Sample Category Title

The greenback is weakening for a third consecutive day in early Asian trade ahead of Wednesday's most awaited Fed meeting. Investors are almost convinced that the Fed will move forward in tightening monetary policy, with speculators pricing in 89% chance of a rate hike according to CME's FedWatch Tool. Friday's robust non-farm payrolls report removed all doubts and now even skeptical investors believe that three rate hikes are the base scenario for 2017. So why is the dollar not benefiting from the shift in expectations?

I believe the answer to this questions is simply based on “buy the rumor, sell the news” adage. The U.S. economy added 235,000 jobs in February and unemployment dipped to 4.7% from 4.8%, meanwhile wages were revised up 2.8% year-on-year from 2.6%. Despite wage growth notbeing robust enough, the continuous improvement in hiring will force wage growth to accelerate and diminish the slack in labor market.

The divergence in monetary policy and aggressive expected U.S. fiscal plans have been the key factors which sent the Dollar's index to a 14-year high back in January. But recent reports indicated that European Central Bank policy makers have raised the possibility of increasing interest rates before the asset purchases come to an end, indicating that this divergence will not last much longer and investors might require to adjust their expectations.

I would rather focus on U.S. treasury yields for now as a break above 2.64% on 10-year treasuries might not only indicate that the dollar's slide is temporary, but could be a sign that the three-decade bull bond market has come to an end, which will eventually increase the risk-free rate required by investors.And if U.S. corporate earnings growth can'tcatch up, then we're likely to see the beginning of U.S. equity markets correction.

In Europe, the U.K. divorce from the EU might become official as soon as Tuesday if the Brexit bill clears parliament later today. This will be the beginning of a very complicated two-year process, and much of it will be felt in the pound. Meanwhile Dutch voters are heading to the polls on Wednesday providing an indication on how strong the populist movement is in Europe ahead of upcoming polls in France and Germany.

USD/CHF - 1.0092

Most recent candlesticks pattern : N/A

Trend                                    : Near term up

Tenkan-Sen level                  : 1.0085

Kijun-Sen level                    : 1.0104

Ichimoku cloud top                 : 1.0127

Ichimoku cloud bottom              : 1.0125

Original strategy :

Bought at 1.0100, stopped at 1.0070

Position : - Long at 1.0100

Target :  -

Stop : - 1.0070

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.

Global Markets:

• Asian stock markets: Nikkei up 0.15 %, Shanghai Composite rose 0.75 %, Hang Seng gained 1.15 %, ASX 200 lost 0.20 %
• Commodities: Gold at $1210 (+0.70 %), Silver at $17.13 (+1.20 %), WTI Oil at $48.30, Brent Oil at $51.30
• Rates: US 10 year yield at 2.58, UK 10 year yield at 1.24, German 10 year yield at 0.48

News & Data:

• Japan Machine Orders MoM (Jan): -3.20% (est -0.10%, prev 6.70%)
• Japan Machine Orders YoY (Jan): -8.20% (est -3.70%, prev 6.70%)
• AU Credit Card Balances (Jan): A$51.5bn (prev A$52.8bn)
• AU Credit Card Purchases (Jan): A$24.6bn (prev A$ 27.7bn)

CFTC Positioning Data:

• EUR net short 59k vs 51k previous
• GBP net short 81k vs 70k previous
• JPY net short 54k vs 50k previous
• AUD net long 51k vs 51k previous
• CAD net long 29k vs 30k previous
• CHF net short 10k vs 12k previous
• NZD net short 4k vs 3k previous

Markets Update:

The US Dollar weakened overnight. The US employment data on Friday was solid, but since the market is already counting on a rate hike on Wednesday, it is not enough to keep the USD rally going.

The Euro broke above the level of 1.07 in Asia. It cleared a major resistance area between 1.0670 and 1.0680, and this signals that the rally could extend to 1.0825 soon.

Meanwhile, USD/JPY is likely to face further pressure soon. Support is seen at 114.00/20. Should it break below that, a deeper correction seems likely.

