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France Conservative political Juppe confirmed he would not run for President

Notes/Observations

France Conservative political Juppe confirms he will not run for President; brings political riks back into elections

Geopolitical tensions on Korean peninsula flared up again ahead of the annual joint US-South Korea military exercises

Deutsche Bank confirmed plans to raise €8B (31.9% of market cap) through rights issue on Mar 21st

Overnight:

Asia:

China National Peoples' Congress (NPC) formally sets 2017 GDP growth target of "around 6.5% or higher if possible" vs 6.5-7.0% in 2016 (in-line with press speculation). CPI maintained at 3.0%

China NDRC State Planner Vice Chairman: Will deepen reforms in 2017 and ensure prices are basically stable

China PBoC Dep Gov Yi Gang: China did not need to raise interest rates or cut RRR for the time being; Yuan to remain relatively strong but will fluctuate in near term

Former China Commerce Min Chen Deming: Both China and the US will be weakened if there is a trade war

North Korea said to have fired 4 missiles into eastern Japanese sea (**Note: Event comes as South Korea and United States are currently holding their annual military exercises, known as Foal Eagle)

Japan PM Abe said to consider potential snap election in 2018. The ruling LDP party endorsed changes to party rules that would allow PM Abe to remain until 2021 (run for a 3rd term) and become the country's longest-serving leader in the post-World War II era

Europe:

France conservative politician Alain Juppe expected to announce he would NOT run for president if candidate Fillon stepped down

French Republican Political Committee Statement: To discuss situation of its Presidential Candidate Fillon at 12:00 ET (17:00 GMT) on Monday, Mar 6th. Meeting brought forward by 24 hours due to ‘evolution of political situation'

Germany BDB Banking Association: Given the economic growth and prices outlook, the exceptionally strong monetary policy impulse provided by the European Central Bank (ECB) is no longer necessary

UK Chancellor Hammond: To take a cautious approach to spending in Wednesday's Budget to ensure that the UK has "got enough in the tank" to get out of the EU

UK Manufacturer's Organization EEF/BDO Survey: UK manufacturers growing at fastest pace in more than 3 years, helped by lower GBP currency and recovery in core EU markets

Italy Govt said to be considering measures to spur economy

ECB's Stournaras (Greece) reiterated view to swiftly conclude Greece bailout review

Fitch affirmed France sovereign rating at AA; outlook Stable

S&P affirmed Sweden sovereign rating at AAA; outlook Stable

Americas:

President Trump claimed Obama ordered wire taps on his phones back in October; Obama spokesperson denied the allegation

Economic data

(DE) Germany Feb Construction PMI: 54.1 v 52.0 prior

(EU) Euro Zone Mar Sentix Investor Confidence (beat): 20.7 v 18.5e

(GR) Greece Q4 Final GDP Q/Q: -1.2% v -0.4%e; Y/Y: -1.4% v 0.2%e

Fixed Income Issuance:

None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 -0.2% at 3,396, FTSE -0.3% at 7,354, DAX -0.3% at 11,993, CAC-40 -0.3% at 4,982, IBEX-35 +0.1% at 9,811, FTSE MIB -0.4% at 19,592, SMI -0.1% at 8,661, S&P 500 Futures -0.2%]

Market Focal Points/Key Themes: European equity indices are trading generally lower after a mixed session in Asia overnight; shares of Deutsche Bank the notable laggard in the Eurostoxx after confirming plans to raise €8B through rights issue; shares of Standard Life in the FTSE 100 the notable gainer after confirming they are to acquire Aberdeen Asset Management for 286.5p/shr; shares of EasyJet also notably higher after releasing their February metrics; commodity and mining stocks trading lower in the index as copper prices trade sharply lower intraday; Shares of PSA Group the notable gainer in the French CAC-40 after they confirmed to acquire GM's European units Opel/Vauxhall for €2.2B to become Europe's second largest automobile manufacturer.

