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Sterling surges broadly today on news that UK Prime Minister Theresa May could trigger Article 50 for Brexit this week. The House of Commons is set to debate the Brexit bill today and there is hope for passing the bill unamended. The House of Lords has already approved two amendments to the bill last week, in particular to grant the Parliament a "meaningful vote" on the final agreement. Passing the of bills in Commons today would set the stage for May to start' her plan for a so-called "hard Brexit". And the announcement could happen as soon as tomorrow. GBP/USD is trading above 1.22 at the time of writing, comparing to last week's low at 1.2133. EUR/GBP is back at 0.872, comparing to last week's high at 0.8786. While Sterling recovers today, it's still holding below near term resistance against Dollar and Euro. Thus, it's maintaining bearish outlook.

Scotland seeks another independence referendum

Also from UK, Scotland's First Minister Nicola Sturgeon announced today that she will seek another independence referendum as early as next year as a response to Brexit. She noted that with Brexit, there is a "material change in circumstances" since Scottish voted to stay in UK by 55 to 45 in 2014. She emphasized that "the future of the U.K. looks very different today than it did two years ago." She criticized that while she sought negotiations with UK PM May on Brexit details, the UK government "has not moved even an inch in pursuit of compromise or agreement." Sturgeon targets to have the referendum in late 2018 or early 2019. And by the time, the exact terms of Brexit should be known.

Euro lower as as Dutch vote this week

Euro trades broadly lower today and pares back some of the ECB triggered gains. Focus is turning to the election in the Netherlands this week. Dutch will head to vote and elect their next prime minister. The Netherlands is seen by many as a "fractured" policy environment and as many as 28 parties are running to be a part of the next government. And as many as five parties could be needed to form the coalition even though the Liberals are tipped to secure a majority of votes. While the result of the Dutch election is unlikely to surprise the markets much, some analysts see that as a precursor to French elections in April and May.

Dollar soft ahead of FOMC

Dollar stays weak in general even though in recovers some losses against Euro and Yen. Fed is widely expected to hike interest rate by 25bps this week. However, such expectation should be fully priced in, traders are looking through the FOMC meeting and turning cautious. In particular, Fed's updated Summary of Projections (SEP) and the monetary policy outlook for the rest of the year would be crucial to Dollar's trend in near term.

BoJ, BoE, SNB to meet

In addition to FOMC meeting, BoJ, BoE and SNB will announce monetary policy decisions this week. All are scheduled for Thursday and thus, we'll have a 24 hours of central bank frenzy from Wednesday to Thursday. All, BoJ, BoE and SNB are expected to stand pat. BoJ is expected to maintain the so called yield curve control framework. BoE's bias would likely stay neutral but may adjust its view on upside risks in inflation. The SNB is expected to leave its sight deposit rate unchanged at -0.75%. These three central bank announcements could end up being non-events.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2133; (P) 1.2160; (R1) 1.2187; More...

GBP/USD reaches as high as 1.2398 today so far as recovery from 1.2133 extends. Intraday bias remains neutral for the moment as such rise is seen as a correction. We'd expect upside of recovery to be limited by 1.2346 support turned resistance and bring fall resumption. As noted before, consolidation pattern from 1.1946 is completed at 1.2705 is resuming larger down trend. On the downside, below 1.2133 will turn bias to the downside for retesting 1.1946/86 support zone. Break of 1.1946 will confirm our bearish view. However, sustained break of 1.2346 will dampen out view and turn focus back to 1.2569 resistance first.

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.

Economic Indicators Update

USD/CAD is almost unchanged in the Monday session. In North American trade, the pair is trading at the 1.3460. On the release front, it's a very quiet start to the week. There are no Canadian releases until Thursday. In the US, there is one minor event on the schedule. On Tuesday, the US releases PPI, with the index expected to slip to 0.1%.

Canada's economy continues to create jobs at an impressive clip, as the Canadian economy continues to expand thanks to the strong recovery south of the border. On Friday, Employment Change came in at 15.3 thousand. This was lower than the previous two readings, but easily beat the forecast of 0.6 thousand. The economy has created jobs for seven straight months, as the labor market continues to recover. The unemployment rate also improved, dropping from 6.8% to 6.6%. Still, these figures only tell part of the story. Wage growth remains soft, and many of the recent job gains have been part-time positions. The Canadian dollar posted only modest gains on Friday, as upward movement was limited by a very strong Nonfarm Payrolls report in the US.

