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USD/JPY continues to hug the 114 line this week. Currently, the pair is trading at 113.90. In economic news, Japanese BoJ Core CPI edged up to 0.2%. The markets are keeping a close eye on Japanese Final GDP for the fourth quarter, with an estimate of 0.4%. Preliminary GDP came in at 0.2%. If GDP is revised upwards, the yen could gain ground. In the US, today's highlight is Trade Balance, with an expected deficit of 47.0 billion. On Wednesday, the US releases ADP Nonfarm Employment Change, ahead of the official Nonfarm Payrolls report on Friday.

Donald Trump continues to create controversy on an almost basis, much to the consternation of the markets. Still, the dollar remains strong, buoyed by a strong economy and the increasing likelihood of a rate hike at the upcoming Fed policy meeting on March 15. The likelihood of a March hike as jumped to 84%, according to the CME group, compared to 33% just a week ago. Why the huge jump in odds? One reason is that Fed policymakers have sent out strong hints that the Fed is leaning towards raising rates next week. Earlier in the year, the Fed sent out signals Fed sent out signals that it would stay on the sidelines until it had a clearer picture of Trump's economic agenda, such as an outline of tax reform or fiscal spending plans. That has changed, as the Fed appears poised to move ahead despite the lack of any details about the administration's economic policy. This week's job numbers will be critically important, as strong numbers will likely boost the odds of a March move as well as push the greenback to higher levels.

The DAX Index continues to have an uneventful week. The index is up slightly in the Tuesday session, trading at 11,968.50. On the release front, German Factory Orders declined 7.4%, well below the estimate of a 2.5% decline. Eurozone Revised GDP remained unchanged at 0.4%, matching the forecast. On Wednesday, Germany releases Industrial Production.

German numbers were generally solid last week, but it's been a different tune early this week. The markets were braced for a downturn from Factory Orders in February, but the decline of 7.4% was much sharper than expected. On Monday, retail sales, the primary gauge of consumer spending, declined 0.8%, compared to an estimate of 0.2%. This marked a fifth decline of six releases, as the German consumer continues to hold tight to her purse strings. The euro has held steady despite these weak readings, but if the negative trend continues from the Eurozone's largest economy, investors could get edgy and drag the DAX to lower levels.

Germany's Deutsche Bank was in the spotlight on Monday. The bank decided on a major reorganization on Sunday, which includes raising EUR 8 billion by issuing 687.5 million shares on March 21. Deutsche Bank has hit rough waters, and it seemed only a matter of time before it was forced took some drastic measures to right the boat. In December, the bank reached a $7.2 billion settlement with the U.S. Department of Justice for selling toxic mortgage-backed securities. Deutsche had a dismal 2016, with losses of EUR 1.4 billion. This capital hike is the fourth since 2010, and it remains to be seen if this move will attract investors and help set the bank in the right direction. Deutsche Bank shares have lost ground this week, weighing on the DAX.

Donald Trump continues to create controversy on an almost basis, much to the consternation of the markets. Still, the dollar remains strong, buoyed by a strong economy and the increasing likelihood of a rate hike at the upcoming Fed policy meeting on March 15. The likelihood of a March hike as jumped to 84%, according to the CME group, compared to 33% just a week ago. Why the huge jump in odds? One reason is that Fed policymakers have sent out strong hints that the Fed is leaning towards raising rates next week. Earlier in the year, the Fed sent out signals Fed sent out signals that it would stay on the sidelines until it had a clearer picture of Trump's economic agenda, such as an outline of tax reform or fiscal spending plans. That has changed, as the Fed appears poised to move ahead despite the lack of any details about the administration's economic policy. This week's job numbers will be critically important, as strong numbers will likely boost the odds of a March move as well as push the greenback to higher levels.

USD/CHF - 1.0138

New strategy  :

Buy at 1.0110, Target: 1.0210, Stop: 1.0075

Position : -

Target :  -

Stop : -

Dollar’s intra-day breach of previous resistance at 1.0146 confirms recent erratic upmove from 0.9861 has resumed and bullishness remains for this move to extend further gain to 1.0175-80, then towards 1.0200-10, however, near term overbought condition should prevent sharp move beyond previous chart resistance at 1.0248, risk from there is seen for a retreat later.

In view of this, would not chase this rise here and would be prudent to buy dollar on pullback as 1.0100-10 should limit downside. Only break of indicated support at 1.0073 would suggest an intra-day top is formed instead, risk weakness to 1.0040-45 but reckon support at 1.0009 would remain intact. 

