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A note on lower timeframe confirming price action…

Waiting for lower timeframe confirmation is our main tool to confirm strength within higher timeframe zones, and has really been the key to our trading success. It takes a little time to understand the subtle nuances, however, as each trade is never the same, but once you master the rhythm so to speak, you will be saved from countless unnecessary losing trades. The following is a list of what we look for:

• A break/retest of supply or demand dependent on which way you're trading.
• A trendline break/retest.
• Buying/selling tails – essentially we look for a cluster of very obvious spikes off of lower timeframe support and resistance levels within the higher timeframe zone.
• Candlestick patterns. We tend to only stick with pin bars and engulfing bars as these have proven to be the most effective.

EUR/USD

The EUR made considerable ground against its US counterpart yesterday, after US President Trump’s trade advisor commented that the euro was ‘grossly undervalued’. The move was further exacerbated by lower-than-expected US consumer sentiment and a disappointing Chicago PMI, as well as a decline in the 10-year treasury yield!

The 1.07 psychological handle, along with H4 supply at 1.0765-1.0753 (now acting demand) were consumed amid the recent advance, which, as you can see, allowed price to shake hands with an interesting area of H4 resistance (green zone). In earlier reports we mentioned to keep an eye on this base as it consists of the following structures:

• A H4 Quasimodo resistance level at 1.0796.
• 1.08 handle.
• H4 Fib 88.6% resistance at 1.0810.
• Weekly resistance at 1.0819.
• H4 symmetrical AB=CD approach terminating at 1.0805.

Our suggestions: Although there is a chance that daily action may continue to advance in order to touch gloves with daily resistance at 1.0850, our desk is confident, given the confluence seen around the above noted H4 resistance area, that a bounce down to H4 demand at 1.0765-1.0753 will likely be seen. With that being the case, a market order was executed at 1.0798, with a stop placed 5 pips above the current weekly resistance level at 1.0824.

Data points to consider: US ADP non-farm employment change at 1.15pm, ISM manufacturing PMI at 3pm followed by the Federal Reserve monetary policy decision at 7pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.0798 ([live position] stop loss: 1.0824).

GBP/USD:  

For those who read Tuesday’s report on the GBP you may recall that our desk highlighted the 1.24/1.2440 region (yellow box) as a rather attractive H4 buy zone. It comprised of a H4 AB=CD 161.8% Fib ext., the 1.24 handle, a H4 trendline support taken from the high 1.2432 and boasted additional backing from a daily support area chiseled in at 1.2510-1.2415. Well done to any of our readers who took advantage of this convergence!

Going forward, we can see that price recently made contact with a H4 supply area coming in at 1.2611-1.2589. While the H4 candles are currently seen holding firm below this area, we feel it will not be long before this zone is engulfed and price makes its way up to the H4 mid-way resistance at 1.2650, or even the H4 Quasimodo resistance level at 1.2699. As of now the better area for shorts, at least in our view, is the above noted H4 Quasimodo resistance that fuses beautifully with the 1.27 handle. Not only is it housed within daily supply at 1.2728-1.2657, it’s also sitting only 25 or so pips above the weekly Quasimodo resistance at 1.2673.

Our suggestions: Be patient! Selling at a H4 supply that has no connection to the higher-timeframe structures is not something we’d advise. Should the unit strike the 1.27 region today/this week, this is an area one could possibly look to sell from without the need for additional confirmation as stops can be positioned above the aforementioned daily supply around the 1.2730 mark.

Data points to consider: UK manufacturing PMI at 9.30am. US ADP non-farm employment change at 1.15pm, ISM manufacturing PMI at 3pm followed by the Federal Reserve monetary policy decision at 7pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.27 region ([possible area to look at selling from without the need for additional confirmation] stop loss: 1.2730 – 2 pips above daily supply).