Upcoming scheduled US earnings (pre-market) include Armstrong Flooring, Ecopetrol, and Fairpoint Communications.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Aurelius AR4.DE +0.9% (FY16 results), Devro DVO.UK -2.3% (FY16 results), EasyJet EZJ.UK +1.5% (Feb metrics), Synthomer 7YC.DE +1.5% (FY16 results)]

Energy: [Alpiq ALPH.CH +1.1% (FY16 results), Bowleven BLVN.UK -5.1% (farm-out agreement with Victoria Oil & Gas), Victoria Oil & Gas VOG.UK +12.0% (farm-out agreement with Bowleven)]

Financials: [Aberdeen Asset Management ADN.UK +4.2% (confirms to be acquired by Standard Life for 286.5p/shr), Deutsche Bank DBK.DE -6.2% (confirms plans to raise €8B through rights issue; exec changes), Flughafen Zuerich FHZN.CH -1.3% (FY16 results), Standard Life SL.UK +5.2% (to acquire Aberdeen Asset Management)]

Industrials: [Norwegian Air NAS.NO -1.6% (Feb metrics), PSA UG.FR +2.2% (Confirms to acquire GM's Opel/Vauxhall for €2.2B)]

Technology: [Ultra Electronics ULE.UK +6.0% (FY16 results)]

Speakers

France politician Juppe (Conservative) stated that he would not run for President; He added that the Fillon candidacy was now a 'dead-end'; uniting right and center was more difficult at this time

Greece PM Tsipras: 2016 saw growth return to country and 2017 would see high growth rate. National growth strategy was needed for a 2021 roadmap

Turkey Central Bank: General FX impact observed in Feb inflation data. TRY currency (Lira) weakening led to price gains in basic goods last month, resulting in faster core inflation

China PBoC Dep Gov Yi Gang stated that to maintain exchange rate policy framework of managed flows based on market supply and demand with reference to basket. CNY currency (Yuan) was stable at a reasonable and balanced level

Currencies

FX markets saw the USD mixed just ahead of the NY morning. Overall dealers noted opposing forces battled for momentum. USD consolidating its recent gains from its Fed-inspired rally. Fed Chair Yellen virtually confirmed intentions to raise rates this month in her speech on Friday while dealers noting a lot of EUR supportive news over recent days particularly France's political centre looked less fragmented from weekend press reports. ECB meets on Thursday, with stronger global inflation and calmer peripheral sovereign spread markets working in its favor. EUR/USD moved off session highs after France politician Juppe (Conservative) confirmed he would not run for President.

GBP/USD hovering around seven-week low after weak UK data from last week. Pair lower by 0.2% at 1.2270 area. Focus will be on Chancellor of the Exchequer Hammond budget statement on Wednesday.

USD/JPY softer on Korean Peninsula jitters. North Korea said to have fired 4 missiles into eastern Japanese sea (**Note: Event comes as South Korea and United States are currently holding their annual military exercises, known as Foal Eagle)

Fixed Income:

Bund futures trade at 161.19 up 48 ticks trading in the lower part of today's range, with price remaining close to the lows made on Friday. Key resistance remains the 163.50 level. Downside momentum targets 160.50 initially followed by 160.00 level. Another major leg lower could target 157.50.

Gilt futures trade at 128.28 up 35 ticks with the focus falling on the UK budget, which will be announced on March 8th. Resistance lies at the 130.00 level, with further upside targets including the 132.36 region. Support lies at 127.50 level, followed by 126.80 then 125.90.

Looking Ahead

05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month Bills

06:25 (BR) Brazil Central Bank Weekly Economists Survey

06:30 (CL) Chile Jan Economic Activity Index (Monthly GDP) M/M: -0.1%e v +0.9% prior; Y/Y: 1.0%e v 1.2% prior

06:30 (TR) Turkey Feb Real Effective Exchange Rate (REER): No est v 88.17 prior

06:45 (US) Daily Libor Fixing

07:00 (IN) India announces details of upcoming bond sale (held on Fridays)

08:00 (BR) Brazil Feb PMI Services: No est v 45.1 prior, Composite: No est v 44.7 prior