The US economy continues to steam ahead at full speed, buoyed by a red-hot labor market. On Friday, Nonfarm Payrolls sparkled with a gain of 235 thousand. This easily beat the estimate of 196 thousand. The strong release makes it a virtual certainty that the Fed will raise rates by a quarter-point on Wednesday. Although a rate hike has been priced in by the markets, there have been disappointments in the past, so a rate move will likely give the dollar a boost against its major rivals, such as the euro. The solid job numbers also give President Trump a much-needed boost. Trump is under pressure to present an economic agenda, but the markets won't mind giving him some additional breathing room with the economy performing well.

USD/CHF - 1.0085

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

The greenback met renewed selling interest at 1.0114 earlier today and has dropped again, suggesting the erratic fall from 1.0171 top is still in progress, however, break of support at 1.0065 is needed to retain bearishness and signal recent erratic rise from 0.9861 has ended and bring further fall to 1.0035-40 but support at 1.0009 should remain intact, bring rebound later.

In view of this, would not chase this fall here and would be prudent to stand aside in the  meantime. Above 1.0114 would bring test of indicated resistance at 1.0142 but break there is needed to signal low is formed instead, bring further gain towards last week’s high at 1.0171.

GBP/USD - 1.2218

Original strategy :

Bought at 1.2215, Target: 1.2320, Stop: 1.2180

Position : - Long at 1.2215

Target :  - 1.2320

Stop : - 1.,2180

New strategy  :

Hold long entered at 1.2215, Target: 1.2320, Stop: 1.2180

Position : - Long at 1.2215

Target :  - 1.2320

Stop : - 1.2180

Current rally above indicated resistance at 1.2195 suggests a temporary low is possibly formed at 1.2135 last week and consolidation with upside bias is seen for retracement of recent decline, hence further gain to 1.2260-65 (38.2% Fibonacci retracement of 1.2471-1.2135) would be seen, however, break of 1.2301-03 (previous resistance and 50% Fibonacci retracement) is needed to signal low is formed, bring a stronger rebound to 1.2340-45 (61.8% Fibonacci retracement) later.

In view of this, we are holding on to our long position entered at 1.2215\. Below the Kijun-Sen (now at 1.2190) would defer and risk weakness to 1.2170 but said support at 1.2135 should hold. Only break there would abort and signal recent decline has resumed and extend weakness to 1.2100.

EUR/USD - 1.0668

Original strategy  :

Buy at 1.0640, Target: 1.0740, Stop: 1.0610

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0640, Target: 1.0740, Stop: 1.0610

Position : -

Target :  -

Stop : -

As the single currency has retreated after rising to 1.0714 earlier today, suggesting consolidation below this level would be seen and pullback to 1.0640 (previous resistance now support) cannot be ruled out, however, reckon downside would be limited and bring another rise later, above 1.0714 would signal the erratic rise from 1.0493 low is still in progress and may extend gain to 1.0740-45 (1.5 times projection of 1.0495-1.0640 measuring from 1.0525) but loss of near term upward momentum should prevent sharp move beyond 1.0760 (1.618 times projection of 1.0495-1.0640 measuring from 1.0525).

In view of this, we are looking to buy euro on further pullback as 1.0540 should limit downside, bring another rise later. Below another previous resistance at 1.0615 would abort and signal top has been formed, risk further fall to 1.0575-80 first. 

USD/JPY - 114.69

New strategy  :

Stand aside

Position :  -

Target :  -

Stop : -

Although the greenback recovered after finding support at 114.48 and minor consolidation is in store, reckon upside would be limited to the Kijun-Sen (now at 115.00) and near term downside risk remains for the fall from 115.51 top (last week’s high) to bring at least a retracement of recent upmove to 114.26 support but downside should be limited to 114.00-05 (38.2% Fibonacci retracement of 111.69-115.51) and price should stay well above strong support at 113.56-61), bring rebound later.

In view of this, would be prudent to stand aside for now. Above the Kijun-Sen (now at 115.00) would suggest an intra-day low is formed, bring a stronger rebound to 115.25-30 but still reckon said resistance at 115.51 would cap upside. Only break there would revive bullishness and extend recent upmove to previous resistance at 115.62, then towards 115.90-00. 

