Daily Pivots: (S1) 120.21; (P) 120.69; (R1) 120.99; 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.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

EURUSD

The EURUSD attempted to push higher yesterday topped at 1.0658 but closed lower at 1.0591. The bias remains bearish in nearest term testing 1.0550 – 1.0500 area as a part of the bearish scenario after broke below the bullish channel and H4 EMA 200 as you can see on my H4 chart below. Immediate resistance is seen around 1.0650. A clear break above that area could lead price to neutral zone in nearest term testing 1.0700 area. Overall I remain neutral.

GBPUSD

The GBPUSD had a moderate bullish momentum yesterday topped at 1.2539. The bias is neutral in nearest term probably with a little bullish bias testing 1.2600 resistance area. Immediate support is seen around 1.2480. A clear break below that area could trigger further bearish pressure testing 1.2440/00 support area. Overall I remain neutral.

USDJPY

The USDJPY was indecisive yesterday. Price attempted to push higher topped at 114.16 but closed lower at 113.72 and hit 113.53 earlier today in Asian session. The bias is neutral in nearest term probably with a little bearish bias testing 113.00 – 112.85 support area. Immediate resistance is seen around 114.00. A clear break and daily close above that area could trigger further bullish pressure testing 115.60 key resistance which remains a good place to sell.

USDCHF

The USDCHF had a moderate bullish momentum yesterday topped at 1.0069. The bias remains bullish in nearest term testing 1.0100 – 1.0150 area. Immediate support is seen around 1.0040. A clear break below that area could lead price to neutral zone in nearest term testing 1.0000 or lower. Overall I remain neutral.

Daily Pivots: (S1) 141.76; (P) 142.18; (R1) 142.89; More...

GBP/JPY edges higher today and intraday bias remains mildly on the upside for 144.77 resistance. Rise from 136.44 is seen as the second leg of the consolidation pattern from 148.42. 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.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Daily Pivots: (S1) 1.0648; (P) 1.0664; (R1) 1.0672; 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.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Daily Pivots: (S1) 0.8437; (P) 0.8478; (R1) 0.8499; More...

EUR/GBP's break of 0.8469 support indicates resumption of fall from 0.8851. This is in line with our view that fall from 0.8851 is the third leg of the corrective pattern from 0.9304. Intraday bias is now back on the downside for 0.8303 low next. Break will extend the fall from 0.9304 to 0.8116 key cluster support level. On the upside, above 0.8550 minor resistance will turn bias neutral first. But outlook will stay bearish as long as 0.8643 resistance holds.

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).

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Daily Pivots: (S1) 1.3834; (P) 1.3862; (R1) 1.3894; More...

EUR/AUD's decline continues today and reaches as low as 1.3808 so far. Intraday bias remains on the downside for 1.3671 key support level next. At this point, we'd still 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.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

US stocks extended the record run overnight as Trump trade remained in force. DJIA closed up 142.79 pts or 0.70% at 20412.16. S&P 500 rose 12.15 pts, or 0.52% to end at 2328.25. NASDAQ gained 29.83 pts or 0.52% to 5763.96. All three indices closed at record highs. Treasury yields also increased mildly but stayed in familiar range. 10 year yield rose 0.025 to end at 2.434. Dollar followed higher with the index hitting 101.11 and breached 101.02 resistance. But there is no sustainable momentum above this resistance yet. In the currency markets, Yen remains the weakest major currency on risk appetite. Euro follows as the second weakest on worries over political situations in Europe. The economic calendar is very busy today but main focus will be on Fed chair Janet Yellen's semiannual testimony to the Senate.

Fed Yellen to Deliver Non-Committal Message

Fed fund futures are pricing in 17.7% chance of a March Fed hike and 66.1% chance by June. Markets will look into Yellen's speech on any change on Fed's forecasts of three rate hike this year. Some might also want to get hints on chance of March hike. However, based on uncertainties over the fiscal policies Trump would adopt, it's likely that Yellen would sound non-committal. Meanwhile, there are also talks that Fed's Yellen's speech doesn't carry the same significance as before. Yellen's stance could be irrelevant as US president Donald Trump would appoint three member of Fed. And that would reshape the policy path.

Dallas Fed Kaplan: Mover Sooner

Dallas Fed president Rob Kaplan said yesterday that Fed should be "moving sooner rather than later will make it more likely that future removals of accommodation can be done gradually - that is, reduce the likelihood that the Fed will get 'behind the curve' and feel the need to remove accommodation more rapidly." He argued that keep rates on hold at current low level for too long could create distortions in investment and hiring.

NY Fed Survey: Inflation Expectations Highest Since June 2015

A New York Fed survey released yesterday show that US inflation expectations rose to the highest level since June 2015. The year-ahead inflation expectations jumped to 3.0%, up from 2.8% in December and 2.5% in November. The three-year inflation expectation was at 2.9% up from 2.8% in December. New York Fed noted that "both increases were fairly broad-based, but largest among younger and higher-income respondents."

