This week's central bank meetings kick off with the Reserve Bank of Australia, which will announce its rate decision during the Asian morning Tuesday. The forecast is for the Bank to keep its policy unchanged. Economic data have been mixed overall since the RBA's latest gathering. Even though headline inflation accelerated in Q4, the trimmed mean rate actually slipped, indicating that underlying inflationary pressures remain subdued. What's more, the nation's GDP contracted in Q3, casting a shadow over the strong economic growth that Australia has enjoyed in recent quarters. On the bright side, the labor market tightened somewhat further in November and December. Considering that the Bank has adopted an overall neutral stance with regards to policy in recent months, we doubt that these data will materially alter that view. However, we could see a slightly dovish shift in the Bank's statement that reflects the latest softness in economic indicators, something that could cause AUD to give back some of its recent gains.

AUD/USD traded higher on Friday, but the advance remained limited below the resistance of 0.7700 (R1). Then the pair retreated somewhat. Given that on Thursday, the rate broke above the upper bound of the sideways range between 0.7500 and 0.7600 (S2), we consider the short-term outlook to be positive. Nevertheless, bearing in mind the inability of the bulls to overcome the 0.7700 (R1) zone on Friday, we see the likelihood for a corrective setback before the next positive leg. The trigger for something like that could be a somewhat dovish RBA during the Asian morning Tuesday. Another dip below 0.7640 (S1) is possible to challenge the 0.7600 (S2) barrier as a support this time.

Looking ahead, we think that the RBA is likely to remain on hold in coming months, while it monitors the effects of its 2016 rate cuts, which were triggered by slowing inflation in the first half of the year. With regards to the recent market chatter for an RBA rate hike in 2017, we believe that it is far too early to even be discussing the prospect. We also do not think that the Bank will hint at anything like that in the foreseeable future, as it may trigger a speculative rally in AUD, something that RBA officials will not be pleased with. Let's not forget that they have repeatedly expressed their desire for a weaker currency.

USD on the back foot as wage growth disappoints

The US economy continued to add jobs at a robust pace in January, the nation's employment data showed on Friday. Nonfarm payrolls came in at 227k in January, far higher than the forecast of 175k, while December's figure was revised marginally higher. The unemployment rate unexpectedly ticked up to 4.8% from 4.7%, but for healthy reasons, as the labor force participation rate rose alongside it to 62.9% from 62.7%, indicating that previously discouraged workers are returning to the labor force. The disappointing aspect of the report was wage growth, with average hourly earnings slowing down by more than expected in both monthly and yearly terms. These are discouraging news for FOMC policymakers and may have pushed back investors' expectations with regards to the timing of the next rate hike.

EUR/USD spiked below the 1.0740 (S1) support after the above-expectations NFP number, but recovered quickly and traded even higher perhaps due to slowing earnings. The rebound remained limited slightly below the 1.0800 (R1) key obstacle. Given that the rate continues to oscillate below the 1.0800 (R1) resistance zone and that there is negative divergence between both our short-term oscillators and the price action, we prefer to stay sidelined for now with regards to the short-term outlook. Another attempt below 1.0740 (S1) could be a first sign that the bias has turned somewhat negative and is possible to open the way for the next support zone of 1.0685 (S2). As for the bigger picture, we maintain the view that the medium-term outlook remains cautiously negative. The price structure has been lower peaks and lower troughs since the 9th of November. So, as long as the recovery started on the 3rd of January remains limited below the 1.0800 (R1) hurdle, we would treat it as a corrective phase.

Overall, this disappointing wage result reinforces our view that the FOMC is likely to hike only twice this year, and that the officials may wait until June before acting again. We doubt that the Fed will want to rush into the next hike while wages remain lackluster and while core PCE inflation remains below 2%, leading us to conclude that a rate hike in March is a highly unlikely prospect with what we know today. With regards to USD, we prefer to adopt a neutral stance, at least in the near term. We would need some clarity on the nation's fiscal direction for the currency's outlook to become clearer, something that we may get today, or in the coming weeks.

Today's highlights:

During the European day, the economic calendar is very light. The only noteworthy indicator we get is Germany's factory orders for December, which are expected to have risen, a rebound from previously.

