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Daily Pivots: (S1) 121.01; (P) 121.52; (R1) 121.84; More...

No change in EUR/JPY's outlook as the consolidation from 124.08 is still unfolding. Deeper fall cannot be ruled out yet. On the downside, below 120.54 will target 118.45 cluster support (38.2% retracement of 109.20 to 124.08 at 118.39). In that case, we'd expect strong support from there 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.

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Daily Pivots: (S1) 0.8515; (P) 0.8570; (R1) 0.8641; More...

At this point, EUR/GBP is staying in range of 0.8449/8650 and intraday bias remains neutral. With 0.8655 minor resistance intact, deeper fall is in favor. Corrective rise from 0.8303 should have completed at 0.8851 already. On the downside, break of 0.8449 support should confirm our bearish view and bring resumption of whole corrective fall from 0.9304. In that case, next target is 0.8116 cluster support. However, break of 0.8650 will turn focus back to 0.8851 instead.

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) 1.3988; (P) 1.4096; (R1) 1.4153; More...

The break of 1.4093 minor support suggests that EUR/AUD's correction from 1.4025 is completed at 1.4289 already. Intraday bias is back on the downside fro 1.4025 temporary low first. Break will resume the larger fall from 1.6587 to key support level at 1.3671. We'd expect downside to be contained there to bring reversal. On the upside, break of 1.4289 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

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 be the first sign of resumption of up trend from 1.1602 and target retesting of 1.6587 high first.

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• A significant upward revision in the Czech National Bank’s (CNB) inflation forecast raises the risk of an exit from the EUR/CZK floor as early as Q2 17, although the CNB still did not change its communication of the expected exit timing (mid-2017).
• We still expect a floor removal in mid-2017, when inflation sustainably reaches the CNB’s target.

The CNB left policy rates unchanged and maintained the EUR/CZK floor at 27 at its monetary policy meeting on 2 February. The decision was unanimous. The CNB reiterated its plan to exit from the EUR/CZK floor in mid-2017, conditional on inflation sustainably reaching the target by then. It also confirmed its ‘hard commitment’ not to exit the exchange rate floor before Q2 17 and its readiness to intervene after the exit if needed to smooth out FX swings. Governor Jiří Rusnok also stressed that the CNB does not have a ceiling for FX reserves, in light of the recent higher intervention volumes.

As expected, the CNB significantly raised its inflation forecasts (see chart below), in light of recent inflation developments, which saw inflation returning to the 2% target in December. However, the CNB still did not change its communication on the expected exit timing (mid-2017). ‘We will follow inflation in the coming months to see if pressures rise or fade; so far we don’t feel we need to act quickly’, Rusnok said and highlighted that a robust fulfilment of the inflation target means ‘certain overshooting of [the] target’. So one reading at 2% is clearly not enough for the CNB to trigger an exit.

We still expect a floor removal in mid-2017, when inflation sustainably reaches the CNB’s target, as FX reserves also create no great concern for now. However, with the recent inflation developments (and the upward revision in the inflation forecast), there is a considerable risk of an exit as early as Q2 17. We expect a further move down in EUR/CZK forwards over coming months as the exit draws nearer and project the cross will settle in a 25.5-26.0 range following the exit.

Market movers today

Today's main event is the US January jobs report. We estimate job growth was 160,000, still primarily driven by services. The annual growth rate in average hourly earnings rose to 2.9% y/y in December, but is likely to fall back to 2.7% y/y in January despite a monthly increase of 0.25% m/m. We estimate the unemployment rate was unchanged at 4.7%, but see a risk that it might increase to 4.8% if the labour force participation rate moves slightly higher.

The ISM non-manufacturing index for January is also due for release. It likely stayed around the December level of 56.6, as the Markit PMI services index signalled solid growth in the service sector in January with an increase to 55.1.

In the Euro area, retail sales figures for December are released. We expect a strong figure with a 0.7% monthly increase, following the 0.4% monthly decline in November. Euro area consumer confidence has been rising from August through December and other survey indicators have created high expectations for Q4 growth. Thus, we expect the retail sales figures to reflect strong growth in Q4.

