightening. Staying in Asia Pacific, the final estimate of Japan's industrial production expanded 0.7% mom in December, compared with consensus of, and November's, 0.5% gain. Also from Asian pacific, Australia NAB business confidence rose to 10 in January.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2483; (P) 1.2511; (R1) 1.2551; More...

GBP/USD dips today but stays in middle of range of 1.2346/2705. 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.

Economic Indicators Update

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Tuesday February 14: Five things the markets are talking about

Risk-off is back in vogue as the dismay in the Trump administration is overshadowing optimism for an improving U.S. economy.

Trump's promises that tax cut and infrastructure spending plans are coming, some good-tempered meetings with world leaders (Japan's PM Abe and Canada's Trudeau), as well as expectations of a more "dovish" Federal Reserve had temporarily rekindled investors' appetite for risk. However, this has come to an abrupt end in the overnight session.

After lengthy DoJ investigations, Trump's NSA advisor Michael Flynn has submitted his resignation after admitting he gave "incomplete" information regarding phone calls with Russia about U.S sanctions - stocks have retreated, the dollar is under pressure, gold is better bid and U.S yields a tad lower.

Investors will now turn their attention to Fed Chair Yellen's testimony in Congress today for market guidance (10:00am EST).

Her testimony will be watched for hints on rates, deregulation and global concerns - fixed income dealers are pricing in a +30% chance the Fed will lifts rates at its March 15 meeting.

1. Global stock indices see "Red"

In Japan, stocks fell as investor sentiment soured after Toshiba Corp delayed its earnings release, including details of a multibillion dollar charge related to cost overruns at its U.S. nuclear arm.

With Toshiba's stock nose-diving -8% helped drag the Nikkei down -1.1%.

In Hong Kong, stocks ended little changed as growing profit taking after a two-month rally offset sustained inflows from main land Chinese investors.

Note: The Hang Seng has risen about +8% ytd, riding a wave of optimism that global economic growth is improving.

In China, the Shanghai Composite Index was largely unchanged after data showed the country's inflation (see below) picked up to multi-year highs and reinforced a shift by Beijing to a more tighter policy stance.

In Europe, the Stoxx Europe 600 Index has slipped -0.1% in early trade, after a five-day rally that brought it to the highest level in more than a year. The FTSE 100 Index has lost -0.3%.

U.S stocks are set to open in the red (-0.1%).

Indices: Stoxx50 -0.1% at 3306, FTSE +0.1% at 7286, DAX -0.1% at 11768, CAC-40 flat at 4889, IBEX-35 +0.1% at 9494, FTSE MIB +0.3% at 19111, SMI -0.3% at 8442, S&P 500 Futures -0.1%

2. Oil prices range bound, gold supported

Crude oil has strengthened slightly overnight, supported by the OPEC-led effort to cut output while rising U.S production is keeping prices within the narrow ranges that have contained them so far this year.

Brent crude is up +45c at +$56.04 a barrel, while U.S. light crude oil (WTI) is up +35c at +$53.28.

Note: The two benchmarks fell -2% yesterday and both remain in the middle of a $5-per-barrel trading ranges seen since early December.

Capping global prices are U.S. oil drillers - they have added the most drilling rigs since 2012 over the past month, bringing the total count to 591.

Gold prices have edged higher (+0.3% to $1,228.90 per ounce) ahead of the U.S open as the dollar underperforms. Investors are turning their attention to the Fed's Janet Yellen testimony in Congress for clues on U.S interest rates.

The techs see support at +$1,215 and strong resistance on top at +$1,240.

3. U.S curve will take shape after Humphrey-Hawkins

Fed Chair Yellen takes the stand for two days in Washington for her Humphrey-Hawkins testimony beginning at 10:00 a.m. EST (today, senate committee).

Note: She will deliver her monetary policy report and prepared remarks and will also present the same report and remarks to the House Financial Services Committee at 10 a.m. tomorrow.

