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Daily Pivots: (S1) 1.2435; (P) 1.2517; (R1) 1.2570; More...

GBP/USD breaches 1.2414 minor support briefly but quickly recovered. Intraday bias stays neutral first. Rise from 1.1986 is seen as the third leg of the consolidation pattern from 1.1946. 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 case of another rise, we'd expect strong resistance at 1.2774 to limit upside and bring down trend resumption eventually.

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's declines continues today and reaches as low as 0.9905 so far. Intraday bias remains on the downside for the moment. Fall from 1.0342 is seen as the third leg of the pattern from 1.0327. Next target will be 61.8% retracement of 0.9443 to 1.0342 at 0.9786 and below. On the upside, however, break of 1.0043 will indicate short term bottoming and turn bias back to the upside.

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

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USD/CAD is slightly lower on Tuesday, continuing the downward trend which marked the Monday session. Currently, the pair is trading at 1.3070. On the release front, Canada releases GDP, with the estimate standing at 0.3%. In the US, today's key event is CB Consumer Confidence, with the markets expecting a strong reading of 112.6 points.

All eyes are on Canadian GDP, which will be released later on Tuesday. In October, GDP declined 0.3%, missing the estimate of a 0.1% gain. This marked the first decline since May and has raised concerns that economic growth in the fourth quarter will be weak. If GDP again misses expectations, we could see the Canadian dollar lose ground, and the BoC will be under increased pressure to lower interest rates. Earlier in January, the bank held rates at 0.50% but expressed concerns of economic turbulence due to Donald Trump's protectionist stance, which could have significant repercussions for the Canadian economy.

The markets had predicted that US economic growth would soften in the fourth quarter, and Advance GDP fell short of the estimate. The economy expanded 1.9%, shy of the estimate of 2.1%. Business investment and consumer spending remains solid and should continue into 2017. However, Trump's protectionist rhetoric and action, which saw tensions escalate with Mexico last week, could cloud the bright picture for the US economy.

Donald Trump has barely warmed the president's chair in the Oval House, but has already signed a host of controversial executive orders which have been condemned both domestically and abroad. Trump has withdrawn from the Trans-Pacific Partnership and declared he will reopen the NAFTA trade agreement with Canada and Mexico. He has also ordered work to begin on a wall with Mexico and banned immigrants from seven Moslem countries. Trump's unconventional and disjointed approach to international politics and trade could have major ramifications on global trade and could lead to financial instability in global markets, triggering volatility in the currency markets. Just a few days before being sworn in as president, Trump stated that the US dollar was "too strong", blaming a weak Chinese currency. Predictably, the greenback lost ground after Trump's remarks. It's a safe bet that Trump's offhand tweets and comments will continue to fuel market movement.

USD/JPY is unchanged in the Tuesday session. Currently, the pair is trading at 113.40. On the release front, there were no surprises from the Bank of Japan, which maintained interest rates at -0.10%. Japanese Household Spending declined 0.3%, better than the forecast of -0.8%. In the US, today's key event is CB Consumer Confidence, with the markets expecting a strong reading of 112.8 points. On Thursday, the Federal Reserve will set the benchmark interest rate, which is expected to remain pegged at 0.50%.

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 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.

The markets had predicted that US economic growth would soften in the fourth quarter, and Advance GDP fell short of the estimate. The economy expanded 1.9%, shy of the estimate of 2.1%. Business investment and consumer spending remains solid and should continue into 2017. However, Trump's protectionist rhetoric and action, which saw tensions escalate with Mexico last week, could cloud the bright picture for the US economy.

Donald Trump has just started his new position, but he has already signed a host of controversial executive orders which have been condemned both domestically and abroad. Trump has withdrawn from the Trans-Pacific Partnership and declared he will reopen the NAFTA trade agreement with Canada and Mexico. He has also ordered work to begin on a wall with Mexico and banned immigrants from seven Moslem countries. Trump's unconventional and disjointed approach to international politics and trade could have major ramifications on global trade and could lead to financial instability in global markets, triggering volatility in the currency markets. Just a few days before being sworn in as president, Trump stated that the US dollar was "too strong", blaming a weak Chinese currency. Predictably, the greenback lost ground after Trump's remarks. Still, Trump's shock election win in November has boosted the US dollar, with USD/JPY soaring 8.3% during that time.

