Weekly

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

Daily

• Last Candlesticks pattern: Long black candlestick
• Time of formation: 24 Jun 2016
• Trend bias: Down

GBP/USD – 1.2432

As cable has remained under pressure after breaking indicated previous support at 1.2347, adding credence to our view that the fall from 1.2706 top is still in progress and mild downside bias remains for further weakness to 1.2200, then towards 1.2150. Looking ahead, below 1.2150 would signal the rebound from 1.1986 low has ended, then further fall to 1.2100 would follow, however, still reckon downside would be limited and price should stay well above support at 1.1986, bring rebound later.

On the upside, although initial recovery to 1.2300 cannot be ruled out, reckon said previous support at 1.2347 would turn into resistance and cap cable’s upside, bring another decline later. A daily close above the Tenkan-Sen (now at 1.2392) would defer and risk a stronger rebound towards the Kijun-Sen (now at 1.2460) but only a sustained breach above there would signal the fall from 1.2706 has ended instead, risk a stronger rebound to 1.2500 but price should falter well below resistance at 1.2570.

Recommendation: Sell at 1.2350 for 1.2150 with stop above 1.2450. 

On the weekly chart, last week’s selloff formed a black candlestick and mild downside bias remains for the fall from 1.2706 to extend weakness to 1.2200, then 1.2150, however, if our view that a temporary low formed at 1.1986 is correct, downside should be limited to 1.2100 and reckon 1.2050 would hold, bring another rebound later. In the event cable drops below support at 1.1986, this would shift risk back to downside for medium term downtrend to extend weakness to 1.1900-10, then 1.1850.

On the upside, whilst initial recovery to 1.2300 cannot be ruled out, renewed selling interest should emerge around previous support at 1.2347 (now resistance) and bring another decline later. Above the Kijun-Sen (now at 1.2412) would bring test of last week’s high at 1.2479 but break there is needed to suggest low is formed, bring a stronger rebound to 1.2570, however, a weekly close above there is needed to signal the retreat from 1.2706 has ended, bring further gain to 1.2650-60, then retest of 1.2706. 

Weekly

• Last Candlesticks pattern: Doji
• Time of formation: 26 Sep 2016
• Trend bias: Sideways

Daily

• Last Candlesticks pattern: Shooting star
• Time of formation: 25 Oct 2016
• Trend bias: Near term up

USD/CHF – 1.0115

Despite rising marginally to 1.0146, lack of follow through buying and the subsequent retreat suggests consolidation below this level would be seen and pullback to 1.0065-70 cannot be ruled out, however, reckon downside would be limited to the Kijun-Sen (now at 1.0004) and bring another rise later. A break of said resistance at 1.0146 would extend the erratic rise from 0.9861 (Jan’s low) to 1.0195-00, having said that, reckon key resistance at 1.0248 would cap upside and bring retreat later. Only a daily close above this level would signal recent correction from 1.0344 top has ended at 0.9861, bring further gain to 1.0300 and later retest of 1.0344 which is is likely to hold from here.

On the downside, whilst test of the Tenkan-Sen (now at 1.0078) cannot be ruled out, reckon support at 1.0009 would hold and bring another rise later. Only a daily close below the Kijun-Sen (now at 1.0004) would abort and suggest top is formed, bring weakness to indicated support at 0.9967, a drop below there would add credence to this view and suggest the rebound from 0.9861 has ended, bring further fall to 0.9935-40 but said support at 0.9861 should hold. A drop below this level would revive bearishness and extend erratic decline from 1.0344 top for retracement of early upmove to 0.9850-55 (61.8% Fibonacci retracement of 0.9550-1.0344) and possibly towards 0.9800.

Recommendation: Stand aside for this week.

On the weekly chart, although dollar edged higher again last week to 1.0146, lack of follow through buying and the subsequent retreat suggest consolidation below this level would be seen initially, however, as long as support at 0.9967 holds, mild upside bias remains for another rise, above said resistance would extend gain to 1.0195-00 but price should falter below key resistance at 1.0248, bring further choppy trading. A sustained breach above this level would signal the retreat from 1.0344 has ended, bring further gain to 1.0335-44 resistance area but break there is needed to signal early upmove has resumed for headway to 1.0400-10 and later 1.0500.