GBP/USD - 1.2198

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As cable has remained under pressure after meeting renewed selling interest at 1.2301, suggesting near term downside risk remains for recent decline from 1.2706 to extend further weakness to 1.2170-75 but reckon 1.2150 would limit downside due to loss of downward momentum and 1.2120-25 should hold, bring another rebound later. 

In view of this, would not chase this fall here and would be prudent to stand aside in the meantime. Above the Kijun-Sen (now at 1.2231) would bring recovery to the Ichimoku cloud (now at 1.2261-69), break there would suggest an intra-day low is formed, bring test of said resistance at 1.2301 which is likely to hold from here . 

EUR/USD - 1.0574

Original strategy  :

Buy at 1.0545, Target: 1.0645, Stop: 1.0510

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.0535, Target: 1.0635, Stop: 1.0500

Position : -

Target :  -

Stop : -

Although the single currency retreated after rising to 1.0640 yesterday and consolidation with initial downside bias is seen for weakness to 1.0560, reckon downside would be limited to 1.0540-45 and bring another rebound later, above said resistance at 1.0640 would extend the erratic rise from 1.0493 lo for retracement of early decline to 1.0660-65 (50% Fibonacci retracement of 1.0829-1.0493) and possibly towards resistance at 1.0680, however, price should falter well below 1.0700-05 (61.8% Fibonacci retracement).

In view of this, we are looking to buy euro on dips. Below 1.0510 would abort and risk retest of 1.0493 but only break there would shift risk back to the downside and signal recent decline from 1.0829 has resumed for further selloff to 1.0470 and then towards previous support at 1.0454.

USD/JPY - 113.97

Original strategy  :

Sell at 114.50, Target: 113.35, Stop: 114.80

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 114.50, Target: 113.35, Stop: 114.80

Position :  -

Target :  -

Stop : -

As the greenback recovered after finding support at 113.56 yesterday, suggesting consolidation with initial upside bias would be seen and corrective bounce to 114.30-35 cannot be ruled out, however, if our view that a temporary top formed at 114.75 last week is correct, upside should be limited to 114.50-55 and bring another decline later, below said support at 113.56 would bring retracement of recent rise to 113.20-25 (50% Fibonacci retracement of 111.69-114.75), however, downside would be limited to 113.00 and 112.84-86 (previous resistance and 61.8% Fibonacci retracement), bring rebound later.

In view of this, we are looking to sell dollar on recovery for such move as 114.50 should limit upside, bring another decline. Only above said resistance at 114.75 would abort and signal the rise from 111.69 has resumed and extend gain to 114.96 (previous resistance) but price should falter well below resistance at 115.38.

China FX Reserves rises for 1st time in 8 months, Swiss and Czech reserves also rise

Notes/Observations

China Feb FX Reserves registers its 1st monthly rise since June amid capital curbs

SNB foreign-currency reserves soar signaling interventions

German Jan industry orders post biggest monthly decline since 2009

Overnight:

Asia:

RBA left its Cash Rate Target unchanged at 1.50% (as expected). Maintains policy rhetoric that global economic conditions had improved over recent months; reiterated rising AUD currency could complicate economic transition; expecteds headline inflation to pickup over 2017

China Fin Min Xiao Jie: 2016 govt debt to GDP ratio at 36.7% China govt debt level generally under control; won't change much in 2017

BOJ's Masai reiterated Board view that expected domestic economy to move into moderate expansion; would maintain its highly accommodative policy and overcome deflation

Commander of US Pacific Command: North Korea's latest missile launch confirms the need for THAAD deployment. Started to deploy anti-missile systems in South Korea despite Chinese opposition

Europe:

German Chancellor Merkel called for a European Union that allowed member states to advance at their own pace to ensure that the bloc was able to confront future challenges

French Conservative Party Chairman: Conservative Political Committee unanimously backed Fillon candidacy (France's Fillon wins party backing after Juppe rules out election bid)- House of Lords holds final debate and vote on Article 50 Bill. Govt at risk of 2nd defeat in House of Lords as Peers might call for a 'meaningful vote' and a guarantee that Parliament could veto the final terms of Brexit agreement if the deal Govt makes was not good enough

Fixed Income Issuance:

(EU) ESM opened its book to sell €3.0B in 10-year bond via syndicate; guidance seen +1bp to mid-swaps