Selected market news

Due to the uncertainty about President Trump's fiscal, foreign and currency policies the market continues to be in two minds about the economic outlook. Despite fairly strong economic numbers released in the US this week and possibly a strong non-farm payroll number this afternoon, stock markets continued to trade sideways. The USD is regaining a little bit of ground ahead of the non-farm payrolls numbers this afternoon and offshore Chinese yuan and most other emerging-market Asian currencies were under pressure. Should the non-farm payrolls come in stronger than expected, notably with higher wage growth, investors would like to start to price in an earlier rate hike, possibly in May, which could add further strength to the USD and hurt emerging-market currencies.

There is increasing speculation that the Trump administration may impose new sanctions on Iran following the missile testing this week. This week Trump's national security advisor Michael Flynn warned that the missile testing was ‘in defiance' of the United Nation's Security Council resolution passed after a nuclear deal in 2015 between Iran and major Western nations. A Bloomberg story this morning refer to plans of imposing the sanctions already today.

Furthermore, we got further indications about the economic priorities of the Trump administration yesterday. House speaker Paul Ryan indicated that the expected tax reform will first be taken up in ‘spring' after dealing with the repeal and replacement of the Affordable Care Act. This is in line with our expectation that it will take time before Trump's economic policy comes into action.

BOJ conducts another fixed-rate JGB operation

Asia Mid-Session Market Update: China Caixin manufacturing PMI misses again; BOJ conducts another fixed-rate JGB operation

US Session Highlights

(US) Q4 PRELIMINARY NONFARM PRODUCTIVITY: 1.3% V 1.0%E; LABOR COSTS: 1.7% V 1.9%E; Q3 productivity revised higher

(US) INITIAL JOBLESS CLAIMS: 246K V 250KE; CONTINUING CLAIMS: 2.06M V 2.06ME

President Trump reiterates very serious concerns about NAFTA

(US) House Speaker Ryan (R-WI): Congress must fix health care first, then move to tax reform; Obamacare must be replaced

(US) Jan ISM New York: 57.7 v 63.8 prior

(US) House Energy and Commerce Committee plans next week to take up bill to boost generic drug development - press

US markets on close: Dow flat, S&P500 +0.1%, Nasdaq -0.1%

Best Sector in S&P500: Utilities

Worst Sector in S&P500: Healthcare

Biggest gainers: MJN +21.4%, CTXS +5.2%, M +5.2%, EQT +5.1%, SWN +5.0%

Biggest losers: RL -12.3%, ETFC -8.9%, EW -8.5%, R -7.8%, SNA -7.4%

At the close: VIX 11.9 (+0.1pts); Treasuries: 2-yr 1.22% (+1bps), 10-yr 2.47% (flat), 30-yr 3.08% (flat)

US movers afterhours

DATA: Reports Q4 $0.26 v $0.14e, R$250.7M v $230Me- Non-GAAP op margin 12.3% v 14.9% y/y; Customer account adds +4K; +16.7% afterhours

FTNT: Reports Q4 $0.30 v $0.21e, R$363M v $352Me; total billings $463.4M, +22% y/y; Non-GAAP Op margin 22% v 16% y/y; +11.1% afterhours

V: Reports Q1 $0.86 GAAP v $0.78e, R$4.46B v $4.28Be; +3.4% afterhours

AMGN: Reports Q4 $2.89 v $2.77e, R$5.97B v $5.74Be; +2.5% afterhours

CMG: Reports Q4 $0.55 v $0.55e, R$1.03B v $1.03Be; -0.5% afterhours

AMZN: Reports Q4 $1.54 v $1.40e, R$43.7B v $44.9Be; -4.2% afterhours

ATHN: Reports Q4 $0.62 v $0.51e, R$288M v $303Me; -7.6% afterhours

GPRO: Reports Q4 $0.29 v $0.21e, R$540.6M v $576Me; -12.5% afterhours

FEYE: Reports Q4 -$0.03 v -$0.16e, R$184.7M v $192Me; Guides Q1 -$0.28 to -$0.26 v -$0.23e, R$160-166M v $178Me, operating margin -26% to -24%; -17.7% afterhours

