Daily Pivots: (S1) 1.0654; (P) 1.0684 (R1) 1.0728; More.....

Intraday bias in EUR/USD remains neutral as it's staying in range of 1.0619/0828. As noted before, choppy rise from 1.0339 is seen as a correction. Hence, in case of another rise, upside should be limited by 1.0872 resistance and bring fall resumption eventually. Break of 1.0619 will argue that the corrective rise is completed and turn bias to the downside for retesting 1.0339 low.

In the bigger picture, whole down trend from 1.6039 (2008 high) is in progress. Such down trend is expected to extend to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

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

Daily Pivots: (S1) 1.2493; (P) 1.2521; (R1) 1.2568; More...

Intraday bias in GBP/USD remains neutral for the moment. Price actions from 1.1946 are viewed as a consolidation, no change in this view. 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.

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

Daily Pivots: (S1) 0.9916; (P) 0.9961; (R1) 1.0021; More.....

Intraday bias in USD/CHF remains neutral as the consolidation from 0.9860 continues. With 1.0043 minor resistance intact, deeper decline is expected. Current fall from 1.0342 is seen as the third leg of the pattern from 1.0327. Below 0.9860 will target 61.8% retracement of 0.9443 to 1.0342 at 0.9786 and below. On the upside, break of 1.0043 will indicate short term bottoming and turn bias back to the upside.

In the bigger picture, rejection from 1.0327 resistance suggests that consolidation pattern from there is still in progress. Fall from 1.0342 is seen as the third leg and retest of 0.9443/9548 support zone could be seen. But we'd expect strong support from there to contain downside. At this point, we're still expecting the larger rally to resume later to 38.2% retracement of 1.8305 to 0.7065 at 1.1359, after the consolidation completes.

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

Daily Pivots: (S1) 111.53; (P) 112.03; (R1) 112.45; More...

No change in USD/JPY's outlook. Deeper decline cannot be ruled out yet. But again, choppy fall from 118.65 is seen as a correction. Hence, we'd expect strong support from 38.2% retracement of 98.97 to 118.65 at 111.13 to contain downside and bring rebound. Above 113.44 minor resistance will turn bias neutral first. Break of 115.36 resistance will argue that such correction is finished and turn bias to the upside for 118.65 high.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance. Rejection from 125.85 and below will extend the consolidation with another falling leg before up trend resumption.

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

Daily Pivots: (S1) 1.3118; (P) 1.3159; (R1) 1.3183; More...

Intraday bias in USD/CAD remains neutral for the moment. On the upside, break of 1.3387 resistance will confirm that fall from 1.3598 has completed at 1.2968. And more importantly, rise from 1.2460 is still in progress. In that case, intraday bias will be turned back to the upside for 1.3598 and above. On the downside, below 1.2968 will revive the case that rise from 1.2460 is completed and turn outlook bearish for this low. Overall, choppy rise from 1.2460 is still seen as a corrective move.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. The second leg could be completed at 1.3598 and fall from there is tentatively seen as the third leg. Break of 1.2460 will target 50% retracement of 0.9460 to 1.4689 at 1.2075 before completing the correction. In case of another rise, we'd look for reversal signal above 61.8% retracement of 1.4689 to 1.2460 at 1.3838.

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

Daily Pivots: (S1) 0.7614; (P) 0.7640; (R1) 0.7668; More...

AUD/USD is staying in tight range below 0.7695 and intraday bias stays neutral. Lost up momentum is seen in bearish divergence condition in 4 hours MACD. While another rise cannot be ruled out, we'd expect strong resistance from 0.7777/7833 resistance zone to limit upside and bring near term reversal. On the downside, break of 0.7510 minor support will indicate that rise from 0.7158 has completed already and turn bias back to the downside for this key near term support level.

In the bigger picture, we're still treading price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seek to 55 month EMA (now at 0.8205) and above.

