Daily Pivots: (S1) 1.0728; (P) 1.0767 (R1) 1.0808; More.....

Intraday bias in EUR/USD remains on the upside as the rebound from 1.0339 extends. Further rally could be seen. However, we're still viewing choppy rise from 1.0339 as a corrective move. Thus, upside should be limited by 1.0872 resistance and bring reversal. On the downside, break of 1.0619 will indicate that such 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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Daily Pivots: (S1) 0.9889; (P) 0.9922; (R1) 0.9960; More.....

Intraday bias in USD/CHF remains neutral for consolidation above 0.9860 temporary low. Overall, further fall is still expected with 1.0043 minor resistance intact. As noted before, decline from 1.0342 is seen as the third leg of the pattern from 1.0327. Below 0.9860 will target 61.8% retracement of 0.9443 to 1.0342 at 0.9786 and below. Meanwhile, break of 1.0043 will indicate short term bottoming and turn bias back to the upside.

In the bigger picture, rejection from 1.0327 resistance suggests that consolidation pattern from there is still in progress. Fall from 1.0342 is seen as the third leg and retest of 0.9443/9548 support zone could be seen. But we'd expect strong support from there to contain downside. At this point, we're still expecting the larger rally to resume later to 38.2% retracement of 1.8305 to 0.7065 at 1.1359.

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Daily Pivots: (S1) 112.60; (P) 113.27; (R1) 113.92; More...

Intraday bias in USD/JPY stays on the downside as fall from 118.65 is still in progress. Such decline would target 38.2% retracement of 98.97 to 118.65 at 111.13. However, such fall is seen as a corrective move. Hence, we'd expect strong support from 111.13 to contain downside an bring rebound. On the upside, above 115.36 resistance will argue that such correction is finished and turn bias to the upside for 118.65. Break will resume whole rise from 98.97 and target 125.85 key resistance.

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.

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USD/CAD has posted considerable losses in the Thursday session, erasing the gains seen in the Wednesday session. Early in the North American session, the pair is trading at 1.2990. On the release front, Unemployment Claims dropped to 241 thousand, short of the forecast of 251 thousand. There are no Canadian releases for the remainder of the week. US employment data will be in focus on Friday, as the US releases Nonfarm Payrolls, Average Hourly Earnings and the unemployment rate.

As expected, the Federal Reserve didn't make any moves on Wednesday, leaving the benchmark interest rate at 0.50%. The markets were hoping to glean something from the rate statement, but the Fed didn't have much to add. The statement was upbeat about the economy and said that inflation continues to move towards the Fed's target of 2 percent. Analysts expect the Fed to raise rates two or three times in 2017, with the odds of a rate hike by June priced in 70%. However, Donald Trump remains an enigma, as his economic policy remains unclear – Trump has promised substantial fiscal spending and tax cuts, but hasn't provided any details. Just a few months ago, a red-hot economy had led to the Fed loudly hinting at gradual rate increases in 2017. However, with the markets showing increasing uneasiness about the new Trump administration, the Fed will likely change gears and adopt a wait-and-see attitude, watching what bills Trump gets through Congress and how the economy responds.

January was kind to the Canadian dollar, as USD/CAD slipped 2.8% percent. Earlier this week, USD/CAD dropped to 1.2965, the pair's lowest level since September 5. Will the Canadian dollar's rally continue into February? There was positive news about the Canadian economy on Tuesday, with the release of Canadian GDP. The economy expanded 0.4% in November, rebounding from a 0.3% decline in October. This figure beat the forecast of 0.3%, and the Canadian dollar moved higher. However, there could be trouble ahead for the Canadian economy. A report by the National Bank Financial Markets says that if Donald Trump's administration implements protectionist policies, Canada's GDP could drop as much as 1.5 percent. Trump has declared he will renegotiate the NAFTA trade agreement, which could have negative repercussions for the Canadian economy. With 70% of Canadian exports headed for the US, any protectionist moves by Trump could unnerve the markets and send the Canadian dollar lower.

