The Euro remains in red on Wednesday and pressures pivotal support at 1.0641 (Fibo 38.2% of 1.0339/1.0827 upleg / 30SMA).

Yesterday's break and close below 20SMA generated bearish signal for further downside, with break below 1.0641 needed to confirm bearish extension of pullback from 1.0827 (02 Feb peak).

towards next strong supports at 1.0550 (daily cloud top) and 1.0525 (Fibo 61.8% retracement).

Broken 20SMA (1.0700) now acts as resistance together with daily Tenkan-sen (1.0723) which is expected to cap upticks.

No events in today's calendar during European session suggest that technicals and politics would be Euro's main driver.

Res: 1.0689, 1.0700, 1.0723, 1.0773
Sup: 1.0641, 1.0600, 1.0550, 1.0525

During the late US trading session today, the RBNZ rate announcement will be in the spotlight. The forecast is for the Bank to remain on hold after cutting rates at the latest meeting in November. We share that view considering the recent improvement in the nation's economic data. Since the latest meeting, the CPI accelerated sharply in Q4, while 2-year inflation expectations for Q1 surged almost to the mid-point of the RBNZ's 1% - 3% target range. In our opinion, these developments have greatly diminished the likelihood for any further action by the Bank in the foreseeable future. Even though the employment data for Q4 were somewhat disappointing, given the material improvement in the inflation outlook, we think that the Bank will be more than satisfied. Thus, the tone of the meeting statement may be more optimistic than previously, something that could bring the Kiwi under renewed buying interest on the rate decision. Currently NZD/USD is trading near the support barrier of 0.7280 (S1) and the crossroad of the short-term uptrend line taken from the low of the 3rd of January and the downside resistance line drawn from the peak of the 7th of September. In case we get an optimistic statement, the bulls may take advantage of that support territory and push the pair back up for another test near 0.7335 (R1). A break above that zone is possible to open the way for our next resistance of 0.7400 (R2).

Having said that, we would stay careful of a possible correction lower in NZD/USD during the press conference following the decision. At the conference following the latest meeting, Governor Wheeler provided strong hints for FX intervention in case the Kiwi continues to appreciate, something that caused the pair to collapse. Considering that NZD/USD is now trading at even higher levels than back then, it seems likely that we get some more jawboning from Wheeler, which could erase any gains the pair posts on the decision itself. NZD/USD could slide back towards the 0.7280 (S1) barrier, but given that the price structure on the 4-hour chart still suggests a short-term uptrend, we would treat such a setback as a corrective phase.

BoE's Forbes says a rate hike may be warranted soon; lifts sterling

The British pound surged yesterday, following some hawkish comments from Kristin Forbes, a member of the Bank of England's Monetary Policy Committee (MPC). Forbes indicated that tentative data suggest that inflation may be accelerating slightly more rapidly than expected, and that if inflation continues to pick up, then a BoE rate hike may soon be an appropriate response. She added that the recent upside surprises in the UK CPI rates may be a precursor to a larger overshoot of the inflation target. GBP/USD had been trading in a declining mode during the European morning Tuesday, but after Forbes's comments, it shot up to hit resistance at 1.2545 (R1). Although there is the likelihood for the rate to continue higher for a while, the possibility for a lower high on the 4-hour chart still exists and as such, the bears may take charge again soon. We believe that they may do so near the 1.2545 (R1) or 1.2600 (R2) resistance areas and could eventually push the rate down for another test near the 1.2410 (S2) key support.

Forbes's hawkish rhetoric reinforces the view we adopted following the latest BoE policy meeting. We believe that since "some" MPC members have moved a little closer to their limits for tolerating an overshoot in inflation, there may be growing division among the Committee with regards to policy, suggesting that we could see some hawkish dissents in the upcoming meetings. The likely candidates for such an action is Forbes herself, and Ian McCafferty, both of which dissented the original decision to restart the QE program in August. Martin Weale also dissented that decision, but he has left the MPC since.

In any case, although such hawkish signals may provide some short-term support to GBP, we believe that the broader outlook of the currency remains cautiously negative. GBP/USD has been trading in a medium-term sideways range between 1.2100 and 1.2850 since the 7th of October, but the prevailing larger trend remains to the downside. Our pessimistic view is based on the fact that the BoE has made it clear that on the whole, it remains willing to "look through" above-target inflation, and that investors should not expect rate hikes anytime soon. Sterling is unlikely to draw support from political developments either, as the current landscape still suggests we are headed for a "hard Brexit" as we approach the triggering of Article 50 in March. Therefore, any further rebounds in GBP may remain limited in the foreseeable future, in our view.

