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President Donald Trump now has to nominate three Fed governors, as Daniel Tarullo has announced he will step down on 5 April. While Trump has expressed different views on monetary policy, we think it is most likely that he will appoint hawkish governors.

Fed Chair Yellen's and Vice Chair Fischer's terms expire in 2018 (in February and June, respectively) and Trump has indicated he would be likely to replace them. One of Trump's nominees for the three vacant seats is likely the next Fed Chair.

Trump is likely to nominate a total of five new governors over the next two years, as Yellen and Fischer are expected to leave the Fed if they are not reappointed.

The Fed may become more rule-based in coming years due to Trump's nominations. A simple Taylor rule based on PCE core inflation and output gap suggests the Fed funds rate should be 3.0% currently. It is more difficult to predict the impact on overall US yields, as it also depends on the impact on inflation expectations.

The Fed's independence may come under greater pressure, as tighter monetary policy would offset Trump's expansionary fiscal policy, which could frustrate him.

After five consecutive weeks of declines,the U.S. dollar finally received a boost last weekleaving many traders wondering if this spike is going to be short-lived or if it would lead to a major reversal and a re-test of the 14-year high.

The motivation behind the rally cannot be attributed to improvement in macroeconomic conditions as only Tier 2 data were released from the U.S. and were rather mixed. In fact, the dollar essentially got a boost from President Trump comments on Thursday regarding the announcement of a phenomenal tax reform proposal to be expected in the next two to three weeks. It's possible that nothing will take fruition as these were the same promises that drove U.S. equities to record highs after the elections; however, it was enough to distract investors from his initial policies on travel bans and protectionism.

There's a high chance for the greenback to resume its rally the week ahead, especially if such comments were reiterated, but traders should be aware that with no progress on such policies the impact on the dollar's price action will be diminished on the longer run. Another risk dollar bulls should be aware of is that President Trump is against a strong currency, so a reduction in taxes along with spending programs may come along with policies to cap any potential rally in the greenback, such as implementing trade tariffs.

Fed Chair Janet Yellen's first semi-annual testimony before Congress on Tuesday and Wednesday is going to grab most of traders' attention the week ahead. The Fed's statement on February 1 didn't provide any additional clues on monetary policy direction, and as of last week, markets were only pricing in 13.3% chance for a rate hike in March and 23.7% in May. Overall, markets still believe that only two rate hikes will occur in 2017 as opposed to the Fed's guidance of three. In terms of economic data, there wasn't sufficient evidence to support aggressive tightening, and same applies for fiscal measures. Thus, it's going to be interesting on which side will Yellen move the needle. If she was able to convince the markets that the Fed is on the path of three rate hikes and that March is a live meeting, then U.S. bond yields will rise further and the best way to play it is against the Japanese Yen. I choose the Japanese currency because yield spreads of U.S. and Japanese bonds will potentially widen the most, thus providing USD/JPY another boost towards 115. Otherwise a dovish message will lead USDJPY to resume its six weeks' downtrend potentially retesting 111.50.

Despite the fact that Yellen's testimony is likely to be the major risk event for the U.S. dollar; traders will also have a busy economic calendar to monitor. Inflation figures, retail sales, industrial production, housing starts and building permits are all due to release.

Japan GDP maintains growth trajectory

Asia Mid-Session Market Update: Trump-Abe summit marred by North Korea missile launch; Japan GDP maintains growth trajectory

Friday US markets on close: Dow +0.5%, S&P500 +0.4%, Nasdaq +0.3%

Best Sector in S&P500: Materials

Worst Sector in S&P500: Consumer Staples

Biggest gainers: ATVI +18.9%; CBG +7.7%; NWSA +7.3%

Biggest losers: CERN -4.4%; TDC -3.2%; WU -3.1%

At the close: VIX 10.9 (-pts); Treasuries: 2-yr 1.21% (flat), 10-yr 2.41% (+1bps), 30-yr 3.01% (flat)

Weekend US/EU Corporate Headlines

SAZ.DE: Private equity group Cinven makes €3.6B takeover offer or ~€58/shr (17% premium to Fri close) - press

Politics

(US) White House advisor Stephen Miller: Administration is considering different options after immigration ban decision in the appeals court, including drafting a new executive order - press

(ES) Spain PM Rajoy has been reelected as the leader of the ruling conservative Popular Party for the 4th term - press

(MX) Approval rating for Mexico's left-wing National Regeneration Movement party leader López Obrador has risen 4pts since the US election give his vocal opposition to President Trump - press

Key economic data:

(JP) JAPAN PRELIM Q4 GDP Q/Q: 0.2% V 0.3%E; Y/Y: 1.0% V 1.1%E

(NZ) NEW ZEALAND JAN CARD SPENDING M/M: +2.7% V 0.7%E; TOTAL M/M: 2.5% V 0.0% PRIOR

Asia Session Notable Observations, Speakers and Press

Asian equity markets remaining bid despite the geopolitical concerns and uncertainty regarding US policy. Sentiment continued to reverberate from the reflation "Trump-trade" persisting in the US session on Friday and pushing indices to record highs. Lift in commodity prices such as new 2-year high in Dalian iron ore has buoyed miners in Australia, while a 2-week high in USD/JPY above ¥114 is supporting Japan's export-rich market.