08:00 (ES) Spain Debt Agency (Tesoro) to announce size of upcoming Bill issuance (held on Tuesday)

08:15 (UK) Baltic Dry Bulk Index

08:30 (CH) Swiss Government Question Time in Parliament

08:50 (FR) France Debt Agency (AFT) to sell combined €5.6-6.8B in 3-month, 6-month and 12-month BTF Bills

09:00 (MX) Mexico Feb Consumer Confidence: 68.6e v 68.5 prior

09:30 (EU) ECB announces Covered-Bond Purchases

09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

10:00 (US) Jan Factory Orders: 1.0%e v 1.3% prior

10:00 (US) Jan Final Durable Goods Orders: 1.0%e v 1.8% prelim; Durables Ex-Transportation : +0.1%e v -0.2% prelim; Capital Goods Orders (Non-defense ex aircraft): No est v -0.4% prelim, Capital Goods Shipments (Non-defense/ex-aircraft): No est v -0.6% prelim - Durables Ex-Defense: No est v 1.5% prelim

11:30 (US) Treasury to sell 3-Month and 6-Month Bills

GBP/USD - 1.2265

Original strategy :

Buy at 1.2220, Target: 1.2340, Stop: 1.2185

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.2220, Target: 1.2340, Stop: 1.2185

Position : -

Target :  -

Stop : -

Although cable dropped to as low as 1.2214 late last week, the subsequent rebound suggests consolidation above this level would be seen with mild upside bias for recovery to 1.2315-20 (38.2% Fibonacci retracement of 1.2479-1.2214), above there would extend gain to 1.2347 (50% Fibonacci retracement and previous support), however, reckon upside would be limited to 1.2375-80 (61.8% Fibonacci retracement of 1.2479-1.2214) and bring another decline later. 

In view of this, we are looking to turn long on dips but one should take profit on such a rebound. Below said support at 1.2214 would extend recent decline from 1.2706 top to 1.2200, then towards 1.2170-75 but reckon 1.2150 would hold from here, risk from there is seen for another rebound. 

EUR/USD - 1.0592

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

The single currency rallied after holding above previous support at 1.0493, dampening our bearishness and consolidation with mild upside bias is seen for marginal gain, however, as broad outlook remains consolidative, reckon upside would be limited to 1.0660-65 (50% Fibonacci retracement of 1.0829-1.0493) and resistance at 1.0680 should hold, price should falter well below 1.0700-05 (61.8% Fibonacci retracement), bring retreat later.

In view of this, would not chase this rise here and would be prudent to stand aside in the meantime. Below 1.0570-75 would prolong consolidation and risk weakness to 1.0540-45, however, support at 1.0493 should remain intact. Only a drop below this support would revive bearishness and signal;l recent decline from 1.0829 has resumed for further selloff to 1.0470 and then towards previous support at 1.0454.

USD/JPY - 113.77

Original strategy  :

Sell at 114.35, Target: 113.35, Stop: 114.70

Position :  -

Target :  -

Stop : -

New strategy  :

Sell at 114.35, Target: 113.35, Stop: 114.70

Position :  -

Target :  -

Stop : -

Although the greenback rose briefly to 114.75, the subsequent sharp retreat suggests top is possibly formed there on Friday, hence consolidation with mild downside bias is seen for retracement of last week’s rise to 111.69, hence weakness to 113.47 support is likely, below there would bring further fall 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 114.40-50 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.

EUR/USD – 1.0593

EUR/USD:   Wave (c) of 2 ended at 1.3993 and wave 3 of III has commenced for weakness to 1.0411 (1.236 of wave 1), then 1.0000.

Although the single currency fell last week to as low as 1.0495, as euro has staged a strong rebound after holding above previous support at 1.0493, retaining our view that further consolidation above this level would be seen and another corrective bounce to 1.0640 cannot be ruled out, however, still reckon upside would be limited to 1.0690-00 and price should falter below 1.0745, bring another decline later. Below 1.0545-50 would bring another test of 1.0493-96 support but break there is needed to add credence to our view that the rebound from 1.0340 has ended at 1.0829 and bring further fall to indicated key support at 1.0454. Looking ahead, a sustained break below this level would suggest the rebound from 1.0340 has ended, bring subsequent decline to 1.0390-00, then towards said recent low at 1.0340.