AUD/USD

Across the board, the US dollar took a rather significant hit yesterday led by US President Trump’s trade advisor commenting that the euro was ‘grossly undervalued’, as well as poor US economic data. This, as you can see, bolstered the commodity currency forcing price to momentarily surpass the 0.76 handle and touch base with November’s opening line 0.7606. As a consequence of yesterday’s advance, daily price also ever so slightly closed above daily supply at 0.7581-0.7551, which could further confirm weekly upside from the top edge of the weekly support area at 0.7524-0.7450. Before our team looks to become buyers in this market, nevertheless, we’d need to see a decisive H4 bullish close above the 0.7606 region. That way, we can be relatively sure that offers within the current daily supply are exhausted.

Our suggestions: Put simply, watch the H4 candles for a close above 0.7606 and then look to trade any retest seen thereafter. Still, following the retest we’d ultimately like to see either a lower-timeframe confirming buy signal form (see the top of this report) or a H4 bullish candle close, before committing to a position.

Data points to consider: Chinese manufacturing at 1am. US ADP non-farm employment change at 1.15pm, ISM manufacturing PMI at 3pm followed by the Federal Reserve monetary policy decision at 7pm GMT.

Levels to watch/live orders:

• Buys: Watch for a H4 close to be seen above 0.7606 and then look to trade any retest seen thereafter ([waiting for a lower-timeframe confirming setup to form following the retest is advised prior to pulling the trigger] stop loss: dependent on where one confirms this area).
• Sells: Flat (stop loss: N/A).

USD/JPY

In our previous report, we noted to keep an eyeball on the H4 demand area penciled in at 112.05-112.37. This base commanded the backing of the current daily demand at 111.35-112.37, which itself is further reinforced by a weekly support area at 111.44-110.10. As is evident from the H4 chart, the unit aggressively drove into the jaws of this zone yesterday and responded beautifully! The recent downside move was brought about by comments made by US President Trump’s trade advisor saying that the euro was ‘grossly undervalued’, along with disappointing US data. Well done to any of our readers who managed to secure a buy from the above noted H4 demand, as current H4 price looks set to continue northbound up until at least the H4 resistance at 113.25. Be that as it may, we would strongly advise taking some profits off the table around 113 and reducing risk to at least breakeven!

Our suggestions: At the time of writing, we do not see much to hang our hat on in regards to trading opportunities. Therefore, we’re going to opt for the safest position of them all – flat.

Data points to consider: US ADP non-farm employment change at 1.15pm, ISM manufacturing PMI at 3pm followed by the Federal Reserve monetary policy decision at 7pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Flat (stop loss: N/A).

USD/CAD

Strengthened by Canadian GDP figures coming in slightly better than expected the USD/CAD tumbled lower yesterday, momentarily surpassing the 1.30 handle and clocking a low of 1.2968. As of current price, we can see that the H4 candles are currently trading above the H4 mid-way resistance point at 1.3050, with the unit looking as though it may tap the underside of the 1.31 handle (bolstered by a H4 61.8% Fib resistance at 1.3091 and a H4 supply at 1.3123-1.3093) sometime today.

Looking over to the bigger picture, daily demand at 1.3006-1.3041, which happens to be positioned within the lower edge of a weekly demand at 1.3006-1.3115, held steady yesterday despite suffering a minor breach to the downside. The next area of value seen from here is 1.3169-1.3116: a daily supply zone which happens to be glued to the top edge of the above noted H4 supply.

Our suggestions: The current H4 supply, owing to its connection with daily structure, will likely bounce price today. How much of a bounce, well, that’s anybody’s guess, since let’s not forget that there’s also a weekly demand area also in play at the moment. With this being the case, waiting for a lower-timeframe sell signal (see the top of this report) to form before considering a sell from the H4 supply zone is, at least in our book, the safer route to take.

Data points to consider: US ADP non-farm employment change at 1.15pm, ISM manufacturing PMI at 3pm followed by the Federal Reserve monetary policy decision at 7pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.3123-1.3093 ([wait for a lower-timeframe confirming setup to form before looking to execute a trade] stop loss: dependent on where one confirms this area).

USD/CHF

In recent sessions, the USD/CHF took out the H4 support at 0.9948 and snowballed south. Aggressively whipsawing through the 0.99 handle and touching gloves with a H4 demand at 0.9832-0.9865, the pair concluded Tuesday’s session closing a few pips below 0.99.

