Daily Pivots: (S1) 1.0653; (P) 1.0668; (R1) 1.0699; More...

EUR/CHF recovered after forming a temporary low at 1.0635. Intraday bias is turned neutral for consolidation. But break of 1.0749 resistance is needed to confirm short term bottoming. Otherwise, outlook remains bearish and deeper fall is expected. Below 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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Daily Pivots: (S1) 1.0717; (P) 1.0764 (R1) 1.0845; More.....

EUR/USD's choppy rise from 1.0339 resumed by taking out 1.0774 and reaches as high as 1.0811 so far. Intraday bias is back on the upside for 1.0872 resistance. At this point, 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) 1.2460; (P) 1.2528; (R1) 1.2644; More...

Intraday bias in GBP/USD remains neutral for the moment as it rebounded from 1.2414 support. Overall, rise from 1.1986 is seen as the third leg of the consolidation pattern from 1.1946. Above 1.2673 will turn bias to the upside and extend such rise towards 1.2774 resistance. We'd expect strong resistance from there to limit upside and bring down trend resumption eventually. On the downside, firm break of 1.2414 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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Daily Pivots: (S1) 0.9907; (P) 0.9975; (R1) 1.0018; More.....

USD/CHF drops to as low as 0.9860 so far as fall from 1.0342 continues. Such decline is seen as the third leg of the pattern from 1.0327. Intraday bias remains on the downside for 61.8% retracement of 0.9443 to 1.0342 at 0.9786 and below. On the upside, however, 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.

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Daily Pivots: (S1) 111.91; (P) 112.94; (R1) 113.80; More...

USD/JPY's break of 112.51 suggests that choppy decline from 118.65 has resumed. Intraday bias is back on he downside for 38.2% retracement of 98.97 to 118.65 at 111.13. At this point, we're still viewing the fall 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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Daily Pivots: (S1) 1.2956; (P) 1.3040; (R1) 1.3112; More...

USD/CAD's decline and break of 1.3017 support invalidated our bullish view. Instead, the development revived the case that corrective rise from 1.2460 has completed at 1.3598 already, after hitting 50% retracement of 1.4689 to 1.3838. Whole correction from 1.4689 could be starting the third leg. Intraday bias is now back on the downside for a test on 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% retirement 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) 0.7531; (P) 0.7549; (R1) 0.7570; More...

AUD/USD's consolidation from 0.7608 is still in progress and intraday bias remains neutral first. Further rise could be seen with 0.7448 support intact. On the upside, above 0.7608 will extend the rebound form 0.7158. But we'd 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 0.7158 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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Dollar is trying to recover today but remains the weakest major currency as markets turn their focus to FOMC rate decision today. The greenback has been under much selling pressure since the start of drama of US president Donald Trump's executive order on immigration ban. And more certainties are added after Trump called China and Japan playing their money markets. Also, his trade adviser Peter Navarro complained that the Euro was "grossly undervalued". Markets' enthusiasm over Trump's expansive policies diminished much this week and that can clearly be seen in the sharp pull back in stocks. DJIA ended down -107.04 pts or -0.54% at 19865.09, moving further away from 20000 handle. 10 year yield also lost 0.032 to close at 2.451. Dollar index is back below 100 handle, trading at around 99.8 at the time of writing.

Trump criticized that "you look at what China's doing, you look at what Japan has done over the years. They play the money market, they play the devaluation market and we sit there like a bunch of dummies." Japan's chief cabinet secretary, Yoshihide Suga, said Trump's criticism "completely misses the mark" and pledged that the central will continue to respond to "one-sided" moves in the markets. BoJ governor Haruhiko Kuroda sad earlier this week that nation's monetary policy "is not targeting exchange rates," but "is aimed at stabilizing prices and attaining a 2 percent inflation goal as soon as possible."

At the interview with the Financial Times, Peter Navarro, head of Trump's new National Trade Council, indicated that the euro has been "grossly undervalued" and Germany has been a big beneficiary of it. He blamed that Germany has been manipulating the single currency, using it as "implicit Deutsche Mark", to "exploit" the US and its EU partners. He also blamed that Germany was the main obstacle to a trade deal between the US and European bloc. German Chancellor Angel Merkel responded emphasized that Germany "has always called for the European Central Bank to pursue an independent policy" and the country "will not influence the behavior of the ECB". And thus, she cannot and do not want to change the situation as it is."

The focus today is on the FOMC meeting. It is widely expected that no change would be on the monetary policy. Yet, the market should pay attention to the accompanying statement. We expect policymakers to highlight the improvement in the employment market, noting that it's close to full employment. The questions remain on whether Fed would realize its projection of three rate hikes this year. Fed fund futures are pricing in less than 70% chance of a hike by June, slightly lower than last week.