(IT) Italy Debt Agency (Tesoro) opened book to sell EUR-denominated May 2028 I/L bond (BTPei); guidance seen +13bps

(ID) Indonesia sold IDR6.1T in Islamic bonds (Sukuk)

(ZA) South Africa sold total ZAR2.35B vs. ZAR2.35B indicated in 2023, 2037 and 2044 bonds

(ES) Spain Debt Agency (Tesoro) sold total €4.64B vs. €4.0-5.0B indicated range in 6-month and 12-month Bills

(AT) Austria Debt Agency (AFFA) sold total €1.32B vs. €1.32B indicated in 2026 and 2034 RAGB bonds

Sold €660M in 0.75% Oct 2026 RAGB bond; Avg Yield: 0.498% v 0.601% prior; Bid-to-cover: 2.31x v 2.30x prior

Sold €660M in 2.4% 2034 RAGB; Avg Yield 1.078% v 0.964% prior; Bid-to-cover: 2.47x v 1.89x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 -0.1% at 3,385, FTSE +0.1% at 7,359, DAX +0.1% at 11,972, CAC-40 -0.3% at 4,959, IBEX-35 -0.2% at 9,782, FTSE MIB -0.2% at 19,407, SMI flat at 8,664, S&P 500 Futures -0.2%]

Market Focal Points/Key Themes: European equity indices are trading mixed after a positive end to the Chinese markets despite a negative end to Japan’s Nikkei; Banking stocks trading generally negative across the board with Eurostoxx losses led by shares of Deutsche Bank; shares of Intertek leading the gains in the FTSE 100 after releasing their FY16 results; Commodity and mining stocks also trading notably higher despite copper prices trading lower, but with energy prices higher intraday; shares of Paddy Power and Ashtead Group the notable laggards in the index after releasing respective results.

Upcoming scheduled US earnings (pre-market) include Brown-Forman, Calavo Growers, Dicks Sporting Goods, John Wiley & Sons, KLX, LGI Homes, Michaels Companies, Momo, and Navistar International.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Aggreko AGK.UK -12.4% (FY16 results), Ashtead Group AHT.UK -2.9% (Q3 results), Casino Guichard CO.FR -4.8% (FY16 results), Intertek ITRK.UK +4.1% (FY16 results), Just Eat JE.UK +4.2% (FY16 results), Lindt & Spruengli LISP.CH -0.9% (FY16 results), Paddy Power Betfair PPB.UK -4.9% (FY16 results), St Ives SIV.UK +1.4% (H1 results), Zumtobel ZAG.AT +3.8% (Q3 results)]

Energy: [EDF EDF.FR +0.1% (€4B rights issue)]

Financials: [Direct Line DLG.UK -1.0% (FY16 results), Paysafe PAYS.UK -3.1% (FY16 results), Shawbrook SHAW.UK -1.6% (Board rejects 330p/shr proposal, FY16 results), Vonovia VNA.DE +0.2% (FY16 results), Worldpay WPG.UK -2.0% (final FY16 results)]

Industrials: [Brenntag BNR.DE -2.8% (FY16 results, div increase), Forbo Holding FORN.CH +5.3% (FY16 results), VTG VT9.DE -2.9% (prelim FY16 results)]

Technology: [Logitech LOGN.CH +1.5% (Affirms outlook, $250M share buyback)]

Telecom: [Iliad ILD.FR +3.5% (FY16 results)]

Speakers

EU Leaders Summit draft: To stress WTO role and commit to address all free trade agreements

Czech Central Bank Gov Rusnok: Could correct any excessive FX move once cap is removed. Reiterated CZK currency (Koruna) cap removal most likely to occur around mid-2017

China FX Regulator SAFE: Foreign Reserves to gradually stabilize; reiterated that outflow pressure expected to ease

China PBoC's Zhou: FX Reserves were not inexhaustible; govt would not allow radical fluctuation of CNY currency (Yuan) rate

Currencies

USD was steady with markets now expected the Fed to hike rates this month.

GBP/USD hit fresh 7-week lows after Halifax data also revealed weaker-than-forecast house price growth and registered its lowest reading since July 2013. Focus set to turn to UK budget on Wednesday

Fixed Income:

June Bund futures trade at 161.18 up 30 ticks trading off highs as Futures roll to June. The Mar-Jun spread currently stands at 322 ticks. Resistance lies initially at 161.59 followed by 162.32 then contract high at 163.12. Support lies at 160.63 then 159.96.