Expect fixed income dealers to get a better handle of the U.S curve once Yellen is questioned on the economy, the path of interest rates, the labor market, financial regulation and the potential impact of the Trump administration's economic policies.

Investors started the week embracing risk, which has backed up Treasury yields +4bps to +2.45%, steepening the curve - a change from the past couple of weeks.

4. Pound pummeled on inflation miss

Ahead of the U.S open, sterling has fallen to an intraday low against the dollar (£1.2452) and the EUR (€0.8524) after data showed that U.K. CPI rose by +1.8% on the year in January.

It was the fastest rate in nearly three-years, but slightly below the consensus (+1.9%). Inflation is being caused mainly by the fall in the pound since the Brexit referendum vote, and there are concerns higher prices will dampen consumer spending and certainly should discourage the BoE from raising interest rates any time soon.

Elsewhere, the USD is keeping within recent ranges, as traders seem to be positioning themselves for potential "dovish" language from the Fed's Yellen.

The EUR is back above the psychological €1.06 level, while the yen (¥113.27) has added +0.4%, after falling -0.5% yesterday.

5. China inflation data continues to improve

Overnight, China released its January CPI and PPI numbers, both topped expectations. The CPI hit a 32-month high (2.5% vs. 2.4%e), while the PPI registered its fifth consecutive increase and highest print since Aug 2011 (6.9% vs. 6.5%e).

Note: The CPI increase was more heavily skewed to food inflation (2.7% vs. 2.4% prior) as non-food component slowed to 0.7% vs. 2.0% prior. China Stats Bureau noted the CPI was skewed by the Lunar New Year effect, since it came in January this year as opposed to February of last year.

Other data released showed that China January new yuan loans missed expectations, but still recorded its second highest reading on record (+¥2.03T vs. +¥2.44Te).

Note: The U.S Commerce Secretary may not choose to name China as a currency manipulator, but rather designate the practice of "currency manipulation as an unfair subsidy when employed by any state."

German GDP registers a slight miss but start of 2017 touted as a solid in a key election year

EU Mid-Market Update: Slight miss in UK CPI sends GBP currency lower; German GDP registers a slight miss but start of 2017 touted as a solid in a key election year

Notes/Observations

Focus on Fed's Yellen with her appearance before the Senate Banking Committee; Should she divert from the moderate projection of the interest rate path as currently priced into the market, the USD may rally

Germany Q4 GDP registers a slight miss but itd domestic economy enters 2017 (a key election year) on solid footing and provides cushion in light of uncertain future trade relations with the UK and the US

UK Jan CPI data comes in below expectations but still registers its highest annual pace since Jun 2014 (Y/Y: 1.8% v 1.9%e)

China Jan New Yuan Loans miss expectations but still its 2nd highest reading on record (CNY): 2.03T v 2.44Te

Overnight:

Asia:

China inflation data continues to improve. Jan CPI hits 32-month high (2.5% v 2.4%e); PPI registered its 5th straight increase and highest since Aug 2011 (6.9% v 6.5%e); with rising commodity prices and a strong January base effect providing the main catalysts

Europe:

Greece Fin Min Tsakalotos stated that it aimed to get political agreement on all issues around the Greek bailout review talks by the Feb 20th Eurogroup meeting - IMF's Lagarde: IMF was doing best it could on Greece bailout, but could not cut a special deal for any country

German CSU Parliamentary Floor Leader Friedrich said to have told Greece Conservative Leader that Greece would not receive any further financial support if it fails to fully implement economic reform obligations

Americas:

US National Security Advisor Michael Flynn resigns after he is alleged to have discussed US sanctions with Russian Ambassador before Trump was elected; Lt Gen Joseph Kellogg as acting National Security Advisor

Fed's Kaplan (Dallas, moderate, voter): Fed could raise rates in a gradual and patient manner; should act soon to raise rates, or risk having to abandon its plan to do so slowly

Economic data

(IN) India Jan Wholesale Prices (beat) Y/Y: 5.3% v 4.3%e (31-month high)