Although some of the selling momentum experienced yesterday throughout the stock markets has cooled down, the market headlines across the globe continue to be dominated by the executive order from Donald Trump to ban certain nationals from entering the United States. While it has to be taken into account that the record moves seen in the stock markets last week would increase the risks of some investors being tempted to take profits from positions, there is no doubting that this move from Trump has caused outrage across the globe and such actions represent a risk to the market sentiment. There was for example some market movement following the news overnight that Donald Trump fired the acting US attorney general for questioning the legality of his immigration clampdown, contributing towards losses being seen across the trading session in Asia.

Investors definitely need to be aware that the markets behaved very suddenly towards pricing in heavy premiums following the US election outcome based on fiscal promises, but so far it is the far-right agenda that we have seen the most movement on from the Trump administration. Fiscal stimulus, job growth and infrastructure spending were the contributors towards the milestone levels in the stock markets, although the agenda so far has been more heavily pointed towards protectionism and moving the United States away from globalisation – quite the opposite in comparison to the "partnership and peace" message Trump delivered following his election victory that soothed investors nerves following his election victory.

I do believe that investors need clarity on how the Trump administration will move forward with fiscal stimulus and infrastructure spending rather than blacklisting certain nationals and getting into a war of words with Mexico over the wall, otherwise there is a risk of the stock markets entering a correction. Basically, the previous moves that were seen are not justified without clarity on what investors priced in.

Dollar still slipping against emerging currencies

While the Dollar has edged higher against emerging currencies in Europe such as the Turkish Lira and Russian Ruble, the Greenback has slipped somewhat against Asian currencies like the Malaysian Ringgit, Thai Baht and Indian Rupee. These are marginal losses but likely related to the overwhelming consensus that the Federal Reserve will be leaving US interest rates unchanged tomorrow. The Asian currencies in general are among those most vulnerable to higher US interest rates, especially considering the amount of bonds that are held in these nations from foreign investors.

What needs to be taken into account with the US interest rate decision tomorrow is that the Federal Reserve is likely to highlight the area of uncertainty over the US fiscal direction following the Trump inauguration. This might be seen as a minor issue now but if Trump is not able to deliver on fiscal intentions and instead continues to isolate the United States from globalisation, it does risk the Federal Reserve needing to keep US interest rate policy unchanged for longer.

EURUSD back above 1.07

The EURUSD has managed to move back above 1.07 on Tuesday following the news that consumer prices in January increased by 1.8%. This is a significant annual increase and will once again open the debate over whether ECB President Mario Draghi will need to provide guidance on the ECB stimulus program and whether the current level of stimulus needs to be tailed back following inflation moving back towards the central bank goal of 2%. Expect for Mario Draghi to continue stressing that inflation needs to be consistently around the target level at 2%, before the central bank acts and this would also dissuade investors away from pricing in further recoveries into the Euro.

GBPUSD looks at risk to falling below 1.24

There has been pressure on the British Pound following the reports earlier this morning that Theresa May might be aiming to invoke Article 50 earlier than expected on March 9. It is quite surprising that Theresa May is reportedly aiming to pull the trigger on Article 50 earlier in March rather than later in the month, especially considering the continuous uncertainty over the strategy to exit the European Union. Investors are also likely to be kept on their toes over the next two days as MPs begin a two-day debate on the European Union bill, allowing the government to trigger Article 50.

EUR/USD is almost unchanged in the Tuesday session. Currently, the pair is trading at the 1.07 line. On the release front, it's a busy day. In the Eurozone, CPI Flash Estimate gained 1.8%, above the estimate of 1.5%. Preliminary Flash GDP improved to 0.5%, edging above the forecast of 0.4%. The unemployment rate dropped to 9.6%, compared to an estimate of 9.8%. The news was not as good from German Retail Sales, which declined 0.9%, nowhere near the forecast of +0.6%. Later in the day, ECB President Mario Draghi delivers remarks at a conference of the ECB and the European Commission. In the US, today's key event is CB Consumer Confidence, with the markets expecting a strong reading of 112.8 points. On Thursday, the Federal Reserve will set the benchmark interest rate, which is expected to remain pegged at 0.50%.

Germany's economy continues to raise concerns, as consumer indicators have looked dismal this week. German 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. However, there was good news from the job front, as unemployment claims dropped by 26 thousand, much better than expected.