What this recent move also accomplished was a break of weekly support at 0.9943. While yesterday’s daily candle portrays this break as an important cue for potentially more downside, let’s first consider the fact that the current weekly candle also recently shook hands with a weekly trendline support extended from the low 0.9943.

Our suggestions: With the weekly chart indicating that the bulls may make an appearance, there’s a chance that a H4 close above the 0.99 could be at hand. Should this come to fruition and price retests 0.99 as support, a long could be a possibility on the condition that a lower-timeframe buy signal is seen following the retest (see the top of this report), targeting H4 supply at 0.9966-0.9949 and then maybe even parity (1.0000).

Data points to consider: US ADP non-farm employment change at 1.15pm, ISM manufacturing PMI at 3pm followed by the Federal Reserve monetary policy decision at 7pm GMT.

Levels to watch/live orders:

• Buys: Watch for a H4 close to be seen above 0.99 and then look to trade any retest seen thereafter ([waiting for a lower-timeframe confirming setup to form following the retest is advised prior to pulling the trigger] stop loss: dependent on where one confirms this area).
• Sells: Flat (stop loss: N/A).

DOW 30

US equities closed lower yesterday, consequently recording its third consecutive losing day. Daily price is now seen trading mid-range between a daily resistance level at 19964 and a daily support boundary coming in at 19747. Meanwhile, up on the weekly chart, the index is currently hovering just ahead of the 2017 yearly opening level at 19769. A decisive weekly close beyond this range could spark another wave of selling down to the weekly demand area at 19071-19222. Before this can be achieved, however, a daily close below the aforementioned daily support would, of course, also need to be seen!

Marching across to the H4 candles, one can see that the H4 demand at 19785-19803 (positioned directly above the 2017 yearly opening barrier) held firm amid yesterday’s action, and helped lift prices to highs of 19897 by the closing bell. With this H4 demand likely weakened by the recent attack, the next level of interest seen beyond here comes in at 19759: a sneaky H4 Quasimodo support that is bolstered by the 2017 yearly opening base and the nearby daily support at 19747.

Our suggestions: Given the confluence in place around the current H4 Quasimodo support, our team has placed a pending buy order at 19760, with a stop set just below the apex of the Quasimodo formation (see black arrow) at 19730.

Data points to consider: US ADP non-farm employment change at 1.15pm, ISM manufacturing PMI at 3pm followed by the Federal Reserve monetary policy decision at 7pm GMT.

Levels to watch/live orders:

• Buys: 19760 ([pending order] stop loss: 19730).
• Sells: Flat (stop loss: N/A).

GOLD

With the dollar taking yet another hit to the mid-section yesterday, the yellow metal extended Monday’s advance. The H4 resistance area at 1198.4-1203.8 (now an acting support barrier) was taken out, leaving price free to challenge the H4 trendline resistance extended from the low 1187.7. As you can see, three H4 bearish wicks have printed off this line, indicating that the bears may take center stage today. Couple this with the fact that the daily candles are also now seen kissing the underside of a daily supply zone at 1220.9-1212.0, as well as trading nearby a weekly trendline resistance taken from the low 1130.1, we may have a very nice short opportunity here!

Our suggestions: Before we look to press the sell button, nevertheless, one has to take into account the risk/reward offered here. If we enter at current price: 1210.1 and place our stop above the H4 bearish wicks at 1215.6, we have a little over one times our risk down to the next H4 support target: 1198.4-1203.8. If this is in line with your trading plan, by all means this is a high-probability short. Personally, what we’d look to do here is reduce risk to breakeven at the above noted H4 support area and take 50% of the position off the table, looking to hold the reminder of the trade down to H4 support at 1191.1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: A short at current prices is valid, in our book, with stops placed at 1215.6.

Currency pair EUR/USD

The EUR/USD turned around – yet again – for one more bullish push higher. The price action, however, remains very choppy and corrective. Price has also reached the next Fibonacci resistance: the 88.6% level. A break above the 88.6% makes a wave 2 (brown) unlikely and a break above 100% invalidates this wave structure. A break below support could spark waves 3.