(DE) Germany Q4 Preliminary GDP (miss) Q/Q: 0.4% v 0.5%e; Y/Y: 1.7% v 1.8%e; GDP NSA Y/Y: 1.2% v 1.4%e

(DE) Germany Jan Final CPI M/M: -0.6% v -0.6%e; Y/Y: 1.9% v 1.9%e; highest annual pace in 3 1/2 years

(HU) Hungary Q4 Preliminary GDP (miss) Q/Q: 0.4% v 0.7%e; Y/Y: 1.6% v 2.0%e

(HU) Hungary Jan CPI M/M: 0.4% v 0.3%e; Y /Y: 2.3% v 2.2%e

(CZ) Czech Q4 Advance GDP (miss) Q/Q: 0.2% v 0.7%e; Y/Y: 1.7% v 2.3%e

(CH) Swiss Jan CPI M/M (beat): 0.0% v -0.1%e; Y/Y: 0.3% v 0.3%e

(CH) Swiss Jan CPI EU Harmonized M/M: -0.2% v -0.1% prior; Y/Y: +0.3%e v -0.2% prior

(CH) Swiss Jan Producer & Import Prices (beat) M/M: 0.4% v 0.2%e; Y/Y: 0.8% v 0.5%e

(NL) Netherlands Q4 Preliminary GDP (miss) Q/Q: 0.5% v 0.6%e; Y/Y: 2.3% v 2.8%e

(ZA) South Africa Q4 Unemployment Rate: 26.5% v 27.0%e

(IT) Italy Q4 Preliminary GDP Q/Q: 0.2% v 0.3%e; Y/Y: 1.1% v 1.0%e

(PL) Poland Q4 Preliminary GDP Q/Q: 1.7% v 1.2%e; Y/Y: 2.7% v 2.5%e

(CN) China Jan M2 Money Supply Y/Y: 11.3% v 11.3%e, M1 Money Supply Y/Y: % v 20.2%e, M0 Money Supply Y/Y: % v 8.9%e

(CN) China Jan New Yuan Loans (CNY): 2.03T v 2.44Te (2nd highest on record)

(CN) China Jan Aggregate Financing (CNY): 3.74T v 3.00Te

(UK) Jan CPI M/M: -0.5% v -0.5%e; Y/Y: 1.8% v 1.9%e; CPI Core Y/Y: 1.6% v 1.7%e (highest annual pace since Jun 2014)

(UK) Jan RPI M/M: -0.6% v -0.4%e; Y/Y: 2.6% v 2.8%e; RPIX Y/Y: 2.9% v 3.1%e

(UK) Jan PPI Input M/M: 1.7% v 1.0%e; Y/Y: 20.5% v 18.5%e

(UK) Jan PPI Output M/M: 0.6% v 0.3%e; Y/Y: 3.5% v 3.2%e

(UK) Jan PPI Output Core M/M: 0.5% v 0.3%e; Y/Y: 2.4% v 2.2%e

(PT) Portugal Q4 Preliminary GDP (beat) Q/Q: 0.6% v 0.3%e; Y/Y: 1.9% v 1.6%e

(GR) Greece Q4 Advance GDP (miss) Q/Q: -0.4% v +0.4%e; Y/Y: 0.3% v 2.2% prior

(DE) Germany Feb ZEW Current Situation Survey: 76.4 v 77.0e; Expectations Survey: 10.4 v 15.0e

(EU) Euro Zone Feb ZEW Survey Expectations: 17.1 v 23.2 prior

(EU) Euro Zone Q4 Preliminary GDP (miss) Q/Q: 0.4% v 0.5%e; Y/Y: 1.7% v 1.8%e (2nd reading)

Fixed Income Issuance:

(ES) Spain Debt Agency (Tesoro) sold total €5.01B v €4.5-5.5B indicated range in 6-month and 12-month Bills

