'Global uncertainty from the U.S., Europe and on the Korean front will drive global prices high again as prices couldn't break the December-low.' – Hareesh V, Geofin Comtrade Ltd. (based on Reuters)

Pair's Outlook

The yellow metal began the week near the 1,230 level, where it traded rather flat during the early hours of Monday's trading session. The bullion began the week below the newly calculated weekly PP, which is located at 1,232.24. It is most likely that the commodity price will continue to decline by the end of the day, as the closest support level is located at 1,219.77, where the weekly S1 is located at. In addition, the weekly S1 is supported by the 38.20% Fibo at 1,219.20 level. After encountering this support level, the bullion is likely going to rebound and begin to regain strength.

Traders' Sentiment

SWFX market sentiment remains bullish, as 55% of open positions are long. In the meantime, 57% of trader set up orders are to buy the metal.

The pair moved to the upper part of near-term 0.7600/0.7700 range, following Friday’s rally that confirmed higher base at 0.7600 zone.

Firm bullish setup of daily studies is supportive for break above 0.7700 barrier and final push towards target at 0.7776 (08 Nov peak) to mark full retracement of 0.7776/0.7158 descend.

Initial support lies at 0.7656 (session low) ahead of rising daily Tenkan-sen at 0.7621 that continues to underpin ascend since early Jan and lower breakpoint at 0.7600 (higher base, reinforced by rising 20SMA).

However, extended sideways mode could be expected while the price holds within 0.7600/0.7700 range.

Res: 0.7687, 0.7694, 0.7732, 0.7765
Sup: 0.7656, 0.7621, 0.7600, 0.7568

The pair cracked psychological 114.00 barrier today, on extension above initial target at 113.91(Fibo 61.8% of 115.36/111.57 downleg). Fresh bulls were limited by falling 30 SMA for now, but the downside stays protected by 20SMA at 113.35 that marks initial support. Expect near-term action to remain biased higher while the price remains above upside-turning daily Tenkan-sen (currently at 112.85). Daily close above 113.91 is needed to signal further recovery and open way towards next pivotal barrier at 114.54 (daily Kijun-sen).

Res: 113.91, 114.13, 114.54, 114.93
Sup: 113.35, 113.20, 112.85, 112.50

Strong bullish acceleration in early Monday's trading sidelined immediate downside risk after last Thu-Fri weakness was contained by daily Ichimoku cloud at 1.2442.

Fresh rally probes above strong barrier at 1.2525 (daily Tenkan-sen) would trigger extension towards next pivot at 1.2580 (last week's high / near Fibo 61.8% of 1.2704/1.2345 downleg).

Improving near-term technicals are supportive, together with bullishly aligned dailies, with daily close above Tenkan-sen to confirm bullish near-term stance.

Focus is expected to stay shifted at the upside while daily cloud holds, with sustained break above 1.2580 to confirm higher low at 1.2438 (Friday's low) and signal further upside.
Conversely, increased downside risk could be expected on penetration into thickening daily cloud (currently spanned between 1.2399 and 1.2442).

Res: 1.2548, 1.2567, 1.2580, 1.2620
Sup: 1.2495, 1.2454, 1.2442, 1.2403

The Euro bounced in Asia after extension of two-day downleg from 1.0708 lower top found footstep at 1.0606 (55SMA) that so far holds. Overall picture remains bearish and favors fresh weakness after correction. Break below initial supports at 1.0606/1.0583 (55SMA / 50% of 1.0339/1.0827) would expose daily cloud base (1.0550) and Fibo 61.8% support at 1.0525 Broken Kijun-sen (1.0641) that now acts as initial resistance is under pressure, with upticks expected to be ideally capped under 1.0665 (Friday's high/falling 5SMA). Upper pivot lies at 1.0707 (20 SMA) and only firm break here would neutralize near-term bears.

Res: 1.0665, 1.0707, 1.0755, 1.0775
Sup: 1.0603, 1.0583, 1.0550, 1.0525

EUR/USD

Current level - 10648

The downtrend is intact, heading towards 1.0580, en route to 1.0500 area. Crucial resistance on the upside is 1.0700.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 113.68

The bias remains positive, for  break through 114.00 resistance area, towards 115.65 zone.

GBP/USD

Current level - 1.2512

The intraday outlook is neutral after the recent reversal at 1.2436. Key support lies at 1.2415 and major resistance is projected at 1.2610.