The EUR/USD bearish price action was an ABC correction (green) and price could have completed a bullish ABC correction too. The wave C (green) could continue higher if price breaks above resistance (red) and the 138.2% Fibonacci.

Currency pair GBP/USD

The GBP/USD broke above the bearish channel (dotted brown line). The price action in the channel is relatively choppy compared to the bullish price action and hence the wave count has been changed to reflect a potential bullish (green) wave count within wave 4 (purple).

The GBP/USD could expand the wave B (green) correction via an expanded WXY (blue) correction. A break above the 138.2% Fibonacci level invalidates the wave X vs W.

Currency pair USD/JPY

The USD/JPY made another attempt to reach the 38.2% Fibonacci level of wave 4 (purple). Either the 38.2% or 50% are likely bounce spots for such a wave 4 (purple).

The USD/JPY is building an ABC (orange) bearish zigzag within wave Y (brown).

NZ unemployment rises as participation rate hits record high

Asia Mid-Session Market Update: China manufacturing PMI still expanding but at 3-month low; NZ unemployment rises as participation rate hits record high

US Session Highlights

(US) Presidential trade adviser Navarro: Germany is benefiting from grossly undervalued euro - financial press

German Chancellor Merkel: Do not want to influence Euro exchange rate; has always called upon ECB to have independent policy

(US) Q4 EMPLOYMENT COST INDEX (ECI): 0.5% V 0.6%E

(US) NOV S&P/CASE-SHILLER 20-CITY M/M: 0.88% V 0.65%E; Y/Y: 5.27% V 5.03%E; HOUSE PRICE INDEX (HPI): 192.14 V 191.77 PRIOR

(US) President Trump: On Medicare and Medicaid, we need prices way down; prices have been astronomical - meeting with industry executives

(US) JAN CHICAGO PURCHASING MANAGER: 50.3 V 55.0E (lowest since May 2016); new orders 49.1 v 56.5

(US) JAN CONSUMER CONFIDENCE: 111.8 V 112.8E; 1-year consumer inflation expectation: 4.9% v 4.5% in Dec

US markets on close: Dow -0.5%, S&P500 -0.1%, Nasdaq flat

Best Sector in S&P500: Utilities

Worst Sector in S&P500: Industrials

Biggest gainers: TMO +6.4%, MNK +4.9%, MYL +4.7%, DHR +4.4%, ABC +4.4%

Biggest losers: UA -23.4%, UPS -6.8%, VLO -3.6%, PNR -3.5%, NUE -3.3%

At the close: VIX 12.0 (+0.1pts); Treasuries: 2-yr 1.22% (+2bps), 10-yr 2.45% (-3bps), 30-yr 3.05% (-3bps)

US movers afterhours

AMD: Reports Q4 -$0.01 v -$0.02e, R$1.11B v $1.07Be; Guides initial FY17 Rev " to grow" % y/y, GM to "increase"; +3.6% afterhours

AAPL: Reports Q1 $3.36 v $3.22e, R$78.4B v $77Be; iPhone shipments 78.3M v 74.8M y/y (v 77Me); +3.0% afterhours

CB: Reports Q4 $2.72 v $2.43e, Net premiums written $6.94B v $7.21B y/y; +1.1% afterhours

EA: Reports Q3 $0.00 v -$0.14 y/y, net Rev $1.15B v $1.07B y/y; -1.1% afterhours

X: Reports Q4 $0.27 (ex $0.88 in charges, unclear if comp) v $0.01e, R$2.65B v $2.67Be; guides initial FY17 adjusted EBITDA $1.3B v $510M y/y; -0.6% afterhours

ILMN: Reports Q4 $0.85 v $0.81e, R$619M v $614Me; -1.5% afterhours

Asia Key economic data:

(CN) CHINA JAN MANUFACTURING PMI (GOVT OFFICIAL): 51.3 (6th consecutive month of expansion, 3-month low) V 51.2E; Non-manufacturing PMI: 54.6 v 54.5 prior

(JP) JAPAN JAN FINAL PMI MANUFACTURING: 52.7 V 52.8 PRELIM (5th month of expansion, confirms highest level since Mar 2014)