(ZA) South Africa sold total ZAR2.35B vs. ZAR2.35B indicated in 2026, 2035 and 2040 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 -0.1% at 3306, FTSE +0.1% at 7286, DAX -0.1% at 11768, CAC-40 flat at 4889, IBEX-35 +0.1% at 9494, FTSE MIB +0.3% at 19111, SMI -0.3% at 8442, S&P 500 Futures -0.1%]

Equities

Consumer discretionary [Aryzta [ARYN.CJ] +11% (CEO and CFO to step down)]

Industrials: [Michelin ML.FR +2% (Earnings), Rolls Royce RR.UK -4.1% (earnings)]

Financials: [Randstad RAND.NL +3.7% (Earnings), Credit Suisse CSGN.CH +3% (Earnings), HeidelburgCement HEI.DE -1.7% (Earnings)]

Energy: [EDF EDF.FR -0.5% (Earnings)]

Speakers

Germany Econ Min Gabriel: Economy off to a solid start for 2017 with Business climate being good while employment was growing

ZEW Economists noted that political uncertainty on Brexit and US economic policy and European elections were depressing expectations

Turkey PM Yildirim reiterated view that FX volatility is temporary with its impact seen limited

White House said to be exploring a new tactic to discourage China from undervaluing its currency to boost exports. Under the plan, the commerce secretary would designate the practice of currency manipulation as an unfair subsidy when employed by any country, instead of singling out China

UN Nuclear Agency (IAEA): Iran missile test was unrelated to nuclear agreement commitments

Currencies

The USD was keeping within recent ranges and a touch softer heading into the NY morning. Traders were positioning for potential dovish language from US Fed chair Janet Yellen. Dealers noted that the Fed chief would have to present the Fed's view which at times has differed from her more dovish attitude. The greenback was also weighing the resignation of National Security Advisor Michael Flynn.

EUR/USD was back above the 1.06 level after a quick flush below the handle to gun for stops loitering below the 50-day moving average

A slight miss in UK CPI sent the GBP currency softer. GBP/USD moved from 1.2510 to test below 1.2450 as the inflation remained below the BOE 2.0% target for the 35th straight month. The 10-year Gilt yield dipped lower as well to test 1.29%

Fixed Income:

Bund futures trade at 163.82 up 6 ticks retracing from highs after futures failed to hold above 164. A move back higher targets 164.17 followed by 164.46, 164.94. Support remains at 163.44 followed by 162.92.

Gilt futures trade at 125.35 down 2 ticks retracing off lows on slightly weaker then expected UK inflation data however did mark the highest annual reading since June 2014. Resistance moves to 125.90 then 126.28 followed by 126.70. A move back below 125.20 low targets 124.91 followed by 124.46. Short Sterling futures trade flat with Jun17Jun18 trading 19bp choice.

Tuesday's liquidity report showed Monday's excess liquidity falls to €1.3215T down €15B from €1.330T prior. Use of the marginal lending facility falls to €353M from €590M prior.

Corporate issuance saw $6.7B come to market via 5 issuers headlined by American Honda finance $1.75B 3 part offering and Goldman Sachs $3B 3 part offering. This puts Monthly issuace at $31.6B.

Looking Ahead

(PT) Bank of Portugal reports Dec ECB financing to Portuguese Banks: €B v €22.4B prior

(AR) Argentina Central Bank: 7-Day Repo Reference Rate

05:30 (UK) Weekly John Lewis LFL sales data

05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender

05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills

06:00 (US) Jan NFIB Small Business Optimism: 104.9e v 105.8 prior

06:00 (PT) Portugal Q4 Labour Costs Y/Y: No est v 3.6% prior

06:00 (BR) Brazil Dec Retail Sales M/M: -2.0%e v +2.0% prior; Y/Y: -4.6%e v -3.5% prior

06:00 (BR) Brazil Dec Broad Retail Sales M/M: -0.4%e v +0.6% prior; Y/Y: -6.6%e v -4.5% prior