DECK: Reports Q3 $4.11 v $4.24e, R$760M v $787Me; Guides Q4 -$0.10 to $0.00 v $0.43e, Rev -6% to -5% y/y, implies $M v $381Me; Cuts FY17 $3.45-3.55 v $4.15e, Rev -5.0% (prior $4.05-4.25, Rev -3% to -1.5%); -23.0% afterhours

Asia Key economic data:

(CN) CHINA JAN CAIXIN MANUFACTURING PMI: 51.0 V 51.8E (7th consecutive expansion)

(HK) HONG KONG JAN COMPOSITE PMI: 49.9 v 50.3 PRIOR (in conctraction for 22nd out of 23 months)

(JP) JAPAN DEC SERVICES PMI: 51.9 (4th consecutive expansion) V 52.3 PRIOR; COMPOSITE PMI: 52.3 (4th consecutive expansion) V 52.8 PRIOR

(AU) AUSTRALIA JAN AIG PERF OF SERVICES INDEX: 54.5 V 57.7 PRIOR (4th month of expansion)

(SG) SINGAPORE JAN PMI COMPOSITE: 51.6 V 52.0 PRIOR

(KR) SOUTH KOREA DEC CURRENT ACCOUNT BALANCE: $7.9B V $8.9B PRIOR; GOODS BALANCE: $9.4B V $10.4B PRIOR

Asia Session Notable Observations, Speakers and Press

Asia indices are tracking lower after a neutral day on Wall St where investors await a critical non-farm payrolls report on Friday; Shanghai Composite has returned for trade after a week-long holiday with a slight decline. Of note in China, the PBoC reverse repo operations saw rates rise 10bps across the maturities.

USD majors also traded in narrow ranges with the exception of USD/JPY; Initially, the pair dropped abruptly some 40pips to the lows after BOJ's QE operation in 5-10yr merely maintained bond purchase quantity in spite of rising yields; 2 hours later, USD/JPY spiked some 60pips back above 113.20 after BOJ took cue from the bond market and conducted its 2nd fixed-rate unlimited JGB operation since mid-Nov to bring the 10-yr back toward 0.1%. BOJ official confirmed the operation was meant to bring the yield to target. Japan Finance officials also continued to deflect currency criticism from US pres Trump

Fin Min Aso said FX policy is in line with G7 and G20 agreements, adding it is aimed at inflation objectives and not manipulating FX.

In economic data, China Caixin PMI and Hong Kong PMI were both slightly disappointing; Caixin PMI was in expansion for 7th month but missed consensus amid slower increase in output and new order activity as well as reduction in employment. After last month's jump in Hong Kong PMI to expansion, the figure was back below the 50-threshold - also on contraction in output, new orders, and falling business confidence. Employment, however, saw some marginal improvement.

In Australia, Services PMI slowed to 54.4 from multi-year high of 57.7 last month, but remain in expansion for the 4th month; Goldman economist also claims that strong economy evidenced by yesterday's record high trade surplus has put the probability of an RBA rate hike this year somewhere at 40% and rising.

China:

(CN) PBoC said to have raised overnight lending rates on SLF to 3.1% by 35bps - financial press

(HK) Hong Kong China visitors +3.6% y/y during Lunar New Year holiday - Chinese press

(HK) Macau China visitors +9.5% y/y during Lunar New Year holiday

Japan:

(JP) BOJ Gov Kuroda: BOJ still has distance to reach inflation target

(JP) Japan Econ Min Ishihara: No comment on Trump's claims about currencies - press

(JP) BOJ official: JGB operation was conducted to implement yield target

Australia/New Zealand:

(AU) Goldman Sachs economist Toohey: Probability of an RBA rate hike by Nov is "somewhere in the 40s and rising" - AFR

(NZ) Capital Economics: Markets have priced in up to RBNZ 2 rate hikes in 2017, but CA expects it to remain on hold this year and likely next year - press