(AU) AUSTRALIA JAN AIG MANUFACTURING INDEX: 51.2 V 55.4 PRIOR (4th straight month of expansion, 3-month low)

(AU) AUSTRALIA JAN CORELOGIC RPDATA HOUSE PRICES M/M: 0.7% V 1.4% PRIOR

(NZ) NEW ZEALAND Q4 UNEMPLOYMENT RATE: 5.2% (3-quarter high) V 4.8%E; EMPLOYMENT CHANGE Q/Q: 0.8% (5-quarter low) V 0.7%E; Y/Y: 5.8% V 6.1%E;
Participation rate 70.5% v 70.2%e (record high)

(KR) SOUTH KOREA JAN PMI MANUFACTURING: 49.0 V 49.4 PRIOR (6th consecutive contraction)

(KR) SOUTH KOREA JAN TRADE BALANCE: $3.2B V $5.3BE; Exports Y/Y: 11.2% v 9.0%e; Imports Y/Y: 18.6% v 10.1%e

Asia Session Notable Observations, Speakers and Press

Asian indices are cautiously higher as US immigration policy-driven selling subsides, even though the focus on Washington remains close after today's volatility in FX markets following claims by Trump's advisor that Germany benefits from undervalued Euro. Germany's Merkel defended EMU's monetary policy and Germany's independence from the ECB, while Japanese officials also stepped up their defensive rhetoric against claims that Japan is manipulating FX. Separately from the currency markets, Trump has nominated Colorado's Neil Gorsuch (age 49) for US Supreme Court seat, as speculated earlier.

PMI data across Asia-Pacific have been mixed - China's manufacturing remained in expansion but slid to a 3-month low, as closely watched Input Price component fell to 64.5 from 69.6. Conversely, New Export Orders rose to 50.3 v 50.1 m/m and Employment rose to 49.2 v 48.9 m/m. Separately, Japan's manuf PMI was confirmed at the highest level in nearly 3 years, while Korea's PMI continued to retreat with 6th straight month of contraction.

NZD was volatile earlier in the session as Q4 unemployment rate rose to a 3-quarter high, however economists were quick to point out that the jump was cushioned by participation rate hitting a record high thanks to strong arrivals.

China

(CN) China State-owned Assets Supervision and Administration Commission (SASAC): Debt risks of SOEs are controllable - China Daily

(CN) China Stats Bureau: Coal production in 2016 fell 9.4% y/y to 3.36B tons - China Daily

Japan:

(JP) Japan PM Abe: Will tell Trump, Japan will contribute to US jobs and infrastructure

(JP) Japan PM Abe adviser Hamada: Trump's one sided arguments on border tax and currencies are destructive to Japan and world economy

(JP) Japan Chief Cabinet Sec Suga: Not setting exchange rate target, follows G7 on policy; watching fx closely with a sense of urgency

(JP) Japan Vice Fin Min of International Affairs (currency chief) Asakawa: Japan's monetary policy is aimed at beating deflation, not FX market - press

(JP) Former BOJ exec Momma: BoJ's next move will likely be to raise 10-yr bond yield target, could start discussions within BOJ on this later this year

Australia/New Zealand:

(AU) Morgan Stanley economist: Australia consumer companies to face more pressure in 2017 "as leading housing indicators soften, the savings rate is lower YoY and income growth remains weak" - press

(NZ) Citigroup: Latest employment data show labor demand and supply are containing wage growth; Gives RBNZ some time before considering rate hike - press

(NZ) New Zealand PM English calls for Sept 23 national elections - press

Asian Equity Indices/Futures (00:00ET)

Nikkei +0.6%, Hang Seng -0.7%, Shanghai Composite closed, ASX200 +0.5%, Kospi +0.5%

Equity Futures: S&P500 +0.1%; Nasdaq +0.4%; Dax flat%; FTSE100 +0.1%

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

EUR 1.0785-1.0805; JPY 112.65-113.25; AUD 0.7550-0.7585; NZD 0.7260-0.7340

Apr Gold -0.1% at $1,211/oz; Mar Crude Oil -0.2% at $52.73/brl; Mar Copper -0.2% at $2.72/lb

