Dollar remains generally weak today after a rather weak recovery attempt. And, much better than expected ADP job data seems providing little inspiration. FOMC rate decision will be the main focus today but would likely be a non-event. Firstly, there practically no chance for Fed to adjust monetary policy at today's meeting. Secondly, after some hawkish Fedspeaks back in January, there were a little speculation of a March hike. And Fed could make use of today's statement to signal this. However, considering recent uncertainties in the financial markets after Donald Trump's inauguration, there is now little chance for Fed to move in March neither. That include the domestic unrest due to immigration ban. Also, trade relationship with others as Trump extended his verbal attack to Germany and Japan. Fed could still be ready for three hikes this year as projected, provided that economic developments meet policy makers' expectations. Their views would be more clearly presented in the next set of economic projections to be released in March. So in short, March FOMC meeting is the key, not today's.

UK PMI manufacturing dropped 0.2 to 55.9 in January, met consensus. That compared to December's 2.5 year high at 56.1. Market noted in the released that "manufacturing activity in the U.K. make a strong start to 2017, bolstering confidence over the British economy". And more importantly to the markets, "factories' raw material costs rose at the fastest pace since PMI records began 25 years ago – fuelled by the pound's near 20 percent drop against the dollar since June's Brexit vote, as well as higher prices for steel and oil. In response, manufacturers raised the prices they charged for their goods at the fastest pace since April 2011." The surge in costs in line with recent solid inflation reading and add to the case for BoE to stand pat for the rest of the year. Also from UK, BRC shop price dropped -1.7% yoy in January. Nationwide house price rose 0.2% mom in January.

Also from Europe, Eurozone PMI manufacturing was revised up by 0.1 to 55.2 in January. Germany PMI manufacturing was revised down -0.1 to 56.4. France PMI manufacturing was revised up by 0.2 to 53.6. Italy PMI manufacturing dropped -0.2 to 53.0 in January. Swiss SVME PMI dropped to 54.6 in January, down from 56.0, below expectation of 55.9. Elsewhere. China manufacturing PMI dropped -0.1 to 51.3 in January, non-manufacturing PMI rose 0.2 to 54.6. New Zealand, employment rose 0.8% qoq in Q4, unemployment rate jumped to 5.2%.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9907; (P) 0.9975; (R1) 1.0018; More.....

Intraday bias in USD/CHF remains on the downside for the moment as decline from 1.0342 is still in progress. Such fall is seen as the third leg of the pattern from 1.0327 and should now extend to 61.8% retracement of 0.9443 to 1.0342 at 0.9786 and below. On the upside, break of 1.0043 resistance is needed to indicate short term bottoming. Otherwise, outlook will stay mildly bearish in case of recovery.

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.

Economic Indicators Update

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USD/JPY has posted gains in the Wednesday session, pushing above the 113 level. Currently, the pair is trading at 113.30. On the release front, Japanese Final Manufacturing PMI edged up to 52.7, within expectations. In the US, there are two key indicators - ISM Manufacturing PMI and the ADP payrolls. As well, the Federal Reserve issues a rate statement and set the benchmark rate, which is expected to remain pegged at 0.50%. On Thursday, the US will publish unemployment claims.

All eyes are on the Federal Reserve, which will release a policy statement later on Wednesday. After a historic quarter-point raise in December, which pushed rates to 0.50 percent, the Fed is expected to remain on the sidelines in its first release of 2017. What happens next? Just a few weeks ago, Fed officials were talking about a series of rates hikes in 2017 in response to a strong US economy (sound familiar? Please rewind to January 2016 for an identical message). However, after just 10 days on the job, President Trump has proven to be as unpredictable and controversial as ever. Trump has not provided any details about his economic blueprint for the country, but he has raised the rhetoric about "America first" and has already picked a fight with Mexico over a border wall and his threat to renegotiate the NAFTA trade agreement. After hinting at gradual rate increases, 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. If economic growth remains strong, a rate hike in the first half of 2017 will have to be seriously considered by the Fed. The markets have priced in a rate hike by June at 66 percent.