Pro-growth business and tax agenda of US Pres Trump is once again overshadowing other factors. Trump met with Japan PM Abe over the weekend, pledging commitment in joint defense and investment in Japan business partnership, hinting he will announce big news on taxes and other industry-supportive changes in the near term.

Another missile launch by North Korea on Sunday has not deterred buyers. This is the first launch during the Trump administration, and thus far he has only stated that US stands to defend Japan 100%. North Korea's state press KCNA announced the test of ballistic missile was successful, while South Korea defense officials said the missile flew 500km before falling into the sea though also acknowledging this was an improved version of the last test. KCNA also stated that the missile type launched on Sunday would be capable of carrying a nuclear warhead.

Japan Q4 preliminary GDP was a decimal shy of consensus but roughly on par with the growth rates reported in Q3. Key components showed flat Private Consumption v 0.3% prior, though Japan Econ Min attributed the slowdown to rising food prices. In contrast, CAPEX was a bright spot, growing 0.9% after a contraction of -0.4% in Q3.

Attention this week turns to Fed Chair Yellen semiannual testimony in Congress, and investors will look for more clues on how probable are the expectations of a March rate hike. Recall the last FOMC decision has dented those probabilities, producing a bounce in US treasuries. Part of the uncertainty lies with the fiscal side of the US economy, and whether President Trump's bold agenda will nudge the purse strings of Republican controlled Congress. Over the weekend, Fed vice chair Fischer echoed as much, stating that there is significant uncertainty about what Congress and the Administration will do with fiscal policy.

China

(CN) Mitsubishi UFJ analyst: PBoC is "trying to juggle too many balls" given all of its various policy tools - press

(CN) China FX regulator SAFE chief Pan: will continue supporting opening of financial markets - Chinese press

(CN) China state researcher: PBoC should step up risk controls in 2017 - Chinese press

(CN) Schedules for approval of 3rd batch of Free Trade Zones (FTZ) have been submitted to central govt; Expected to be launched soon - Chinese press

Japan

(JP) Japan Econ Min Ishihara: No change to view of Japan in moderate recovery

(JP) Japan Chief Cabinet Sec Suga: Important that US and Japan firmly ally on North Korea; urge China to take constructive measures on North Korea

Australia/New Zealand:

(AU) RBA Gov Lowe: Hard to say that exchange rate is too high - AFR (update)

(NZ) ANZ: New Zealand housing shortage estimated at about 60K units - NZ press

Asian Equity Indices/Futures (23:00ET)

Nikkei +0.6%, Hang Seng +0.5%, Shanghai Composite +0.6%, ASX200 +0.7%, Kospi flat

Equity Futures: S&P500 +0.2%; Nasdaq +0.2%, Dax +0.3%, FTSE100 +0.1%

FX ranges/Commodities/Fixed Income (23:00ET)

EUR 1.0610-1.0635; JPY 113.45-114.15; AUD 0.7655-0.7680; NZD 0.7180-0.7210; GBP 1.2465-1.2495

Apr Gold -0.4% at 1,231/oz; Mar Crude Oil -0.1% at $53.80/brl; Mar Copper +0.7% at $2.80/lb

GLD SPDR Gold Trust ETF daily holdings rise 4.1 tonnes to 836.7 tonnes; 7th consecutive increase; Highest since Dec 16th

(CN) PBOC to inject combined CNY100B v CNY50B on Feb 2nd in 7-day, 14-day and 28-day reverse repos (1st injection after 6 consecutive halts)

(CN) PBOC SETS YUAN MID POINT AT 6.8898 V 6.8819 PRIOR; 2nd straight weaker setting; weakest CNY setting since Jan 13th

(AU) Australia MoF sells A$300M in 4.5% 2033 bonds; avg yield 3.164%; bid-to-cover 3.42x

Asia equities/Notables/movers

Australia

AMC.AU Amcor +4.5% (H1 result)

AZJ.AU Aurizon +3.6% (H1 result)

JBH.AU JB Hi-Fi +2.8% (H1 result)

OZL.AU Oz Minerals +2.8% (raised at Morgan Stanley)

BHP.AU +2.3%, RIO.AU +3.4% (iron ore price at 2-year high)

NCM.AU Newcrest Mining +1.0% (H1 result)