(US) Weekly API Oil Inventories: Crude: +5.8M v +2.9M prior; Biggest build since Nov 1st

(AU) Australia MoF (AOFM) sells A$800M in 2.75% 2027 Bonds; avg yield: 2.7841%; bid-to-cover: 3.24x

Asia equities / Notables / movers by sector

Consumer discretionary: FXJ.AU Fairfax Media +6.1% (buyer interest report); 028150.KR GS Home Shopping +4.2%; 7419.JP Nojima Corp +9.7% (9-month result); 2802.JP Ajinomoto Co +3.2% (9-month result); ANN.AU Ansell -5.6% (JPMorgan cuts rating); SEA.AU Sundance Energy Australia -20.0% (guidance)

Financials: CYB.AU CYBG -3.1% (Q1 trading update); OFX.AU OzForex Group -24.9% (guidance; CEO resigns); 8411.JP Mizuho Financial Group -1.1% (9-month result)

Industrials: GUD.AU GUD Holdings +4.0% (H1 result); 5411.JP JFE Holdings +4.3% (9-month result); 5333.JP NGK Insulators +5.2% (9-month result); 7211.JP Mitsubishi Motors +12.7% (9-month result); 1911.JP Sumitomo Forestry +5.6% (raises guidance)

Technology: 7974.JP Nintendo Co. -3.0% (guidance); 6502.JP Toshiba Corporation +0.8% (press speculates about exit nuclear construction); 6967.JP Shinko Electric Industries -17.5% (9-month result); YPB.AU YPB Group Ltd -13.6% (Q4 result); GBT.AU GBST Holdings -16.9% (guidance); 4902.JP Konica Minolta -8.5% (9-month result)

Materials: 6988.JP Nitto Denko Corp +5.7% (9-month result); 581.HK China Oriental Group +51.7%; 5471.JP Daido Steel Co +12.9% (9-month result); ILU.AU Iluka -4.8% (JPMorgan cuts rating)

Energy: 639.HK Shougang Fushan Resources Group -2.0%; SXY.AU Senex Energy +6.1% (affirms capital raising); 9532.JP Osaka Gas +2.9% (9-month result); 9506.JP Tohoku Electric +3.0% (9-month result); 9503.JP Kansai Electric Power +2.1% (9-month result)

Healthcare: SRX.AU Sirtex Medical -1.0% (received draft claim alleging it misled market); 7459.JP Mediceo Paltac Holdings -0.9% (9-month result)

Utilities: 9501.JPTokyo Electric Power Co +1.6% (9-month result)

Market movers today

Today, focus will be mainly on the FOMC meeting in the US, with the accompanying policy announcement at 20:00 CET. We expect the Fed to maintain the fed funds target range of 0.50-0.75% in line with market pricing and consensus. At the December meeting, the Fed signalled that the economic outlook was 'uncertain' due to 'Trumponomics' but that 'almost all' FOMC members thought there were upside risks to their growth forecasts (and hence the number of Fed hikes) due to the expectations of more expansionary fiscal policy. In line with markets, we expect the Fed to hike twice this year (in June and December), with risks skewed towards a third hike. Continued strong economic data and more information about Trump's fiscal policy may trigger the Fed to hike earlier than June.

In the US, ISM manufacturing data for January is also due to be released. We expect a marginal move higher to 55.0 from 54.5 in December.

Danish housing prices and Swedish PMI manufacturing data are due out.

Selected market news

Markets have started to price in a higher Trump risk premium, as it becomes increasingly clear that protectionism and tougher immigration policy seem to be higher on Trump's priority list than the growth-friendly policies for which investors are waiting. Yesterday, the Trump administration accused Germany and Japan of devaluing their currencies to gain a competitive advantage, drawing criticism from German and Japanese officials and heightening concerns that USD competitiveness could have a prominent role on Trump's policy agenda. The comments sent EUR/USD to an eight-week high and fuelled a risk-off mood that kept Asian stocks subdued this morning, as unease about the outlook for global trade as well as bilateral relations with Japan, Europe and China is growing. Trump's pick of the conservative judge Neil Gorsuch for the Supreme Court also did nothing to ease market concerns.