06:00 (TR) Turkey to sell 10.6% 2026 Bonds

06:45 (US) Daily Libor Fixing

07:00 (IS) Iceland Jan Unemployment Rate: No est v 2.3% prior

07:45 (US) Weekly Goldman Economist Chain Store Sales

08:00 (RO) Romania Central Bank (NBR) Feb Minutes

08:00 (PL) Poland Jan M3 Money Supply M/M: -0.6%e v 2.1% prior; Y/Y: 9.2%e v 9.6% prior

08:00 (RU) Russia announces weekly OFZ bond auction

08:15 (UK) Baltic Dry Index

08:30 (US) Jan PPI Final Demand M/M: 0.3%e v 0.3% prior; Y/Y: 1.5%e v 1.6% prior

08:30 (US) Jan PPI Ex Food and Energy M/M: 0.2%e v 0.2% prior; Y/Y: 1.1%e v 1.6% prior

08:30 (US) Jan PPI Ex Food, Energy, Trade M/M: 0.1%e v 0.1% prior; Y/Y: No est v 1.7% prior

08:30 (CA) Canada Jan Teranet/National Bank HPI M/M: No est v 0.3% prior; Y/Y: No est v 12.3% prior

08:50 (US) Fed's Lacker to speak at University of Delaware

08:55 (US) Weekly Redbook Sales

09:00 (EU) Weekly ECB Forex Reserves: € v €280.3B prior

09:50 (UK) Bank of England (BOE) Bond Buying Operation (over 15 years)

10:00 (US) Fed Chair Yellen semi-annual testimony before Senate Banking Panel

11:00 (IS) Iceland Jan International Reserves (ISK): No est v 815B prior

11:00 (UR) Ukraine to sell Bonds - 11:30 (US) Treasury to sell 4-Week Bills

13:15 (US) Fed's Lockhart to speak on Economy in Huntsville, Alabama

16:00 (CL) Chile Central Bank (BCCH) Interest Rate Decision: Expected to leave Overnight Rate Target unchanged at 3.25%

16:30 (US) Weekly API Oil Inventories

News and Events:

Swiss CPI prints higher

The Swiss consumer price index came in slightly above median forecasts in January as it remained unchanged while economists were expecting a contraction of 0.1%m/m. On a year-over-year basis, the headline gauge rose 0.3%y/y - matching expectations - compared to a flat reading in December. Looking at the HICP gauge, (Harmonised Index of Consumer Prices, which enables a comparison of CPI measures across EU countries) inflation also rose 0.3%y/y in January, while on a month-over-month basis, it contracted 0.2%.

Despite the drop in clothing and footwear prices at the end of the Christmas sales period, the big picture did not change much during the first month of the year. EUR/CHF traded sideways at around 1.0660 amid the release. Even the rejection of the corporate tax reform on Sunday did not allow the CHF to weaken, suggesting that investors are willing to put up with more bad news from Switzerland. Indeed, in spite of the sharp rally in the equity market, the geopolitical environment, on both side of the Atlantic, has never been so uncertain. This uncertainty is encouraging international investors to keep part of their investments in safe haven assets. The Swiss franc is not the only asset enjoying this situation. Gold has risen more than 7.5% since 1st January. Given the current environment, we see no justification for a change in the current dynamic as the European political calendar, together with Trump's first 100 days, remain the main challenges of the year.

German & Eurozone ZEW should provide optimism

The biggest source of fear this year for financial markets is Europe's political uncertainties. Eurozone and German ZEW sentiment indicators will be released today. In particular, when it comes to Germany, markets are still anxious to get a sense of what is happening. The underlying difficulties of the Euro area should be reflected in the survey. For example, it is clear that the European elections (French, German and Dutch) should add significant downside pressures to economist sentiment, which from our vantage point should remain mixed.