On the downside, expect pullback to be limited to the Tenkan-Sen (now at 1.0055) and support at 1.0009 should hold, bring another rise. Only a weekly close below support at 0.9967 would suggest the rebound from 0.9861 has ended, bring test of the Kijun-Sen (now at 0.9947), break there would add credence to this view, bring further fall to 0.9900, then retest of 0.9861. A break of this level would revive near term bearishness for the fall from 1.0344 to bring retracement of early upmove to 0.9850-55 (61.8% Fibonacci retracement) and possibly towards the Ichimoku cloud bottom (now at 0.9722), however, reckon downside would be limited to 0.9690-00 and price should stay well above support at 0.9550.

The Aussie is outperforming its major peers early Tuesday after the Reserve Bank of Australia held interest rates steady at 1.5%. This move was widely anticipated and many market participants deemed the statement as boring with no fresh signals provided on the future path of interest rates, however, the minor tweaks were enough to send AUD higher.

Governor Philip Lowe seemed to rule out the idea of pulling interest rates lower, although inflation remained well below the 2-3% target at 1.5%. The improved conditions in business and consumer confidence along with higher commodity prices are viewed as positive signs of future inflation, which indicates that the easing cycle is currently in the rear-view mirror.

The Australian dollar has been the best performing currency so far this year, up by more than 5% against the dollar, and although the RBA reiterated that an appreciating exchange would complicate the adjustment from the mining investment boom, AUD/USD still managed to gain 0.6% today. However, I believe that any potential gains should be rather limited from current levels, especially since a series of rate hikes are expected from the Fed.

Elsewhere currencies remained stuck in narrow ranges as traders await the two major events of the week, the ECB meeting on Thursday and U.S. labor report on Friday.

While the first U.S. rate hike in 2017 looks almost certain next week, markets still require a confirmation from Friday's NFP report. However, I don't expect to see any strong rally in the dollar until we receive more clarity from Trump's administration on the fiscal side. Given that the President is still struggling to advance on his travel ban and repealing Obama Care, tax reforms and infrastructure spending will likely take more time than previously anticipated, thus, keeping any rally in the dollar limited for now.

Sunrise Market Commentary

• Rates: Consolidation ahead of ECB and payrolls
  Today's eco calendar contains only second tier eco data suggesting more consolidation on core bond markets with Thursday's ECB meeting and Friday's payrolls in mind. Risk sentiment on stock markets is a wildcard for trading. Will we finally get a real correction in the US, away from dazzling heights?
• Currencies: Has post-Yellen USD correction already run its course?
  Yesterday, the dollar found a bottom as last week's correction petered out. A rebound of EUR/USD was blocked by political uncertainty in Europe. Today's eco data might be mixed for the dollar. If sentiment on risk turns positive again, the dollar might gain slightly ground. EUR/GBP remains on an upward trajectory and is testing a next minor resistance.

The Sunrise Headlines

• US equities closed around 0.3% lower after partially overcoming some of the opening losses in an uneventful session. Overnight, most Asian stock markets eke out small gains with Japan underperforming.
• Australia kept interest rates unchanged as risks from Sydney's soaring property prices outweighed subdued inflation. The RBA left the cash rate at 1.5% amid strong growth and trade performances in Q4 2016.
• British consumers are cutting back on non-essential spending as the impact of last year's Brexit vote pushes up the cost of their day-to-day shopping, two surveys showed this morning (BRC & Barclaycard).
• German factory orders fell a much stronger than expected 7.4% M/M to be down 0.8% Y/Y, the biggest decline since 2009 on investment goods. The Ministry points to less big ticket items and is confident manufacturing remains on upward trajectory.
• China will strictly control local government debt quotas and step up checks on illegal debt guarantees, FM Xiao Jie said, as the country's top officials stepped up assurances that they will keep financial risks under control.
• The IMF warned that high levels of household debt tied up in property are a risk to New Zealand's financial stability and backed the central bank's lobby for new tools to deal with the red-hot housing market.
• Today's eco calendar only contains final Q4 EMU GDP and US Trade balance. Austria, Germany (I/L) and the US tap the market. The OECD publishes its interim eco outlook.

Currencies: Has Post-Yellen USD Correction Already Run Its Course?

Has USD correction already run its course?

On Monday, EUR/USD reversed early strength after Alain Juppe said he won't run for president even as Fillion would step out of the election race. At the same time, the dollar gradually found a better bid after tentative early session softness. Even so, USD/EUR and USD/JPY stayed away from last week's recovery top even as a March Fed rate hike is discounted. EUR/USD finished the session at 1.0582 (from 1.0622). USD/JPY closed the day at 113.89 from 114.04.