ANN.AU Ansell Ltd -2.3% (H1 result)

Hong Kong

175.HK Geely Auto +6.0%; 494.HK Li& Fung -3.2% (Geely replace Li&Fung in Hang Seng)

1098.HK Road King Infrastructure Limited +4.9% (profit alert)

337.HK Greenland Hong Kong +1.6% (Jan sales)

1628.HK Yuzhou Properties Company -1.1% (Jan sales)

434.HK Boyaa Interactive -1.4% (profit warning)

Japan

7312.JP Takata +8.0% (9-month result)

1605.JP Inpex +5.9% (9-month result)

6502.JP Toshiba +2.1% (9-month result speculation)

9432.JP Nippon Telegraph And Telephone Corp -1.8% (9-month results)

European equity markets are expected to open higher on Monday, tracking gains in Asia overnight where investors appear relieved at the softening foreign policy stance of new US President Donald Trump towards the region.

It's been a surprisingly good few days for those that were concerned about the relationship between the US under Trump and two of Asia's powerhouses, China and Japan. It seems that Trump's stance in relation to both has softened considerably since being elected – at least in public – and he may have adopted a relationship more in line with previous regimes.

This is a big relief for investors given that Trump's previous stance had raised serious foreign policy concerns, not to mention the prospect of severely damaged trade ties with the region and increased protectionism. Of course, one phone call with Chinese President Xi Jinping is unlikely to have addressed some of Trump's biggest concerns, around the yuan and jobs for example, and details of what was discussed with Japanese Prime Minister Shinzo Abe are few and far between, but these early signs are at least encouraging.

Given how active he's been in the early stages of his tenure, Trump is likely to continue to be a big influence in the markets in the weeks ahead. As he settles into the White House and provides greater detail on a wide range of policies, investors should gain a better understanding of what they're dealing with which in turn should remove some of the uncertainty that is hanging over markets currently.

In contrast to last week, there's a lot of important economic data being released over the next few days which will give investors something else to think about, although today is looking very quiet on this front. The standout events this week will likely be Federal Reserve Chair Janet Yellen's appearances before the Senate Banking and House Financial Services committees. These are often highly charged events and may provide more insight on the path of interest rates going forward and the impact the new administration will have on this. Yellen may also be pressed on her future as Chair of the Fed.

Key Points:

• Fundamentals rather weak
• Double top seemingly forming on the daily chart.
• Plenty of news due out this week.

The Aussie Dollar's recent uptrend may be coming to an end this week as it looks as though a double top is forming on the daily chart. Additionally, a number of other technical and fundamental factors are signalling that the pair is destined for a tumble in the coming days. However, first of all it might be worth looking at what brought the AUD to where it is now.

Last week got off to a fairly torrid start for the AUD with the Australian Retail Sales posting a 0.1% m/m contraction. This negative sentiment carried through to the subsequent session, in which, the RBA elected to hold the Cash Rate steady at 1.50% which came as little surprise to the market. However, contrary to the broader market trend, the Aussie Dollar rebounded strongly later in the week as the reserve bank used the Monetary Policy Statement to skilfully downplay rising fears that the nation is already in, or could soon be facing, a recession.

On the technical front, the AUD had some strong underlying bullish sentiment but this could be about to abate as a result of what looks like a double top beginning to form. Moreover, the current zone of resistance has proven to be a rather difficult one to crack historically which should be an additional impediment to further gains moving forward. The main dissenting technical signal is the EMA bias which is patently highly bullish. Luckily, the MACD oscillator is showing some evidence of a signal line crossover which suggests that this uptrend is likely about to come to an end.

As for what lies ahead in the news, the coming week is rather data rich which should provide the requisite fuel for some strong moves. In the first half of the week, the NAB Business Confidence and Westpac Consumer Confidence figures are due out which could help to set the tone for the rest of the week. However, it is Thursday's employment data that will truly be in focus as, if another uptick in unemployment is seen, the RBA will have a hard time defending its stance that the country is unlikely to see a recession take hold.

As a result of all of this, it seems all it will take is some vaguely weaker Australian results to send the pair lower in the near-term. More precisely, given the rather weak technical and fundamental position the AUD is in, it could be overvalued at present. As a result of this, downside risks could be fairly substantial which is worth keeping a close watch on.