Our preferred count on the daily chart remains that a wave (II) from 1.2329 ended at 1.5145 with A-leg ended at 1.4720, followed by wave B at 1.2457, the wave C from there was also a 3 legged move and is labeled as (a): 1.3739, (b): 1.2885, the wave iii of the 5-waver (c) from 1.2885 has ended at 1.4339 and wave iv is a triangle ended at 1.3878 and wave v formed a top at 1.5145. The decline from there is a 5-waver (C) with minor wave (i) of I of (C) ended at 1.4218 with wave (ii) ended at 1.4580, wave (iii) ended at 1.3267 and wave (iv) ended at 1.3692 and wave (v) ended at 1.1876, this is also the low of wave I of (C) and wave II ended at 1.4940, hence wave III is now in progress with a diagonal wave 1 ended at 1.2042, the breach of previous support at 1.1876 (wave I trough) adds credence to our view that the wave 2 has ended at 1.3993, wave 3 has commenced for further weakness to 1.0411, then towards 1.0000.

On the upside, whilst initial recovery to 1.0680 cannot be ruled out, reckon upside would be limited to 1.0745 and bring another decline later. A daily close above this level would risk retest of 1.0829 but break there is needed to signal the corrective rise from 1.0340 low is still in progress for retracement of recent decline to resistance at 1.0873 but still reckon upside would be limited to 1.0930-35 (61.8% Fibonacci retracement of 1.1300-1.0340) but reckon 1.1000 would hold from here, bring another decline in Q2.
 
Recommendation: Sell at 1.0740 for 1.0540 with stop above 1.0840.

Euro's long-term uptrend started from 0.8228 (26 Oct 2000) with an impulsive structure. The rise from 0.8228 to 0.9593 (5 Jan 2001) is labeled as wave I, the retreat to 0.8352 (6 Jul 2001) is wave II and the rally to 1.3670 (31 Dec 2004) is wave III. Wave IV from there ended at 1.1640 (15 Nov 2005), the subsequent upmove to 1.6040 (July 15, 2008) is treated as wave V, the major selloff from the record high of 1.6040 to 1.2329 (October 27, 2008) signals a reversal has taken place with (I) leg ended at 1.2329 and once (II) ended at 1.5145, wave (III) itself is an extended move with I: 1.1876 and complex wave II ended at 1.4902, wave III has commenced with wave 1 and 2 ended at 1.2042 and 1.3993 respectively, wave 3 of III is now unfolding for weakness towards parity.

Speaking to the Executives' Club of Chicago on Friday, Fed Chair Janet Yellen confirmed that the FOMC is likely to raise borrowing costs when it meets next week. Yellen was particularly hawkish, indicating that if at the upcoming meeting the Committee judges that employment and inflation continue to evolve in line with the Fed's expectations, then an increase in the Federal funds rate would likely be appropriate. Coming on top of similarly optimistic comments from many of her colleagues recently, the Chair's comments boosted the probability for a March rate hike even further to reach 80%, according to the Fed funds futures. Fed Vice Chair Fischer, who also spoke on Friday, left hints that he may vote for a March hike too. He said that the recent commentary from many FOMC officials is correct, and that he strongly supports it. Nevertheless, despite these hawkish signals from the Fed's top two policymakers, the dollar drifted lower following their speeches. We think that this may have been a "buy the rumor, sell the fact" reaction, as investors who had already entered USD-long positions on the hawkish chorus from other FOMC members, locked in profits on Yellen's confirmation. EUR/USD traded higher, breaking above the resistance (now turned into support) barrier of 1.0570 (S1) to stop fractionally below the 1.0630 (R1) hurdle, defined by the peaks of the 27th and 28th of February. In our view, bearing that the pair oscillates between that zone and the key support of 1.0500 (S2) since the 17th of February, the short-term path is sideways. As such, given the rate's proximity to the upper bound of the range, we see the case for the bears to jump in and drive the action lower, perhaps to test the 1.0570 (S1) level as a support this time. A clear dip below that obstacle could open the way for another test near the key psychological zone of 1.0500 (S2).