On Monday, the BoJ maintained interest rates at -0.10%, where they have been pegged since January 2016. The bank raised its GDP projection for fiscal year 2017 to 1.5 percent, up from 1.3 percent. At the same time, the BoJ highlighted the uncertainty that the economy faces due to the new US administration. President Trump has already taken some protectionist moves, and this could have a negative effect on Japan, which relies heavily on exports. The Japanese yen remains at low levels and the BoJ has previously said that it would consider taking action if the dollar rose above 120 yen. However, after the rate announcement, BoJ Governor said that the bank does not have a target for the currency.

US equity markets are poised to open a little higher on Wednesday as we await a selection of economic data and the first FOMC monetary policy decision since Donald Trump's inauguration.

Trump and his aides have made efforts in recent days to talk down the greenback which has to an extent been successful, with the dollar index having slipped back below 100 to its lowest level since the December meeting. This comes alongside markets also pricing in only two hikes this year - rather than the three that the Fed has outlined - with the next coming in June.

In the absence of a press conference with Chair Janet Yellen following today's announcement, investors will be left to pour over the statement that it released alongside the decision to see whether views have changed on the path of interest rates this year since the last meeting. Given that the Fed is none-the-wiser when it comes to Trump's spending and tax plans, I would imagine the views of policy makers will be unchanged since the middle of December and they will reiterate an intention to hike three times.

With the dollar more than 4% off its post-hike highs, it could start to look attractive once again to traders as long as the Fed sticks the same script.

Of course, this will also be dependent on what we get from Trump today, given his ability to both excite investors and worry them on a regular basis. We'll also get some economic data from the US throughout the day including ADP non-farm employment data and manufacturing PMIs. This will be accompanied by crude inventory numbers from EIA, with another small build expected.

Today, all eyes will be on the FOMC rate decision. At the latest gathering, the officials raised the federal funds rate by 25bps for the second time in a decade, and revised up the projected path for interest rates in 2017 to indicate 3 hikes from 2 previously, surprising many market participants with their hawkish forward guidance. The forecast for this meeting is for the Committee to keep its rate hike powder dry, something overwhelmingly supported by market pricing. This will be one of the meetings that is not accompanied by updated economic forecasts nor a press conference by Chair Yellen and as such, the market action will probably come from the phrasing of the statement accompanying the decision. Considering that there has been further economic progress since the latest gathering, with the headline CPI rising above 2% for the first time since 2014, and wage growth accelerating to +2.9 yoy in December, we believe that the overall tone of the statement is likely to be quite optimistic. Something like that could bring forth market expectations with regards to the timing of the next rate increase and thereby, bring USD under renewed buying interest. According to the Fed funds futures, the market is currently anticipating the next hike to come in June.

Overall, we maintain the view that the most likely scenario is for the Committee to hike borrowing costs only twice this year, and not three times as currently projected by the "dot plot". We believe that the excessive USD strength that three hikes could cause, as well as a more dovish Committee this year in terms of voting rights, are both factors that could lead to only two hikes. We would need to see a material pick-up in inflationary pressures (particularly in the core PCE price index), and some further clarity regarding the government's fiscal stimulus package, before we reevaluate this view.

Trump vs USD strength: Round 2

The Trump administration took another shot at the strength of the US dollar yesterday. The President's top trade advisor, Peter Navaro, said that Germany is using a "grossly undervalued" euro in order to exploit the US and its EU partners, which caused USD to tumble. A few hours later, President Trump himself indicated that "other countries take advantage of America by devaluation", pointing the finger at China and Japan in particular. The dollar extended its losses following these comments, perhaps on increased speculation that the new administration will begin to focus on the value of the dollar moving forward. Even though the outlook surrounding USD appears negative at the moment, considering that major USD crosses such as EUR/USD and USD/JPY lie near critical technical barriers, and that the Fed may appear optimistic today, we believe that we could see a rebound in the greenback.

USD/JPY traded south yesterday, fell temporarily below 112.60 (S1), but hit support at 112.00 (S2) and rebounded back within the range it has been trading since the 11th of January, between the support of 112.60 (S1) and the resistance of 115.50. As a result, we still consider the short-term path to be to the sideways. For now though, it is possible for the pair to continue trading higher within the range. Now it is testing the 113.25 (R1) resistance, where a break is possible to initially aim for the next obstacle of 114.00 (R2).

