EUR/USD

Current level - 10567

The intraday bias is negative, for a slide towards 1.0493 low, en route to 1.0450. Crucial on the upside is 1.0600 high.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 113.69

The corrective pattern above 113.50 needs one more upswing to 114.25 before drowning towards 112.80 support area. 

GBP/USD

Current level - 1.2204

My outlook remains bearish, for a slide towards 1.2115 area. Initial intraday resistance lies at 1.2220, followed by the crucial high at 1.2300.

EUR/CAD – 1.4030

EUR/CAD: Wave 4 ended at 1.4380 and wave 5 as well as circle wave C has possibly ended at 1.2129, major (A)-(B)-(C) correction has commenced and indicated target at 1.6000 had been met.

Euro's rebound after falling to 1.3784 last month together with the breach of indicated resistance at 1.4132 add credence to our view that a temporary low has been formed there, hence consolidation with mild upside bias is seen for this rebound to bring retracement of recent decline and gain to 1.4250-60 is likely but resistance at 1.4308 should hold from here. Looking ahead, only above this level would indicate recent decline has ended, bring retracement of the intermediate fall from 1.5282, hence further gain to 1.4365-70 and then 1.4440-50 would follow.

Our latest preferred count is that larger degree wave [C] from 1.3289 as well as circle wave B ended at 1.7509 in Dec 2008 with (A): 1.6325, (B): 1.4719 followed by wave (C) at 1.7509, hence circle wave C is unfolding with wave 1 ended at 1.5186 (diagonal wave 1), wave 2 at 1.6096, impulsive wave 3 has ended at 1.2451, followed by wave 4 at 1.4380, in view of recent strong rebound, we are now treating the wave 5 as well as larger degree circle wave C has ended at 1.2129, hence (A)-(B)-(C) correction has commenced from there with impulsive wave (C) now unfolding and indicated initial upside target at 1.6000 had been met and reckon 1.6500 would hold.

On the downside, expect pullback to be limited to 1.4100-10 and 1.4005-10 should hold, bring another rebound later. Below previous resistance at 1.3960-65 would dampen this near term bullishness and risk weakness to 1.3900, however, still reckon downside would be limited to 1.3850 and 1.3800 should hold, bring another rebound. Only below said support at 1.3784 would signal recent decline from 1.6106 has resumed and may extend further fall to 1.3750-55 (76.4% retracement of 1.3025-1.6106) and possibly 1.3600 but reckon downside would be limited to previous support at 1.3518 and price should stay above 1.3355-60 (100% projection of 1.6106-1.4181 measuring from 1.5282).

Recommendation: Buy at 1.4100 for 1.4300 with stop below 1.4000.

On the bigger picture, our long-term count on the monthly chart is that a big sideways consolidation from 2000 low of 1.2557 has possibly ended at 1.7509 as circle wave B with [A]: 1.6976 ( (A): 1.4513, (B): 1.2612, (C): 1.6976), wave [B]: 1.3289 is a double three with 1st a-b-c: 1.5384, x: 1.6709 and 2nd a-b-c: 1.3289. As indicated above, the wave [C] has ended at 1.7509. The selloff from there is now unfolding which itself should be labeled as an impulsive wave with wave 1: 1.5186 (diagonal wave 1), followed by wave 2: 1.6096 and wave 3: 1.2451, wave 4: 1.4380, wave 5 as well as larger degree circle wave C has possibly ended at 1.2129 and major correction has possibly commenced for retracement of recent decline towards 1.4000, then 1.4180-90 (38.2% Fibonacci retracement of 1.7509-1.2129). Below said support at 1.2129 would risk weakness to psychological support at 1.2000 and then 1.1851 (50% projection of 1.7509-1.2451 measuring from 1.4380) but reckon 1.1500 would remain intact, bring reversal later.

AUD/USD     –  0.7565




AUD/USD – Wave 5 of C and (B) has possibly ended at 1.1081




As aussie has retreated quite sharply after rising to 0.7741 late last month, suggesting top is possibly formed there and consolidation below this level would be seen with mild downside bias for test of support at 0.7512, however, a daily close below there is needed to add credence to this view, bring retracement of recent upmove to 0.7490 (38.2% Fibonacci retracement of 0.7158-0.7696) and then 0.7455-60 but reckon downside would be limited to 0.7425-30 (50% Fibonacci retracement) and price should stay above 0.7360-65 (61.8% Fibonacci retracement), bring another rise later.