Today's highlights:

During the European day, the economic calendar is empty, with no noteworthy indicators due to be released.

In the UK, lawmakers will vote again on the Article 50 bill and any potential amendments. Even though amendments that give Parliament serious scrutiny over the negotiations could prove positive for sterling, that scenario is rather unlikely in our view, as two such attempts have already been rejected.

From Canada, we get housing starts for January and expectations are for the figure to have declined somewhat, though this indicator is usually not a major market mover.

Besides RBNZ Governor Wheeler who will hold a press conference following the rate decision, we do not have any other speakers scheduled for today.

EURUSD

The EURUSD had a bearish momentum yesterday slipped below the bullish channel but still unable to break break below 1.0650 key support and H4 EMA 200 as you can see on my H4 chart below. The bias is bearish in nearest term but we need a clear break below 1.0650 to confirm the bearish reversal scenario with nearest target seen at 1.0500 region. Immediate resistance is seen around 1.0730. A clear break above that area could lead price to neutral zone in nearest term but would keep the bullish phase remains valid testing 1.0800 area. Overall I remain neutral.

GBPUSD

The GBPUSD attempted to push lower yesterday bottomed at 1.2346 but whipsawed to the upside and closed higher at 1.2505. The bias is neutral in nearest term probably with a little bullish bias testing 1.2600 area. Immediate support is seen around 1.2450. A clear break below that area could trigger further bearish pressure testing 1.2400 – 1.2350 region. Overall I remain neutral.

USDJPY

The USDJPY failed to continue its bearish momentum yesterday topped at 112.57. The bias is neutral in nearest term but overall I still prefer a bearish scenario at this phase with nearest target seen at 111.30. Immediate resistance is seen around 113.00. A clear break and daily close above that area could trigger further bullish pullback testing 114.00 region but any upside pullback should be seen as a good opportunity to sell. Immediate support is seen around 112.00. A clear break below that area could trigger further bearish pressure testing 111.30.

USDCHF

The USDCHF had a bullish momentum yesterday slipped above 1.0000. The bias is bullish in nearest term but 1.0000 – 1.0040 (H4 EMA 200) area is a good place to sell with a tight stop loss. Immediate support is seen around 0.9950. A clear break below that area could lead price to neutral zone in nearest term testing 0.9900 region. Overall I remain neutral.

Sunrise Market Commentary

• Rates: Looking for EMU bond markets and risk sentiment for guidance
  Today's eco calendar is empty apart from heavy supply (Germany, Portugal, Finland, US). Investors' focus will remain on EMU bond markets. Yesterday tensions eased, but we don't take that for granted. The short term technical picture of the Bund improved and the US Note future is near key resistance (125-09/16).
• Currencies: Sterling rebounds on hawkish BoE comments and 'Brexit compromise'
  Yesterday, the dollar gained modestly against the euro and the yen as risk sentiment improved. Today, the eco calendar is very thin. Sterling profits from hawkish comments from BoE's Forbes and as the UK government agreed on the Parliamentary approval of the final Brexit deal

The Sunrise Headlines

• US equities ended around 0.2% higher with the S&P 500 underperforming (flat). Asian stock markets trade mixed with Japan outperforming on the back of yesterday's yen weakness.
• Japan attained its second-biggest current account surplus on record in 2016, just days before the US and Japanese leaders meet for talks with trade surpluses and currency valuations expected to be high on the agenda.
• Britain will not seek further talks with the EU if parliament rejects the exit deal it reaches, the government said, as ministers defeated attempts to give lawmakers more say on the terms of the final agreement.
• The RBNZ will undertake a cost-benefit analysis of imposing debt-to-income limits aimed at cooling down a red-hot housing market, NZ's FM said, though it is unlikely DTI measures will be used this year.
• Bundesbank President Weidmann said that Germans mustn't forget that they benefit from low interest rates that make jobs safer and boost government tax revenue. The ECB is not yet at a point where it can end its expansionary policy.
• The IMF warned that Greece once again risks a eurozone exit amid stalled bailout talks, sending the clearest signal yet the emergency lender isn't likely to soon rejoin Europe's failed efforts to fix the debt-weary nation.
• Crude oil prices dropped $1.5/b yesterday after a private report (API) showed that oil inventories spiked last week and as Norwegian energy group Statoil booked a $2.3B impairment due to reduced LT expectations for oil prices.
• Today's eco calendar is empty apart from auctions in Portugal, Germany, Finland and the US..