Gilt futures trade at 126.61 up 9 ticks pushing to session highs despite a reversal in Equities. Resistance moves to 126.87 followed by 127.35. Support moves to 126.39 followed by 126.12.

Tuesday liquidity report showed Monday's excess liquidity fell to €1.345T down €3B from €1.348T prior. Use of the marginal lending facility rose to €276M from €232M prior.

Corporate issuance saw $22.7B come to market via 11 issuers in an active start to the week headlined by HSBC 2 part $5B offering, Great Plains Energy $4.3B 4 part offering and McDonald's $2B 3 part offering. This puts issuance for the month at $36.7B.

Looking Ahead

(UK) Lords hold final debate and vote on Article 50 Bill

(IL) Israel Feb Foreign Currency Balance: No est v $101.6B prior

05.30 (UK) Weekly John Lewis LFL sales data

05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender

05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills

05:30 (BE) Belgium Debt Agency (BDA) to sell 3-Month and 12-Month Bills

06:00 (BR) Brazil Apr FGV Inflation IGP-DI M/M: 0.1%e v 0.4% prior; Y/Y: 5.2%e v 6.0% prior

06:30 (CL) Chile Feb Trade Balance: $0.3Be v $0.7B prior; Total Exports: $5.0Be v $5.5B prior; Total Imports: $4.8Be v $4.8B prior

06:30 (CL) Chile Feb International Reserves: No est v $39.9B prior

06:30 (EU) ESM to sell €1.5B in 3-month Bills

06:45 (US) Daily Libor Fixing

07:00 (BR) Brazil Q4 GDP Q/Q: -0.5%e v -0.8% prior; Y/Y: -2.4%e v -2.9% prior, GDP 4-quarters accumulated: -3.6%e v -4.4% prior

07:00 (BR) Brazil Jan PPI Manufacturing M/M: No est v 0.7%prior; Y/Y: No est v 0.8% prior

07:00 (CL) Chile Jan Nominal Wage M/M: No est v 0.8% prior; Y/Y: 4.4%e v 4.7% prior

07:45 (US) Weekly Goldman Economist Chain Store Sales

08:00 (PL) Poland Feb Official Reserves: No est v $113.7B prior

08:00 (RU) Russia Feb Official Reserve Assets: $395.5Be v $390.6B prior

08:00 (RU) Russia announces weekly OFZ bond auction

08:15 (UK) Baltic Dry Bulk Index

08:30 (US) Jan Trade Balance: -$48.5Be v -$44.3B prior

08:30 (CA) Canada Jan Int’l Merchandise Trade: C$0.8Be v C$0.9B prior

08:30 (SI) Slovenia Debt Agency to sell 12-month Bills

08:55 (US) Weekly Redbook Sales

09:00 (BR Brazil Jan CNI Capacity Utilization: No est v 76.0% prior

09:00 (EU) Weekly ECB Forex Reserves

09:20 (BR) Brazil Feb Vehicle Production: No est v 174.1K prior; Vehicle Sales: No est v 147.2K prior; Vehicle Exports: No est v 37.2K prior

09:50 (UK) BOE to buy £0.78Bin APF Gilt purchase operation (over 15 years)

10:00 (BR) Brazil to sell I/L 2022, 2026, 2035 and 2055 Bonds

10:00 (CA) Canada Feb Ivey Purchasing Managers Index (Seasonally Adj): 58.5e v 57.2 prior; PMI unadj: No est v 52.3 prior

11:30 (US) Treasury to sell 4-Week Bills

13:00 (US) Treasury to sell 3-Year Notes

15:00 (US) Jan Consumer Credit: $19.0Be v $14.2B prior

15:00 (MX) Mexico Banamex Survey of Economists

16:30 (US) Weekly API Oil Inventories

GBP/USD – 1.2193

 
GBP/USD – Wave 4 is unfolding as an (A)-(B)-(C) and could have ended at 1.7192

 
As cable has fallen again after brief recovery, suggesting the decline from 1.2706 is still in progress and may extend further weakness to 1.2150, then 1.2100, however, as broad outlook remains consolidative, reckon downside would be limited to 1.2040-50 and price should stay above recent low at 1.1986 and bring another rebound later. In the event sterling drops below said recent low, this would signal the major downtrend has finally resumed and extend weakness to 1.1900-10 and then 1.1850 but near term oversold condition should limit downside to 1.1800. 