We are keeping our count that top has been formed at 1.1081 (wave 5 of V) and major correction (A-B-C-X-A-B-C) has commenced, indicated downside targets at 0.7945 (61.8% Fibonacci retracement of entire rise from 0.6007-1.1081) and 0.7750 had been met and downside bias is seen for further weakness to 0.6800, then 0.6700 but reckon 0.6500 would hold from here.

Our preferred count is that the rally from 0.6007 to 0.7270 (7 Jan 2009) is marked as wave A, the retreat to 0.6248 (2 Feb 2009) is wave B and the subsequent upmove is labeled as wave C with wave (iii) and wave (iv) ended at 0.8265 and 0.7700 respectively and wave (v) as well as 3 ended at 0.9407, then wave 4 ended at 0.8066 (instead of 0.8578). The wave 5 has met our indicated projection target of 1.1060 and could ended at 1.1081, this level is now treated as the peak of wave (C) as well as larger degree wave B, hence major fall in wave C has commenced, our initial downside target at psychological support at 0.7000 has just been met and further weakness to 0.6500 would be seen later.



On the upside, whilst recovery to 0.7600-05 cannot be ruled out, reckon upside would be limited to 0.7635-40 and bring another decline. Above 0.7700 would risk retest of said resistance at 0.7741 but break there is needed to extend recent rise from 0.7158 to resistance at 0.7778. Looking ahead, only a break of this level would suggest another leg of major corrective upmove from 0.6827 low is underway for retest of 0.7835 resistance first, then 0.7900, however, psychological resistance at 0.8000 should hold from here.



Recommendation: Sell at 0.7605 for 0.7450 with stop above 0.7705



Our alternate count on the daily chart treated the top formed in 2008 at 0.9851 could be a larger degree wave I and was followed by a deep and sharp correction in wave II to 0.6007 and wave III is unfolding from there.

The long-term uptrend started from 0.4775 (2 Apr 2001) with an impulsive structure. Wave I is labeled as 0.4775 to 0.9851 (15 Jul 2008), wave II has ended at 0.6007 (Oct 2008) and wave III is still in progress which may extend further gain to 1.1265.

EUR/JPY - 120.31

Recent wave: wave v of (C) ended at 94.12 and major correction in wave A has ended at 149.79

Trend: Sideways

Original strategy:

Buy at 119.65, Target: 121.35, Stop: 119.05

Position: -
Target:  -
Stop: -

New strategy :

Buy at 119.65, Target: 121.35, Stop: 119.05

Position: -
Target:  -
Stop:-

As the single currency has retreated after rising to 121.19 late last week, suggesting consolidation below this level would be seen and pullback to 120.00 is likely, however, reckon downside would be limited to 119.60-65 and bring another rise later, above said resistance at 121.19 would extend the rebound from 118.24 low for retracement of recent decline to 121.30-35 but overbought condition should limit upside to 121.90-00 and price should falter well below resistance at 122.52, bring another decline later.

In view of this, we are looking to buy euro on dips as 119.60-65 should limit downside. Below previous resistance at 119.47 would defer and risk weakness to 119.00-10 but reckon support at 118.67 would contain downside and bring further consolidation. Only below this support would signal the rebound from 118.24 has ended, bring retest of this level later. A drop below there would extend recent decline from 124.10 top to 118.00 and later towards 117.50.

Our latest preferred count is that wave (ii) is ABC-X-ABC which ended at 123.33 and wave (iii) is unfolding with wave iii ended at 100.77, followed by wave iv at 111.57 and wave v as well as the wave (iii) has ended at 97.04, followed by wave (iv) at 111.43 and wave (v) has ended at 94.12 which is also the end of the larger degree v, this also implied the major wave (C) has also ended there, hence major correction has commenced from there with (A) leg unfolding in its lower degree wave c which has possibly ended at 145.69. Under this count, A-B-C wave (B) has commenced with A leg ended at 136.23, wave B at 143.79 and wave C has possibly ended at 149.79.

Our larger degree count is that the decline from 139.26 is wave (C) and is sub-divided into a diagonal triangle i-ii-iii-iv-v with wave i - 105.44, wave ii- 123.33, wave iii - 97.03, wave iv - 111.43, followed by the final wave v as well as the end of wave (C) at 94.12, this also mark the bottom of larger degree wave B. Under this count, major rise in wave C has commenced as an impulsive wave with minor wave III ended at 145.69, wave V is still in progress for further gain to 150.00. Having said that, this so-called wave V could well be the first leg of larger degree 5-waver wave C and this wave C should bring at least a retest of wave A top at 169.97 (July 2008).