Currencies: Sterling Rebounds On Hawkish BoE Comments And 'Brexit Compromise'

Dollar looking for a bottom

On Tuesday, the European risk-off trade that dominated Monday's session faded. In a session devoid of important data, this was enough to put a short term floor undere the dollar. USD/JPY rebounded from a correction low in the 111.60 area and settled in 112 big figure during the European hours. However, the pair lost again ground in US dealings as equities couldn't maintain the opening gains. USD/JPY closed the session at 112.39. EUR/USD extended its decline. Contrary to Monday, USD strength rather than euro weakness prevailed. The dollar also lost momentum against the euro later on and finished the session at 1.0683.

Overnight, Asian equities trade mixed. The rise of the dollar is positive for Japan. Chinese equity markets probably also still react to the Chinese forex reserve statistics showed a decline of reserves below $3 trillion. China weakened the yuan reference rate to USD/CNY 6.8849 and the PBOC again tightened monetary conditions as it skipped its reverse rate operations. The CNH and the CNY are losing marginal ground. The dollar shows no clear trend. USD/JPY stands at 112.25. EUR/USD at 1.0675.

Today, US and EMU eco calendars are devoid of market moving data. We are also not aware of any important events. So technical considerations and global risk sentiment will guide currency trading. Sentiment on risk is a bit fragile in Asia this morning, but nog enough to draw conclusion for European and US trading. So we expect a calm start for trading in the major USD cross. The USD price action over the previous days showed a mixed picture. The topside in EUR/USD looks rather well protected as sentiment on the euro is fragile due to political risks in the region. At the same time, USD/JPY struggles to hold above the 112/111.16 support area. The jury is still out whether this area will hold. A retest/break is possible if risk sentiment would worsen again. Yen traders also look to the meeting between PM Abe and President Trump later this week, as the yen will likely debated. This might be slightly yen-supportive

Global context. The dollar is in a corrective downtrend against most majors since the start of January. The USD rally on the Trump reflation trade petered out. Interest rate differentials in favour of the dollar narrowed. Trump politics/communication became a sources of uncertainty, also for the dollar. A break above EUR/USD 1.0874 (next resistance) would question the short-term USD positive outlook. At some point, absolute interest rate support should provide a USD floor, especially as the Fed is expected to continue its policy normalisation. Price action earlier this week showed that that euro weakness might still be a factor too. As we see the 1.0874 resistance is solid, a sell EUR/USD on upticks might be considered. USD/JPY is trading well off the post- Trump highs (118.60/66) and dropped (temporary?) below the112 support. USD/JPY 111.16 (38% retracement of the 99.02/118.66 rally) is the next key support. A break below this area is clearly USD negative.

EUR/USD: Topside test rejected. Dollar tries to build a bottom after recent correction

EUR/GBP

Sterling gain on BoE comments and Brexit compromise

Yesterday, sterling initially traded with a negative bias on soft BRC retail sales, below consensus Halifax house prices and lingering uncertainty on the Brexit debate in Parliament. EUR/GBP returned to the 0.8640 area even as EUR/USD traded with a negative bias. In the afternoon, sentiment on sterling improved for the better. BoE's Forbes said that “If the real economy remains solid and the pickup in the nominal data continues, this could soon suggest an increase in bank rate.” Sterling rebounded further on Brexit headlines. Cable finished the session at 1.2501. EUR/GBP tumbled below 0.86 and finished the session at 0.8538.

Overnight, a survey of the Recruitment and Employment Confederation and IHS Markit indicated rising wage pressures. Sterling is holding near yesterday's highs against the dollar and the euro. No eco releases are scheduled. Yesterday, sterling rebounded as the UK Parliament was allowed to vote on the final Brexit agreement, but there will be no renegotiation if the proposed deal is rejected. At this stage, we don't see this 'agreement' as a reason for further sterling strength. Last week's balanced approach of the BoE capped the topside of sterling and helped a cautious bottoming out process for EUR/GBP. Yesterday's comments from Forbes supported sterling, but we don't think they change the broader picture on the BoE policy approach. The EUR/GBP 0.8450 support looks again a bit better protected. The sterling momentum is waning a bit, but euro weakness might still be an issue. A cautious buy-on-dips approach is preferred. The cable price action suggests that further cable gains are difficult too

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

Download entire Sunrise Market Commentary

WTI crude falls another 1% after large API build

Asia Mid-Session Market Update: PBOC skips reverse repos again while weakening Yuan fix; WTI crude falls another 1% after large API build