However, this indicator does not fully reflect the underlying robustness of the largest European economy. The German 10Y is still on the rise since the start of the year - yielding around 0.33%. The deflation risk seems to be slowly fading and the annual Eurozone Core CPI is on the rise (0.9% y/y) and is now at its highest level in two years. Moreover, the ECB's objective of 1.7% in 2019 looks attainable and it seems that we are at a turnaround in terms of monetary policy.

Currency wise, the major driver for the euro is the political uncertainty and this definitely helps the ECB as it adds upside pressures on inflation and as result on growth. Our view is mixed on the single currency as there is a major risk of depreciation due to the continued rise of nationalist parties despite better economic data.

Today's Key Issues (time in GMT):

• Jan CPI MoM, exp -0,10%, last -0,10% CHF / 08:15
• Jan CPI YoY, exp 0,30%, last 0,00% CHF / 08:15
• Jan CPI EU Harmonized MoM, last -0,10% CHF / 08:15
• Jan CPI EU Harmonized YoY, last -0,20% CHF / 08:15
• Jan Producer & Import Prices MoM, exp 0,20%, last 0,20% CHF / 08:15
• Jan Producer & Import Prices YoY, exp 0,50%, last 0,00% CHF / 08:15
• 4Q South Africa Unemployment, exp 27,00%, last 27,10% ZAR / 08:30
• 4Q P GDP WDA QoQ, exp 0,30%, last 0,30% EUR / 09:00
• 4Q P GDP WDA YoY, exp 1,00%, last 1,00%, rev 1,10% EUR / 09:00
• Jan Money Supply M2 YoY, exp 11,30%, last 11,30% CNY / 09:03
• Jan Money Supply M1 YoY, exp 20,20%, last 21,40% CNY / 09:03
• Jan Money Supply M0 YoY, exp 8,90%, last 8,10% CNY / 09:03
• Jan New Yuan Loans CNY, exp 2440.0b, last 1040.0b CNY / 09:03
• Jan Aggregate Financing CNY, exp 3000.0b, last 1630.0b, rev 1626.0b CNY / 09:03
• Jan CPI MoM, exp -0,50%, last 0,50% GBP / 09:30
• Jan CPI YoY, exp 1,90%, last 1,60% GBP / 09:30
• Jan CPI Core YoY, exp 1,70%, last 1,60% GBP / 09:30
• Jan Retail Price Index, exp 266,2, last 267,1 GBP / 09:30
• Jan RPI MoM, exp -0,40%, last 0,60% GBP / 09:30
• Jan RPI YoY, exp 2,80%, last 2,50% GBP / 09:30
• Jan RPI Ex Mort Int.Payments (YoY), exp 3,10%, last 2,70% GBP / 09:30
• Jan PPI Input NSA MoM, exp 1,00%, last 1,80%, rev 2,70% GBP / 09:30
• Jan PPI Input NSA YoY, exp 18,50%, last 15,80%, rev 17,00% GBP / 09:30
• Jan PPI Output NSA MoM, exp 0,30%, last 0,10%, rev 0,20% GBP / 09:30
• Jan PPI Output NSA YoY, exp 3,20%, last 2,70%, rev 2,80% GBP / 09:30
• Jan PPI Output Core NSA MoM, exp 0,30%, last 0,00% GBP / 09:30
• Jan PPI Output Core NSA YoY, exp 2,20%, last 2,10% GBP / 09:30
• Dec House Price Index YoY, exp 6,50%, last 6,70%, rev 6,10% GBP / 09:30
• Dec Industrial Production SA MoM, exp -1,50%, last 1,50% EUR / 10:00
• Dec Industrial Production WDA YoY, exp 1,70%, last 3,20% EUR / 10:00
• Feb ZEW Survey Current Situation, exp 77, last 77,3 EUR / 10:00
• Feb ZEW Survey Expectations, last 23,2 EUR / 10:00
• Feb ZEW Survey Expectations, exp 15, last 16,6 EUR / 10:00
• 4Q P GDP SA QoQ, exp 0,50%, last 0,50% EUR / 10:00
• 4Q P GDP SA YoY, exp 1,80%, last 1,80% EUR / 10:00
• Jan NFIB Small Business Optimism, exp 105, last 105,8 USD / 11:00
• Dec Retail Sales MoM, exp -2,00%, last 2,00% BRL / 11:00
• Dec Retail Sales YoY, exp -4,60%, last -3,50% BRL / 11:00
• Jan PPI Final Demand MoM, exp 0,30%, last 0,30%, rev 0,20% USD / 13:30
• Jan PPI Ex Food and Energy MoM, exp 0,20%, last 0,20%, rev 0,10% USD / 13:30
• Jan PPI Ex Food, Energy, Trade MoM, exp 0,20%, last 0,10% USD / 13:30
• Jan PPI Final Demand YoY, exp 1,50%, last 1,60% USD / 13:30
• Jan PPI Ex Food and Energy YoY, exp 1,10%, last 1,60% USD / 13:30
• Jan PPI Ex Food, Energy, Trade YoY, last 1,70% USD / 13:30
• Fed's Lacker to Speak at University of Delaware USD / 13:50
• Fed's Yellen Appears Before Senate Banking Panel USD / 15:00
• Dallas Fed's Kaplan Speaks in Houston USD / 18:00
• Fed's Lockhart to Speak on Economy in Huntsville, Alabama USD / 18:15
• RBA'S Heath Speech at ABE Conference in Sydney AUD / 20:50
• Jan Foreign Direct Investment YoY CNY, exp 1,40%, last 5,70% CNY / 23:00
• Jan Tax Collections, exp 138200m, last 127607m BRL / 23:00