AUD/USD – 0.7565

Recent wave: Wave 5 ended at 1.1081 and major correction has commenced for fall to 0.7000 and then towards 0.6500-10

Trend: Near term up

Original strategy :

Sold at 0.7605, Target: 0.7450, Stop: 0.7665

Position: - Short at 0.7605
Target:  - 0.7450
Stop: - 0.7665

New strategy :

Hold short entered at 0.7605, Target: 0.7450, Stop: 0.7635

Position: - Short at 0.7605
Target:  - 0.7450
Stop:- 0.7635

As aussie has retreated after meeting renewed selling interest at 0.7633 yesterday, suggesting the rebound from 0.7543 has ended and bearishness remains for the decline from 0.7741 top to resume, bring retracement of recent upmove, below said support would extend weakness to 0.7512 support but near term oversold condition should prevent sharp fall below previous support at 0.7493 and price should stay above support at 0.7449, bring rebound later.

In view of this, we are holding on to our short position entered at 0.7605. Above said resistance at 0.7633 would risk a stronger rebound to 0.7665 (61.8% Fibonacci retracement of 0.7741-0.7543) but only break there would abort and suggest the retreat from 0.7741 has ended, bring a stronger rebound to 0.7700 but price should falter well below said resistance at 0.7741, bring another decline.

On the 4-hour chart, the move from 0.8066 is the wave 5 with i: 0.8860, ii: 0.8315, wave iii is an extended move ended at 1.0183, iv: 0.9706 and wave v has ended at 1.1081 (also the top of entire wave 5). The subsequent selloff is the major correction which is unfolding as ABC-X-ABC and 2nd A leg has ended at 0.8848, followed by a-b-c wave B which ended at 0.9758, hence, 2nd C wave is now in progress and indicated downside target at 0.7000 and 0.6950 had been met, so further fall to 0.6710-20 cannot be ruled out.

Weekly

• Last Candlesticks pattern: Shooting star
• Time of formation: 5 Sep 2016
• Trend bias: Down

Daily

• Last Candlesticks pattern: Doji
• Time of formation: 25 Jul 2016
• Trend bias: Near term up
  


NZD/USD – 0.6976



Kiwi’s decline has accelerated after breaking support at 0.7130, adding credence to our view that top has been formed at 0.7376 and bearishness remains for the fall from there to bring retracement of early upmove to previous support at 0.6949, a daily close below this level would retain bearishness and signal the rebound from 0.6862 has ended at 0.7376, bring further fall towards 0.6900 later but reckon support at 0.6885 would hold from here due to near term oversold condition.

On the upside, whilst initial recovery to 0.7045-50 cannot be ruled out, reckon upside would be limited to the lower Kumo (now at 0.7088) and the Tenkan-Sen (now at 0.7109) should hold, bring another decline later. Only a daily close above the Kijun-Sen (now at 0.7174) would suggest low is possibly formed, risk a stronger rebound to resistance at 0.7247 but break there is needed to add credence to this view and encourage for further gain to 0.7300, however, price should falter well below said top at 0.7376.

Recommendation: Sell at 0.7100 for 0.6900 with stop above 0.7200



On the weekly chart, kiwi opened lower this week after last week’s selloff, adding credence to our view that the fall from 0.7376 is still in progress and may extend further weakness to 0.6900, however, as broad outlook remains consolidative, reckon downside would be limited to 0.6862 and price should stay well above 0.6780 (50% Fibonacci retracement of 0.6074-0.7486), bring another rebound later.

On the upside, expect recovery to be limited to 0.7100 and price should falter below the Kijun-Sen (now at 0.7133), bring another decline later. Only a weekly close above the Tenkan-Sen (now at 0.7163) would signal low is formed and suggest the retreat from 0.7376 has ended, bring a stronger rebound to 0.7247 resistance but break there is needed to provide confirmation, bring further gain to 0.7330-40, however, said resistance at 0.7476 should remain intact. Looking ahead, above there would extend the rebound from 0.6862 to previous resistance at 0.7403 but a sustained breach above there is needed to retain bullishness and signal the pullback from 0.7486 has ended at 0.6862, then the rise from 2015 low at 0.6074 may extend further gain to 0.7550 and later 0.7600, however, reckon upside would be limited to 0.7680 (1.618 times projection of 0.6074-0.6898 measuring from 0.6347), bring retreat later. 