US Session Highlights

(US) DEC TRADE BALANCE: -$44.3B V -$45.0BE

(US) Fed's Kashkari (dove, voter): would prefer to err on side of being too loose than too tight; sees no immediate risks to financial stability; inflation expectations remain well anchored

(US) Atlanta Fed cuts Q1 GDP forecast to 2.7% from 3.4% on 2/1

GM shares slump despite solid Q4 financial results amid slide in margins and rising inventories

US markets on close: Dow +0.2%, S&P500 flat, Nasdaq +0.2%

Best Sector in S&P500: Consumer Staples

Worst Sector in S&P500: Energy

Biggest gainers: TDG +6.5%, CNC +5.3%, NOV +4.9%, EMR +4.5%, CHD +4.0%

Biggest losers: KORS -10.8%, FMC -6.0%, MSI -5.4%, VMC -4.9%, GM -4.7%

At the close: VIX 11.3 (-0.1pts); Treasuries: 2-yr 1.17% (+2bps), 10-yr 2.39% (-2bps), 30-yr 3.02% (-3bps)

US movers afterhours

COHR: Reports Q1 $2.57 ex-items (unclear if comp) v $1.79e, R$346.1M v $318M; +13.2% afterhours

MCHP: Reports Q3 $1.05 v $0.90e, R$881.2M v $850Me; Guides Q4 $1.01-1.11 v $0.93e, R$872-908M v $862Me; +9.9% afterhours

CTB: Cooper Tire to join MidCap 400; Hersha to replace WCI Communities in SmallCap 600, after the close Feb 10th; +3.3%; HT +5.9% afterhours;

TIME: Meredith, Bronfman-led investor group said to be advancing in pursuit of Time Inc - press; +2.9% afterhours

PNRA: Reports Q4 $2.05 v $2.00e, R$727M v $728Me; +2.6% afterhours

MDLZ: Reports Q4 $0.47 v $0.49e, R$6.77B v $6.87Be; +1.9% afterhours

DIS: Reports Q1 $1.55 v $1.48e, R$14.8B v $15.3Be; -0.6% afterhours

TTWO: Reports Q3 -$0.33 (gaap) v $0.37e (unclear if comp), R$476.5 v $715Me (2 est); -1.3% afterhours

AKAM: Reports Q4 $0.72 v $0.68e, R$616M v $606Me; -3.7% afterhours

BWLD: Reports Q4 $0.87 v $1.23e, R$494.2M v $515Me; -4.6% afterhours

GILD: Reports Q4 $2.70 v $2.43e, R$7.22B v $7.17Be; Increases dividend 10% to $0.52/shr from $0.47; -5.3% afterhours

Z: Reports Q4 $0.14 v $0.13e, R$227.6M v $169.4M y/y; Guides initial FY17 R$1.03-1.05B v $1.07Be; -7.2% afterhours

USNA: Reports Q4 $0.87 v $0.90e, R$253M v $251Me; Discloses internal investigation of China operations; -20.7% afterhours

Politics

(US) 9th Circuit Court of Appeals said to have indicated a ruling on Pres Trump's travel ban today is unlikely; Ruling to come some time this week - press

(US) As expected, VP Pence breaks 50-50 deadlock in US Senate, confirming Education Sec nominee Devos

Asia Key economic data:

(CN) CHINA JAN FOREIGN RESERVES: $2.998T V $3.004TE (7th consecutive decline and falls below $3T for first time since Feb 2011) (overnight)

(JP) JAPAN DEC BOP CURRENT ACCOUNT TOTAL: ¥1.1T V ¥1.2TE; ADJ CURRENT ACCOUNT TOTAL: ¥1.7T V ¥1.7TE; TRADE BALANCE BOP BASIS: ¥807B V ¥739BE

(TW) TAIWAN JAN CPI Y/Y: 2.3% V 2.0%E; WPI Y/Y: 2.7% V 1.5%E

(NZ) New Zealand Jan ANZ Truckometer Heavy (heavy traffic) M/M: -0.8% v -0.1% prior; 2nd straight decline

Asia Session Notable Observations, Speakers and Press

Lack of momentum in US indices continues to be felt in Asia, where indices were once again mixed and volatility contained. Australia is the worst performer with Energy sector under heavy pressure - WTI oil fell below $52/brl in US hours and then fell another 1% in electronic session after API crude inventories report was 5x the expected build and also the 2nd biggest on record.

Mainland China markets are taking the 6-year low just below $3T in FX reserves released overnight in stride, with the main index down marginally. BoCom researcher said reserves of about $2T are appropriate given China's floating exchange rate system. Similarly, overnight China FX regulator SAFE said FX reserves are ample, and fluctuations in forex reserves are normal.