On the 4h chart of EURUSD, we are observing a nice bearish reversal taking place, with price currently trading in black wave 3 as part of a higher degree decline, that may unfold in weeks ahead. As such this bearish reversal is a sign for a completed complex correction that was recognized in wave 4). A five wave fall from the highs and a broken corrective channel line is also an indication for lower levels to follow.

EURUSD, 4H

Sunrise Market Commentary

• Rates: Calm start of the week?
  The eco calendar is empty today. Sentiment in Asia is modestly risk-on. In this context, core bonds may feel some modest downside pressure, especially as investors will also be cautious ahead of Yellen's testimony on Tuesday and a raft of US eco data, including inflation to be released Wednesday.
• Currencies: dollar extends gradual rebound
  The dollar still profits from a constructive risk sentiment. The positive tone from the meeting between president Trump and Japanese PM Abe eased market fears on global trade and is marginally supportive for the dollar. The prospect of important tax measures in the US still prevents investors from going short equities and the dollar.

The Sunrise Headlines

• On Friday, US equities eked out modest gains, setting again new all-time highs in an uneventful session. Asian equities start the week with moderate gains, as the yen weakens and dollar slightly strengthens and ahead of key US eco data.
• Japanese investors culled their stakes of US Treasuries in December by the most in four years. It's not just Japanese investors, as across the world foreigners are pulling back from USD debt like never before.
• Fed Tarullo, dove and architect of the Fed's banking regulation, will leave the Fed early April. It gives Donald Trump the opportunity to nominate 3 new Fed governors and to reshape the Fed's oversight of Wall Street and monetary policy.
• Commodities opened the week excellent with copper and iron ore surging, while oil stabilizes. Copper futures hit the highest level since 2014. It pushed producer shares higher in Asia.
• Fitch affirmed Sweden's AAA+ rating stable outlook and Slovakia's A+ rating stable outlook
• Fed vice chair Fischer said over the weekend that significant uncertainty remains over the outlook for US fiscal policy
• Tokyo stocks gained as PM Abe and president Trump refrained from arguing about FX levels during their meeting. Japanese GDP grew for the 4th consecutive quarter, but the advance (0.2% Q/Q) was slightly below expectations.
• Today's eco and event calendar is empty. Attention might go to the Italian BTP auction. Later this week, Yellen will hold her semi-annual testimony before Congress and manifold interesting US eco data will be released

Currencies: Dollar Extends Gradual Rebound

Dollar extends gradual rebound

On Friday, the dollar traded again higher, as the new phase in the reflation trade continued. USD/JPY trended higher in the 113 big figure, supported by higher core/US yields and by a decent equity sentiment. The decline of EUR/USD was even more pronounced as the pair also suffers from underlying euro softness. The US rally slowed in US trading after Michigan consumer confidence was reported softer than expected. USD/JPY closed the session at 113.22 (from 113.25 on Thursday). EUR/USD finished the session at 1.0643 (from 1.0655).

Overnight, Asian equities show modest gains across the board. The meeting between US president Trump and Japanese PM Abe developed in a constructive environment, easing market fears on global trade tensions. Asian equities are also supported by new equity records (three indices) in the US on Friday. Japan Q4 GDP was reported marginally softer, but had no big impact on trading. Japanese investors cut their Treasury holdings the most on four years in December. This could be a negative for the dollar. However, currently, the risk-on sentiment prevails and is supporting the dollar. USD/JPY is trading in the 113.70 area. EUR/USD also resumed its gradual decline, trading in the 1.0630 area.

Today, the eco calendar is empty. So, USD trading will be driven by global market sentiment. The price action in Asia suggests a positive risk sentiment at the European open. This is USD supportive. Investors apparently still don't want to go short US equities and/or short USD as US president Trump promised to present its tax plans in the near future. Short-term, markets will also look forward to Fed's Yellen semi-annual testimony before Congress (Tuesday). The Fed chair will probably keep a balanced approach, but confirm that the Fed is nearing its targets. Yellen's assessment at least shouldn't be negative for the dollar. Markets will also keep a close eye on the US CPI and retail sales data (Wednesday). We start the week with a cautious USD-positive bias, but the moves might by modest given the upcoming key events/data

Global context: The dollar is/was in a corrective downtrend since the start of January as the Trump reflation trade petered out. Interest rate differentials in favour of the dollar narrowed. Trump's communication became a source of uncertainty, also for the dollar. At some point, absolute interest rate support should provide a USD floor, especially as the Fed is expected to continue its policy normalisation. Last week, the dollar showed tentative signs of a bottoming out process, supported by the ‘Trump tax promise'. Price action earlier last week showed that euro weakness might be a factor too. As we see the 1.0874 as solid resistance, a sell EUR/USD on upticks approach might be considered. The downside test of USD/JPY is also rejected. USD/JPY 111.16 (38% retracement of the 99.02/118.66 rally) remains key support. The day-to-day momentum improved, but a return to the recent highs looks an uphill battle. The post-Trump highs (118.60/66) are still far away.