Sunrise Market Commentary

• Rates: ADP employment more important than usual?
  US yield resistances remain under severe test (2y: 1.3%, 5y: 2%; 10y 2.55%; 30y 3.13%), with even small breaks at the front end of the curve, suggesting that today's ADP employment report could have more market-moving potential than is generally the case. If it's strong enough, it could trigger breaks even with payrolls and Fed ahead.
• Currencies: USD in consolidation modus ahead of ECB and Payrolls
  The dollar remains will bid even as risk sentiment eased slightly this week. Interest rate differentials continue to support the US currency. Today, the ADP labour market report is the only eco data series with potential to move the dollar. More consolidation ahead of the ECB and the payrolls might be on the cards.

The Sunrise Headlines

• US equities lost marginally ground yesterday as the waiting game for new impetus (payrolls, Fed) continues. Overnight, most Asian stock markets lose up to 0.5%.
• Japan's economy grew more than earlier estimated in Q4 2016 (0.3% Q/Q) as capital expenditure (2% Q/Q) grew at its fastest in almost three years. Private consumption was flat in the final three months of last year.
• A huge miss for China exports saw the nation plunge to a 60B yuan trade deficit in February (172.5B yuan surplus expected). Imports surged 45% while exports rose a mere 4.2%. The Lunar New Year holidays helped distort the figures.
• The House of Lords inflicted a 2nd Brexit-bill defeat on PM May. They mandated Parliament get a "meaningful vote" on the outcome of exit talks, potentially vetoing any deal. She'll now seek to have it overturned by the Commons.
• The G20 may no longer explicitly reject protectionism or competitive currency devaluations, a draft communique of their meeting next week showed, promising only to keep an "open and fair international trading system".
• German industrial production increased by 2.8% M/M in January, to be flat Y/Y, which is near December's -0.1% Y/Y (upward revised from -0.7% Y/Y. The market expected a -0.6% Y/Y. All in all, it looks close to expectations.
• Today's eco calendar contains the US ADP employment report. UK FM Hammond presents the Spring Budget and Germany & the US tap the market

Currencies: USD In Consolidation Modus Ahead Of ECB And Payrolls

USD consolidation ahead of ECB and payrolls

On Tuesday, the dollar traded with a slight positive bias. Interest rate differentials weighed on EUR/USD as short-term German yields declined. Later in the session, the decline of core bond yields bottomed out, causing a cautious bid in USD/JPY. The US trade deficit was big ($48.5 bln), but with no negative dollar consequences. EUR/USD finished at 1.0566 (from 1.0582). USD/JPY closed the day at 113.98 (from 113.89).

Overnight, most Asian equities show modest losses in low volume trading. The February China trade data showed an unexpected deficit of CNY 60.36 bln (see headlines) but Chinese New Year likely distorted the figure. Japan Q4 GDP growth was revised up to a still soft 0.3% Q/Q, but with limited market impact. The yen (USD/JPY 113.75 area) trades slightly stronger as Japanese equities are softer. EUR/USD holds near yesterday's closing levels (1.0565). The Aussie dollar lost slightly ground after the publication of the China trade data, even as Chinese imports of commodities rose strongly. AUD/USD is changing hands near 0.76.

The EMU calendar is empty today, after the German production data have been released this morning (see headlines). In the US, only the February ADP Employment report is of importance. In January, the ADP surprised on the upside with a net private job growth of 246K. For February a more trend-like 185K job growth is expected. On a monthly basis, there are often substantial deviations between ADP and payrolls. So, a big surprise is probably needed for the ADP to affect USD trading. In a daily perspective, the odds for USD trading are mixed/indecisive. Last week's USD profit taking looks finished. Sentiment on risk is turning cautious, but for now it doesn't hurt the dollar. We expect more technical trading going into tomorrow's ECB meeting and Friday's US payrolls. Declining (ST) German yields weighed on the euro yesterday. Even so, we see no trigger for the dollar to clear significant technical levels now. (EUR/USD (1.0494) or in USD/JPY (114.95)).