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

New Zealand Dollar weakens after RBNZ left the Official Cash Rate (OCR) unchanged at 1.75%. More importantly, the central bank adopted a more dovish outlook for the OCR. RBNZ now forecast interest rate to stay at around 1.8% through June 2019 and move up to 2.0% in 2020. The markets were nearly pricing in full chance of a rate hike by November this year. But after the release, such pricing dropped to around 50%. Meanwhile, RBNZ trimmed inflation forecast too. Inflation is projected to be at 1.5% this year, soften to 1.3% at the start of 2018 and then climb back to 2% by mid-2019. Technically, NZD/USD dips through 0.7240 support which now indicates near term reversal. Near term outlook in NZD/USD is now turned bearish for 55 day EMA (now at 0.7150).

Australia Business Confidence Firm

From Australia, NAB business confidence dropped slightly to 5 in Q4, down from 6. Current condition index dropped 2 points to 5. Capital expenditure plans dropped to 22, down from 24. NAB noted that "relative stability of business confidence gives us some comfort". However, "some of the trends could suggest a loss of momentum in the longer term, should they continue." Also, there is "little to no sign that inflation or wage pressures are picking up materially."

UK Businesses to Offer Lower Wage Increase

In UK, a BoE survey showed that businesses are prepared to offer less pay rise this year. Companies expected to offer 2.2% increase in wages, slowed from 2.7% in 2016. That is a reaction to rising costs due to Sterling's depreciation since last year's Brexit referendum. BoE also noted that "consumer spending growth had remained resilient, but was expected to ease during the year as prices rose." Wage growth would be a key factor for BoE to determine when to lift interest rate while policies are still tolerant for a spike in headline inflation in near term.

On the data front, New Zealand building consents dropped -7.2% mom in December. Japan M2 rose 4.1% yoy in January while machine orders rose 6.7% mom. UK RICS house price balance rose to 25 in January. Looking ahead, Swiss unemployment rate, German trade balance will be release in European session. Canada will release new housing price index. US will release jobless claims.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7614; (P) 0.7640; (R1) 0.7668; More...

AUD/USD is staying in tight range below 0.7695 and intraday bias stays neutral. Lost up momentum is seen in bearish divergence condition in 4 hours MACD. While another rise cannot be ruled out, we'd expect strong resistance from 0.7777/7833 resistance zone to limit upside and bring near term reversal. On the downside, break of 0.7510 minor support will indicate that rise from 0.7158 has completed already and turn bias back to the downside for this key near term support level.

In the bigger picture, we're still treading price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seek to 55 month EMA (now at 0.8205) and above.

Economic Indicators Update

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

More active than it appears

The US equity market was very low spirited overnight, but the Dow closed above the psychological 20,000 barriers for the fourth successive day. The Trump trade is the primary focus for equity markets and without any further guidance on US tax policies, investors stay on the sidelines, annoyed and concerned about the unknown.

New Zealand Dollar

The Kiwi gapped lower on the RBNZ statement when the central bank stated that “Monetary policy would remain accommodative for a considerable period” [1]; indicating concerns for a slower return to their inflation target.

The comments were overtly dovish, and with an active element in the market that were long NZD for it to outperform on the crosses, in particular on the AUDNZD, as inflation trajectories were diverging; hence monetary policies also appeared to be heading in polar opposite directions, the bottom fell out. I suspect this morning’s drop was initially driven by position unwind which has now gathered steam as the Kiwi tracks towards .7200 level. So much for getting the parity party outfit dusted off, back to the closet it goes.

Australian Dollar

The Australian dollar is trading quietly ahead of Governor Lowe’s speech later today, as was the case with the broader market overnight. The Australian dollar had a rather uneventful session.

Japanese Yen

US fixed income continues to lead the way, and with a steady bid in the UST 10 years trading down to 2.35%, USDJPY dove below the critical 112 level and remains offered in early APAC trade.

With a possible event risk looming, the meeting between Japanese PM and President Trump this weekend, US bond yields will likely give the cleanest picture for the USDJPY trend into this week’s end. The event risk is clearly the downside if this meeting does not go as expected on trade negotiations.