The series of pending elections in Europe, ongoing Brexit developments and heightened Trump uncertainties should ensure that political risk remains a recurrent market theme for the first quarter of 2017. Global stocks have been subdued amid the rising market jitters with Asian shares trading mostly mixed during Thursday's trading session. The risk-off trading attitude from Asia should infect European markets with the bearish domino potentially capping gains on Wall Street. It is becoming quite clear that financial markets have been heavily impacted by Donald Trump's repeated verbal assaults and such continues to keep investors on edge. With the clash of optimism and fear fuelling global markets rather than fundamentals, extreme levels of volatility may be expected across the board moving forward.

Dollar remains pressured

The growing threat of Donald Trump moving forward with the protectionist policies while overlooking the proposed fiscal stimulus continues to leave the Greenback vulnerable to heavy losses. Sellers have exploited the lack of clarity provided on the market shaking fiscal promises to attack the Dollar ruthlessly with the Federal Reserve's passive stance in Wednesday's FOMC statement adding insult to injury. Although fundamentally speaking, sentiment remains bullish towards the United States amid the solid economic data, the unknown labelled as Trump could de throne the Dollar. Investors may pay extra attention towards Friday's NFP report which if exceeds expectations could provide the Dollar a lifeline.

From a technical standpoint, the Dollar Index is under pressure on the daily charts. The Index currently resides within a bearish channel while technical lagging indicators such as the MACD point to the downside. Previous support at 100.00 could transform into a dynamic resistance which encourages a further selloff towards 99.00 and potentially lower.

Super Thursday's Sterling selloff

The fact that Sterling was exposed to steep losses on Thursday despite the Bank of England raising the UK growth forecasts for 2017 continues to highlight how the Brexit dilemma has repelled investor attraction towards the currency. Markets were expecting the BoE to tilt to the hawkish camp amid the accelerating inflation but the central bank seemed to be in no rush to take action and such has left Sterling bullish investors empty handed. Uncertainty still remains the name of the game when dealing with the Pound with further selloffs likely as anxiety mounts ahead of the article 50 invoke in early March.

Gains seem to be limited on the Sterling/Dollar with the current downside momentum potentially bringing prices lower towards 1.2500. A sharp breakdown and daily close below 1.2500 should encourage bears to drag the GBPUSD lower back towards the pivotal 1.2350 level. Although the parity dream on the GBPUSD may be pushed back in the longer term, the Brexit woes have made Sterling a seller's dream.

Commodity spotlight - Gold

A vulnerable Dollar coupled with the persistent Trump uncertainties has bolstered Gold's safe haven allure with the metal charging to a fresh three-week high above $1220 during Thursday's trading session. This yellow metal seems to be back in fashion in the short term with further inclines expected as investors scatter from riskier assets to safety. Although there remains a threat of Friday's NFP capping gains on Gold, bulls should remain in control above the $1195 higher low. Technical bullish traders could utilise the breakout above $1220 to propel Gold prices higher towards $1230.

Daily Pivots: (S1) 1.2573; (P) 1.2626; (R1) 1.2710; More...

GBP/USD dropped sharply after hitting 1.2705 and intraday bias is turned neutral again. Overall, rise from 1.1986 is seen as the third leg of the consolidation pattern from 1.1946. Hence, in case of another rise, we'd expect strong resistance from 1.2774 to limit upside and bring down trend resumption eventually. On the downside, firm break of 1.2411 minor support will argue that it's completed and turn bias to the downside for 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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Sterling tumbles sharply today even though BoE upgraded growth forecasts in the quarterly Inflation Report. The central bank kept key interest rate unchanged at 0.25% and held the asset purchase target at GBP 435b, as widely expected. The central bank maintained a neutral stance and noted that "monetary policy can response, in either direction". Also, it noted that some policy makers are "closer to those limits" referring to the tolerance of overshooting the 2% inflation target. In the latest projections, BoE forecasts inflation to average 2.7% in 2017, 2.6% in 2018 and 2.4% in 2019, November forecast of 2.8% in 2017, 2.7% in 2018 and 2.5% in 2019. Growth is projected to be 2.0% in 2017, 1.6% in 2018, 1.7% in 2019, comparing to November's forecast of 1.4% in 2017 and 1.5% in 2018, 1.6% in 2019. Sterling bulls are clearly dissatisfied with the announcement as the pound weakens notably against Euro and Yen.