Overnight, Asian equity indices show modest gains despite a negative close in the US yesterday. The constructive equity sentiment is putting a floor under the dollar, but gains are negligible. EUR/USD is changing hands in the 1.0585/90 area. USD/JPY trades in 113.90 area. The RBA, as expected, left its policy rate unchanged at 1.5%. The bank acknowledged an improvement in global conditions and in domestic activity. So, any expectations for an additional rate cut are unjustified. AUD/USD rebounded from the 0.7580/90 area to the 0.7625 area.

Today, the eco calendar is again thin. The OECD is expected to upwardly revise its growth forecasts. In theory this might be supportive for core bond yields. Usually this supports the dollar more than the euro. Any market reaction will only be of intraday significance. The US trade deficit is expected to widen from $44.3 to $47.0. This has become a politically sensitive issue. A deficit in line or bigger than expected might trigger protection reactions from the Trump administration and weigh on the dollar. Political uncertainty in Europe remains a wildcard. In France, some short-term status quo has been reached as Fillon remains the Republican candidate. This is tentatively negative for the euro, but shouldn't have any immediate further impact. In a daily perspective, the odds for USD trading are mixed. Last week's buy-the-rumour, sell-the fact USD profit taking move looks finished. If sentiment on risk would again turn positive, the dollar might slightly outperform, but no important technical levels in EUR/USD (1.1494) or in USD/JPY (114.95 will be broken today.

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/ solid support. Last week's correction suggests that it is too early for a break. 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 approach remains favoured.

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

EUR/GBP

Sterling softness persists

On Monday, EUR/GBP to a large extent copied the price pattern of EUR/USD. The pair spiked higher to the 0.8665/70 early in Europe, but the gain was reversed as the euro declined on Juppé's statement. Still, sterling couldn't fully profit for the euro softness. EUR/GBP closed the session at 0.8648. Cable also traded with a negative bias and finished the day at 1.2236. So, sterling shows a loss of momentum short-term as recent developments suggest that the BoE has a good case to keep a wait-and-see approach

Overnight, the BRC like for like sales declined slightly more than expected. The BRC sees an ‘undeniable trend of cautious spending on non-essential items. Later today, only the Halifax House prices will be published. The House of lords will have the final debate on the Brexit law. Markets will also look forward to the Budget Statement of UK Fin Min Hammond tomorrow. We see the day-to-day context/momentum as slightly sterling negative. Sterling sentiment has 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 the EUR/USD rebound to go far, but a combination of a temporary improving euro sentiment 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

Daily Pivots: (S1) 1.0557; (P) 1.0598 (R1) 1.0622; More.....

Despite prior brief breach of 1.0630 minor resistance, EUR/USD is staying in established range of 1.0493/1.0630. Intraday bias remains neutral at this point. On the upside, firm break of 1.0630 resistance will argue that pull back from 1.0828 is completed. Also, rise from 1.0339 could possibly be resuming. In that case, intraday bias will be turned back to the upside for 1.0828 resistance and above. On the downside, below 1.0493 support will affirm the case that fall from 1.0828 is resuming the larger down trend. In that case, intraday bias will be back to the downside for resting 1.0339 low.

In the bigger picture, whole down trend from 1.6039 (2008 high) is in progress. Such down trend is expected to extend to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Market movers today

It is another quiet day in terms of global data releases ahead of the ECB meeting on Thursday and the US jobs report on Friday.

We have some important data releases in the Scandis today, not least in Norway. Norges Bank will publish the regional survey, which is its preferred economic indicator. We estimate the index climbed to around 1.0 in February, equivalent to roughly 2.0% annualised growth. Also, manufacturing production data for January is due out.

In Sweden, the budget balance data for February is due out.

For more details on the Scandi releases, see page 2.

Selected market news

Markets are relatively calm this morning. In the US, S&P 500 closed a bit lower yesterday and futures point at further losses today, as investors may have taken profits from the strong gains recently amid the more hawkish Fed strongly indicating a hike next week. EUR/USD is unchanged, just below 1.06. Brent oil trades at USD56 per barrel amid Iraq comments that it is ready to cut oil production further if the OPEC decides to extend its current cut policy, according to Bloomberg. As expected, the Reserve Bank of Australia kept its policy unchanged at 1.50%.

Yesterday, we published our ECB Preview: Inflation on target but still too early to discuss tapering. We expect the ECB to maintain its dovish stance at the meeting on Thursday, although inflation has reached the 2% target, as we expect core inflation will have to exceed 1.0% for a number of months before the ECB will announce tapering of its QE purchases. We still believe the ECB will extend its QE programme beyond December 2017. The ECB released QE details yesterday, see more here.