Separately, PBoC weakened Yuan slightly more aggressively, with the lowest CNY setting in over 2 weeks. PBoC also skipped reverse repo operations for the 4th straight session, though reiterated that banking system liquidity is at high level. Likewise overnight, PBOC research said the OMO are influenced by market forces, and last week's 10bp increase in offer rates should not be interpreted as tightening.

BOJ's summary of opinion from the latest meeting touched on the familiar themes, affirming commitment to YCC policy despite the rising US rates with an eye on risks from Brexit and Trump policy uncertainties. As reflected in the statement, BOJ was more upbeat on developments in exports, consumption and capex.

China:

(CN) China Information Daily: PBOC has no conditions for interest rate hike; will focus on flexible monetary policy

(CN) Bank of Communications (BoCom) researcher Liu Jian: China FX reserves of about $2T are appropriate - Chinese press

Japan:

(JP) Japan Chief Cabinet Sec Suga: Japan does make large investments into the US

Australia/New Zealand:

(NZ) New Zealand Fin Min Joyce: Budget to be presented on May 25th

(NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: +1.3% v +0.6% prior; 2nd straight increase

Asian Equity Indices/Futures (00:00ET)

Nikkei +0.2%, Hang Seng -0.1%, Shanghai Composite -0.3%, ASX200 +0.5%, Kospi -0.5%

Equity Futures: S&P500 flat; Nasdaq flat; Dax +0.1%; FTSE100 +0.1%

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

EUR 1.0665-1.0690; JPY 112.05-112.55; AUD 0.7610-0.7640; NZD 0.7285-0.7315

Apr Gold -0.1% at $1,235/oz; Mar Crude Oil -1.0% at $51.60/brl; Mar Copper +1.1% at $2.67/lb

(US) Weekly API Oil Inventories: Crude: +14.2M v +5.8M prior; 5x bigger expected, 3rd straight build; largest build since Feb 2015 and 2nd largest build on record

SPDR Gold Trust ETF daily holdings rise 8.2 tonnes to 826.9 tonnes; 5th consecutive increase; Highest since Dec 20th

(CN) PBOC SETS YUAN MID POINT AT 6.8849 V 6.8604 PRIOR; weakest setting since Jan 17th

(CN) China MoF sells 1-yr bonds at 2.78% v 2.78%e, bid-to-cover 1.8x; 10-yr bonds at 3.4% v 3.46%e, bid-to-cover 4.08x

(CN) PBOC skips reverse repo operations (4th consecutive day)

(JP) Japan Finance Ministry MOF: Foreign investors sold ¥119.2B in Japan stocks; bought ¥1.68T in japan bonds in Dec.

(AU) Australia MoF sells A$800M in 3.25% 2029 bonds; avg yield 2.8922%; bid-to-cover 2.48x

Asia equities/Notables/movers by sector

Consumer discretionary: 1929.HK Chow Tai Fook Jewellery Group -1.0%, 178.HK SA SA International Holdings -0.9% (Chinese New Year SSS); 2269.JP Meiji Holdings Co. -0.6% (9-month result)

Financials: 1918.HK Sunac China Holdings +5.6% (Jan result); 6837.HK Haitong Securities -0.7% (Jan result); SCP.AU Shopping Centres Australasia Property Group -2.2% (JPMorgan cuts rating); GMA.AU Genworth Mortgage Australia -14.7% (FY16 result)

Industrials: 6504.JP Fuji Electric Holding -2.5%; CIM.AU CIMIC Group +8.0% (H1 result); 7003.JP Mitsui Engineering & Shipbuilding Co -8.3% (9-month result)

Technology: CAR.AU Carsales.com limited +8.1% (H1 result); 9613.JP NTT Data Corp -5.0% (9-month result); 5201.JP Asahi Glass Co +8.5% (FY16 result)

Materials: 3405.JP Kuraray Co -5.8% (FY16/17 result)

Energy: 5019.JP Idemitsu Kosan Co -3.7% (9-month result)

Healthcare: 2784.JP Alfresa Holdings Corp +1.1% (9-month result)

Utilities: TCL.AU Transurban -2.2% (Morgans Financial cuts rating); 6841.JP Yokogawa Electric Corp -8.0% (9-month result)

Market movers today

There are no major events for the market today, so focus is once again on any news from the new US administration.

The market will also scrutinize any polls from France that could give an idea of whether Marine le Pen has gained following the Francois Fillon scandal. Greece is also back in the limelight after the harsh comments by the IMF earlier in the week.