Our preferred count on the daily chart is that cable's rebound from 1.3500 (wave (A) trough) is unfolding as a wave (B) with A ended at 1.7043, followed by triangle wave B and wave C as well as wave (B) has possibly ended at 1.7192, below support at 1.4232 would add credence to this count, then further fall to 1.4000 level would follow but reckon downside would be limited to 1.3655 support and price should stay above previous support at 1.3500.

On the upside, whilst initial recovery to 1.2250-55 cannot be ruled out, reckon upside would be limited to 1.2300-05 and previous support at 1.2347 should turn into resistance and put a lid on cable. A daily close above another previous support at 1.2383 would abort and signal the fall from 1.2706 has ended instead, bring a stronger rebound to 1.2440-50 and possibly towards 1.2500 but price should falter well below resistance at 1.2570, bring further choppy trading later.
 

Recommendation: Sell at 1.2300 for 1.2100 with stop above 1.2400.

 
Longer term - Cable's rise from 1.0520 (Feb 1985) to 2.0100 (September 1992) is seen as [A], the decline to 1.3682 is labeled as (B) and (C) wave rally has ended at 2.1162 (9 Nov, 2007) which is also the top of larger degree wave B with circle. The selloff from there is a 5-waver with wave (A) ended at 1.3500 (23 Jan 2009), wave (B) itself is labeled as A: 1.6733, triangle wave B: 1.4813 and wave C as well as top of wave (B) ended at 1.7192 (2014), hence the selloff from there is an impulsive wave (C) with wave I : 1.4566, wave II 1.5930, an extended wave III is unfolding and already exceeded our downside target at 1.3500 and 1.3000, hence weakness to 1.2500 and possibly 1.2000 cannot be ruled out, however, price should stay well above psychological level at 1.0000.

GBP/JPY – 138.95

GBP/JPY – Wave 5 as well as wave (III) has possibly ended at 116.85



Although sterling has remained under pressure and near term downside risk remains for weakness to 138.55 support, below there is needed to signal a possible downside break of recent established range, bring further fall to 137.50-60 and later 137.00-05, however, reckon previous support at 136.50 would contain downside, bring another rebound later. Looking ahead, only below this level would signal another leg of decline from 148.45 top is underway for retracement of early upmove from 120.50 to 135.90-00, then towards 134.45-50 (50% Fibonacci retracement of 120.50-148.45) which is likely to hold from here.

Our preferred count is that larger degree wave V with circle is unfolding from 251.12 with wave (I) 219.34, (II): 241.38 and wave (III) is subdivided into 1: 192.60, 2: 215.89 (23 Jul 2008) and wave 3 ended at 118.87 earlier in 2009. The correction from there to 162.60 is wave 4 which itself is a double three and is labeled as first a-b-c ended at 151.53, followed by wave x at 139.03, 2nd a ended at 162.60, 2nd b at 146.75 and 2nd c leg of wave 4 ended at 163.00. Therefore, the decline from 163.00 to 116.85 is now treated as wave 5 which also marked the end of larger degree wave (III), hence wave (IV) major correction has commenced for retracement of the wave (III) from 241.38 and upside target at 183.95-00 (50% Fibonacci retracement of the wave (II) from 241.38) had been met, a drop below 160.00 would suggest wave (IV) has ended at 195.85, bring decline in wave (V) for initial weakness to 130 (already met) and 120.

On the upside, whilst recovery to 139.70-80 cannot be ruled out, as outlook is consolidative, reckon upside would be limited to 140.70-75 and 141.75-80 should remain intact, bring retreat later. A daily close above resistance at 142.80 would signal the pullback from 144.75 has ended, bring further gain to 143.40-45 and then test of 144.10-15 but said resistance at 144.75 should hold. Looking ahead, a rise above 144.75 would signal the rebound from 136.50 is still in progress and may bring further upmove to indicated resistance at 145.40, break there would add credence to our bullish scenario that correction from 148.45 has ended at 136.50, bring further gain to 146.40-50, then 147.10-20.
 
Recommendation: Stand aside for this week.