Global Markets:

• Asian stock markets: Nikkei up 0.50 %, Shanghai Composite gained 0.65 %, Hang Seng rose 0.45 %, ASX 200 rallied 0.70 %
• Commodities: Gold at $1230 (-0.40 %), Silver at $17.94 (+0.03 %), WTI Oil at $53.75 (-0.20 %), Brent Oil at $56.60 (-0.20 %)
• Rates: US 10-year yield at 2.43, UK 10-year yield at 1.26, German 10-year yield at 0.32

News & Data:

• Japan GDP Annualised (QoQ) Q4 P: 1.0% (est. 1.1%, prev. 1.3%)
• Japan GDP SA (QoQ) Q4 P: 0.2% (est. 0.3%, prev. 0.3%)
• Japan Private Consumption (QoQ) Q4 P: 0.0% (est. 0.0%, prev. 0.3%)
• Japan Business Spending (QoQ) Q4 P: 0.9% (est. 1.2%, prev. -0.4%)
• Yen slips after Trump-Abe meet, Asian shares firm – RTRS
• Dollar hits two-week high vs yen on U.S.-Japan summit relief – RTRS
• Oil prices dip as markets remain bloated despite OPEC-led cuts – RTRS
• 'Significant uncertainty' about fiscal policy under Trump: Fed's Fischer

CFTC Positioning Data:

• EUR short 45K vs. 46K short last week. Shorts trimmed by 1K
• GBP short 64K vs. 62K short. Shorts increased 2K
• JPY short 55K vs. 58K short last week. Shorts trimmed by 3K
• CHF short 14K vs. 17K short last week. Shorts trimmed by 3K
• CAD long 4.7K vs. 3K long last week. Longs increased by 1.7K
• AUD long 17K vs 12K long last week. Longs increase by 5K
• NZD short 2K vs 1K short last week. Shorts increased by 1K

Markets Update:

All major Asian stock markets are up on the day. Market sentiment improved following the meeting of US President Trump and Japanese PM Abe over the weekend, during which Trump backed a little bit away from his focus on protectionist policy.

In FX, the Dollar strengthened and the Yen was the worst performing currency. USD/JPY opened around 113.40 in Asia, slightly higher from Friday's close, and rallied to a high of 114.17 later in the session. Resistance is now seen at 115.20.

Price action in the other major FX pairs was relatively quiet. EUR/USD rose from 1.0612 to 1.0636, while GBP/USD made it from 1.2480 to 1.25. AUD/USD consolidated in a 0.7660-80 range, while NZD/USD was stuck between 0.7180 and 0.7210.

Upcoming Events:

• 07:00 GMT – German WPI
• 11:00 GMT – OPEC Monthly Report

The Week Ahead:

Tuesday, February 14th

• 00:30 GMT – Australian NAB Business Confidence
• 01:30 GMT – Chinese CPI
• 01:30 GMT – Chinese PPI
• 07:00 GMT – German CPI
• 07:00 GMT – German GDP
• 08:15 GMT – Swiss CPI
• 09:00 GMT – Italian GDP
• 09:30 GMT – UK CPI
• 10:00 GMT – German ZEW Economic Sentiment
• 10:00 GMT – Euro Zone GDP
• 10:00 GMT – Euro Zone Industrial Production
• 10:00 GMT – Euro Zone ZEW Economic Sentiment
• 13:30 GMT – US PPI
• 13:50 GMT – FOMC Member Lacker speaks
• 15:00 GMT – Fed Chair Yellen speaks
• 18:00 GMT – FOMC Member Kaplan speaks
• 18:15 GMT – FOMC Member Lockhart speaks
• 23:30 GMT – Australian Westpac Consumer Sentiment

Wednesday, February 15th

• 08:00 GMT – Spanish CPI
• 09:30 GMT – UK Average Earnings
• 09:30 GMT – UK Unemployment Rate
• 09:30 GMT – UK Claimant Count Change
• 10:00 GMT – Euro Zone Trade Balance
• 13:30 GMT – US CPI
• 13:30 GMT – US Retail Sales
• 13:30 GMT – Canadian Manufacturing Sales
• 14:15 GMT – US Manufacturing Production
• 14:15 GMT – US Industrial Production
• 15:00 GMT – US Business Inventories
• 15:00 GMT – Fed Chair Yellen speaks
• 15:00 GMT – US NAHB Housing Market Index
• 15:30 GMT – US Crude Oil Inventories
• 17:00 GMT – FOMC Member Rosengren speaks
• 17:45 GMT – FOMC Member Harker speaks

Thursday, February 16th

• 00:00 GMT – Australian Inflation Expectations
• 00:30 GMT – Australian Employment Change
• 00:30 GMT – Australian Unemployment Rate
• 09:00 GMT – Italian Trade Balance
• 12:30 GMT – ECB Meeting Minutes
• 13:30 GMT – US Housing Starts
• 13:30 GMT – US Building Permits
• 13:30 GMT – US Initial Jobless Claims
• 13:30 GMT – US Philadelphia Fed Manufacturing Index
• 21:30 GMT – New Zealand Business NZ PMI
• 21:45 GMT – New Zealand Retail Sales

Friday, February 17th

• 09:00 GMT – Euro Zone Current Account
• 09:30 GMT – UK Retail Sales
• 20:30 GMT – US CFTC Positioning Data

Currency pair GBP/USD

The GBP/USD is probably building an ABC (blue) zigzag as part of a wave 4 (purple). The support (green) and resistance (orange) trend lines are showing a contracting triangle chart pattern, which is critical for a potential breakout towards the larger support (dark green) or resistance (brown).