The Aussie Dollar bounced as well. The major support area between 0.75 and 0.7520 held, and it is on its way to test 0.76 again. Should it break above 0.7620 resistance, it could have another test of 0.7740 soon.

Upcoming Events:

• 09:00 GMT – Italian Industrial Production
• 13:30 GMT – ECB President Draghi speaks
• 14:00 GMT – ECB Member Constancio speaks
• 16:30 GMT – ECB Member Praet speaks

The Week Ahead:

Tuesday, March 14th

• 07:00 GMT – German CPI
• 10:00 GMT – German ZEW Economic Sentiment
• 10:00 GMT – Euro Zone Industrial Production
• 10:00 GMT – Euro Zone ZEW Economic Sentiment
• 12:30 GMT – US PPI
• 21:45 GMT – New Zealand Current Account

Wednesday, March 15th

• 07:45 GMT – French CPI
• 08:15 GMT – Swiss PPI
• 09:30 GMT – UK Unemployment Rate
• 09:30 GMT – UK Claimant Count Change
• 09:30 GMT – UK Average Hourly Earnings
• 10:00 GMT – Italian CPI
• 12:30 GMT – US CPI
• 12:30 GMT – US Retail Sales
• 14:00 GMT – US NAHB Housing Market Index
• 14:30 GMT – US Crude Oil Inventories
• 18:00 GMT – Federal Reserve Rate Decision
• 18:00 GMT – FOMC Statement
• 18:30 GMT – FOMC Press Conference
• 21:45 GMT – New Zealand GDP

Thursday, March 16th

• 00:30 GMT – Australian Employment Change
• 00:30 GMT – Australian Unemployment Rate
• 03:00 GMT – Bank of Japan Rate Decision
• 06:30 GMT – Bank of Japan Press Conference
• 08:30 GMT – SNB Rate Decision
• 08:30 GMT – SNB Statement
• 10:00 GMT – Euro Zone CPI
• 12:00 GMT – Bank of England Rate Decision
• 12:30 GMT – US Building Permits
• 12:30 GMT – US Housing Starts
• 12:30 GMT – US Philadelphia Fed Manufacturing Index
• 12:30 GMT – US Initial Jobless Claims

Friday, March 17th

• 10:00 GMT – Euro Zone Trade Balance
• 12:30 GMT – Canadian Manufacturing Sales
• 13:15 GMT – US Industrial Production
• 13:15 GMT – US Manufacturing Production
• 14:00 GMT – US CB Leading Index
• 14:00 GMT – US Michigan Consumer Sentiment

Daily Pivots: (S1) 1.0595; (P) 1.0647 (R1) 1.0723; More.....

EUR/USD's rise from 1.0494 extends to as high as 1.0713 today so far. Intraday bias remains on the upside for 1.0828 resistance and above. Note again that rise from 1.0339 low is seen as a corrective move. Hence, we'd expect upside to be limited by 100% projection of 1.0339 to 1.0828 from 1.0494 at 1.0983. The larger down trend is still expected to resume later. On the downside, break of prior resistance at 1.0630 will turn bias back to the downside for retesting 1.0494 low.

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115.

GBP/USD - 1.2215

Most recent candlesticks pattern   : N/A

Trend                                 : Near term down

Tenkan-Sen level                 : 1.2197

Kijun-Sen level                    : 1.2189

Ichimoku cloud top              : 1.2173

Ichimoku cloud bottom        : 1.2162

New strategy  :

Buy here, Target: 1.2320, Stop: 1.2180

Position : -

Target :  -

Stop : -

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 looking to turn long here. 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.

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

GBP/USD's rebound from 1.2133 extends higher today. But still, such rise is seen as a correction. Intraday bias stays neutral first. At this point, we'd still 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.

Daily Pivots: (S1) 1.0078; (P) 1.0107; (R1) 1.0135; More.....