EUR/USD: Topside test rejected. Dollar succeeds a cautious/gradual comeback

EUR/GBP

EUR/GBP holding in the 0.85 area

On Friday, UK eco data were unequivocally positive. Production rose more than expected and so was construction output. At the same time, the UK trade deficit narrowed more than expected. However, for the production output and the trade deficit, the ONS mentioned one-off factors potentially distorting the data. Sterling gained temporary a few ticks after the data, but the gains couldn't be sustained. EUR/GBP even spiked temporary higher in the 0.85 big figure. Sterling sentiment improved slightly later in the session. EUR/GBP closed the day at 0.8513 (from 0.8526). Cable ended the session at 1.2491.

Today, there are no UK or EMU eco data. For now, we see no driver for sterling trading. A constructive risk-on sentiment and tentative euro softness caps the topside of EUR/GBP short-term. Later this week, important UK eco data including the CPI, the labour data and the retail sales will be published. We still look out whether the 0.8450 support will continue to play its role as ST line in the sand. Context. The ongoing balanced BoE approach capped the topside of sterling and helped a cautious bottoming out process for EUR/GBP. Last week, sterling rebounded as the UK Parliament was allowed to vote on the final Brexit agreement. We don't see this ‘agreement' as a reason for further sterling strength though. The EUR/GBP 0.8450 support remains key for EUR/GBP short-term. A cautious EUR/GBP buy-on-dips approach remains preferred, but overall euro softness remains a risk. In case of a break, the 0.8304 area is the next MT support

EUR/GBP still struggles to rebound off the 0.8450 support area

Download entire Sunrise Market Commentary

The US dollar opened with a positive gap on Monday against most of its counterparts and continued to trade higher during the Asian morning in the aftermath of the meeting between US President Trump and Japanese Prime Minister Abe over the weekend. The positive reaction in the greenback may have been due to the absence of any discussion on the issues of currency manipulation or trade policy by the two leaders. What's more, market participants may have been concerned of President Trump taking this opportunity to jawbone the dollar again. With that risk finally out of the way, investors likely breathed a sigh of relief, and may have assumed new long positions in USD.

USD/JPY was one of the currency pairs that opened with a gap up and continued to rally until it hit resistance slightly above the 114.00 (R1) barrier. Then the pair retreated somewhat, but we still believe that the short-term outlook may have turned positive following the completion of a short-term double bottom on Thursday. Considering the recent signals from Trump that he will announce a "phenomenal" plan on tax reform within the coming weeks, we maintain the view that speculation regarding fiscal stimulus could keep the greenback broadly supported in coming days, absent any verbal interventions from the government. As such, we expect the bulls to regain control soon and push the rate up for another test near 114.00 (R1). A clear break above that obstacle could see scope for extensions towards our next resistance of 114.80 (R2). The next major market moving event for USD will probably be tomorrow, when Fed Chair Yellen testifies before Congress.

As for the bigger outlook of USD/JPY, the recent recovery confirms our view that the slide started early January was just a corrective phase which could be over. However, we prefer to wait for a decisive break above 115.50 (R3) before we assume the resumption of the prevailing medium-term uptrend.

CAD lifted by remarkable employment data

The Canadian dollar came under renewed buying interest on Friday, following the release of the nation's jobs data for January. All the indicators beat their forecasts significantly, with the unemployment rate declining instead of staying unchanged as expected, and the labor force participation rate rising. This means that the number of unemployed people fell, even as the total number of people available to work rose, a strong indication that the slack in Canada's labor market is quickly diminishing. In our view, these data lower notably the likelihood for the Bank of Canada to take any action in the foreseeable future, something that may keep the Canadian dollar supported for a while. USD/CAD tumbled to break below the support (now turned into resistance) barrier of 1.3110 (R1), but hit support slightly above 1.3050 (S1) and rebounded to test the 1.3110 (R1) zone as a resistance. We believe that sellers may take advantage of that level and drive the battle lower for another test near 1.3050 (S1). If they prove strong enough to overcome that obstacle, we may see a test near the psychological zone of 1.3000 (S2). This view is amplified by the fact that oil prices remain relatively high and that the recent sentiment in the energy market appears somewhat bullish. The latest IEA report on Friday showed that OPEC members have reached a record 90% compliance with their agreed output cuts, which suggests that oil prices could remain elevated in coming weeks. However, considering our view for both a stronger USD and a stronger CAD, we would avoid USD/CAD as a proxy for any further CAD gains. The technical picture agrees with that view as the pair seems to be trading within a falling wedge formation on the daily chart, something that may keep any further declines limited near the lower bound of the pattern. Instead, EUR/CAD may be a better pair to exploit more strength in the Canadian dollar, especially given the political risks facing the Eurozone, which have started to weigh on the common currency.