Euro area HICP inflation surprised slightly on the upside yesterday (1.8% y/y from 1.1% y/y in December); however, core inflation remained below 1%. Higher inflation was seen across countries and hence, the ECB can conclude that it is not just German inflation picking up. We do not expect the higher inflation figures to change the ECB's monetary policy stance, as underlying price pressures are still weak. Although some ECB members have started to express a more hawkish stance recently, consensus in the ECB seems to be that core inflation also needs to rise before tapering will be discussed. See also Euro area inflation surprises on the upside - will core inflation follow the upward trend 31 January 2017.

In the UK, the formal process of passing Article 50 legislation in Parliament has begun, with a first vote taking place today. However, the so-called 'committee stage', where members of parliament are allowed to put forward amendments to the bill, does not start until 6 February. Recently, there have been media reports (The Times, 31 January) that Theresa May could trigger Article 50 in connection with an EU summit on 9 March.

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For the 24 hours to 23:00 GMT, the AUD rose 0.28% against the USD and closed at 0.7579.

In economic news, Australia's AiG performance of manufacturing index eased to a level of 51.2 in January, compared to a reading of 55.4 in the previous month.

LME Copper prices rose 1.1% or $64.0/MT to $5921.0/MT. Aluminium prices rose 0.8% or $13.5/MT to $1820.5/MT.

In the Asian session, at GMT0400, the pair is trading at 0.7558, with the AUD trading 0.28% lower against the USD from yesterday's close.

Early morning data showed that, in China, Australia's largest trading partner, the NBS manufacturing PMI eased to a level of 51.3 in January, compared to market expectations of a fall to a level of 51.2 and after recording a level of 51.4 in the previous month. On the contrary, the nation's NBS non-manufacturing PMI edged-up to a level of 54.6 in January. In the previous month, the PMI had registered a level of 54.5.

The pair is expected to find support at 0.7529, and a fall through could take it to the next support level of 0.75. The pair is expected to find its first resistance at 0.7596, and a rise through could take it to the next resistance level of 0.7634.

Moving ahead, market participants will focus on Australia's trade balance and building approvals, both for December, slated to release tomorrow.

The currency pair is trading below its 20 Hr moving average and showing convergence with its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the EUR rose 0.9% against the USD and closed at 1.0795, after the Euro-zone's flash consumer price index (CPI) jumped more-than-expected by 1.8% on an annual basis in January, surging to its highest level in nearly four-years, a development that is likely to amplify calls for the European Central Bank to reconsider its monetary policy stance. Meanwhile, the CPI registered a rise of 1.1% in the previous month, while markets were anticipating for an advance of 1.5%. Additionally, the region's seasonally adjusted preliminary gross domestic product (GDP) showed that the economy expanded 0.5% QoQ in the fourth quarter, meeting market expectations and following a revised rise of 0.4% in the previous month. Further, the region's unemployment rate surprisingly plummeted to a seven-year low level of 9.6% in December, highlighting that the labour market is gaining strong momentum. In the previous month, the unemployment rate had registered a revised level of 9.7%, whereas investors had envisaged for an increase to 9.8%.

Separately, Germany's seasonally adjusted unemployment rate unexpectedly declined to a record low level of 5.9% in January, whereas investors were expecting the unemployment rate to remain steady at 6.0%. Moreover, the nation's retail sales unexpectedly eased 0.9% on a monthly basis in December, defying market expectations for an advance of 0.6%. In the previous month, retail sales had dropped by a revised 1.7%.

The greenback lost ground against its key counterparts, after the US CB consumer confidence index dropped to a level of 111.8 in January, surpassing market anticipation for the index to ease to a level of 112.8 and compared to a revised level of 113.3 in the previous month. Also, the nation's Chicago Fed purchasing managers index unexpectedly fell to a level of 50.3 in January, hitting its lowest level since May 2016 and confounding market expectation for a rise to a level of 55.0. In the previous month, the index recorded a revised level of 53.9 in the prior month.