On the data front, New Zealand, employment rose 0.8% qoq in Q4, unemployment rate jumped to 5.2%. China manufacturing PMI dropped -0.1 to 51.3 in January, non-manufacturing PMI rose 0.2 to 54.6. UK BRC shop price dropped -1.7% yoy in January. UK nationwide house price rose 0.2% mom in January. PMI will be the main feature today. Swiss will release SVEM PMI in European session while UK will also release PMI manufacturing. US will release ADP employment, ISM manufacturing and construction spending.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7531; (P) 0.7549; (R1) 0.7570; More...

AUD/USD's consolidation from 0.7608 is still in progress and intraday bias remains neutral first. Further rise could be seen with 0.7448 support intact. On the upside, above 0.7608 will extend the rebound form 0.7158. But we'd 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 0.7158 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.

Economic Indicators Update

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So it is time to attack the Dollar? That was the name of the game yesterday after the Dollar was sent on a wild tumble following comments from Peter Navarro, the head of President Trump's National Trade Council that Germany was using a “grossly undervalued” euro to gain advantage over the US and its own European Union neighbours. This was later followed by outspoken comments from President Trump himself when he implied during a meeting with senior pharmaceutical bosses that currency devaluation from other countries had increased the probability of drug makers outsourcing their production as he calls on these companies to turn production back towards the United States.

While the USD has stabilised somewhat since the attack on its strength yesterday, investors continue to be kept on their toes towards pricing in some political risk premium into the new US President after getting carried away beforehand on growth promises and these fundamentals are expected to continue driving the markets.

Investors must be aware that the Trump rally was encouraged on promises of economic growth, deregulation, fiscal spending and job creation. Yet there is still a large element of political risk that was ignored with Trump famously known to favour protectionist and other far-right policies. It must also be remembered that in order for this era of protectionism to work,Trump does need a weaker Dollar, otherwise it will become counterproductive to his economic plan as President of the United States. You can promise to cut taxes, deregulate and offer additional incentives to encourage business in the United States, but unless you are as competitive as your competition overseas corporations will continue to favour doing business in locations where operating costs are lower.

Dollar still slipping against emerging currencies

Despite the Dollar having stabilised after suffering heavy losses against its main trading partners, the Greenback is still slipping lower against most emerging market currencies in Asia ahead of the Federal Reserve interest rate decision this evening. While the Federal Reserve is expected to continue indicating their bias towards raising US interest rates higher more than once in 2017, the general consensus is that interest rates will be left unchanged tonight and this is providing support to Asian currencies seen as being the most vulnerable to higher US interest rates.

The biggest risk for the Dollar heading into the US interest rate decision is if the Federal Reserve indicates an air of unease around the unknown fiscal policy agenda of Donald Trump.

British MPs set to vote on Brexit bill

It shouldn't be forgotten that with Donald Trump continuing to attract all the limelight that MPs in the United Kingdom are set to vote later today on whether to give Theresa May the green-light to get Brexit negotiations underway. Today represents the conclusion of the debate in parliament that has lasted two days and is expected to end with Prime Minister Theresa May being awarded the nod of approval to begin Brexit negotiations, with reports circulating yesterday that May is aiming to invoke Article 50 on March 9.

This should have some ramifications on the British Pound while the recent news that the UK economy is expected to slow down over the next couple of years also provides another risk to investor sentiment.

On a general level however, global economics are being ignored with market volatility being driven by this new era of political risk becoming common across the developed world.

Sunrise Market Commentary

• Rates: Fed statement will probably sound more hawkish
  The US calendar is interesting with ADP employment report and manufacturing ISM, but they will be overshadowed by tonight's FOMC meeting. We expect an unchanged policy without hints to a March rate hike. The wording of the statement will be more hawkish. We only anticipate big market moves in case of a deviation from this ploy.
• Currencies: Trump administration 'attacks' trading partners on weak currency
  Yesterday, the dollar declined as US president Trump and an one of his advisers openly accused Germany, China and Japan on keeping their currencies artificially weak. Today, the focus is on the Fed's policy statement. Will the Fed statement be hawkish enough to counterbalance the recent USD negatives coming from the Trump administration?

The Sunrise Headlines

• The S&P 500 and Nasdaq ended nearly unchanged while the Dow Jones underperformed (-0.5%). Overnight, most Asian stock markets eke out gains up to 0.50%. Strong Apple earnings are supportive.
• Apple snapped out of 3 straight quarters of falling revenue as strong demand for the iPhone 7 raised investors' hopes that the technology giant is emerging from its roughest period since it reinvented the market for mobile devices.
• China's manufacturing sector saw growth slightly soften in January (PMI: 51.3 from 53.4). Sub-indices for both output (53.1) and new orders (52.8) registered slower growth. Chinese services expansion increased (PMI: 54.6 from 54.5).
• US President Trump and a top economic adviser unleashed a barrage of criticism against Germany, Japan and China, saying the three key US trading partners were engaged in devaluing their currencies to the harm of American companies and consumers.
• Britain's economy now looks set to slow only slightly in 2017 after its resilient response to last year's Brexit vote, NIESR said. Its latest forecasts pointed to growth of 1.7% this year, only a moderate slowdown from 2% in 2016.
• US President Trump picked Judge Gorsuch as nominee to the Supreme Court, a choice that would fill a nearly year-long vacancy on the bench and amount to the most transformational decision of his eventful first 12 days in office.
• New Zealand's jobless rate jumped (5.2%) and wage growth stayed sluggish as more people flooded the workforce in the fourth quarter, suggesting interest rates can remain at record lows even as the economy hums along.
• Today's eco calendar contains manufacturing PMI's in Europe (final), the UK and the US (ISM). ADP publishes its employment report and Germany taps the market, but most attention goes to tonight's FOMC meeting