Global context: Last week, the focus shifted from US fiscal policy to the Fed's monetary policy, as the Fed prepared markets for a March rate hike. However, the dollar rally petered out as a March rate hike is now discounted. EUR/USD 1.0494 and USD/JPY 114.95 were tested, but no break occurred. Some ST USD consolidation might be on the cards. The payrolls are the next key issue for USD trading. USD/JPY 111.60/111.16 (Range bottom/38% retracement of the 99.02/118.66 rally) remains a key and solid support. Last week's correction suggests that it is too early for a break higher in the absence of important USD supportive news. In EUR/USD 1.0829/74 is the short-term line in the sand with intermediate resistance at 1.0679. A sell EUR/USD on upticks remains favoured.

EUR/USD: upside(USD correction) blocked. USD waiting for a trigger to resume uptrend?

EUR/GBP

Sterling drifts south; Budget in focus today

On Tuesday, sterling traded again with a negative bias. Eco data (BRC sales; Halifax housing prices) suggested that the UK economy's positive momentum post-Brexit is easing. Sterling declined further against the dollar. EUR/GBP returned to the 0.8680 area, but declined slightly later in the session. The UK government faced another defeat in the Brexit-debate in the Upper House. The House of Lords changed the Brexit-bill draft and asked a meaningful vote on the outcome of the Brexit-negotiation. EUR/GBP finished the session at 0.8566 (from 0.8648). Cable closed the session at 1.2200.

Today, UK Chancellor of the Exchequer, Phillip Hammond, will present the Spring UK Budget. The Budget is expected to support specific categories of citizens as the impact of Brexit might hurt spending. There will also be selective investment plans. In a broader perspective, the budget will probably be rather restrictive as the government still wants to further reduce the budget deficit. If anything, ongoing budgetary austerity could be a slightly negative for sterling. Regarding Brexit, UK PM May will try to convince conservatives in the House of Commons to rejected the amendments from the Lords. This debate probably won't support sterling even as more involvement of Parliament was in the past considered as reducing the chances on a hard Brexit. Sterling sentiment softened of late. The euro was in better shape at the end of last week, helping EUR/GBP to break the 0.8592 resistance, which improved the short-term EUR/GBP picture. We don't expect a sustained EUR/USD rebound , but a combination of temporary euro consolidation and ongoing sterling softness might trigger some further ST EUR/GBP gains. A sustained break north of 0.8645 might reinforce the ST positive momentum. Longer term, we keep a sterling negative view, as the Brexit will negatively impact the UK

EUR/GBP: clears first resistance at 0.8592. 0.8645 resistance under test

Download entire Sunrise Market Commentary

Market movers today

German industrial production data for January (due at 08:00 CET) is likely to show a large monthly increase following the strong factory orders in December.

The UK Spring Budget will be presented by the Chancellor of the Exchequer, Philip Hammond, today at 13:30 CET. Speaking on Sunday, Mr Hammond rejected calls to increase borrowing, favouring a cautious approach to ensure adequate reserves. According to media reports , the government plans for a GBP60bn 'war chest' in order to boost the country's resilience to turbulence that may ensue as the UK withdraws from the EU, and fresh spending may thus be funded by cuts elsewhere. Further leaks suggest that the Chancellor may finance a boost in healthcare spending by raising taxes.

Selected market news

May suffers defeat in UK Parliament on Brexit-trigger law. The House of Lords yesterday backed an amendment to Article 50 that will require the government to bring the final terms of Britiain's exit from the EU before Parliament for approval. The amendment is seen as a defeat for Prime Minister Theresa May, as MPs will have the ability to send her back to the negotiating table to seek better terms if the exit conditions are not considered good enough.

US equities struggled. The S&P500 index traded 0.3% lower yesterday. A new tweet from US President Trump that he intends to drive drug prices 'way down' as well as the revelation of plans to repeal Obamacare drove down pharmaceutical and healthcare stocks.

Fed hike pricing moving higher still. A March rate hike is considered more or less a given, unless Friday's employment report disappoints significantly. Following a further increase in short-term yields, markets are now discounting a probability of some 85%. This also seems to be the main driver for the dollar, with the USD index up 0.2%, despite news that the US trade deficit reached the largest level in real terms since 2015.

Japanese economy expands less than expected in Q4. A bunch of Japanese economic data was released overnight. Notably, GDP expanded again in Q4, implying four consecutive quarters of growth, the longest run in more than three years. However, at 0.2% q/q, the economy grew by less than expected (0.3%). Growth has been driven mainly by exports recently.