Kiwi tumbles on disappointing employment data

Overnight, the New Zealand dollar came under selling pressure following the release of the nation's employment data for Q4. Even though the labor force participation rate rose significantly and for the 5th consecutive quarter, the unemployment rate rose as well, indicating that despite an increase in the number of people available to work, the number of unemployed people rose as well. On balance, even though these data could slow down any further gains in the Kiwi, they are not soft enough to alter our overall optimistic view with regards to New Zealand's economy. We think that a neutral stance by the RBNZ in coming months, combined with the fact that New Zealand's yields remain very attractive compared to other G10 nations, are factors which could keep the Kiwi supported.

NZD/USD tumbled yesterday after it hit resistance at 0.7350 (R3), near the prior upside support line taken from back at the low of the 20th of January 2016. The rate is also back below the longer-term downtrend line taken from back at the peak of the 7th of September. Therefore, although the price structure on the 4-hour chart still suggests a short-term uptrend, we prefer to remain sidelined for now. We would like to see a clear close above 0.7350 (R3) before we get confident on larger bullish extensions. On the downside, a break below 0.7230 (S1) and the upside support line drawn from the low of the 3rd of January, could shift the short-term outlook to negative and perhaps carry larger bearish extensions.

Today's highlights:

During the European day, we get the final manufacturing PMIs for January from several European countries and the Eurozone as a whole. The forecasts are for the final figures to confirm the preliminary estimates and as such, the reaction in EUR may remain muted.

From the UK, we get the manufacturing PMI for January and expectations are for the index to have ticked down, but to have remained elevated above the 50 mark separating expansion from contraction. Although something like that may hurt GBP somewhat on the news, as long as the index remains significantly above 50, we doubt that it will affect the BoE's optimistic view on the economy.

What's more, UK lawmakers will continue to debate the government's Brexit bill in Parliament today, and later in the day they will vote on the motion. Given the heated debate yesterday, we would expect market focus to fall primarily on what type of amendments MPs will propose, in particular with regards to what kind of scrutiny Parliament will be given over the negotiations. Some MPs from the main opposition party, Labor, have indicated that they want an amendment that requires the government to report back to Parliament frequently on how the negotiations are proceeding, and to allow lawmakers to debate on the direction of the future EU-UK talks. If Parliament is seen as likely to gain a bigger say over what kind of deal the UK negotiates, speculation over a not-so-hard Brexit could support the pound somewhat, in our view.

As for the US indicators, we get the ADP employment report and the ISM manufacturing PMI, both for January, but we believe that ahead of the FOMC gathering, these releases will attract much less attention than usual.

From Canada, we get the Markit manufacturing PMI for January, though no forecast is currently available.

Besides UK lawmakers, we have one more speaker scheduled for today: BoJ Governor Haruhiko Kuroda will speak to the Japanese Parliament during the early European morning.

USD/JPY

• Support: 112.60 (S1), 112.00 (S2), 111.50 (S3)
• Resistance: 113.25 (R1), 114.00 (R2), 114.80 (R3)

NZD/USD

• Support: 0.7230 (S1), 0.7180 (S2), 0.7130 (S3)
• Resistance: 0.7280 (R1), 0.7310 (R2), 0.7350 (R3)

Wednesday February 1: Five things the markets are talking about

Words do hurt, just ask all the dollar 'bulls' - the 'mighty' buck has just completed its worst January in thirty-years after President Trump complained that every other country lives on "devaluation."

Nevertheless, the dollar is managing to drift a tad higher on the first trading day of a new month in anticipation of a 'hawkish' tone from the FOMC statement this afternoon (2pm EST). Yesterday, the greenback came under extreme pressure amid administration comments suggesting officials would prefer a weaker dollar.

In reality, verbal intervention alone should not have a lasting impact; it's the U.S economy that will eventually set the dollar's course.

Even the world's most powerful central bank requires greater clarity on Trump's economic policies and reason why the Fed is expected to keep interest rates unchanged this afternoon - the accompanying statement will be analyzed by the market for any reading on Trump's impact thus far on the world's largest economy.

1. Equities see the light

In Asia, equity prices stabilized overnight after two-days of declines, as investors position themselves ahead of the Fed's policy statement (no press conference).

Korea's Kospi's gained +0.5% amid stronger-than-expected trade figures, while Australia's S&P/ASX 200 was up +0.4%, and Japan's Nikkei finished trading flat after opening lower.