Intraday bias in USD/CHF remains neutral for the moment. Upside momentum has been very unconvincing with bearish divergence condition in 4 hour MACD. But the pair holds well above 1.0008 support so far, making another rise in favor. Above 1.0169 will turn bias to the upside and target a test on 1.0342 resistance. Based on neutral medium term outlook, we'd be cautious on topping below 1.0342. On the downside, break of 1.0008, however, will indicate completion of the rebound from 0.9860. And intraday bias will be turned back to the downside for 0.9860.

In the bigger picture, prior rejection from 1.0327 resistance argues that USD/CHF is staying in a medium term sideway pattern. In any case, decisive break of 1.0342 resistance is needed to confirm underlying strength. Otherwise, we'll stay neutral in the pair first. In case of another fall, we'd expect strong support from 0.9443/9548 support zone.

EUR/USD - 1.0707

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.0696

Kijun-Sen level                  : 1.0651

Ichimoku cloud top             : 1.0579

Ichimoku cloud bottom      : 1.0570

Original strategy  :

Buy at 1.0560, Target: 1.0660, Stop: 1.0525

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0660, Target: 1.0760, Stop: 1.0625

Position : -

Target :  -

Stop : -

As the single currency has risen again after finding renewed buying interest at 1.0669, suggesting recent upmove from 1.0493 low is still in progress and bullishness remains for this move to extend further gain to 1.0730-35 (50% projection of 1.0572-1.0699 measuring from 1.0669), however, loss of near term upward momentum should prevent sharp move beyond 1.0745-50 (61.8% projection) and reckon 1.0760 (1.618 times projection of 1.0495-1.0640 measuring from 1.0525) would hold on first testing.

In view of this, would not chase this rise here and we are looking to buy euro on pullback as 1.0560-70 should limit downside, bring another rise later. Below the Kijun-Sen (now at 1.0651) would defer but only break of previous resistance at 1.0615 would abort and signal top is formed.

Daily Pivots: (S1) 114.42; (P) 114.96; (R1) 115.28; More...

Intraday bias in USD/JPY remains neutral for consolidation below 115.49 temporary top. Deeper retreat could be seen to 4 hour 55 EMA (now at 114.20). But downside should be contained well above 113.60 support and bring another rally. As noted before, corrective decline from 118.65 should have completed with a a double bottom pattern (111.58, 111.68). Above 115.49 should turn bias to the upside and pave the way for a test on 118.65. Decisive break there will extend whole rise from 98.97 and target 125.85 high next. However, break of 113.60 will invalidate our view and turn bias back to the downside for 111.58/68 support zone instead.

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.

Currency pair EUR/USD

The EUR/USD broke above the resistance trend line (dotted red) of the consolidation zone (red/green) and has reached the 61.8% Fibonacci retracement level of wave 2 (purple). Any of the Fibonacci levels could be a resistance spot but a break above the 100% level invalidates the wave 1-2 structure.

The EUR/USD is showing strong momentum in the bullish 5th wave (orange) within wave C (blue). The momentum could indicate a potential for wave 4 (pink) and another wave 5 (pink) within wave 5 (orange).

Currency pair GBP/USD

The GBP/USD is moving sideways in a consolidation zone and price has both horizontal support (orange) and resistance (orange) nearby. A bearish break below support (green) could see price move towards 1.20 which is a psychological round level, previous bottom (green) and 161.8% Fibonacci target.

The GBP/USD remains bearish in my view as long as price stays below horizontal resistance levels (orange). The divergence between the bottoms could indicate that a bearish break of support (green) might lack strength. A break above resistance (orange) invalidates the wave 4 (pink) correction.

Currency pair USD/JPY

The USD/JPY broke above the resistance top (dotted red) of the wave 1 (blue) but momentum is lacking so far and price has retraced back below the broken resistance point (dotted red). Price could be retracing as long as price stays above support (green lines).

The USD/JPY could be building a wave 1-2 (orange) but a break below the 100% Fibonacci level invalidates wave 2 (orange).