In the US, Trump has signed a new executive order banning immigration from six Muslim countries ('travel ban 2.0'), effective from 16 March. The new travel ban tries to address some of the problematic issues raised by federal courts. Still, the travel ban is likely to face legal challenges and is likely to be centre of attention in the media coverage in coming days/weeks. For more read CNN.

In France, presidential candidate Francois Fillon got support from the leadership of the Republican party. Yesterday, Alain Juppé (runner up in the primary) said he will not run; therefore, the Republican party did not have any other choice but to back Fillon. Fillon's campaign has suffered heavily from accusations that he paid his wife a salary for a 'fake job' and he is now third in the poll, meaning he is not expected to go through to the second round. The first round of the presidential election will be held on 23 April. For economic and financial implications of a Marine Le Pen win see Le Pen - What If? Implications for Euro and Nordic markets, 23 February 2017.

We expect the US jobs report, due out on Friday, to be strong enough for the Fed to hike next week. See our jobs report preview, US Labour Market Monitor: Jobs report should be more than strong enough for the Fed to hike later this month, 7 March 2017.

Daily Pivots: (S1) 1.2207; (P) 1.2254; (R1) 1.2284; More...

GBP/USD's consolidation from 1.2213 temporary low continues today and intraday bias remains neutral first. While another recovery cannot be ruled out, we'd expect upside to be limited by 1.2382 support turned resistance to bring another fall. As noted before, consolidation pattern from 1.1946 should have completed with three waves to 1.2705 already. Below 1.2213 will turn bias to the downside for retesting 1.1946/86 support zone. Break of 1.1946 will confirm our bearish view and resume the larger down trend. Nonetheless, on the upside, above 1.2382 minor resistance will delay the bearish case and turn bias back to the upside for 1.2569.

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.

Daily Pivots: (S1) 1.0084; (P) 1.0107; (R1) 1.0141; More.....

USD/CHF's consolidation from 1.0145 temporary top continues today and intraday bias remains neutral at this point. As long as 1.008 minor support holds, further rise would be mildly in favor. Break of 1.0145 will extend the whole rebound from 0.9860 and target test on 1.0342 key resistance. Based on neutral medium term outlook, we'd be cautious on topping at around 1.0342. On the downside, break of 1.0008, however, will indicate completion of the rebound from 0.9860. And intraday bias will be turned back to the downside for 0.9860.

In the bigger picture, prior rejection from 1.0327 resistance argues that USD/CHF is staying in a medium term sideway pattern. In any case, decisive break of 1.0342 resistance is needed to confirm underlying strength. Otherwise, we'll stay neutral in the pair first. In case of another fall, we'd expect strong support from 0.9443/9548 support zone. Meanwhile firm break of 1.0342 will target 38.2% retracement of 1.8305 to 0.7065 at 1.1359.

Daily Pivots: (S1) 113.58; (P) 113.85; (R1) 114.16; More...

Intraday bias in USD/JPY remains neutral for the moment as the pair is staying in tight range below 114.94 resistance and above 4 hour 55 EMA. Near term outlook is a bit mixed as the corrective fall from 118.65 might not be completed yet. But still, in case of another fall, we'd still expect strong support from 38.2% retracement of 98.97 to 118.65 at 111.13 to contain downside and bring rebound. On the upside, decisive break of 114.94 will indicate that it's completed with a double bottom pattern (111.58, 111.68). In such case, intraday bias will be turned to the upside for retesting 118.65.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance. Rejection from 125.85 and below will extend the consolidation with another falling leg before up trend resumption.

Daily Pivots: (S1) 1.3350; (P) 1.3393; (R1) 1.3416; More...

USD/CAD is staying in consolidation below 1.3436 temporary top and intraday bias remains neutral first. While deeper retreat cannot be ruled out, downside should be contained well above 1.3209 resistance turned support and bring another rally. Above 1.3436 will extend the whole rise from 1.2968 and target 1.3598 high. Break there will resume the medium term rally from 1.2460 to next fibonacci level at 1.3838.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. The second leg is likely still in progress and could target 61.8% retracement of 1.4689 to 1.2460 at 1.3838. We'd look for reversal signal there to start the third leg. Break of 1.2968 wold at least bring at retest of 1.2460 low. However, sustained trading above 1.3838 would pave the way to retest 1.4689 high.