Nevertheless, investor caution does persist. New Zealand's NZX-50 was down -0.3%, and Hong Kong's Hang Seng dropped -1.1% in its first session of the week after the Lunar New Year break - it's catching up with weakness seen in Asian stocks the prior two days.

Note: Markets in China, Taiwan and Vietnam remained closed for the Lunar New Year holiday.

In Europe, equity indices are trading sharply higher as positive sentiment continues after a raft of good earnings reports pre-market. Banking stocks are trading higher across the board, while pharmaceuticals support both the Eurostoxx and FTSE 100. Commodity and mining stocks are also trading notably higher as copper prices consolidate around contract highs.

U.S futures are currently trading in the 'black' (+0.2%).

Indices: Stoxx50 +0.7% at 3,264, FTSE +1.0% at 7,168, DAX +1.0% at 11,646, CAC-40 +1.0% at 4,803, IBEX-35 +0.6% at 9,373, FTSE MIB +0.7% at 18,724, SMI +0.9% at 8,369, S&P 500 Futures +0.2%

2. Oil heads higher, gold consolidates

Oil prices are edging up supported by signs that Russia and OPEC producers are delivering on promised supply reductions, although yesterday's API report which showed a large rise in U.S. crude inventories is limiting these gains.

Note: Russia cut production last month by around -100k bpd.

Brent crude futures are trading up +25c at +$55.83 a barrel, while U.S. light crude (WTI) is up +26c to +$53.07.

Expect dealers to take direction from today's U.S EIA inventory figures (10:30am EST). The market is expecting crude stocks to rise by +3.3m barrels.

Gold slipped overnight (down -0.2% to +$1,208.67) as the 'big' dollar recovered from its two-month lows and as the market waits to see what the Fed has to say.

Note: Spot gold rose over +5% in January, its best month since June 2016. On Monday, it touched a one-week high of +$1,215.37. Silver rose over +2% to an 11-week high of +$17.61 on Tuesday and over +10% in January, its best month also since June 2016.

3. Sovereign yields look for support

Currently, sovereign government bond yields seem stuck in a tug of war between inflation data and risk factors, resulting in volatile trading sessions.

Investors should expect the choppy trend to continue even after the Fed announcement. In Europe, dealers are looking to open tactical short positions in the 10-year German bund (+0.46%). Many believe that they have backed up too quickly over the past three-month on the Trump reflation trade.

In the U.S, data yesterday shows that the negative sentiment toward Treasury's has reached the highest in more than a month, but fence sitters still dominate.

The share of investors expecting higher bond yields rallied to +27%, while those expecting lower bond yields is down to +14% from +16%. However, those staying 'neutral' account for the bulk, holding steady at +59%. U.S 10's are at +2.457% and are likely to continue to gyrate in the +2.3%-2.6% range they have been trading in 2017.

Elsewhere, long-term JGB prices have weakened, pushing the benchmark 10-year yield up to +0.09% as some risk-on sentiment returns.

4. Dollar licks its wounds in currency war

2017 currency moves have not been for the faint of heart.

A barrage of FX verbal intervention has dominated the market this week. The USD weakened yesterday after President Trump and his Director of the National Trade Council Navarro accused Germany (€1.08) and Japan (¥113.34) of weakening their respective currencies for trade advantage.

The replies from G7 official continue to be swift and defensive. Chancellor Merkel, Japan's PM Aso, Cabinet Sec Suga, Japan Fin Min Aso, Vice Fin Min of International Affairs (currency chief) Asakawa all defended their respective central bank and trade policies noting that they continue to follow G7 and G20 communiqués.

Note: USD/JPY continues to build technical support above the psychological ¥112.50 level - Overnight, the BoJ's Kuroda helped to weaken the yen after he noted his monetary policy was aimed at domestic price stability (not devaluing currencies to gain a Trump trade advantage). Sterling (£1.2622) has found further support from this morning U.K manufacturing data (see below).

5. U.K, China and Japan manufacturing expand

Data this morning revealed that U.K. manufacturing activity grew strongly in January, slowing only slightly from a two-year high in December - 55.9 vs. 56.2 prior.

The expansion was supported by a solid increase in new order intakes, mainly from the domestic market. Improving global market conditions and a weaker sterling is also driving a modest increase in new export orders.