(NZ) New Zealand real estate agency Barfoot & Thompson: Auckland Jan avg house price m/m: flat v -2.0% prior; y/y: 13% v 5.1% prior

Asian Equity Indices/Futures (00:00ET)

Nikkei flat, Hang Seng -0.4%, Shanghai Composite -0.5%, ASX200 -0.4%, Kospi -0.1%

Equity Futures: S&P500 -0.2%; Nasdaq -0.2%; Dax -0.2%; FTSE100 -0.2%

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

EUR 1.0745-1.0770; JPY 112.50-113.25; AUD 0.7635-0.7665; NZD 0.7265-0.7295

Apr Gold -0.4% at $1,215/oz; Mar Crude Oil +0.6% at $53.86/brl; Mar Copper -1.3% at $2.65/lb

GLD SPDR Gold Trust ETF daily holdings rise 1.5 tonnes to 811.2 tonnes; 2nd straight increase, highest since Jan 6th

(CN) PBOC SETS YUAN MID POINT AT 6.8556 V 6.8588 PRIOR

(CN) PBOC to inject combined CNY50B in 7-day, 14-day and 28-day reverse repos v CNY30B on 1/25; raises reverse repos offer yield ; Raises offer yields by 10bps

(JP) BOJ AGAIN CONDUCTS A FIXED-RATE JGB PURCHASE OPERATION OF UNLIMITED AMOUNTS FOR 5-10YR JGBS

(JP) BOJ announces amounts to buy in upcoming QE operation; Raises 5-10-yr maturity JGB purchase; To buy ¥450B (¥410B expected) in 5-10yr JGBs, unch from ¥450B purchased on Jan 27th

(AU) Australia MoF (AOFM) sells A$600M in 5.75% 2022 Bonds; avg yield: 2.2669%; bid-to-cover: 5.18x

Asia equities/Notables/movers by sector

Consumer discretionary: VAH.AU Virgin Australia -2.3%(Q2 result); 1237.HK Merry Garden Holdings +4.1% (guidance); 2432.JP DeNA Co. +3.7% (new smartphone game debuts strongly); MTR.AU Mantra Group +2.1% (Citi raises rating); SWM.AU Seven West Media -2.8% (no allegations of wrongdoing of CEO); 7733.JP Olympus Corp +0.7% (9-month result); 4452.JP Kao Corp +4.1% (FY16 result); 9831.JP Yamada Denki -4.9% (9-month result)

Financials: 001450.KR Hyundai Marine & Fire Insurance Co +5.1%

Industrials: 4183.JP Mitsui Chemical -4.1% (9-month result); JHX.AU James Hardie Industries -4.8% (Q3 result); 7261.JP Mazda Motor Corp -2.3% (9-month result)

Technology: BXB.AU Brambles +2.3% (Morgan Financail raises rating); 7974.JP Nintendo Co. +5.0% (new smartphone game debuts strongly); 5802.JP Sumitomo Electric Industries +7.0% (9-month result);

Materials: 4202.JP Daicel Corp +6.2% (9-month result); 5406.JP Kobe Steel -6.9% (9-month result)

Energy: 568.HK Shandong Molong Petroleum Machinery -13.5% (prelim FY16 result)

Healthcare: IPD.AU ImpediMed Ltd +2.1% (Allan Gray Australia raises rating)

Telecom: 017670.KR SK Telecom +0.9% (Q4 result); 9433.JP KDDI Corp -1.8% (9-month result)

Utilities: 5803.JP Fujikura +12.2% (9-month result)

Daily Pivots: (S1) 1.0667; (P) 1.0684; (R1) 1.0694; More...

EUR/CHF is staying in consolidation above 1.0635 temporary low. Intraday bias stays neutral first. With 1.0749 resistance intact, near term outlook remains bearish. On the downside, break of 1.0635 will target 1.0620 support. Decisive break there will confirm resumption of whole fall from 1.1198. In that case, next downside target will be 1.0485 fibonacci level.