Today's highlights:

During the European day, the economic calendar is very light. The only noteworthy indicator we get is Sweden's unemployment rate for January, though no forecast is available yet.

With regards to the speakers, US President Trump will meet Canada's Prime Minister Trudeau. Any comments on trade policy, especially on the future of NAFTA, could cause some volatility in both USD and CAD.

As for the rest of the week:

On Tuesday, during the Asian morning, we get China's CPI and PPI data for January. In the US, the main event will be Fed Chair Yellen's semi-annual testimony on monetary policy before the Senate Banking Committee of Congress. She will present the same testimony before the House of Representatives on Wednesday. Although the testimony will be the same on both occasions, we expect market participants to pay extra attention to the Q&A sessions. In particular they may be on the lookout for any fresh hints regarding her view on the economy, and whether she is likely to vote in favor of a rate hike in the upcoming policy meetings. From the UK, we get inflation data for January.

On Wednesday, market participants are likely to turn their gaze to Sweden, where the Riksbank will announce its policy decision. The last time the officials met, they extended the duration of their QE program and maintained a rather sanguine tone in the meeting statement, indicating that the outlook for economic activity in Sweden and abroad has improved somewhat. Considering that since that gathering the nation's CPI and CPIF rates for December both surged to reach highs last seen in 2011 and 2012 respectively, we see a very low likelihood for the Bank to take action. In the UK, employment data for December are due out. As we already noted, in the US, Fed Chair Yellen will testify before lawmakers again, this time before the House Committee on Financial Services. With regards to the US economic indicators, we get inflation and retail sales data, all for January.

On Thursday, the economic agenda is relatively empty, with no major events and only second-tier indicators due to be released.

On Friday, we get UK retail sales data Sweden's CPI data, both for January.

Market movers today

We have a very quiet start to an otherwise busy week on the macro front. Today will not provide any key figures, only new economic forecasts from the European Commission. Apart from data and central bank speeches, focus will continue to be on any announcements by Donald Trump on policies and on developments in the French election campaign.

On the macro front, Fed chairman Janet Yellen is due to hold her first semi-annual testimony before Congress since Trump was inaugurated. Focus will be on any guidance on the timing of the next rate hike. We continue to look for a June hike but risks are still skewed towards an earlier hike.

On the global data front, focus will be on US retail sales and CPI, German ZEW index and GDP, UK CPI and Chinese producer price inflation. See Weekly Focus, 10 February 2017 for more on this.

In the Scandies, all eyes will be on the Riksbank on Wednesday and Swedish inflation data on Friday. In Norway, the annual address by the central bank governor will be the main event.

Selected market news

Reflation trades were back in fashion late last week with equities and bond yields higher and USD stronger again. US equities finished at a new all-time high after trading sideways for a while and all Asian indices are up this morning. Risk sentiment got a lift from a change in tone from US president Donald Trump on foreign politics, lowering the immediate risk of a clash between the US and China or other trade partners. Trump's telephone call with Chinese president Xi Jinping last week and his two-day summit with Japan's Prime Minister Shinzo Abe points to a change in style on foreign politics following his very confrontational comments recently.

For now, this has lowered the risk of a foreign policy clash or trade war. We would warn against Trump given he has changed tack many times before, and given his very harsh criticism of China previously, it is probably still too early to call off the risk of a trade war. However, for now, it is clearly a positive development and has dampened one of the key risks this year.

Oil prices rose on Friday as OPEC achieved 90% compliance with its pledged oil cut. The news came from the International Energy Agency (IEA). Brent oil prices are back in the upper end of the past three months' range between USD54 and USD57 per barrel.

In Japan, GDP for Q4 rose 1.0% q/q annualised, which was close to expectations of 1.1% q/q annualised.

No big news in the French election campaign. Polls still suggest Emmanuel Macron is currently the favourite to become the new French President. However, there is still a long way to go until the election in late April and many things could happen before then.