Overnight, Japans Jan Final PMI Manufacturing was revised a touch lower, but still registered its fifth month of expansion and the highest level since Mar 2014 - 52.7 vs. 52.8 prelim.

In China, its Jan PMI Manufacturing (Govt. official) saw a slight slowing of momentum, but still registered its sixth-month of expansion, but at a three-month low - 51.3 vs. 51.4 prior.

EUR/USD has taken a pause on Wednesday, following strong gains in the Tuesday session. Currently, the pair is trading at the 1.08 line. On the release front, Manufacturing PMIs in Germany and the Eurozone were within expectations and both pointed to expansion in the manufacturing sector. In the US, there are two key indicators – ISM Manufacturing PMI and the ADP payrolls. All eyes will be on the Federal Reserve, which will issue a rate statement and set the benchmark rate, which is expected to remain pegged at 0.50%. On Thursday, the US will publish unemployment claims.

The German economy, the largest in Europe, has been sending mixed messages this week. 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 1989. 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.

The Federal Reserve will be on center stage on Wednesday, with the release of its policy statement. After a historic quarter-point raise in December, which pushed rates to 0.50 percent, the Fed is expected to remain on the sidelines in its first release of 2017. What happens next? Just a few weeks ago, Fed officials were talking about a series of rates hikes in 2017 (sound familiar? Please rewind to January 2016 for an identical message). However, after just 10 days on the job, President Trump has proven to be as unpredictable and controversial as ever. Trump has not provided any details about his economic blueprint for the country, but he has raised the rhetoric about “America first” and has already picked a fight with Mexico over a border wall and declaring he would renegotiate the NAFTA trade agreement. After hinting at gradual rate increases, 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. If economic growth remains strong, a rate hike in the first half of 2017 will have to be seriously considered by the Fed. The markets have priced in a rate hike by June at 66 percent.

News and Events:

Fed meeting likely to be a non-event

The Federal Open Market Committee kicked-off its two-day monetary policy meeting yesterday and will announce any modifications later today. There is no doubt that the Federal Reserve will leave its benchmark rates unchanged after lifting them by one notch at the December meeting. Instead, the market will focus on the Fed's assessment of the potential direct and indirect effects of Donald Trump's presidency on the economy. The January meeting is a light one, meaning that there will be no new economic forecasts or a press conference, just a statement.

Given the highly uncertain environment that has emerged since the investiture of Trump, and the rain of executive orders that has ensued, we expect that the Fed will play for time and avoid giving any strong signals. Moreover, the recent relatively disappointing economic data from the US (GDP, durable goods orders…) has eased the pressure on the Fed, which would translate into a less aggressive pace of tightening for the year ahead. Indeed, we remain sceptical that the Fed will be able to hike rates three times this year.

In the FX market, the US dollar took another hit on Tuesday as investors start to really wonder whether a Trump presidency will be in any way positive for businesses in general. The dollar index slid 0.85% yesterday and is currently struggling to reverse the negative momentum. We continue to expect further dollar weakness in the short-term as the November-December rally was exclusively driven by speculation. However, the growing risk-off sentiment will slow down the dollar sell-off as investors take shelter from the uncertainty stemming from Trump's political style.

Watch for further CHF appreciation

Swiss PMI manufacturing came in slightly below expectations at 54.6 against 55.9 exp (56.2 prior read). Declines could be seen in output and order backlogs but none of these were significantly troublesome or enlightening. Overall, the Swiss economy continues to hum along at a decent pace despite the strong currency and late winter. Yet the sleepless nights continue for the Alpine economy as the SNB battles to manage the negative effects of an overvalued currency. J&J's purchase of Actelion has caused EURCHF to drop below 1.07 on the back of speculation of massive demand for CHF (Although as my colleague Arnaud Masset points out, it is unlikely that all $30bn will be converted). The European political outlook is becoming significantly more unstable as accusations mount against French presidential hopeful, Fillon. This has caused an uptick in migrations into the safe haven swissie. Meanwhile stateside, US President Trump's focus on perceived currency manipulators has temporarily shifted from China to German and Japan, suggesting that it is only a matter of time before the SNB's exchange rate policy also comes under scrutiny. We continued to see further downside risk in EURCHF as macro headwinds increase and the SNB continues to allow great exchange rate flexibility as the inflation outlook improves. We anticipate a bearish extension back towards 1.0623 support. In USDCHF the break of key 61% Fib retracement lvl and 200D MA indicates further bearish pressure towards 0.9537.