On the data front, Australia business confidence rose to 10 in January. China CPI accelerated to 2.5% yoy in January while PPI also accelerated to 6.9% yoy. Looking ahead in European session, Eurozone, Germany and Italy GDP will be featured together with German ZEW economic sentiment. Swiss and UK will both release CPI and PPI. Later in the day, US will release PPI.

EUR/AUD Daily Outlook

Daily Pivots: (S1) 1.3834; (P) 1.3862; (R1) 1.3894; More...

EUR/AUD's decline continues today and reaches as low as 1.3808 so far. Intraday bias remains on the downside for 1.3671 key support level next. At this point, we'd still 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.

Economic Indicators Update

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Previously, we had EUR/GBP bouncing off daily support, which as you can see if you bring up the pair on your own MT4 charts, gave a nice trade with multiple chances to get long.

Some hindsight trading homework for you would be to look at that daily level and then where you could have got long on any short term pullbacks. Think about why you'd wait for a pullback and also the risk:reward ratios that you can give yourself by waiting.

Back to the present and as you can see, the EUR/GBP daily chart shows that after the higher time frame support level held, price has again pulled back:

EUR/GBP Daily:

It hasn't quite pulled back all the way to the higher time frame level, but this intraday swing low level just above is certainly in play:

EUR/GBP 4 Hourly:

I've redrawn the level as a zone on the intraday chart so you can see what I'm talking about a little clearer. With daily support having held, if this intraday zone holds, I'm happy to look for longs on any retests back into or around it.

Markets await Yellen

It has been a quiet start to the week, but the markets should pick up with Fed Chair Yellen's semi-annual testimony before Congress. While the Feds have been taking a back seat of late to Fiscal and Tax banter, Dr Yellen returns to the spotlight this evening, and as usual, the market is sitting on pins and needles.

While there is tremendous uncertainty over the new US administration policies, I expect her to hold the FOMC cards close to the chest and to avoid any explicit jawbone to a March rate hike. Guidance will be sufficient to tighten up market interest rate expectations, and we could see the dollar punch higher.

Australian Dollar

The AUD was a bit of a drifter overnight as any upward momentum was sapped by concerns of a hawkish Yellen testimony. The stronger US tempered base and precious metals prices, and despite another bump in iron ore prices, interest remained muted ahead of Dr Yellen's appearance.
Overall, price action is very much reflective of last week's neutral RBA. The current technical trading edges remain very much intact. There is strong resistance between 77- 7750, while the .7500 offers major support.

New Zealand Dollar

The NZD, on the other hand, continued to roll over after the RBNZ statements last week, and all but wrong-footed traders with a neutral interest rate outlook.

Japanese Yen

Market optimism over the Trump-Abe talks continues to hold, but the lack of a convincing follow-through above saw profit taking quickly out of the market. The feel-good factor remains intact, with the market leaning for a hawkish Dr Yellen. Dollar dips should remain well supported today.

Chinese Yuan

Yuan tracked the JPY lower, undermined by concerns about a hawkish Yellen speech and US tax reform. Risk points lower for the Yuan as the markets reprice US tax reform.
Expect external drivers to be the dominant force ahead of China's annual parliamentary session in March. Mainland policymakers seldom if ever rock the boat ahead of major events. PBOC has resumed open market operations.

It's been a slow start to trading on Monday, with a lack of major news flow or data providing few catalysts, but unlike last week that is unlikely to continue with numerous events scheduled that could shake things up.

The feeling at the start of the week is predominantly of relief. Donald Trump met with Shinzo Abe over the weekend which, given his tone towards Japan during his election campaign, could have been a tasty affair but as we saw following a phone call with Xi Jinping on Friday, the meeting appeared to go very smoothly. Of course we know very little about what was said behind the scenes but there is a sense of relief that the joint statement focused on "bilateral cooperation", which appeared to be a welcome step down from Trump's previous stance.

This sense of relief is helping drive equity markets higher in Europe and US futures suggest we'll see similar moves on Wall Street when the bell gets the week underway. The noises coming from the White House over the last week have certainly been more market friendly, with Trump also signalling that sweeping tax cuts that were promised during the campaign will be announced in the next few weeks. Other policies will continue to leave a cloud of uncertainty over markets for now but with all three major indices at record highs, it's clear that investors are pleased with how things are progressing, so far.

Oil has recovered some of its losses after OPEC released its monthly report which largely confirmed the report from IEA on Friday which claimed that compliance with cuts within the cartel was above 90% in January. In fact, OPEC claimed 93% compliance from the 11 members which have agreed to take part, with Saudi Arabia actually cutting more than it agreed taking its output to 9.748 million barrels per day. The report also slightly revised higher its demand growth forecasts and claimed the oil market will see zero average surplus this year, from 985,000 barrels per day last month.

While this level of compliance is unusually strong, many still believe the agreement to cut 1.8 million barrels per day until June will still not be enough to bring the market back into balance. An extension to the cuts has been touted by some including Russian energy minister Alexander Novak, who claimed the decision on whether to extend could be made at a meeting with Saudi Arabia in April or May.