China Trade in deficit for the first time in 3 years

Asia Mid-Session Market Update: Japan Q4 final GDP revised higher on stronger CAPEX; China Trade in deficit for the first time in 3 years

US Session Highlights

(US) JAN TRADE BALANCE: -$48.5B V -$48.5BE (widest deficit since Mar 2012): China: -$31.3B v -$27.8B prior

(US) JAN FACTORY ORDERS: 1.2% V 1.0%E

(CA) CANADA JAN INT’L MERCHANDISE TRADE: C$0.8B V C$0.8BE (3rd straight surplus)

(US) President Trump tweets: "I am working on a new system where there will be competition in the Drug Industry. Pricing for the American people will come way down!”

(SA) Saudi Oil Min Al-Falih: Saudi output is now below 10M bpd after cuts; production cutting deal is working well - CERAweek conf comments

(US) Atlanta Fed cuts Q1 GDP forecast to 1.3% from 1.8%

(US) Commerce Sec Ross: US trade deficit data shows there is much work to be done

US markets on close: Dow -0.1%, S&P500 -0.3%, Nasdaq -0.3%

Best Sector in S&P500: Technology

Worst Sector in S&P500: Energy

Biggest gainers: HUM +2.5%, VIAB +1.8%, ALB +1.7%, FFIV +1.6%, BBY +1.5%

Biggest losers: FTR -5.1%, ENDP -4.4%, SWN -4.2%, ESRX -3.8%, SIG -3.6%

At the close: VIX 11.5 (+0.2pts); Treasuries: 2-yr 1.33% (+2bps), 10-yr 2.51% (+2bps), 30-yr 3.11% (+1bps)

US movers afterhours

HRB: Reports Q3 -$0.49 v -$0.46e, R$452M v $451Me; H&R Block return volume outperformed industry results compared to IRS data; +7.8% afterhours

AVAV: Reports Q3 -$0.09 v -$0.34e, R$53.2M v $50.7Me; guides initial FY17 $0.20-0.35 v $0.50e, R$260-280M v $283Me; +7.0% afterhours

CLNE: Reports Q4 -$0.02 v -$0.09e, R$101.8M v $96.5Me (2 est); +7.0% afterhours

APC: Guides initial FY17 capex $4.5-4.7B v ~$2.9B y/y; -1.2% afterhours

URBN: Reports Q4 $0.55 v $0.56e, R$1.03B v $1.04Be; -1.6% afterhours

BOJA: Reports Q4 $0.28 v $0.21e, R$139.4M v $140Me; Guides initial FY17 $0.87-0.93 v $1.02e; R$560-569M v $592Me; -4.8% afterhours

GEO: Files to sell 6M shares through JPM, SunTrust, BCS, Merrill (8% of shares outstanding); -5.0% afterhours

Politics

(US) State of Hawaii to sue the Federal Govt to block implementation of the revised Executive Order on travel - press

(US) Atlanta Fed said to be considering Raphael Bostic as the next President, replacing retiring (Feb 28th) Dennis Lockhart (moderate, non-voter) - financial press

(US) CNBC's Kudlow: Sources say Commerce Sec Ross now opposes border adjustment tax

(UK) Govt ministers said to call for PM May to call a snap election to give her a clear mandate for her Brexit plan - UK press

Asia Key economic data:

(CN) CHINA FEB TRADE BALANCE (CNY-TERMS): -60.4B V +172.5BE; First deficit since Feb 2014

(JP) JAPAN Q4 FINAL GDP Q/Q: 0.3% V 0.4%E; ANNUALIZED GDP: 1.2% V 1.5%E

(JP) JAPAN JAN BOP CURRENT ACCOUNT TOTAL: ¥65.5B (2-year low) V ¥270BE; ADJ CURRENT ACCOUNT TOTAL: ¥1.26T V ¥1.46TE; TRADE BALANCE BOP BASIS: - ¥853B (first deficit in a year) V - ¥800BE

(JP) JAPAN FEB BANK LENDING (INC TRUSTS) Y/Y: 2.8% V 2.5% PRIOR; BANK LENDING (EX- TRUSTS) Y/Y: 2.9% V 2.6% PRIOR

(NZ) NEW ZEALAND Q4 MANUFACTURING ACTIVITY (SA) Q/Q: 0.8% V 0.4% PRIOR; VOLUME Q/Q: -1.8% (biggest decline since Q2 of 2013) V 2.1% PRIOR