On the data front, US initial jobless claims dropped 14k to 246k in the week ended January 28. Challenger job cut dropped -38.8% yoy in January. Non-farm productivity rose 1.3% in Q4 while unit labor costs rose 1.7%. UK construction PMI dropped to 52.2. in January. Eurozone PPI rose 0.7% mom, 1.6% yoy in December. Swiss retail sales dropped -3.5% yoy in December. Japan monetary base rose 22.6% yoy in January. Japan consumer confidence rose 0.1 pt to 43.2 in January. Australia trade surplus widened to AUD 3.51b in December, building approvals dropped -1.2% mom.

Dollar remains generally pressured, except versus Sterling, after yesterday's FOMC announcement. FOMC voted unanimously to leave its policy rate within a target range of 0.50-0.75%. The outcome had been widely anticipated as the Fed just adopted rate hike of 25 bps in December. Only minor changes were seen in the accompanying statement. In short, policymakers retained the stance that future interest rate change would be 'data dependent'. They also reiterated that economic conditions will evolve in a manner that will warrant only gradual increases in the federal fund rate'. Fed's view on the economic outlook has not changed, with overall growth remaining 'moderate' and the balance of risks 'roughly balanced'. The focus will now turn to Chair Yellen's Congressional testimony on February 14-15. During the 1.5 week period, we would receive the employment report for January. More in Fed Upbeat About Employment, Next Rate Hike Data Dependent.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2573; (P) 1.2626; (R1) 1.2710; More...

GBP/USD dropped sharply after hitting 1.2705 and intraday bias is turned neutral again. Overall, rise from 1.1986 is seen as the third leg of the consolidation pattern from 1.1946. Hence, in case of another rise, we'd expect strong resistance from 1.2774 to limit upside and bring down trend resumption eventually. On the downside, firm break of 1.2411 minor support will argue that it's completed and turn bias to the downside for 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.

Economic Indicators Update

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Thursday February 2: Five things the markets are talking about

For anyone looking for significant clues to the future of Fed policy, yesterday's FOMC statement was a real letdown. The announcement mostly reflects U.S policy makers' caution in a time of political upheaval.

Nevertheless, the Fed indicated that they remain on track to gradually raise short-term interest rates this year, but gave no hint about when the next increase might come.

The official statement shows that U.S economic activity has continued to expand at a moderate pace, with jobs gains remaining solid and unemployment atop of its recent low. Will tomorrow's non-farm payroll (NFP) report (08:30am EST) continue to support this? Officials reiterated that they expect only "gradual" increases in the fed-funds rate.

Fed fund futures now suggest a +69% probability of at least one rate increase by June - about the same level before the announcement - and a +71% chance of two increases by December.

1. Mixed responses from global stock indexes

For the time being, stronger U.S data continues to support 'risk assets,' however, investor uncertainty and concerns over Trump's policies is putting global markets on edge.

Overnight in Asian, equities touched a four-month high as the dollar underperformed after the Fed stuck to its mildly upbeat economic view but gave no hint of accelerating rate hikes.

MSCI's broadest index of Asia-Pacific shares, ex-Japan, was up +0.15% - touching its highest level since mid-October. However, gains were not broad-based in the region, with Hong Kong's Hang Seng slipping -0.6% and Singapore down -0.8%. Even Japan's Nikkei lost -1% on the back of a stronger yen (¥112.37).

In Europe, equity indices are trading mixed ahead of the BoE's policy decision (07:00am EST) and a speech by ECB President Draghi scheduled at 07:15am EST. Financial are again leading the sector losses in the Eurostoxx while the FTSE 100 is being weighed by tech shares. Energy, commodity and mining stocks are providing some support in the index.

U.S equities are currently set to open a tad softer (-0.4%).