In the Asian session, at GMT0400, the pair is trading at 1.0792, with the EUR trading marginally lower against the USD from yesterday's close.

The pair is expected to find support at 1.0712, and a fall through could take it to the next support level of 1.0631. The pair is expected to find its first resistance at 1.0842, and a rise through could take it to the next resistance level of 1.0891.

Ahead in the day, investors will closely monitor the release of final Markit manufacturing PMI for January across the Euro-zone and the European Commission's economic growth forecast report. Also, the US ADP employment change, ISM manufacturing and final Markit manufacturing PMI, all for January, along with construction spending for December, scheduled to release later in the day, will keep investors on their toes.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP rose 0.7% against the USD and closed at 1.2580, after the UK's number of mortgage approvals for house purchases rose to a level of 67.9K in December, notching its highest level in nine-months, against market consensus for a rise to a level of 69.0K and following a reading of 67.5K in the previous month. Meanwhile, the nation's net consumer credit rose less-than-expected by £1.0 billion in December, growing at its slowest pace in five-months, thus signalling that Britons may have grown more cautious on spending amid rising inflation. In the prior month, net consumer credit had registered an increase of £1.9 billion, while market expected for an advance of £1.7 billion.

In the Asian session, at GMT0400, the pair is trading at 1.2571, with the GBP trading 0.07% lower against the USD from yesterday's close.

Overnight data showed that the nation's BRC shop price index dropped 1.7% YoY in January, following a revised decline of 1.4% in the prior month.

The pair is expected to find support at 1.2455, and a fall through could take it to the next support level of 1.2340. The pair is expected to find its first resistance at 1.2641, and a rise through could take it to the next resistance level of 1.2712.

Going ahead, UK's Markit manufacturing PMI and nationwide house prices, both for January, scheduled to release in a few hours, will pique a lot of market attention.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.94% against the JPY and closed at 112.66.

In the Asian session, at GMT0400, the pair is trading at 113.13, with the USD trading 0.42% higher against the JPY from yesterday’s close.

Overnight data revealed that Japan’s final Nikkei manufacturing PMI advanced to a level of 52.7 in January, expanding at its fastest pace in almost three-years, suggesting that the nation’s manufacturing sector gathered pace in the start of the new year. The preliminary figures had indicated a rise to a level of 52.8 and after recording a reading of 52.4 recorded in the previous month.

The pair is expected to find support at 112.13, and a fall through could take it to the next support level of 111.12. The pair is expected to find its first resistance at 114.05, and a rise through could take it to the next resistance level of 114.96.

Looking ahead, traders look forward to Japan’s consumer confidence index for January, due to release tomorrow.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD declined 0.57% against the CHF and closed at 0.9891.

In the Asian session, at GMT0400, the pair is trading at 0.9900, with the USD trading 0.09% higher against the CHF from yesterday’s close.

The pair is expected to find support at 0.9849, and a fall through could take it to the next support level of 0.9799. The pair is expected to find its first resistance at 0.9958, and a rise through could take it to the next resistance level of 1.0017.

Moving ahead, investors will keep a close watch on Switzerland’s real retail sales for December, set to release tomorrow and SVME-purchasing managers’ index for January, scheduled to release in some time.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD declined 0.54% against the CAD and closed at 1.3041.

The Canadian Dollar gained ground, after Canada’s gross domestic product (GDP) expanded more-than-expected by 0.4% on a monthly basis in November, driven by strength in the manufacturing sector. Markets expected for a rise of 0.3%, following a revised drop of 0.2% in the previous month.

In the Asian session, at GMT0400, the pair is trading at 1.3084, with the USD trading 0.33% higher against the CAD from yesterday’s close.

The pair is expected to find support at 1.2993, and a fall through could take it to the next support level of 1.2902. The pair is expected to find its first resistance at 1.3149, and a rise through could take it to the next resistance level of 1.3214.

Investors this afternoon will await Canada’s RBC manufacturing PMI for January.

The currency pair is trading above its 20 Hr moving average and showing convergence with its 50 Hr moving average.