Oil prices have been under pressure this week and today’s weekly oil stock numbers from the DOE will be scrutinized.

Selected market news

The sentiment in financial markets and especially in the European government bond market improved yesterday after the strong sell-off on Monday. The battered French bond market saw a small spread tightening to Germany for a change. It seems that despite the recent focus on Republican candidate Francois Fillon and his derailed campaign, he is still not out of the race and, importantly, the polls are still pointing to a significant lead for both Emmanuel Macron and Fillon versus Le Pen in a possible second round in the French presidential election.

A daily poll by the pollster Ifop showed that Le Pen’s lead in the first round had increased to 26% of support, that Macron is at 21% and that Fillon is now steady at 18.5%. However, importantly, the poll also showed that in the second round, Macron is forecast to get 64% versus 36% for Le Pen. Hence, the probability of Le Pen actually becoming President is still relatively low, according to the polls.

Greece has also attracted attention this week after the IMF earlier this week said the surplus targets are unrealistic and that Greece needs more substantial debt relief. Yesterday, Jeroen Dijsselbloem, president of the Eurogroup of finance ministers, said that the EU disagrees and that the IMF has an outdated view of the Greek economy and that it ‘must be honest’ in its assessments. The IMF’s comments and its disagreement with the EU weighed heavily on Greek short-term debt, and the 2Y Greek benchmark bond yesterday rose 66bp to 9.2%.

Dow Jones touched an all-time high yesterday evening as the market was expecting news from the Trump administration on tax cuts and fiscal spending. However, nothing was revealed and as oil prices dropped for a second day, sentiment turned and the major indices ended the day more or less unchanged.

The lower oil price and a ‘Trump reflation’ case running a bit out of steam, coupled with disappointing consumer credit data and dovish comments from the Fed’s Kashkari (voting member) supported US treasuries, and 10Y yields dropped below 2.40% for the first time since mid-January. After the lower wage growth in the labour market data released on Friday, we have become even more convinced that the FOMC will leave rates unchanged at the March Fed meeting. In the currency market, the sterling once again attracted attention as two Bank of England members called for a rate hike as early as March. It supported the otherwise battered pound.

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

The EUR continued to sag against its US counterpart yesterday, as the US dollar advanced against the majority of its trading peers. H4 demand at 1.0684-1.0709 along with the 1.07 psychological handle housed within, were both wiped out, allowing price to clock a low of 1.0656 and retest the aforementioned H4 broken demand as a resistance area.

From a technical perspective, the weekly timeframe is trading with a reasonably strong downside bias at the moment. With the weekly resistance at 1.0819 holding firm, the next support target on tap falls in at around a weekly support area drawn from 1.0333-1.0502. While this may be true, we also have to take into consideration the fact that the daily candles are now seen checking in with a daily demand base at 1.0589-1.0662.

Our suggestions: Although weekly price indicates further selling may be on the cards, we really like the look of the H4 mid-way support at 1.0650. This level boasts a H4 AB=CD 161.8% ext. at 1.0637, a deep 88.6% retracement at 1.0644, a H4 trendline support etched from the low 1.0589 (yellow zone) and is seen positioned within the above noted daily demand area. One could also say that there’s a possible H4 three-drive approach in play as well. Ideally, we’ll be looking to enter just above 161.8% ext. today, with stops placed 2-3 pips below the H4 Quasimodo support at 1.0621. That way, should a fakeout be seen beyond the 161.8% ext. there’s another H4 trendline seen just below (1.0579) to support our trade. Just to be clear here, we are not looking for a reversal off this area. A bounce is all that’s expected due to what’s been noted on the weekly timeframe.

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: 1.0637/1.0650 ([an area that can, dependent on the time of day, possibly be traded without additional confirmation] stop loss: 1.0619).
• Sells: Flat (stop loss: N/A).

GBP/USD

The GBP/USD, as you can see, came under pressure going into the early hours of yesterday’s European session, consequently walloping its way through the 1.24 handle and a H4 trendline support taken from the high 1.2432. However, this downside move was a relatively short-lived one, as the buyers managed to recover from lows of 1.2346 relatively quickly, and aggressively lift prices into positive territory by the closing bell.

In addition to the above, we can also see that daily price came within an inch of clipping the top edge of a daily demand area at 1.2252-1.2342, along with weekly action just missing the 2017 yearly opening level at 1.2329, before advancing north.