Euro

With a sparse economic calendar, the focus remains on yield spreads in the EZ (Italy/France vs. Germany) and the assortment of scandal sheet politics coming out of France. European Bond Markets have been extremely busy overnight rallying sharply in concert with UST’s.

Despite the USD trading with a softer bias overnight, EURUSD remained capped at 1.07, as political uncertainty remains the primary driver in the Euro space. Perhaps in a move to ease investor’s nerves, Draghi reportedly said at a “not so ” at a private ECB dinner meeting yesterday, inferring that the ECB will continue to be accommodative throughout his mandate, which ends in October 2019.

Yuan

The PBOC held off from offering Reverse Repos in the market for the fourth consecutive day, draining liquidity in hopes of defending the CNH and halting capital outflow. However, interestingly enough, we are starting to see the more two-way flow in the CNH than we saw in some time. I would not go as far as calling it bullish CNH momentum, but rather with the US dollar energy all but sapped, we have gone from extreme pessimism to one of the mixed views, as investors are becoming less confident about a USD bull run.

Reserve Bank of India

Time to reload the INR carries trade after the RBI surprised the markets with another unexpected interest rate pause. This should bring to a close all the speculation about interest rates cuts for the medium term. The RBI shift to a neutral stance should all but cement that view.

Bank of Thailand

No surprises from the Bank of Thailand who kept rates unchanged as expected. If anything by the currency reaction dealers were expecting a more accommodative stance from the BOT

Following on from Monday's chat around diversifying your commodities trading, we today head back to the mainstream with another look at Oil.

While the commodity isn't as left field as XAU/AUD, the higher time frame resistance level in Oil that we identified back at the start of the month is back in play and worth another look.

First up as always, we take a look at the higher time frame chart. Here we highlight the major resistance level that we spoke about in that last post I've linked to above.

Oil Weekly:

As we said back then, the weekly shows a trend line break and price capped by a horizontal resistance level that price has rejected off in the past. With the level still holding, it may give an opportunity for us to start to look for a short entry.

Once again as always, we then step down to an intraday chart and look for a short term level that offers us tight risk:reward.

Oil Hourly:

Zooming into the hourly chart, we have seen the first sign of a short term pullback. Price broke the immediately last swing lows, showing that the sellers are gaining a stranglehold on the market.

Oh and look at that. The pullback has magically seen price spike into the previous level of support now turned resistance!

Remember that price still has a bit of room to move higher and still see the higher time frame level hold, so I don't know if this is the type of setup to be aggressively shorting, but the levels are definitely in play.

• Housing starts inched up to 207k annualized units in December from 206k in December.

The monthly increase was led by a 4.2% increase in the often-volatile multiple-unit structures component that built on an outsized 14.0% jump in December. Single-unit starts declined 4.6% to partially retrace an 8.1% December gain.

Regionally, the increase in urban starts was concentrated in Ontario where a 25% increase built onto a 38% surge in December. Starts also rose 14% in Atlantic Canada but declined 6% in Quebec, 11% in the Prairies, and plunged 33% in British Columbia.

Our Take:

Strong new home building activity early in 2017 and late 2016, with the 200k+ readings over the last two months above our estimate of the underlying pace of household formation, is less surprising following a year in 2016 in which home resales set a new national sales record. The recent strength in housing starts has been largely concentrated in Ontario, where resale markets have also been the hottest in recent months although warmer-than-usual temperatures may also have played a role boosting starts in the region in January. Nonetheless, new building activity typically follows the resale market with a lag and home resales nationally slowed through the end of last year reflecting a combination of new provincial regulations in B.C. and federal macro-prudential regulations implemented in the fall while a modest drift higher in borrowing rates and stretched affordability conditions in some markets should further moderate housing demand. Although near-term permit issuance continues to point to near-term upside risk in starts (permit issuance was over 230k per month in November and December of last year, the most recent months available), we expect housing starts will, on balance, slow as the year progresses and continue look for overall residential investment to be a modest drag on overall GDP growth in 2017 for the first time in four years.