(NZ) New Zealand Feb ANZ Truckometer Heavy M/M:+2.3% v -1.0% prior

Asia Session Notable Observations, Speakers and Press

Asia equity markets are mixed despite another day of modest declines on Wall St in both equity and bond markets. Investors look ahead to Wednesday's release of ADP and Friday's non-farm payrolls to confirm expectations of this month's Fed hike, as only a very weak print on the jobs front would derail that view. After yesterday's advance, the Energy sector lagged all others, and the soft patch may carry over as API petroleum saw a large build - its 6th in 7 weeks - despite the claims from Saudi Oil Min that demand is picking up. Regionally, Nikkei225 lagged as USD/JPY remained below ¥114 despite the uptick in US yields, weighed down by chip equipment stocks. JPY was also firmer as risk aversion was felt in US equity futures - S&P eminis hit 1-week lows of 2,360. Hang Seng outperformed with rallies in Geely Auto and China Unicom.

In other FX majors, AUD was supported by a research note out of Goldman estimating 60% chance of an RBA rate hike as soon as November, but came in on release of disappointing China trade data. In CNY terms, trade fell into deficit for the first time in 3 years, with Exports undershooting at Y/Y 4.2% v 14.6%e and Imports surging 44.7% v 23.1%e. Some of the deviation will likely be attributed to the timing of Lunar New Year coming in late Jan this year vs early Feb last year. Also of note in China, Foreign Min Wang said Beijing is working to expand cooperation with US while also calling on Washington to back away from THAAD missile system in South Korea and for North Korea to stop its nuclear development.

In other economic data, Japan Q4 Final GDP improved slightly from Prelim levels but missed expectations. Consumption growth remained flat, though the CAPEX component was revised sharply higher to 2.0% from 0.9% prelim, also beating 1.7% est.

China

(CN) China Feb iron ore total inventory 12.1Mt, +44.3% m/m - Chinese press

(CN) China Foreign Minister Wang Yi: One belt and One road initiative is critical amid protectionism

(CN) PBoC Dep Gov Yi Gang: China to steadily promote global use of Yuan - press

Japan

(JP) Japan investors sold net ¥1.69T of US sovereign debt during Jan (3rd consecutive sale, longest streak since June 2013)

(JP) Japan PM Abe: Japan completely out of deflation

(JP) Japan Fin Min Aso: easy cuts to corporate tax rates would harm trust in system

Australia/New Zealand

(AU) CitiGroup Australia to limit its mortgage loans for overseas borrowers to high net worth clients with minimum deposits of A$250K amid concerns of capacity, as most other Australian banks withdrew from lending to foreign clients - AFR

(AU) Hearing Goldman Sachs said to be calling for a RBA rate hike as soon as this Nov

(NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: -6.3% v -3.2% prior; 2nd straight decline, biggest decline since Feb 2nd (out in US session)

(NZ) Westpac lowers FY16/17 milk payout target to NZ$5.90 from NZ$6.20 following today's auction price decline - NZ press

(NZ) ANZ: New Zealand Feb non-tradable inflation 0.2% m/m, 2.2% y/y

Korea

(KR) Korean press speculates Korea's currency swap total may be halved due to tensions with China on THAAD deployment

(KR) South Korea Fin Min Yoo: Economy showing signs of recovery - press

Asian Equity Indices/Futures (00:00ET)

Nikkei -0.5%, Hang Seng +0.5%, Shanghai Composite +0.1%, ASX200 -0.1%, Kospi flat

Equity Futures: S&P500 -0.2%; Nasdaq -0.2%; Dax -0.2%; FTSE100 flat

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

EUR 1.0570-1.0595; JPY 113.85-114.10; AUD 0.7575-0.7630; NZD 0.6980-0.7020

Apr Gold flat at $1,225/oz; Apr Crude Oil flat at $53.20/brl; May Copper +0.1% at $2.66/lb

(US) Weekly API Oil Inventories: Crude: +11.6M v +2.5M prior (6th build in the past 7 weeks; Highest build since Feb 7th)

(SA) Saudi Oil Min: Global oil demand is picking up

(US) DoubleLine's Gundlach: Reiterates 10-year yield to drop below 2.25% before rising again