Our suggestions: As we write, the H4 candles are seen interacting with a rather interesting H4 area of resistance. Comprised of a psychological number at 1.25, December’s opening base at 1.2514, a H4 50% retracement at 1.2525, a H4 trendline resistance drawn from the low 1.2260 and a H4 mid-way resistance level at 1.2550 (yellow zone), this area could possibly halt buying today. Granted, there is little higher-timeframe convergence seen here, but given the H4 confluence in play, a short from this zone could be considered. Still, we would recommend waiting for a H4 close beyond 1.25 before initiating a sell, since beyond this number there’s very little standing in the way of price challenging the 1.24 vicinity.

Data points to consider: MPC member Cunliffe speaks today at 1pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.2550/1.25 ([wait for a H4 close to be seen beyond 1.25 followed up with a retest to the underside of this number, before pulling the trigger] stop loss: ideally beyond the trigger candle).

AUD/USD

With the US dollar advancing across the board yesterday the AUD/USD tumbled lower, bottoming just ahead of the 0.76 psychological barrier. In view of this, we’re currently drawn to the 0.7577/0.76 H4 support area today. Supporting a bounce from this zone we have the following converging structures:

• A H4 AB=CD 127.2% ext. at 0.7586.
• A H4 61.8% Fib support at 0.7582.
• February’s opening level at 0.7577.
• Round number 0.76.
• We also have the top edge of a daily support area at 0.7581 bolstering the above noted H4 support zone.

Our suggestions: Based on the above confluence, we feel a long from the 0.7586 mark is feasible. To be on the safe side, stops may want to be placed beyond the H4 161.8% ext. at 0.7560 (0.7558).

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: 0.7577/0.76 ([an area that can, dependent on the time of day, possibly be traded without additional confirmation] stop loss: 0.7558).
• Sells: Flat (stop loss: N/A).

USD/JPY

Starting from the top this morning, weekly action recently bottomed just ahead of a weekly support area registered at 111.44-110.10. To our way of seeing things, this could have something to do with the fact that a daily demand at 111.35-112.37 is also currently in play at the moment. Of particular interest here are Monday and Tuesday’s daily candles, as combined they resemble a strong buying tail!

Looking over to the H4 chart, we can see that yesterday’s advance brought the unit up to a H4 supply coming in at 112.77-112.55, which did in fact hold firm. Should this area continue to remain in motion, we may see the H4 candles complete the D-leg of an AB=CD bull pattern, terminating just ahead of a H4 demand area seen at 110.85-111.35.

Our suggestions: Should the above come to fruition, we would not be looking to enter long until price connects with the H4 AB=CD 127.2% ext. at 111.25. The safest position for stops, in our opinion, would be beyond the above noted H4 demand. This trade is effectively based on the premise that price will also be teasing the top edge of the aforementioned weekly support area. To avoid the possibility of a fakeout through this H4 demand to the daily broken Quasimodo line at 110.58, waiting for a H4 bull candle to take shape beforehand could help to eliminate this (a slightly different approach to Tuesday’s analysis).

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: 111.25 region ([wait for a H4 bull candle to form before looking to execute a trade] stop loss: ideally beyond the trigger candle or below the H4 demand at 110.85-111.35).
• Sells: Flat (stop loss: N/A).

USD/CAD

From the weekly chart this morning, we can see that the weekly bulls continue to bid price higher from weekly demand at 1.3006-1.3115. This could, assuming the bulls remain in the driving seat here, force price to challenge the weekly trendline resistance taken from the high 1.4689. In conjunction with the weekly chart, the daily candles recently closed above a daily supply area at 1.3169-1.3116 (now acting support area), potentially clearing upside towards a daily supply at 1.3387-1.3317.

In spite of the above notes, to become buyers in this market we would like to see the H4 candles close above the 1.32 handle. Not only would this further confirm the recent break above daily supply, but it would also open up the path north to H4 supply at 1.3299-1.3265.

Our suggestions: Assuming that a H4 close is seen above 1.32 today, this would be our cue to begin watching for price to retest this number as support. Providing that this is followed-up with a lower-timeframe buy signal (see the top of this report for more info on confirming price action), this would be a viable long setup, targeting the aforementioned H4 supply zone.

Data points to consider: Crude oil inventories at 3.30pm GMT.

Levels to watch/live orders:

• Buys: Watch for a H4 close above 1.32 and then look to trade any retest seen thereafter ([waiting for a lower-timeframe buy signal to form following the retest is advised before pulling the trigger] stop loss: dependent on where one confirms this level).
• Sells: Flat (stop loss: N/A).