In what was already going to be an eventful week for the UK, Nicola Sturgeon has thrown another, albeit expected, spanner in the works calling for another Scottish independence referendum leaving PM Theresa May with not only Brexit but also Scexit to contend with.

The announcement hasn't come as a major surprise, with the SNP making their feelings repeatedly known since the EU referendum last June after the majority of the country voted to remain only to be dragged out kicking and screaming. What is confusing is the timing for the new referendum, with Sturgeon claiming that it should happen between Autumn 2018 and Spring 2019, prior to the two years of Brexit negotiations being completed.

This effectively means that even if the negotiations go perfectly to plan, which they likely won't, the Scottish people won't know what they will actually be voting for. It's almost like Sturgeon wants the alternative to independence to be enormous uncertainty when the alternative could be cleared up months after the proposed date.

While all of this seems rather confusing, markets have broadly taken it in their stride. The pound, which had started the session well on hopes that parliament could have a vote on its on exit deal, saw some volatility immediately after the announcement but has since settled slightly higher. The uncertainty has hit UK Gilts slightly but even here, the impact has been minimal, albeit enough to send yields to session highs.

Aussie has turned sharply lower last week which has been expected since we identified an ending diagonal in wave C) position. That's a reversal pattern that put a bearish impulse in progress, wave 1 that found a base at the 0.7489 level. As such current bullish rally is the start of wave 2, which may find an ideal reversal zone around the 50.0 or 61.8 Fibonacci ratio, for where a bearish breakdown may follow.

AUD/USD, 4H

GOLD (in USD) Bearish Pause

Gold is consolidating after strong bearish move since resistance given at 1263 (27/02/2017 high). Expected to reach strong support at 1177 (11/01/2017 low).

In the long-term, the technical structure suggests that there is a growing upside momentum. A break of 1392 (17/03/2014) is necessary ton confirm it, A major support can be found at 1045 (05/02/2010 low).

SILVER (in USD) Short-Term Bullish Consolidation

Silver's selling pressures are still important. Hourly support is now given at 16.63 (27/01/2016 low). Expected to see renewed bearish pressures.

In the long-term, the death cross indicates that further downsides are very likely. Resistance is located at 25.11 (28/08/2013 high). Strong support can be found at 11.75 (20/04/2009).

Crude Oil (in USD) Weakening

Crude oil's bearish pressures continues. The commodity has been unable to mount a serious challenge to 55.24 (03/01/2017 high) resistance. Strong support given at 49.61 (08/12/2016) has been broken. Expected to see deeper selling pressures.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness are very likely. Strong support lies at 24.82 (13/11/2002) while resistance can now be found at 55.24 (03/01/2017 high).

EUR/CHF Temporary Surge

EUR/CHF's bullish pressures have increased sharply. Resistance given at 1.0762 (27/12/2016 high) has been broken. Anyway, the mediumterm pattern suggests us to see continued bearish pressures towards key support that can be found at 1.0623 (24/06/2016 low). Temporary surges seem the new normal for the CHF.

In the longer term, the technical structure is mixed. Resistance can be found at 1.1200 (04/02/2015 high). Yet,the ECB's QE programme is likely to cause persistent selling pressures on the euro, which should weigh on EUR/CHF. Supports can be found at 1.0184 (28/01/2015 low) and 1.0082 (27/01/2015 low).

EUR/JPY Monitoring Resistance at 123.31

EUR/JPY's demand has rejuvenated . Hourly resistance at 121.34 (10/02/2017 high) has been broken. Strong resistance is given at a distance at 123.31 (27/01/2017 high). Expected to show further increase.

In the longer term, the technical structure validates a medium-term succession of lower highs and lower lows. As a result, the resistance at 149.78 (08/12/2014 high) has likely marked the end of the rise that started in July 2012. Strong support at 94.12 (24/07/2012 low) looks nonetheless far away.

EUR/GBP Heading Higher

EUR/GBP is pushing higher. Strong resistance given at 0.8854 (15/01/2017 high) is at stake. We rule out further weakness towards supports given at 0.8450 (03/01/2016 low) and at 0.8304 (05/12/2016). Expected to further strengthen.

In the long-term, the pair has largely recovered from recent lows in 2015. The technical structure suggests a growing upside momentum. The pair is trading above from its 200 DMA. Strong resistance can be found at 0.9500 psychological level.