The long-term downtrend from 570.99 (29 Feb 1980) is labeled as an impulsive wave with III with circle ended at 129.77 (20 Apr 1995) and the corrective rebound to 251.12 (20 Jul 2007) is treated as wave IV with circle and the wave V with circle selloff from 251.12 has possibly ended at 116.80 (almost reached our indicated target at 116.00) and major correction has commenced from there and indicated upside target at 183.90-00 (50% Fibonacci retracement of 251.10-116.85) had been met, reckon upside would be limited to 199.80-90 (61.8% Fibonacci retracement) and bring wave (V) decline in later part of 2017.

News and Events:

Australia's central bank holds rate, AUD surges

As broadly expected, the Reserve Bank of Australia kept its cash rate target unchanged at a record low of 1.5%. The RBA reiterated its well-known view that the Aussie is overvalued and stated that an appreciating exchange rate would complicate the economic transition that followed the mining investment boost. However, the institution acknowledged the positive development in commodity prices that provided “a significant boost to Australia's national income”.

Despite the RBA's positive assessment of the economy, Governor Lowe maintained a cautious stance about Australia's outlook, recalling that the “medium-term risks to Chinese growth remains”. Indeed, China is Australia's biggest trade partner as it absorbs around 35% of Aussie total exports. From our standpoint, we suspect that the surge in commodity prices - more specifically iron ore prices - is coming to an end and that a reversal is looming as Chinese stockpiles went through roof while crude steel production remain subdued.

For all these reasons, we believe that the RBA is definitely not on its path to tighten its monetary policy as the inflation gauge is still well below the 2%-3% target band. The year-ended trimmed mean inflation reached 1.6% in December 2016, while the headline gauge hit 1.5%. There RBA is therefore in no hurry to tighten; however should commodity prices consolidate the recent gains, inflation will quickly start to pick-up. Looking at the AUD this morning, it seems that investors consider the latter scenario as highly probable as the Aussie rose 0.30% against the greenback and erased partially last week gains to return above the 0.76 threshold. On our side, we maintain our bearish view on AUD/USD with 0.75 as next target.

On the technical side, a first support lies at around 0.7530-40 (200dma and 50dma), then 0.7519 (Fibonacci 38.2% on December-February rally). Should AUD/USD break these levels, the road will be wide open towards 0.73-0.72.

Evidence of FX intervention as SNB Reserves Surge

The Swiss National Bank's foreign exchange reserves surged 3.8% to 668.2bn CHF. While the SNB does not generally comment on intervention, the size of the balance sheet expansion indicates that the SNB has been very active in FX markets. This has been the fastest accumulation since December 2014 when the SNB was under siege to defend the 1.200 floor. Data published today suggests that the SNB greater exchange rate flexibility did not account for fear-driven flight of capital out of Europe. The strong demand for CHF indicates just how worried European investors are regarding political developments. Despite an improvement in inflation and the growth backdrop, SNB Jordan continues to define the CHF as “significantly overvalued.” Unfortunately for the SNB the short EURCHF trade remains the cleanest way to hedge mounting European political risk. We anticipate that despite SNB intervention the EURCHF will continue to grind lower. On a side note, judging from the SNB actions they are not concerned about US President Trump administration labelling Switzerland a “Currency Manipulator”.

German factory orders collapse

Financial markets always tend to closely monitor German's economic data as the country is always acting as the locomotive of the European economy. In particular its industry is the strongest of the Eurozone. Early this morning, factory orders data have been released and have sharply declined to -7.4% which is the worst month decline since 2009. The read is well below the consensus. A decline of -2.5% was expected.

The low interest rates era has helped the German economy but this does not seem sufficient as the demand is clearly weakening. Fundamental data must be compared with survey such as the IFO business climate or expectations which are showing some positivity

The euro barely reacted to that data and remains below $1.06. Optimism still seems to prevail on the market. The German DAX index is trading at all-time high and there is no reason for this move to stop in the short-term as economic expectations are strong for the time being. The ECB next Thursday should not change anything about the monetary policy and whatever the data, we believe that the euro should stay weak and stocks markets overvalued.