The GBP/USD has completed 5 bullish waves (purple) either within a larger wave 1 (orange) or alternatively a wave A. The pullback could be part of a wave 2 (orange) and price has already bounced at the 61.8% Fibonacci support level. A break below the 100% Fib level of wave 2 vs 1 invalidates the wave 2 (orange).

Currency pair EUR/USD

The EUR/USD seems to be in a bearish breakout and is developing a downtrend (red line). Price could be moving lower within a wave 3 (purple).

The EUR/USD needs to break below the support (green) trend line before a continuation of the wave 3 (purple) becomes possible. A move higher could face heavy resistance levels (orange/dark red/red).

Currency pair USD/JPY

The USD/JPY is breaking above the resistance trend line (dotted red) after making a bullish bounce at the wave 4 (purple). This bullish breakout could be part of a wave 3 (blue) within wave 5 (purple).

The USD/JPY indeed started and completed a wave 4 (brown) correction at the 50% Fibonacci retracement level. Price is now trend higher within a bullish trend channel (red/green lines). A break below the support trend lines (green) makes a continuation of wave 5 (brown) unlikely. A break above the 61.8% Fib target could see further extensions towards the next Fib targets.

A note on lower timeframe confirming price action…

Waiting for lower timeframe confirmation is our main tool to confirm strength within higher timeframe zones, and has really been the key to our trading success. It takes a little time to understand the subtle nuances, however, as each trade is never the same, but once you master the rhythm so to speak, you will be saved from countless unnecessary losing trades. The following is a list of what we look for:

• A break/retest of supply or demand dependent on which way you're trading.
• A trendline break/retest.
• Buying/selling tails – essentially we look for a cluster of very obvious spikes off of lower timeframe support and resistance levels within the higher timeframe zone.
• Candlestick patterns. We tend to only stick with pin bars and engulfing bars as these have proven to be the most effective.

EUR/USD

Weekly gain/loss: – 149 pips

Weekly closing price: 1.0635

Recent trade shows that the EUR/USD extended its bounce from the weekly resistance level at 1.0819, and ended the week chalking up a near-full-bodied weekly bearish candle. Provided that the bears remain in the driving seat here, the next weekly support target on tap can be seen at 1.0515: the 2017 yearly opening level which happens to be strengthened by a weekly support area drawn from 1.0333-1.0502.

On the other side of the ledger, however, we have the daily candles battling for position within the walls of a daily demand zone coming in at 1.0589-1.0662. Despite this base managing to hold the market higher since Jan 26 2017, nearby daily resistance at 1.0710 is proving troublesome to overcome and could force candle action beyond the current area this week down to a daily support at 1.0520 (sited 5 pips ahead of the aforementioned 2017 yearly opening level).

Friday’s US consumer sentiment survey came in worse than expected. Although this is considered a high-impacting event, it did not manage to generate much trading. Technically speaking, the H4 chart’s structure is somewhat restricted at the moment. To the downside, price bottomed around a H4 Quasimodo support at 1.0621. Meanwhile, overhead we have a H4 supply at 1.0667-1.0650 that is joined together with a H4 trendline resistance taken from the low 1.0579.

Our suggestions: Based on the higher-timeframe structure, we find it difficult to imagine the H4 candles breaching the current H4 supply today. In fact, on account of the weekly chart’s position, and daily demand looking somewhat vulnerable at this time, the aforementioned H4 Quasimodo support, along with the round number 1.06 and December’s opening level at 1.0590 may be consumed today/early this week.

In the event that we do happen to clock a H4 close below these levels, the next H4 support in the firing range can be seen at the 2017 yearly opening level. This could set the foundation for a reasonable short trade this week if the candles retest the broken levels as resistance and pencil in a H4 bear candle.

Data points to consider: There are no scheduled high-impacting news events on the docket today relating to these two markets.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Watch for a H4 close below 1.06/1.0590 and then look to trade any retest seen thereafter ([waiting for a H4 bear candle to form following the retest is advised before pulling the trigger] stop loss: ideally beyond the trigger candle).

GBP/USD:

Weekly gain/loss: + 3 pips

Weekly closing price: 1.2481

Despite the pair ranging over 230 pips, GBP/USD prices are little changed this week consequently forming a weekly indecision candle into the closing bell. As far as structure goes, the unit is currently seen trading mid-range between the 2017 yearly opening level at 1.2329 and a weekly Quasimodo resistance coming in at 1.2673.