China is showing, at best, some signs of stabilization

China's outlook has the full attention of world markets. Last night saw the release of important economic data, including manufacturing PMI which came in higher than expectations at 51.3 in January versus 51.4 in December. As we know, a figure above 50 indicates expansion. This marks the sixth straight month of expansion.

It is true that the housing boom has boosted demand for manufacturing products as new buildings are on the rise. Industrial firms selling raw materials have also enjoyed an upsurge in profits as commodity prices show some solid potential lately. Nonetheless, as the manufacturing PMI approaches the 50-mark, some fundamentals are beginning to cause fears - mainly that the housing market is on the decline.

In addition, we are currently concerned that China's fiscal deficit, which widened in 2016 will continue to do so in 2017. The PBoC has injected a lot of liquidity into the banking system through its MLF tool (medium-term lending facility) and this may cause issues at some point, particularly as it can drive downside pressures on inflation. We firmly believe that strong economic risks are ahead for China. We remain bullish on the pair USDCNY towards 7 in the medium-term.

Today's Key Issues (time in GMT):

• Jan Manufacturing PMI, exp 51,2, last 51,4, rev 51,6 NOK / 08:00
• Jan Markit Spain Manufacturing PMI, exp 55, last 55,3 EUR / 08:15
• Jan PMI Manufacturing, exp 55,9, last 56, rev 56,2 CHF / 08:30
• Jan Markit/ADACI Italy Manufacturing PMI, exp 53,3, last 53,2 EUR / 08:45
• Jan F Markit France Manufacturing PMI, exp 53,4, last 53,4 EUR / 08:50
• Jan F Markit/BME Germany Manufacturing PMI, exp 56,5, last 56,5 EUR / 08:55
• Jan F Markit Eurozone Manufacturing PMI, exp 55,1, last 55,1 EUR / 09:00
• Jan Barclays Manufacturing PMI, exp 47,5, last 46,7 ZAR / 09:00
• Jan Markit UK PMI Manufacturing SA, exp 55,9, last 56,1 GBP / 09:30
• janv..31 FGV CPI IPC-S, exp 0,65%, last 0,63% BRL / 10:00
• Jan Danish PMI Survey, last 64,3 DKK / 10:00
• Dec Industrial Production MoM, exp 2,40%, last 0,20% BRL / 11:00
• Dec Industrial Production YoY, exp 0,60%, last -1,10% BRL / 11:00
• Dec MLI Leading Indicator MoM, last 0,30% CAD / 12:00
• Jan Markit Brazil PMI Manufacturing, last 45,2 BRL / 12:00
• janv..27 MBA Mortgage Applications, last 4,00% USD / 12:00
• janv..30 CPI WoW, last 0,10% RUB / 13:00
• janv..30 CPI Weekly YTD, last 0,50% RUB / 13:00
• Jan ADP Employment Change, exp 168k, last 153k USD / 13:15
• Jan Markit Canada Manufacturing PMI, last 51,8 CAD / 14:30
• Currency Flows Weekly BRL / 14:30
• Jan F Markit US Manufacturing PMI, exp 55,1, last 55,1 USD / 14:45
• Jan ISM Manufacturing, exp 55, last 54,7, rev 54,5 USD / 15:00
• Jan ISM Prices Paid, exp 65,5, last 65,5 USD / 15:00
• Jan ISM New Orders, last 60,2, rev 60,3 USD / 15:00
• Jan ISM Employment, last 53,1, rev 52,8 USD / 15:00
• Dec Construction Spending MoM, exp 0,20%, last 0,90% USD / 15:00
• janv..27 DOE U.S. Crude Oil Inventories, exp 3000k, last 2840k USD / 15:30
• janv..27 DOE Cushing OK Crude Inventory, exp -200k, last -284k USD / 15:30
• Jan Imports Total, exp $12286m, last $11525m BRL / 17:00
• Jan Exports Total, exp $14335m, last $15941m BRL / 17:00
• Jan Trade Balance Monthly, exp $2049m, last $4415m BRL / 17:00
• Jan New Car Registrations YoY, last 13,06% EUR / 17:00
• Feb 1 FOMC Rate Decision (Upper Bound), exp 0,75%, last 0,75% USD / 19:00
• Feb 1 FOMC Rate Decision (Lower Bound), exp 0,50%, last 0,50% USD / 19:00
• Jan ANZ Job Advertisements MoM, last 1,60% NZD / 21:00