Today's Key Issues (time in GMT):

• Jan Industrial Production MoM, exp -2,50%, last 0,90%, rev 2,30% DKK / 08:00
• Feb Foreign Currency Reserves, last 643.7b, rev 643.9b CHF / 08:00
• Feb Foreign Reserves, exp $2969.0b, last $2998.2b CNY / 08:00
• Feb Budget Balance, last 8.7b SEK / 08:30
• Feb Halifax House Prices MoM, exp 0,40%, last -0,90%, rev -1,10% GBP / 08:30
• Feb Halifax House Price 3Mths/Year, exp 5,30%, last 5,70% GBP / 08:30
• Feb CPI YTD, exp 0,90%, last 0,60% RUB / 09:00
• Feb CPI MoM, exp 0,30%, last 0,60% RUB / 09:00
• Feb CPI YoY, exp 4,60%, last 5,00% RUB / 09:00
• Feb CPI Core MoM, exp 0,40%, last 0,40% RUB / 09:00
• Feb CPI Core YoY, exp 5,20%, last 5,50% RUB / 09:00
• Feb Region Survey: Output Past 3M, last 0,6 NOK / 09:00
• Feb Region Survey: Output Next 6M, last 0,73 NOK / 09:00
• Jan PPI MoM, last 0,60% EUR / 09:00
• Jan PPI YoY, last 0,90% EUR / 09:00
• 4Q GDP Annualized QoQ, exp 0,00%, last 0,20% ZAR / 09:30
• 4Q GDP YoY, exp 0,60%, last 0,70% ZAR / 09:30
• 4Q Gross Fix Cap QoQ, exp 0,60%, last 0,20%, rev -0,50% EUR / 10:00
• 4Q Govt Expend QoQ, exp 0,40%, last 0,50%, rev 0,40% EUR / 10:00
• 4Q Household Cons QoQ, exp 0,50%, last 0,30% EUR / 10:00
• Istat Releases the Monthly Economic Note EUR / 10:00
• OECD Interim Economic Outlook EUR / 10:00
• 4Q F GDP SA QoQ, exp 0,40%, last 0,40% EUR / 10:00
• 4Q F GDP SA YoY, exp 1,70%, last 1,70% EUR / 10:00
• Feb FGV Inflation IGP-DI MoM, exp 0,05%, last 0,43% BRL / 11:00
• Feb FGV Inflation IGP-DI YoY, exp 5,22%, last 6,02% BRL / 11:00
• Jan PPI Manufacturing MoM, last 0,70% BRL / 12:00
• Jan PPI Manufacturing YoY, last 0,78% BRL / 12:00
• 4Q GDP QoQ, exp -0,50%, last -0,80% BRL / 12:00
• 4Q GDP YoY, exp -2,40%, last -2,90% BRL / 12:00
• 4Q GDP 4Qtrs Accumulated, exp -3,60%, last -4,40% BRL / 12:00
• Feb Official Reserve Assets, exp 395.5b, last 390.6b RUB / 13:00
• Jan Trade Balance, exp -$48.5b, last -$44.3b USD / 13:30
• Jan Int'l Merchandise Trade, exp 0.75b, last 0.92b CAD / 13:30
• Feb Vehicle Production Anfavea, last 174064 BRL / 14:20
• Feb Vehicle Sales Anfavea, last 147219 BRL / 14:20
• Feb Vehicle Exports Anfavea, last 37189 BRL / 14:20
• Bank of England Bond Buying Operation GBP / 14:50
• Feb Ivey Purchasing Managers Index SA, exp 58,5, last 57,2 CAD / 15:00
• Jan Consumer Credit, exp $17.250b, last $14.160b USD / 20:00
• Feb ANZ Truckometer Heavy MoM, last -0,80% NZD / 21:00
• 4Q Mfg Activity Volume QoQ, last 2,10% NZD / 21:45
• 4Q Mfg Activity SA QoQ, last 0,40% NZD / 21:45

The Risk Today:

EUR/USD is moving lower. Hourly resistance is given at 1.0679 (16/02/2017 high). Hourly support at 1.0521 (15/02/2017 low) has been broken. The technical structure suggests deeper consolidation below 1.0600. In the longer term, the death cross late October indicated a further bearish bias. The pair has broken key support given at 1.0458 (16/03/2015 low). Key resistance holds at 1.1714 (24/08/2015 high). Expected to head towards parity.

GBP/USD has broken support given at 1.2254 (19/01/2017 low). The road is wide-open for further decline. Hourly resistance is given at 1.2570 (24/02/2017 high). The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY is showing limited short-terms buying interest after reversing off base lows. Key resistance is given at 115.62 (19/01/2016 high). The technical structure suggests further weakening towards 112.00. We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

USD/CHF continues to improves after testing 1.0021 support. Hourly resistance is implied by upper bound of the uptrend channel. Key resistance is given at a distance at 1.0344 (15/12/2016 high). Expected to see further strengthening. In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.