Analysts expected the US economy to soften in the fourth quarter, and GDP fell a bit short of the forecast. The economy expanded 1.9%, shy of the estimate of 2.1%. Business investment and consumer spending remains solid and should continue into 2017. However, Trump's protectionist rhetoric and action, which saw tensions escalate with Mexico last week, could cloud the bright picture for the US economy.

Donald Trump continues to stir controversy, after signing a host of executive orders last week which have been condemned both domestically and abroad. Trump has withdrawn from the Trans-Pacific Partnership and declared he will reopen the NAFTA trade agreement with Canada and Mexico. He has also ordered work to begin on a wall with Mexico and banned immigrants from seven Moslem countries. Trump's unconventional and disjointed approach to international politics and trade could have major ramifications on global trade and could lead to financial instability in global markets, triggering volatility in the currency markets. Just a few days before being sworn in as president, Trump stated that the US dollar was "too strong", blaming a weak Chinese currency. Predictably, the greenback lost ground after Trump's remarks. It's a safe bet that Trump's offhand tweets and comments will continue to fuel market volatility.

'Euro inflation forwards may have rallied too far, too soon in the absence of any sign of a pickup in core price pressures.' – Tanvir Sandhu, Bloomberg

Pair's Outlook

On Tuesday morning the EUR/USD currency exchange rate remained rather flat just below the weekly PP, which is located at 1.0709. However, the course of the rate can be forecasted. Previously, during Monday's trading the pair fell down to 1.0620 mark and rebounded there. As a result a surge began which lasted into Tuesday and reached the weekly PP. Afterwards the rate bounced off of the resistance level and set a course southward. Due to that reason the pair is set to fall down to the weekly S1 at 1.0644. Although, the decline is set to be hindered by the 20-day SMA at 1.0652.

Traders' Sentiment

SWFX traders remain bearish, as 56% of trader open positions are short on Tuesday. In the meantime, 56% of trader set up orders are set up to sell the Euro.

'Our analytical focus remains on USD. The past week's USD downward correction may be challenged when the Fed releases its statement on Wednesday.' – Morgan Stanley (based on PoundSterlingLive)

Pair's Outlook

The British currency sustained further losses against the US Dollar on Monday, with the immediate demand area around 1.2515 failing to limit the losses. Although the Cable slipped back under 1.25 yesterday, another tough support area is now likely to keep the pair afloat. The support cluster is formed by the monthly PP, the weekly S1, the 20 and the 55-day SMAs, all located around the 1.24 major level. However, the 100-day SMA could also play its part and still trigger a rebound. Technical indicators also suggest the Sterling could edge higher today, but with the 1.26 mark remaining intact, as there is no impetus present for a surge that far up.

Traders' Sentiment

Today 60% of traders are long the Pound (previously 62%). At the same time, the portion of sell orders inched up from 54 to 55%.

'The market is very much tethered to movement in the broader U.S. dollar. We may be entering some very important times as the markets are digging for clues on the Trump policy front.' – OANDA (based on Reuters)

Pair's Outlook

Risk-aversion kept driving the markets yesterday, causing the US Dollar to lose nearly 100 pips against the Yen. The Buck, however, remains on the back foot, risking to post more losses versus the Japanese currency today. The monthly and the weekly S1s could still provide sufficient support in order to avoid this outcome, but that would imply a close in the green zone, with the 114.00 mark being reclaimed again. Ultimately, a drop towards 112.60 is possible, namely a strong psychological support level, which is expected to cause a U-turn if things get out of hand for the Greenback. Meanwhile, technical studies are unable to confirm any scenario, as they keep giving mixed signals.

Traders' Sentiment

Market sentiment remains relatively neutral, as 51% of all open positions are short and the other 49% are long.

'To go higher, gold needs constant injections from political uncertainty or increases in geopolitical tensions.' – James Steel, HSBC (based on Reuters)

Pair's Outlook

The yellow metal continues to surge, as political uncertainty increases demand for a safe haven investment. However, from a technical perspective, it seems that the 20-day SMA was strong enough to push the yellow metal higher. In addition, during the move the bullion broke through the resistance put up by the weekly PP, which is located at 1,196.86. Due to that reason the commodity price might rise up to the weekly R1 at 1,213.16, as there are no other levels of resistance up to that mark.

Traders' Sentiment

Today 51% of SWFX traders are still bullish. In the meantime, 58% of trader set up orders are set up to buy the yellow metal.