From the US, there is a possibility that we receive some information regarding the Trump administration's fiscal plans. The President is required to submit his preliminary budget proposal to Congress on the first Monday of February, though sometimes this process is delayed. Clinton's first budget was delayed by 66 days, Bush's first budget by 63, and Obama's by a record 94 days. We should also note that we are a long way off from having final budget numbers; the budget process is a prolonged back-and-forth procedure between the government and Congress that may not conclude until the second half of the year. Nonetheless, the preliminary figures could shed some light into the government's objectives and intentions with regards to fiscal expansion, and particularly, the size and the composition of any potential stimulus package. A highly expansionary proposal could signal to investors that the new administration remains committed to its pre-election pledges for massive spending and tax cuts, thereby alleviating uncertainty around the nation's fiscal direction. On the other hand, a more moderate budget could suggest that the government is not fully dedicated to delivering the fiscal stimulus it promised.

We have only one speaker scheduled for today: ECB President Mario Draghi.

As for the rest of the week:

On Tuesday, the RBA will announce its rate decision, as we highlighted above.

On Wednesday, during the European day, market attention may shift to the UK, where Parliament will vote again on the Article 50 bill, and potential amendments. Later in the day, investors will turn their gaze to the RBNZ rate announcement. Expectations are for this Bank to remain on hold as well, a view we share considering that the nation's economic data have been slightly optimistic since the latest meeting.

On Thursday, we have no major events or indicators due to be released.

On Friday, Norway's CPI for January is due to be released. In the UK, industrial output data for December are coming out, and in Canada, the employment report for January will take center stage.

Daily Pivots: (S1) 121.05; (P) 121.41; (R1) 121.73; More...

EUR/JPY dips mildly but stays in range of 120.54/124.08 and intraday bias remains neutral for the moment. Price actions from 124.08 are seen as a corrective move. Below 120.54 will bring deeper pull back. But downside should be contained by 118.45 cluster support (38.2% retracement of 109.20 to 124.08 at 118.39) to bring rebound. On the upside, break of 124.08 will extend the larger rally from 109.20 to 126.09 key resistance next.

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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Daily Pivots: (S1) 139.90; (P) 140.94; (R1) 141.50; More...

The break of 140.43 minor support argues that GBP/JPY's rebound from 136.44 has completed at 144.77 already. And, the correction from 148.42 is starting the third leg. Intraday bias is mildly on the downside for 136.44 support and possibly below. At this point, we'd expect strong support from 50% retracement of 122.36 to 148.42 at 135.39 to contain downside and bring rebound. On the upside, above 144.77 will extend the rise from 136.44 to 148.42 high.

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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On the updated chart of AUD/USD we are looking at a higher degree wave E taking place, with price specifically trading in the final wave C) of this complex correction. As we can see, pair made a nice break higher last week after wave B) triangle found a base at 0.7550 area. As such pair is now in final stages of a corrective advance so be aware of a limited upside this week, ideally near 0.7700.

AUDUSD, 4H

Sunrise Market Commentary

• Rates: First reference by Fed governor to March rate hike
  US Treasuries erased gains at the end of US dealings on Friday as SF Fed governor Williams said that he sees some arguments to raise rates in March. Today's eco calendar is empty apart from a speech by ECB President Draghi, but we expect him to hold his dovish line. Trading on bond markets will likely be sentiment-driven and technical in nature.
• Currencies: Dollar slightly in the defensive post-Payrolls
  The dollar is holding near the recent lows against most majors as soft US wage growth eased Fed rate hike expectations. Today, the eco calendar is thin. We keep a close eyes at the technicals. Especially USD/JPY is nearing an important support area. Sterling traders will keep an eye at the Brexit debate in the UK parliament

The Sunrise Headlines

• US equities profited from the US payrolls report and held on to the gains as president Trump took the first measures regarding deregulation They closed with juicy gains. Asian equities trade modestly higher in the opening session.
• President Trump was criticised by prominent Republicans after saying in a televised interview that the US was no better than Putin's Russia. His position on Russia remains very unclear.
• Investors piled into bank shares on Friday following news that Donald Trump will begin the process to undo parts of the Dodd-Frank financial reform law. The S&P 500 financials sector advanced 2%.
• German factory orders boomed in December, up a very strong 5.2% M/M and 8.1% Y/Y, up from 2% Y/Y in November. It confirms that the German economy had got momentum, coming into 2017. Figures looks nevertheless distorted somewhat by some big-ticket orders.
• Romania's government scraped disputed changes to corruption legislation in reaction of widespread protest that asks the resignation of the government.
• Fitch confirmed the BB+ rating of Portugal and the AA+ rating of Austria, both with stable outlook
• The pace of growth in China's services sector softened in January. The services Caixin PMI fell slightly to 53.1 in January from 53.4 previously. The official PMI, earlier reported (more dominated by state enterprises) had strengthened a bit. Also the Caixin manufacturing PMI softened slightly.
• Wolfgang Schäuble, German finance minister, has blamed the European Central Bank for an exchange rate that is "too low" for Germany.
• Today, quasi empty eco calendar, but the speech of Draghi may be interesting