By the same token, a similar pattern is being seen on the daily chart. The daily candles are, at this time, seen loitering between daily demand at 1.2252-1.2342 (bolstered by a daily trendline support stretched from the high 1.3437) and a daily supply penciled in at 1.2728-1.2657.

Friday’s UK manufacturing data came in stronger than expected, which did manage to trigger a round of buying in the market. However, the advance was a short-lived one, with upside capped by December’s opening base at 1.2514/1.25 psychological handle. In a similar fashion to the EUR/USD pair above, H4 structure is also somewhat restricted on the GBP. Overhead, we can see a newly-formed H4 supply at 1.2520-1.2494 that is linked together with December’s opening base and the 1.25 handle. To the downside, nonetheless, price recently caught a fresh bid from the H4 mid-level support at 1.2450.

Our suggestions: As far as we can see, there’s equal opportunity to trade this pair both long and short today. We say this simply because the higher-timeframe structures are, at the time of writing, offering very little guidance on medium-term direction. While one could possibly trade long from 1.2450 today, we favor the current H4 supply given its H4 converging structures (1.25/1.2514 – see above). Be that as it may, to initiate a trade from this barrier, we require a lower-timeframe sell signal to take shape beforehand. This could be either in the form of an engulf of demand followed by a retest as supply, a trendline break/retest or simply a collection of well-defined selling wicks around the H4 supply zone. We typically search for lower-timeframe confirmation between the M15 and H1 timeframes, since most of our higher-timeframe areas begin with the H4. Stops are usually placed 3-5 pips beyond confirming structures.

Data points to consider: There are no scheduled high-impacting news events on the docket today relating to these two markets.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.2520-1.2494 ([wait for a lower-timeframe signal to form before looking to execute a trade] stop loss: dependent on where one confirms the zone).

AUD/USD:  

Weekly gain/loss: – 7 pips

Weekly closing price: 0.7672

As you can see from the weekly chart, little change was seen during trade last week. On account of this, the pair remains lurking within striking distance of a weekly trendline resistance taken from the high 0.8163, followed closely by a weekly supply zone logged in at 0.7849-0.7752 (bolstered by yet another weekly trendline resistance stretched from the high 0.7835). As such, there’s a possibility that the buying pressure may diminish sometime this week.

Positioned nearby the oncoming weekly trendline resistance (0.8163) is a daily Quasimodo resistance penciled in at 0.7734 and a daily resistance at 0.7720. This, along with the underside of weekly supply at 0.7752 (0.7752/0.7720) defines a strong-looking higher-timeframe sell zone.

A quick recap of Friday’s trade on the H4 shows that the commodity currency gathered momentum going into the US segment. As far as we can see, the move was sparked by a disappointing US consumer sentiment reading, consequently lifting the pair to highs of 0.7688 by the day’s end.

Our suggestions: According to the bigger picture, there’s still room for this pair to push a tad higher, at least until we hit daily resistance at 0.7720. With that being said, a long trade from the H4 mid-level support at 0.7650 could be something to think about. The reason being is that it boasts a H4 trendline support etched from the high 0.7695 and a 50.0% retracement support clocked in at 0.7647. If one is considering trade from this zone without waiting for additional confirmation, stops can be positioned beyond the 0.7635 low point. Should price happen to connect with the 0.76 handle beforehand, nevertheless, we would think twice about trading from 0.7650 since at that point the unit will be trading within a few pips of daily resistance at 0.7720, which you may remember forms the underside to a rather strong-looking higher-timeframe sell zone (0.7752/0.7720 – see above). 0.7752/0.7720 is, of course, also somewhere we would consider trading from, but only if a H4 bearish candle forms within the walls of this region beforehand, since by shorting here you’d effectively be selling into a medium-term uptrend.

Data points to consider: There are no scheduled high-impacting news events on the docket today relating to these two markets.

Levels to watch/live orders:

• Buys: 0.7650 region ([personally, we would wait for a lower-timeframe signal to form [see the top of this report] before looking to execute a trade] stop loss: dependent on where one confirms the zone).
• Sells: 0.7752/0.7720 ([wait for a H4 bear candle to form before pulling the trigger] stop loss: ideally beyond the trigger candle).

USD/JPY:

Weekly gain/loss: + 67 pips

Weekly closing price: 113.22

Over the last week, the weekly price bottomed just ahead of the weekly support area coming in at 111.44-110.10 and was able to achieve a high of 113.85. The next upside hurdle on our radar can be seen at 116.08: a weekly resistance level that’s positioned in close proximity to the 2017 yearly opening level at 116.97. Should things turn sour from here, nevertheless, the next area of interest beyond the current zone is a weekly support area coming in at 105.19-107.54.