The Risk Today:

EUR/USD's selling pressures continue. the pair has broken strong hourly support given at 1.0620 (30/01/207 low). The break of this level is paving the way towards stronger hourly support at 1.0581 (16/01/2016 low) and 1.0454 (11/01/2017 low). Expected to see continued decrease. In the longer term, the death cross late October indicated a further bearish bias. The pair has broken key support given at 1.0458 (16/03/2015 low). Key resistance holds at 1.1714 (24/08/2015 high). Expected to head towards parity.

GBP/USD is still trading below strong resistance given at 1.2771 (05/10/2016 high). The technical structure suggests that the pair should back bouncing lower towards support given at 1.2254 (19/01/2016 low). The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY is now consolidating after its increase from support given at 111.36 (28/11/2016 low). Hourly resistance is given at 115.62 (19/01/2016 high). Expected to see continued sideways price action. We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

USD/CHF's medium-term momentum is still bearish despite ongoing increase. Key resistance is given at a distance at 1.0344 (15/12/2016 high). We believe that the road is nonetheless clearly wide-open for further decline if the pair gets back below parity. In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.

The pair is consolidating after yesterday's failure to sustain break above 114.00 barrier.

Gains were capped by falling 30SMA and just under 114.28 pivot (Fibo 38.2% of 118.59/111.61 pullback).

The downside was so far protected by broken bear-trendline from 118.59 peak, currently at 113.25 (near Fibo 38.2% of 111.61/114.13 upleg).

Risk is turning at the downside, as slow stochastic is reversing from overbought territory – negative signal.

Firm break below the trendline/Fibo 38.2% support would trigger fresh acceleration and expose next pivot at 112.85 (daily Tenkan-sen) for stronger bearish signal.

Conversely, sustained break above 113.90/114.20 upper pivots, would improve near-term structure and signal extended recovery.

Res: 113.91, 114.20, 114.47, 114.93
Sup: 113.25, 112.85, 112.58, 112.20

The pair remains biased lower following yesterday's probe and marginal close below 55SMA pivot that generated fresh bearish signal. Break lower was not sustained for now, with temporary base forming at 1.0590 zone. Subsequent bounce is seen corrective and should be capped by hourly Ichimoku cloud that lies above (cloud is spanned between 1.0628 and 1.6656), before bears resume. Initial target lies at 1.0583 (50% of 1.0339/1.0827 upleg), ahead of strong supports at 1.0550/25 (daily cloud base/Fibo 61.8% of 1.0339/1.0822 rally). Firm break above hourly cloud (cloud top is at the same level with yesterday's high) would sideline immediate bears, in favor of stronger correction. Upper triggers lay at 1.0681 (Fibo 38.2% of 1.0827/1.0591) and 1.0708 (daily Tenkan-sen).