Currencies: Dollar Slightly In The Defensive Post-Payrolls

Dollar holding near the recent lows post payrolls

On Friday, the dollar didn't go anywhere before the US payrolls report. The outcome was mixed with very solid job growth, but a big miss in wage growth. The latter prevailed for interest rate markets and for the US dollar. The dollar declined even as equities rebounded. EUR/USD rebounded close to the 1.08 big figure and closed the session at 1.0783 (from 1.0759). USD/JPY finished the session at 112.61 (from 112.80).

Overnight, Asian equity markets are trading in positive territory, joining the rebound in the US on Friday. The China Caixin Services (and composite) PMI's declined in January, but there is no obvious negative impact on Chinese or other regional equity markets. The dollar is holding near the recent lows against the likes of the euro and the yen. Some other Asian currencies are outperforming , trading at multi-week highs against the US currency. USD/JPY is hovering in the 112.50 area. No real test of the 112.06/08 recent lows occurred yet, but the area stays within reach. EUR/USD is trading in the 1.0775 area. During the weekend, German Fin Min Schauble in an interview said that the euro was too low for Germany.

Today, besides the German factory orders, released this morning (see headlines), the calendar is devoid of market moving eco data. ECB Draghi will speak before parliament, but we expect him to keep to the script of the last ECB meeting (defending policy). ECB Smets (majority Draghi camp inside the ECB) speaks in Brussels, while Fed Harker speaks on payments systems late this evening. We don't see a clear driver for USD trading and start the week with a USD neutral bias. We keep though a very close eye at the technical charts as the dollar is near key support levels against several majors. Especially USD/JPY is near key support (112.06/08 and 111.16). A break below this level would be technically relevant also for the broader USD sentiment.

Global context. The dollar is in a (presumed) corrective downtrend against most majors since the start of January. The USD rally due to the Trump reflation trade petered out. Interest rate differentials in favour of the dollar narrowed. Trump politics/communication is becoming a sources of global uncertainty that weighs on the dollar. EUR/USD broke a minor resistance at 1.0775. Next resistance is coming in at 1.0874. The day-to-day USD momentum has become more fragile. A return above EUR/USD 1.0874 would question the short-term USD positive outlook. At some point, the absolute interest rate support should provide a USD floor, especially as the Fed is still expected to continue its monetary policy normalisation. Friday's US payrolls were OK, but low wage growth eased market expectations on the Fed's rate hike trajectory, keeping the dollar in the defensive. We wait for technical signals that the USD correction has run its course. USD/JPY is trading well off the post-Trump highs (118.60/66). The recent rebound off the lows (112.08) wasn't convincing. 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: Holding near the recent highs

EUR/GBP

Brexit debate remains focus of sterling trading

On Friday, the UK services PMI dropped from 56.2 to 54.5, confirming a slight softening of growth in the manufacturing and the construction section. The outcome still suggests decent growth. Even so, services are facing accelerating input costs. In the wake of Thursday's relatively soft BoE communication, markets gave slightly more weight to the softer growth as indicated by the PMI rather than to rising price pressures. Sterling lost modest ground after the release and rebounded (temporary) above 0.86. The soft US payrolls and the rise of EUR/USD also supported EUR/GBP. The pair closed the session at 0.8640 (from 0.8588). Cable also didn't profit from the post-payrolls USD weakness. The pair closed the session at 1.2484.

Today, only the UK car registrations are scheduled for release. So, the focus of UK investors might be on the Brexit Debate in the UK Parliament. The usual dynamics between majority and opposition will probably be at work, but in the end PM May will probably get the green light to trigger article 50 of the Lisbon Treaty. The debate in Parliament might be neutral to slightly negative for sterling in a day-to-day perspective. Last week's balanced approach of the BoE capped the topside of sterling and helped to started a cautious bottoming out process for EUR/GBP. EUR/GBP 0.8450 support looks again a bit better protected. A cautious buy-on-dips approach is preferred. The price action in cable also suggests that further sterling gains against the dollar won't be easy.

EUR/GBP: 0.8450 support better protected after soft BoE policy assessment

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Daily Pivots: (S1) 0.8592; (P) 0.8617; (R1) 0.8659; More...