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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Global Markets:

• Asian stock markets: Nikkei up 0.20 %, Shanghai Composite fell 0.60 %, Hang Seng declined 0.45 %, ASX 200 lost 0.35 %
• Commodities: Gold at $1214 (-0.40 %), Silver at $17.33 (-0.60 %), WTI Oil at $53.90 (+0.60 %), Brent Oil at $56.85 (+0.50 %)
• Rates: US 10-year yield at 2.49, UK 10-year yield at 1.39, German 10-year yield at 0.43

News & Data:

• China Caixin Manufacturing PMI Jan: 51.0 (est. 51.8, prev. 51.9)
• Australia AIG Services PMI Jan: 54.5 (prev. 57.7)
• Japan Nikkei Services PMI Jan: 51.9 (prev. 52.3)
• Japan Nikkei Composite PMI Jan: 52.3 (prev. 52.8)
• NZ ANZ Commodity Price Index (MoM) Jan: -0.1% (prev. 0.70%)
• South Korea BoP Current Account Balance (USD) Dec: 7869.2M (prev. 8892.2M)
• PBOC set USD/CNY mid-point at 6.8556 (prev. fix 6.8588)
• South Korea BoP Goods Balance (USD) Dec: 9433M (prev. 10425M)
• Asia stumbles as Chinese markets fall after Beijing tightens policy – RTRS

Markets Update:

The US Dollar is recovering slightly ahead of the release of NFP data today at 13:30 GMT. The market is expecting good numbers following the strong ADP and initial jobless claims data.

EUR/USD fell to 1.0745 in Asia, after trading as high as 1.0820 in yesterday's NY session. Support is now seen at 1.0730, followed by 1.0680.

The British Pound has come under pressure after the Bank of England signalled that it will not hike rates anytime soon. BoE Governor Carney highlighted that many uncertainties remain around Brexit. GBP/USD fell from 1.27 to 1.2550 and extended losses to 1.2510 in Asia.

USD/JPY managed to find support ahead of the 112 level once again and recovered to 113.20 in Asia. Resistance is seen at 113.90-114.00, followed by 115.

The Australian Dollar retraced slightly in Asia, but remains well bid overall. Support now lies at the former resistance level at 0.7610.

Upcoming Events:

• 08:45 GMT – Italian Services PMI
• 08:50 GMT – French Services PMI
• 08:55 GMT – German Services PMI
• 09:00 GMT – Euro Zone Services PMI
• 09:30 GMT – UK Services PMI
• 10:00 GMT – Euro Zone Retail Sales
• 10:00 GMT – Italian CPI
• 13:30 GMT – US NFP
• 13:30 GMT – US Unemployment Rate
• 13:30 GMT – US Average Hourly Earnings
• 14:45 GMT – US Services PMI
• 15:00 GMT – US ISM Non-Manufacturing PMI
• 15:00 GMT – US Factory Orders

Daily Pivots: (S1) 1.2986; (P) 1.3019; (R1) 1.3059; More...

With 1.3168 resistance intact, deeper decline is expected to USD/CAD. As noted before, corrective rise from 1.2460 should have completed at 1.3598 already, after hitting 50% retracement of 1.4689 to 1.3838. Fall from 1.3598 is seen as the third leg of the corrective fall from 1.4689. Further fall would be seen to retest 1.2460 low. On the upside, though, break of 1.3168 minor resistance will mix up the outlook again and turn intraday bias neutral first.

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

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Daily Pivots: (S1) 0.7591; (P) 0.7643; (R1) 0.7709; More...

With 0.7510 minor support intact, further rise could be seen in AUD/USD for 0.7777 resistance. At this point, we'd still expect strong resistance from 0.7777/7833 resistance zone to bring near term reversal. On the downside, break of 0.7448 support will indicate that rebound from 0.7510 has completed. That will turn bias to the downside for 0.7144 key support level.

In the bigger picture, AUD/USD is staying inside long term falling channel and it's likely that the down trend from 1.1079 is still in progress. Break of 0.6826 low will confirm this bearish case. We'll be looking for bottoming sign again as it approaches 0.6008 key support level. Meanwhile, sustained break of 0.7833 resistance will be a strong sign of medium term reversal.

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