Indices: Stoxx50 -0.3% at 3,247, FTSE flat at 7,106, DAX -0.4% at 11,616, CAC-40 flat at 4,793, IBEX-35 +0.2% at 9,345, FTSE MIB +1.1% at 18,940, SMI -0.6% at 8,281, S&P 500 Futures -0.4%

2. Oil prices steady, gold still has support

Oil prices are steady ahead of the U.S open despite a sharp rise in U.S. crude and gasoline stockpiles yesterday. The market negatives continue to be mitigated by evidence that OPEC and other big exporters are cutting production.

Brent crude is up +5c cents at +$56.85 a barrel after settling up +$1.22 in the previous session. U.S. light crude (WTI) is down -5c at +$53.83 after climbing +$1.07 yesterday.

Weekly U.S. EIA inventories rose by more than double (+6.5m barrels to +494.8m) what was expected for the week ended Jan. 27, while gasoline stockpiles also increased sharply (+3.9m barrels to +257.1m).

Note: Oil stored at Cushing, Okla., the delivery point for U.S. stocks, decreased by -1.2m barrels to +64.1m.

Gold has edged up overnight (+0.4% to +$1,214.67 an ounce), resuming its gains after halting a three-day rally on Wednesday, on the back of a weaker dollar.

Platinum has printed a three-month highs this morning at +$1,004.60, its best since Nov. 10, 2016, while silver touched a 2-month high of +$17.63 in yesterday's session.

3. U.S yields fall on Fed decision

It was natural to see the U.S bond market gets a boost as the latest Fed policy statement suggests the Fed is not in a rush for the next rate hike given the fiscal policy uncertainty.

The Fed called the near-term risks to the economic outlook 'roughly balanced' and indicated that they expect "only gradual increases" in rates. That suggests that the Fed may wait for a few more months and raise rates in the summer.

U.S 10's are trading at +2.475% vs. +2.492% before yesterday's Fed announcement. The policy sensitive two-year yield is +1.22% vs. 1.244%.

Given the lack of any new direction from the Fed, markets are likely to watch non-farm payrolls closely this week, and a stronger number could increase the probability of a March hike.

Elsewhere, Japanese 10-year yields rallied +2bps to +0.12%. That's the highest print since the BoJ introduced negative interest rates over 12-months ago.

4. Dollar bulls continued to be squeezed

The FX volatility seen over recent days appears to have calmed, at least for the moment.

Currently, the 'big' dollar is maintaining its soft tone following yesterday's FOMC statement and recent rhetoric from Trump officials. The Fed seems not to be in any hurry to adjust rates - market expectations are being slashed with dealers now pricing the possibility of a March hike at +18% odds, down from +28% prior the statement.

The pound (£1.2697) trades atop its two-month highs. No changes are expected from the BoE (see below) - officials are likely to reinforce their neutral policy stance and focus on Brexit risk and uncertainties. USD/JPY (¥112.35) continues to test key chart support ahead of the psychological ¥112 handle. Analysts believe a break of this and the market will be eyeing ¥111.00 rather quickly. Europe's single unit (€1.0808) is holding up at the upper end of this week's range.

One of the other big movers overnight has been the AUD (A$0.7670). It has found support after reporting a record trade surplus for the month of December (+A$3.5B vs. +A$2.0B e), supported mostly by the rise in prices of iron ore and coal to China.

5. Super Thursday - BoE to be all words no action

All eyes are on the Bank of England (BoE) interest rate decision and the presentation of its quarterly forecasts. Although rates are expected to be left "unchanged," the BoE is likely to upgrade its growth and inflation forecasts.

The Inflation Report needs to reflect the more upbeat U.K activity data since November. Therefore, fixed income dealers expect above-target inflation to remain a feature of the updated forecasts, thus making it a tad difficult for Governor Carney to strike a "dovish" tone this morning.

Note: More inflation chatter will lead to more talk of interest rates increase if the U.K. economy continues to perform well, however, the neutrals should expect this argument to be somewhat counterbalanced by concerns about Brexit - perhaps an argument for sterling gains to be somewhat capped?