Res: 1.0628, 1.0640, 1.0656, 1.0681
Sup: 1.0590, 1.0550, 1.0525, 1.0509

'With inflation picking up from low levels, we cannot expect current monetary stimulus to last forever'. - Valdis Dombrovskis, European Commission

On Monday, the European Commission released its latest set of economic forecasts, suggesting that the Brexit vote and elections in Germany and France would have a significant impact on the Euro zone economy. The latest estimates suggest the region's economy is likely to expand 1.6% in 2017, following the preceding year's growth pace of 1.7%. However, it is highly expected to regain footing in 2018, growing at an annualized pace of 1.8%. Back in November, the Commission estimated the Euro zone's economy would grow 1.5% this year and 1.7% in 2018. The region's largest economy, Germany, is set to expand 1.6% in 2017, down from 1.9% in 2016. Meanwhile, economic growth is expected to climb from 1.2% to 1.4% in France, and keep steady at 0.9% in Italy. The key reason for the upward revisions to the forecasts was stronger than expected performance in the second half of 2016. The Commission also revised up its forecasts for the UK economy, despite the Brexit vote. The British economy is set to expand 1.5% in 2017 and 1.2% in 2018, compared to a 2% growth pace in 2016. In November, it said the economy would expand just 1% in 2017. The 2018-year growth forecast remained unchanged. In 2016, the British economy outperformed all other G7 economies. The Commission also said inflation would hit 1.7% this year but drop to 1.4% in 2018.

'The fact that the economy grew a fourth straight quarter on the back of exports should be considered a passing mark for policymakers'. - Hidenobu Tokuda, Mizuho Research Institute

Japan's economy expanded for the fourth consecutive quarter in the three-month period to December 2016 amid higher exports supported by the weak Yen. Figures released on Monday showed Japan's economy grew at an annualized pace of 1.0% in the Q4, following the preceding quarter's downwardly revised pace of 0.3% and falling behind analysts' expectations for a 0.3% expansion. Economic growth in the Q4 was mainly driven by stronger exports, which offset weak domestic demand. Last week, during a meeting with the Japanese PM Shinzo Abe, the US President Donald Trump accused Japan of using its monetary policy to weaken the Yen and benefit from it. The US Dollar rebounded sharply in the weak of the US 2016 presidential election, rising above 118 versus the Yen and rebounding from its October low of 101. Monday's data showed external demand contributed 0.2% to GDP in the Q4, with exports climbing 2.6%, the strongest growth in two years, while private consumption showed no growth, meeting analysts' projections. Meanwhile, housing investment advanced 0.2%, the slowest growth in four quarters, whereas capital expenditure jumped 0.9%, following a 0.3% drop in the previous quarter. The data also showed the GDP deflator, another measure of inflation, declined 0.1% in the past quarter, marking its second quarterly decline.

'It's Le Pen's anti-euro stance that's worrying.' – Mark Gilbert, Bloomberg

Pair's Outlook

As it was forecasted before, the common European currency found support against the US Dollar in the 55-day simple moving average, which on Tuesday was at 1.0604 level. However, the forecast of a decline of the Euro against the Greenback still remains intact, as the latest rebound is seen as a consolidation after three consecutive trading sessions of losses for the Euro. The next level, where the pair will be heading is the weekly S1, which is located at 1.0568. Although, it is unclear where exactly the rate will encounter resistance, which will propel it lower.

Traders' Sentiment

SWFX traders have not changed their opinion, as 51% of open positions are long on Tuesday. In the meantime, 58% of trader set up orders are to sell the Euro.