Currencies: Trump Administration 'Attacks' Trading Partners On Weak Currency

Trump questions strong dollar policy

On Tuesday, EMU data were excellent, but hardly supported the euro. The Trump administration stepped up its campaign against US trading partners by accusing them to profit from a weak currency. Trump's Trade adviser Peter Navarro said that Germany used a grossly undervalued euro to its advantage. Donald Trump made similar accusations to China and Japan as he said these countries used negative/low yields to keep their currencies weak. The dollar declined further, reinforced by disappointing US data. USD/JPY dropped to the low 112 area, but rebounded as US equities found a better bid. The pair closed the session at 112.80 (from 113.77). EUR/USD broke beyond the 1.0775 resistance and closed at 1.0790.

This morning, Asian equities show modest gains despite yesterday's accusations FX manipulation by China and Japan. The dollar rebounds after yesterday's selloff. USD/JPY is trading in the 113.25/30 area. The Fed policy statement this evening is probably preventing further USD losses. EUR/USD is stabilizing in the high 1.07 area. The Kiwi dollar was sold on weak labour data. A rise in the unemployment rate and soft wage growth data make an RBNZ interest rate hike unlikely. NZD/USD dropped to the mid 0.72 area.

Today, FOMC policy statement will take centre stage (20:00 CET). A rate hike is unlikely (markets are discounting a 13.5% chance). In December, the Fed confirmed a gradual pace of withdrawing accommodation. The March meeting will probably also be too soon to tighten policy. If the FOMC thinks (unlikely) that tightening might be appropriate in March, it might start to prepare markets by today's statement. We favour a next rate hike in June. Nevertheless, the tone of the FOMC members has become more hawkish as the Fed is coming closer to its objectives for employment and inflation. We do expect some hawkish changes to the statement. Several governors have focussed on the normalization of the Fed balance sheet and indicated the debate might have to be started in a not too far distance. We agree, but don't expect news on it in today's statement.

Yesterday, the dollar was hammered as the Trump administration started its campaign against the artificially weak currencies of its major trading partners. The jury is still out, but some observers see it as the US moving away from its strong dollar policy/rhetoric. Question is whether today's Fed statement will be hawkish enough to counterbalance these new USD negatives. We are not a priori convinced this will be the case. In an addition, the Trump politics/communication is also becoming a sources of global uncertainty and weighs on the dollar. EUR/USD cleared a next minor resistance at 1.0775. Next resistance is coming in at 1.0874. The day-to-day USD momentum has become a 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, but we are not in a hurry to play this card already now. 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 rebound off the 112.57/53 reaction low was quite constructive, but is losing momentum. USD/JPY 111.16 (38% retracement of the 99.02/118.66 rally) is a key support.

EUR/USD regains next resistance as Trump devaluation talk weighs on the dollar

EUR/GBP

Sterling still looking for a clear trend

Yesterday's UK eco data triggered a significant, albeit temporary, move lower of sterling. UK December credit an money supply data were weaker than expected. Even more important, foreign investors were net sellers of Gilts for the first time since July, triggering an intraday sell-off of sterling. EUR/GBP jumped to the 0.8630/35 area. However, sterling rebounded later in the session even as risk sentiment remained fragile. So, sterling trading gave some mixed signals. EUR/GBP closed the session at 0.8584 (from 0.8566). Cable rebounded on broad USD weakness and finished the session at 1.2579.

Overnight, the BRC shop prices were softer than expected at -1.7% Y/Y. Nationwide house prices were in line with expectations. Later today, the UK manufacturing PMI is expected to decline slightly from 56.1 to 55.9. Of late, sterling didn't react too much to UK eco data. However, we have to impression that the UK currency is becoming slightly more sensitive to negative eco news. There will also be plenty of headlines on the Brexit-debate in Parliament, but for now we assume that it won't be a major obstacle for PM May's government. Over the previous days, sterling gradually lost some momentum against the euro even as the reason behind the move was not always very clear. A softer global risk sentiment is probably at least one factor. Last week, EUR/GBP 0.8579 and 0.8515 supports (50% and 62% retracement of the 0.8304/0.8854 rebound) were broken. The correction low comes in at 0.8451 and should provide strong support. Yesterday's price action confirms this view. We still look to buy EUR/GBP on dips.

EUR/GBP: 0.8450 support remains intact, tentative signs of a rebound”

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