In conjunction with the weekly candles, daily price eventually caught a bid from daily demand seen at 111.35-112.37 (located around the top edge of the current weekly support area), which, in our opinion, shows room for the piece to gravitate up to the daily resistance area at 115.62-114.60.

Looking at Friday’s action on the H4 chart, we can see that the unit was incapable of sustaining gains beyond the H4 supply zone at 113.96-113.43, resulting in price trading back down to the 113 psychological handle into the closing bell. In light of the bigger picture (see above) we do not envisage the H4 candlesticks pushing beyond the H4 support area at 112.77-112.55 this week. In spite of this, we have no intention of becoming buyers in this market until the current H4 supply area is consumed.

Our suggestions: Beyond the current H4 supply area, we see room for price to challenge December’s opening base at 114.68, which, as you may have noticed, is positioned within the lower edge of the aforementioned daily resistance area. Should a H4 close take shape above the H4 supply today/early this week, and is followed up with both a retest and a lower-timeframe buy signal (see the top of this report), our desk would look to buy, targeting the 114.68 boundary.

Data points to consider: Japanese prelim GDP data at 11.50pm GMT (Sunday).

Levels to watch/live orders:

• Buys: Watch for a H4 close above 113.96-113.43 and then look to trade any retest seen thereafter ([waiting for a lower-timeframe signal to form following the retest is advised before pulling the trigger] stop loss: dependent on where one confirms this zone).
• Sells: Flat (stop loss: N/A).

USD/CAD:  

Weekly gain/loss: + 67 pips

Weekly closing price: 1.3086

Although weekly demand at 1.3006-1.3115 remains intact right now, there has been very little noteworthy movement registered from this zone over the last two weeks. In the event that the demand base eventually does give way this week, the next support hurdle in view would be the weekly trendline support penciled in from the high 1.1278.

Moving down to the daily timeframe, Tuesday’s action topped at a high of 1.3212 and spent the remainder of the week receding lower. To our way of seeing things, there is very little daily support stopping the daily candles from continuing lower this week down to at least the daily support at 1.3006, which happens to merge closely with a daily trendline support extended from the low 1.2654.

The impact of Friday’s upbeat Canadian job’s report sent the H4 candles screaming lower, engulfing the 1.31 handle and clocking a low of 1.3064. With the 1.31 support now out of the picture, the next H4 downside target can be seen at the H4 mid-way support drawn from 1.3050. 1.3050 is an interesting base as supporting a bounce from this neighborhood we have the following converging structures: February’s opening level at 1.3039, a H4 trendline support taken from the low 1.2968, a H4 AB=CD 161.8% approach terminating around 1.3019 and to top it off there’s also the current daily trendline support intersecting with this H4 buy zone (yellow rectangle).

Our suggestions: While buying from the H4 buy zone noted above at 1.3019/1.3050 may very well be tempting considering its confluence, we still have to remain cognizant of the 1.30 figure seen just below it. This watched number could act as a magnet to price and pull the pair through our H4 buy zone! Therefore, to be on the safe side, we will wait for a reasonably sized H4 bull candle to take shape here before pressing the buy button. This will by no means guarantee a winning trade, but what it will do is show buyer interest within a high-probability reversal zone, and, let’s be honest, we cannot ask for much more than this!

Data points to consider: There are no scheduled high-impacting news events on the docket today relating to these two markets.

Levels to watch/live orders:

• Buys: 1.3019/1.3050 ([wait for a reasonably sized H4 bull candle to form before pulling the trigger] stop loss: ideally beyond the trigger candle).
• Sells: Flat (stop loss: N/A).

USD/CHF:  

Weekly gain/loss: + 109 pips

Weekly closing price: 1.0022

Erasing two weeks of prior losses as well as breaking a six-week bearish phase, we saw the Swissy recover beautifully from a weekly trendline support extended from the low 0.9943 last week. While this could signify that the tables may have turned, it may be worth noting that weekly action also collided with the 2016 yearly opening level at 1.0029 going into the close. In addition to this, down on the daily chart, Friday’s daily candle chalked up a strong-looking daily bearish selling wick off the back of a daily trendline resistance etched from the high 0.9956. With the next downside target not in view until daily support at 0.9950, there’s a strong possibility that the pair may correct itself early this week.

Swinging across to the H4 scale, it seems that we missed a stunning setup here on Friday at a H4 sell zone (marked in yellow) comprising of: a H4 trendline resistance taken from the high 1.0136, a H4 mid-level resistance at 1.0050, a H4 resistance at 1.0041 (marking the lower edge of the zone), a H4 AB=CD 161.8% approach (denoting the top edge of the zone at 1.0069) and also let’s not forget the daily trend line resistance that’s currently in play! As you can see, the pair struck a high of 1.0062 going into Friday’s US segment, and from here went on to pare earlier gains made during the European/London session to a low of 1.0014.