Intraday bias in EUR/GBP remains neutral for the moment as consolidation from 0.8469 continues. At this point, we're tentatively viewing fall from 0.8851 as the third leg of the corrective pattern from 0.9304. Hence, we'd expect upside of the recovery from 0.8469 to be limited by 50.% retracement of 0.8851 to 0.8469 at 0.8660 to bring fall resumption. Below 0.8469 will turn bias to the downside for 0.8303 low. However, firm break of 0.8660 will indicate that rise from 0.8303 is still in progress and would turn bias to the upside for 0.8851 resistance and above.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. Deeper fall cannot be ruled out yet. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside. Overall, the corrective pattern would take some time to complete before long term up trend resumes at a later stage. Break of 0.9304 will pave the way to 0.9799 (2008 high).

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Daily Pivots: (S1) 1.3993; (P) 1.4034; (R1) 1.4072; More...

Intraday bias in EUR/AUD remains on the downside for the moment. Current decline is part of the whole fall from 1.6250 and should target 1.3671 key support level next. As the larger decline from 1.6587 is seen as a corrective move, we'd expect downside to be contained by 1.3671 to bring reversal. On the upside, break of 1.4289 resistance will confirm short term bottoming and turn bias back to the upside for 1.4721 resistance.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a consolidative pattern. 50% retracement of 1.1602 to 1.6587 at 1.4095 was already met. While further fall cannot be ruled out, we'd expect strong support above 1.3671 to contain downside and bring rebound. Up trend from 1.1602 should not be finished and will resume later. Break of 1.4721 resistance will indicate completion of such correction and outlook bullish for retesting 1.6587 high.

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Daily Pivots: (S1) 1.0678; (P) 1.0691; (R1) 1.0712; More...

Intraday bias in EUR/CHF remains neutral as consolidation from 1.0635 continues. Near term outlook will remain bearish as long as 1.0749 resistance holds and deeper decline is expected. Decisive break of 1.0620 key support level will confirm resumption of whole fall from 1.1198. In that case, next downside target will be 1.0485 fibonacci level. Break of 1.0749 will raise the chance of medium term reversal and turn focus back to 1.0897 key resistance.

In the bigger picture, the decline from 1.1198 is seen as a corrective move. Such correction is still in progress. Sustained trading below 38.2% retracement of 0.9771 to 1.1198 at 1.0653 will target 50% retracement at 1.0485. On the upside, break of 1.0897 resistance is needed to confirm completion of such fall. Otherwise, outlook will stay bearish.

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After a very busy week of central banks meetings, economic data outcomes, and earnings across the globe, investors' attention will shift again to politics – A move that is likely to remain the major market moving factor for months to come.

While the dollar has been struggling for the past six weeks, Friday's Non-Farm Payrolls reported a rise of 227,000 jobs. Even though the rise has been the largest in the last four months, this has done did very little to buck the trend because the average hourly earnings rose by only 0.1% and unemployment ticked up slightly suggesting that slack in the labor market still exists. As a result traders lowered their bets for a March rate hike to 13%.

For the new U.S. administration solely analyzing economic data won't be enoughin what seems to be declaring a currency war. In a non-traditional fashion, the officials in the U.S. including the president himself have been repeatedly saying the dollar is over-valued and accusing countries like China, Germany, and Japan for manipulating their currencies,

This will become more interesting as Japan's Prime Minister visits Washington on Friday. Shinzo Abe told parliament that suggestions of Japan devaluing the yen were off the mark, emphasizing that his country is abiding by G20 agreements to refrain from competitive currency devaluation, and that monetary policy easing is a tool to accelerate growth, not manipulate the currency. Well, he can also remind Mr. Trump of who started QE1, QE2, and QE3 programs.

On the U.S. data front, there's only Tier 2 economic data to be released next week including trade balance, and University of Michigan consumer sentiment. However, the trade deficit in the U.S. will become an important figure to monitor as Trump's trade policies are taking center stage.

Similarly, in the Eurozone, the calendar is light with only German trade balance and couple of industrial production numbers from the rest of area, which makes again politics, especially in France of more importance to the Euro. Marine Le Pen kicked off her presidential campaign on Saturday with a promise to shield voters from globalization and make France free again. The chances of the far-right leader to win the elections is very slim according to opinion polls, but I think markets have learnt the lessons from the UK and the US.

China also returns from a long holiday with lot of data to digest. Foreign exchange reserves, services PMI, Foreign Direct Investments and Trade Balance figures are all due to release.

Daily Pivots: (S1) 1.0729; (P) 1.0763 (R1) 1.0818; More.....

Intraday bias in EUR/USD remains neutral for the moment as it's bounded in tight range below 1.0828. 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 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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