(CN) PBOC SETS YUAN MID POINT AT 6.9032 V 6.8957 PRIOR; weakest Yuan setting since Jan 12th

(CN) China MoF sells CNY20B in 5-yr bonds; avg yield 3.0265% v 3.0387% prior; bid-to-cover 1.85x

(CN) PBOC to inject combined CNY30B v CNY30B prior in 7-day, 14-day and 28-day reverse repos

(AU) Australia MoF (AOFM) sells A$800M in 2.25% 2028 Bonds; avg yield: 2.9816%; bid-to-cover: 3.78x

Asia equities / Notables / movers by sector

Consumer discretionary: SVW.AU Seven Group Holdings -0.2% (considers privatization); 3099.JP Isetan Mitsukoshi -4.2% (Mizuho cuts rating)

Financials: 1375.HK Central China Securities Co -0.7%; 813.HK Shimao Property +6.0% (Feb result); 978.HK China Merchants Land +3.3% (FY16 result)

Industrials: QUB.AU Qube +3.1% (Peer DP World raised charges at ports in Melbourne and Sydney)

Technology: 6502.JP Toshiba Corporation +2.6% (no signs for Q3 earnings delay); 7741.JP Hoya Corp +2.2% (Morgan Stanley raises rating)

Materials: 5406.JP Kobe Steel +0.9% (Mizuho raises rating)

Healthcare: 570.HK China Traditional Chinese Medicine Co +1.0% (profit alert); MYX.AU Mayne Pharma -1.8% ( US President Trump tweeted about new system for lower drug prices in America); CAJ.AU Capitol Health +3.3% (Credit Suisse raises rating)

Telecom:763.HK ZTE Corp +5.9% (FY16 result, US settlement)

Weekly

• Last Candlesticks pattern: Shooting star
• Time of formation: 5 Sep 2016
• Trend bias: Down

Daily

• Last Candlesticks pattern: Shooting star
• Time of formation: 8 Sep 2016
• Trend bias: Down
  


Although aussie found support at 0.7543 late last week and recovered, reckon the Tenkan-Sen (now at 0.7642) would limit upside and bring another decline later, below said support at 0.7543 would extend the fall from 0.7741 top for retracement of recent upmove to support at 0.7512 which is likely to limit downside and bring another rebound later. A daily close above 0.7665-70 would suggest low is formed, bring test of resistance at 0.7700 but recent high at 0.7741 should hold, only a break of this level would confirm recent upmove has resumed and extend gain to previous chart resistance at 0.7778. Looking ahead, a break above there is needed to retain bullishness and signal early erratic upmove from 0.6827 (2016 low) has resumed for retest of 0.7835 (2016 high) first. 



On the downside, below said last week’s low at 0.7543 would extend the fall from 0.7741 top for retracement of recent upmove to support at 0.7512, however, reckon 0.7490-00 would limit downside and bring another rise later. A daily close below the upper Kumo (now at 0.7467) would abort and suggest top is formed instead, bring weakness to 0.7390-00 and possibly towards 0.7350 but reckon 0.7300-10 would remain intact, bring rebound later.



Recommendation: Buy at 0.7515 for 0.7715 with stop below 0.7415.



On the weekly chart, assize’s retreat from 0.7741 suggests minor top has been formed there and consolidation below this level would be seen and initial downside risk remains for test of the Tenkan-Sen (now at 0.7515), however, reckon the Kijun-Sen (now at 0.7468) would hold and bring another rise later, above 0.7700 would bring retest of 0.7741 but break there is needed to extend the rebound from 0.7158 towards resistance at 0.7778, however, as broad outlook remains consolidative, reckon upside would be limited and price should falter below 2016 high at 0.7835. Looking ahead, only above this level would suggest an upside break of recent established broad range has occurred, bring further subsequent rise towards 0.7900.

On the downside, although initial pullback to 0.7512-15 (indicated minor support and current level of the Tenkan-Sen) cannot be ruled out, reckon the Kijun-Sen (now at 0.7468) would limit downside and bring another rise. A weekly close below the Kijun-Sen would suggest top is possibly formed, bring weakness to 0.7400, break there would add credence to this view, bring subsequent weakness to the lower Kumo (now at 0.7331) but break of 0.7285-90 support is needed to signal the rebound from 0.7158 has ended and bring further decline to 0.7200-10, then towards strong support area at 0.7145-58.