USD/JPY has posted losses in the Thursday session, erasing the gains from Wednesday. Currently, the pair is trading at 112.30. On the release front, Japanese Consumer Confidence remains weak, as the reading of 43.2 missed the estimate of 43.7. In the US, today's highlight is Unemployment Claims, with the markets expecting claims to drop to 251 thousand. Employment data will be under the spotlight on Friday, as the US releases Nonfarm Payrolls, Average Hourly Earnings and the unemployment rate.

There were no surprises from the Fed on Wednesday. The Fed opted for the sidelines, leaving the benchmark interest rate at 0.50%. The markets were hoping to glean something from the rate statement, but the Fed didn't have much to add. The statement was upbeat about the economy and said that inflation continues to move towards the Fed's target of 2 percent. Analysts expect the Fed to raise rates two or three times in 2017, with the odds of a rate hike by June priced in 70%. However, the big question mark for the markets and the Fed is one Donald Trump, who remains an enigma, as his economic policy remains unclear – Trump has promised substantial fiscal spending and tax cuts, but hasn't provided any details. Just a few months ago, a red-hot economy led to the Fed loudly hinting at gradual rate increases in 2017. However, with the markets showing increasing uneasiness about the new Trump administration, the Fed will likely change gears and adopt a wait-and-see attitude, watching what bills Trump gets through Congress and how the economy responds.

President Donald Trump has not hesitated to butt heads with world leaders, and on Tuesday it was the turn of China, Germany and Japan, as Trump accused them of devaluating their currencies in order to gain an unfair trade advantage. On Wednesday, Japan flatly denied the claim of currency manipulation, saying that Japan's monetary policy was aimed at curbing deflation and not lower the value of the yen. Trump and Japanese Prime Minister will meet in Washington on February 10, and it's a sure thing that currency policy will be high up the list on the agenda of the meeting. The BoJ sent off its own warning about currency manipulation when the dollar pushed above the 120 level, but BoJ Governor Haruhiko Kurodo recently stated that the bank does not have a target for the currency.

EUR/USD has posted slight gains on Thursday, as the pair trades at the 1.08 level. Earlier in the day, the pair rose to 1.0818, its highest level since December 5. On the release front, Eurozone PPI improved to 0.7%, above the forecast of 0.5%. Later in the day, ECB President Mario Draghi will address a conference in Slovenia. In the US, today's highlight is Unemployment Claims, with the markets expecting claims to drop to 251 thousand. Employment data will be under the spotlight on Friday, as the US releases Nonfarm Payrolls, Average Hourly Earnings and the unemployment rate.

As expected, the Federal Reserve didn't make any moves on Wednesday, leaving the benchmark interest rate at 0.50%. The markets were hoping to glean something from the rate statement, but the Fed didn't have much to add. The statement was upbeat about the economy and said that inflation continues to move towards the Fed's target of 2 percent. Analysts expect the Fed to raise rates two or three times in 2017, with the odds of a rate hike by June priced in 70%. However, Donald Trump remains an enigma, as his economic policy remains unclear – Trump has promised substantial fiscal spending and tax cuts, but hasn't provided any details. Just a few months ago, a red-hot economy had led to the Fed loudly hinting at gradual rate increases in 2017. However, with the markets showing increasing uneasiness about the new Trump administration, the Fed will likely change gears and adopt a wait-and-see attitude, watching what bills Trump gets through Congress and how the economy responds.

The German economy, the largest in Europe, is often viewed as the bellwether of the strength of the Eurozone economy. This week's data out of Germany has been a mixed bag. There was positive news on Wednesday, as German Manufacturing PMI improved to 56.5, pointing to solid expansion. This was just shy of the estimate of 55.5. Earlier in the week, unemployment claims dropped by 26 thousand, as the unemployment rate dropped to 5.9% in January, its lowest level since reunification in 1990. However, key consumer indicators were unexpectedly soft. Germany's economy continues to raise concerns, as consumer indicators have looked dismal this week. Retail Sales, the primary gauge of consumer spending, posted a sharp decline of 0.9%, its fourth decline in five readings. This reading comes on the heels of Preliminary CPI, which declined 0.6%, its first decline in 9 months.