Our suggestions: Unless the unit retests the above noted H4 sell zone today and produces a reasonably sized H4 bear candle, we will likely be remaining on the sidelines. However, there’s one caveat here. Should parity come into play beforehand and then price retests the H4 sell zone, we would likely look to pass as this could signal bullish strength and a possible overthrow of the higher-timeframe resistance mentioned above.

Data points to consider: There are no scheduled high-impacting news events on the docket today relating to these two markets.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.0069/1.0041 ([wait for a reasonably sized H4 bear candle to form before pulling the trigger] stop loss: ideally beyond the trigger candle).

DOW 30:  

Weekly gain/loss: + 210 points

Weekly closing price: 20266

As can be seen from the weekly chart, a healthy round of buy orders flowed into the market last week following the previous week’s strong-looking bullish tail printed just ahead of the 2017 yearly opening level at 19769. With equities now trading at record highs, where do we go from here? Well, given that there is absolutely no weekly resistance levels in sight, the best we can do for the time being is continue looking to ‘buy the dips’. The closest higher-timeframe area can be seen at 20003-20091: a daily demand that is positioned directly above a daily support barrier at 19964.

Working our way across to the H4 chart, the index concluded the week forming a H4 bearish selling wick. Although this candle signals a potential selloff may be on the cards, we would be very wary of shorting this unit in light of the recent buying. The only area of interest on the H4 this morning is seen positioned at 20197-20218: a H4 demand hurdle.

Our suggestions: While the current H4 demand boasts little higher-timeframe (structural) convergence, let’s bear in mind that it has formed in-line with the current uptrend. For that reason, we feel it is worthy of attention. Trading this area without additional confirmation, nevertheless, is not something our desk would be comfortable with. Waiting for a reasonably sized H4 bull candle to print before pressing the buy button would, in our opinion, be the safer route to take here.

Data points to consider: There are no scheduled high-impacting news events on the docket today that will likely affect the US equity market.

Levels to watch/live orders:

• Buys: 20197-20218 ([wait for a H4 bull candle to form before looking to execute a trade] stop loss: ideally beyond the trigger candle).
• Sells: Flat (stop loss: N/A).

GOLD:  

Weekly gain/loss: + $12.4

Weekly closing price: 1232.2

From the weekly chart, we can see that the yellow metal printed its second consecutive weekly bull candle last week, enabling the unit to cross swords with a weekly resistance level penciled in at 1241.2. With an upside rejection being seen from this perimeter, it’s possible that bullion may look to shake hands with the weekly support boundary seen below at 1180.1 in the near future.

While the weekly timeframe looks primed for further selling this week, down on the daily chart the daily support area at 1232.9-1224.5 is still seen in motion. As such, it will take a decisive close beyond this support barrier before our team is convinced that the bears are in fact in control.

For those who read Thursday’s report you may recall our desk highlighting a short position we took from 1239.6, with a stop logged in at 1245.4. As mentioned in Friday’s report, we liquidated 70% of the position around the H4 demand area at 1227.6-1230.5 and reduced risk to breakeven. Our next port of call for profit taking is still seen at February’s opening base drawn from 1211.5. However, before this can be achieved, price will have to overcome the H4 demand area seen at 1221.5-1224.8 which held firm going into the early hours of Friday’s session.

Our suggestions: In view of daily action trading from a daily support area at 1232.9-1224.5, there’s a possibility that the remaining 30% of our position may be tapped at breakeven. What is quite notable from a technical perspective, however, is the possible H4 AB=CD pattern (see black arrows) that may be at hand, terminating at the H4 161.8% ext. at 1207.8. Notice that it not only bottoms nearby the February opening level at 1211.5, it is also located nearby a H4 trendline support etched from the low 1145.9 (1207.8/1211.5 zone). Not only is this a reasonable area to take profits but it’s also a platform in which one could potentially hunt for long opportunities. With this area lacking higher-timeframe (structural) convergence, however, we would require a H4 bull candle to form here in order to validate this area before pulling the trigger.

Levels to watch/live orders:

• Buys: 1207.8/1211.5 ([wait for a H4 bull candle to form before looking to execute a trade] stop loss: ideally beyond the trigger candle).
• Sells: 1239.6 ([live order] stop loss: breakeven).

Daily Pivots: (S1) 140.74; (P) 141.55; (R1) 142.10; More...

GBP/JPY's rebound from 138.53 continues today and intraday bias stays on the upside. Price actions from 148.42 are seen as developing into a corrective pattern. Rise from 136.44 is seen as the second leg. Further rebound should be seen to 144.77 and possibly to retest 148.42 high. On the downside, below 139.79 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) 119.98; (P) 120.65; (R1) 121.10; More...

Intraday bias in EUR/JPY remains neutral for the moment. 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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