USD/CHF

The USD/CHF, as you can see, stabilized around parity (1.0000) yesterday, following a wave of buying from just ahead of the 0.99 handle. With parity being a closely watched juncture in this market, as well as being reinforced with a H4 trendline resistance taken from the low 0.9960, it was no surprise to see price had reacted so well from this neighborhood. However, as we write, price seems to be stalling around a nearby H4 support area coming in at 0.9966-0.9949.

With the daily candles potentially on course to retest the underside of a daily trendline resistance drawn from the high 0.9956 right now, and weekly price reflecting a bullish stance beyond weekly resistance at 0.9943, we feel the current H4 support area has a better than fair chance of holding ground today. Based on this, do we believe that the H4 zone is stable enough to permit a long entry? Probably not, in our opinion. The reason is that from the top edge of this zone up to parity gives one only 30 or so pips to play with. Does this mean that a trade from the H4 support zone will not work? Absolutely not. If one is able to pin down a lower-timeframe buy signal from here (see the top of this report) that allows a trade with a relatively small stop loss, the risk/reward could still be favorable up to 1.0000.

Our suggestions: For us personally, we will remain flat going into today’s segment and look to reassess around tomorrow’s open.

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: Flat (stop loss: N/A).

DOW 30

US equities trimmed an earlier advance on Tuesday, after price spiked through a daily supply area at 20138-20075. Although yesterday’s move recorded fresh all-time highs, we would not be confident (at least in the medium term) buyers until the said daily supply is consumed.

In light of the recent selloff, the H4 candles show little standing in the way of a move lower to 20000. Now, given that 20000 is bolstered by both a H4 support at 19989 and a daily support at 19964, this area could be somewhere to expect price to bounce from, or even potentially reverse.

Our suggestions: Before our team looks to commit to any long positions from the 19964/20000 region, however, we would need to see at least a H4 bull candle take shape within the walls of this area. Although this would not guarantee a winning trade, what it does do is signal buyer interest within a high-probability reversal zone.

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: 19964/20000 ([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

Gold prices are little changed this morning. The H4 candles continue to emphasize overbought conditions, in our opinion, as price remains trading within a H4 AB=CD (see black arrows) sell zone comprised of both the 127.2%/161.8% Fib extensions (yellow area – 1232.9/1241.7). As highlighted in Tuesday’s report, this area is also supported by the fact that the top edge is strengthened by a weekly resistance level pegged at 1241.2. As such, there may be trouble ahead for traders who bought into the breakout above daily supply at 1232.9-1224.5!

Our suggestions: On the account that there’s been very little change to structure in this market, we continue to wait and see if bullion can stretch a little higher into the above noted H4 sell zone, before looking to short. Ideally, the closer the better to the weekly resistance at 1241.2! In addition to this, our trigger to sell will be based on whether or not a reasonably sized H4 bear candle forms. Granted, this will by no means guarantee a winning trade, but what it will do is show seller interest within a high-probability reversal zone.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1241.7/1232.9 ([wait for a H4 bear candle to form within the upper limit of this zone before looking to execute a trade] stop loss: ideally beyond the trigger candle).

Currency pair GBP/USD

The GBP/USD is building a correction between support (green) and resistance) which is most likely a wave 4 (purple). A bearish ABC (orange) seems to be completed within a larger wave B (blue) correction as price bounced strongly at the 50% Fibonacci level.

The GBP/USD bullish momentum is probably a 5 wave (orange) structure, which could mean that price is retracing within wave 4 (orange) as long as price stays above the 50% Fibonacci level.

Currency pair EUR/USD

The EUR/USD break below the support trend line (blue) could spark a continuation of the wave 3 (purple). A break of the resistance trend lines (orange/red) could change the wave structure

The EUR/USD is most likely in a wave 4 (blue) retracement, which would be invalidated if price broke above the resistance (red) and 61.8% Fibonacci. A break below support (green) could see a continuation.

Currency pair USD/JPY

The USD/JPY is building a retracement back to the Fibonacci levels of wave 4 (purple). The 38.2% and 50% are likely support levels to complete a wave 4 (purple).

The USD/JPY could have completed a bearish ABC zigzag (orange) at the 38.2% Fibonacci level of wave 4 (purple). A break above the resistance trend lines could indicate a continuation of the bullish momentum whereas a break below support (green) could see a bearish continuation.

Daily Pivots: (S1) 1.2386; (P) 1.2466; (R1) 1.2585; More...

GBP/USD rebounded strongly after hitting 1.2346 and intraday bias is turned neutral first. 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.

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EUR/USD Daily Outlook

Daily Pivots: (S1) 1.0641; (P) 1.0695 (R1) 1.0734; 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.

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