The Risk Today:

EUR/USD's momentum has increased sharply. Hourly resistance area is given at around 1.0800. Hourly support lies at 1.0590 (19/01/2016 low) and 1.0341 (03/01/2017 low). Expected to see continued consolidation. In the longer term, the death cross late October indicated a further bearish bias. The pair has broken key support given at 1.0458 (16/03/2015 low). Key resistance holds at 1.1714 (24/08/2015 high). Expected to head towards parity.

GBP/USD's buying pressures are increasing again. The pair is on the road towards 1.2771 (05/10/2016 high). The technical structure is still anyway showing positive potential. Hourly support is given at 1.2466 (30/01/2016 low). Expected to show further bullish move. The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY had surprisingly exited the downtrend channel after monitoring resistance implied by the upper bound. Yet, the pair is back within it. Hourly resistance is given at 115.62 (19/01/2016 high) A break of hourly support given at 112.57 (17/01/2017 low) has confirmed further bearish pressures. We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

USD/CHF's momentum is bearish. Yet, the selling pressures are being reduced below parity. Key resistance is given at a distance at 1.0344 (15/12/2016 high). The road is clearly wide-open for further decline. In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.

'The single currency remains the most undervalued among its Group-of-10 peers, according to an OECD measure of purchasing-power parity.' – Stefania Spezzati and Vassilis Karamanis, Bloomberg

Pair's Outlook

During the early hours of Wednesday's trading session the common European currency was still in a retreat against the US Dollar. The retreat began on Tuesday, as the currency exchange rate hit the upper trend line of the long term descending channel, in which the pair has been trading since the end of March. In addition, on Wednesday morning just below the trend line the 100-day SMA at 1.0797 is keeping the pair lower. It is most likely that the rate will retreat back to the weekly R1, which is located at 1.0761.

Traders' Sentiment

SWFX traders continue to be bearish regarding the pair, as 57% of trader open positions are short on Wednesday. In the meantime, 59% of trader set up orders are set up to sell the Euro.

'We think that price developments so far this year, together with investors realizing that there has to be a significant risk premium priced into the USD and the recent noteworthy shift towards a 'weak dollar policy' suggest that the risks for a deeper correction lower in the US currency are increasing.' – UniCredit Research (based on PoundSterlingLive)

Pair's Outlook

The GBP/USD pair managed to erase most of Monday's losses yesterday, but with the 1.26 mark once again providing sufficient resistance, preventing the Cable from edging further up. Today the Pound could go sideways, with the 100-day SMA at 1.2481 expected to limit any possible losses. However, technical studies suggest a positive development could occur, in which case the main target will be the 1.27 mark, where the 23.60% FIbo, the weekly R1 and the upper Bollinger band form relatively strong resistance. The given pair is unlikely to surge significantly beyond 1.26, unless weak US fundamentals provide sufficient impetus today.

Traders' Sentiment

Now 63% of traders are long the Sterling (previously 60%), whereas 56% of all pending orders are to acquire the Pound (up from 45%).

'It is becoming clear that the Trump administration is one that will pursue a weaker dollar and criticise the currency policies of others. Under such conditions, U.S. yields and the dollar are losing their correlation. Any rise in yields resulting from monetary policy expectations will no longer be able to support the dollar as much.' – Barclays (based on Reuters)

Pair's Outlook

The Greenback experienced another leg down yesterday, having once again lost nearly 100 pips against the Japanese Yen. However, the exchange rate closed above the 112.60 psychological support level, which should technically now cause a U-turn. Technical indicators, on the other hand, are giving bearish signals, and the 20-day SMA recently crossed the 55-day one to the downside-also providing a sell signal. As a result, downside risks are relatively high today, in which case price could fall even below the 112.00 mark. With a lot of uncertainty present in the markets recently, we should not rule out the possibility of bulls taking over, but with the 115.00 handle remaining intact.

Traders' Sentiment

Today 53% of all open positions are long and 59% of all pending orders are to buy the Buck (previously 49% and 53%, respectively).