Back to the Fed, in our latest reports we indicated that in order for us to reassess our view for the next rate hike to come in June, we would like to see hawkish hints from Yellen and Fischer, as well as a strong employment report for February. Given the undeniably hawkish signals from the two top officials, we switch our view and now consider the March meeting as the most likely candidate for action. However, we would also like to see February's jobs data, due out on Friday, before we assume that March is a done deal. At this stage, we think that a serious disappointment in the report, particularly in average hourly earnings, is needed to stop the Fed from hiking when it meets next.

In our view, the main reason the FOMC wants to hike in March is not due to strong underlying fundamentals, as the economic outlook has not changed so dramatically from the February meeting, when the Committee appeared hesitant. Instead, the fact that global markets are calm at the moment allows the Fed to proceed without rocking the boat, something hinted by Fed Board Governor Brainard last week. She noted that global "constraints" of the past two years caused by problems from Europe to China are finally easing.

With regards to the dollar, despite the correction lower after Yellen's comments, we expect the currency to come back under buying interest in the coming days. This is not only due to the prospect of a March rate hike, as that scenario is largely priced in already. We believe that the main factor for USD to outperform may be expectations for faster rate hikes. Yellen suggested that the process of scaling back accommodation in the future will probably not be as slow as it was in 2015 and 2016. We should also bear in mind that in December, only some FOMC members included expectations for greater fiscal policy in the forecasts for the rate path. This suggests that as uncertainty around fiscal policy dissipates, we could see the "dot plot" being revised higher at one of the upcoming meetings, perhaps as early as in March.

RBA policy meeting in focus

During the Asian morning Tuesday, the RBA will announce its rate decision. The forecast is for the Bank to remain on hold, a view we share following strong hints from Governor Lowe recently that the bar for any further easing is high. The Bank has maintained a neutral bias in all of its recent communications, and in its latest policy statement, it even disregarded the softness in Australian data as being transitory. Considering that economic data have been mixed since that gathering, we do not expect the Bank to change its neutral tone. We believe that the Aussie will react positively to another neutral statement, especially after Lowe recently noted that it's hard to say that the currency is overvalued. However, we would treat any positive reaction in AUD/USD as providing renewed selling opportunities. The latest dollar rally brought the pair below the key support (now turned into resistance) obstacle of 0.7600 (R1), a move that signaled a short-term trend reversal, in our view. We expect sellers to take the reins again soon and aim for 0.7550 (S1), where a dip is possible to set the stage for the 0.7500 (S2) psychological area.

Today's highlights:

During the European day, the economic calendar is empty, with no major events or indicators due to be released.

From the US, we get factory orders for January, which are expected to have slowed somewhat.

We have only one speaker scheduled for today: Minneapolis Fed President Neel Kashkari.

As for the rest of the week, on Tuesday the Reserve Bank of Australia decision will be in focus, as we outlined above.

OnWednesday, we get China's trade data for February. In the US, the ADP employment report for February is expected to show that the private sector have added 180k jobs.

On Thursday, the highlight of the day will be the ECB policy decision, followed by a press conference from President Draghi. The forecast is for the Bank to stand pat. We expect President Draghi to maintain a dovish tone, amid non-accelerating underlying inflationary pressures. From China, we get inflation data for February.

On Friday, the US employment report for February will take center stage. Expectations are for a solid report overall, which may seal the deal with regards to March rate hike by the Fed. We also get Canada's employment data for February, and Norway's CPI figures for the same month.

News and Events:

China sets growth target to 6.5% for 2017

China's National People's Congress (NPC) began its annual meeting on Sunday. Li Keqiang, the Premier of the State Council, opened the session with a speech that focused mostly on the economic situation but also on the country's disastrous air pollution. The annual growth forecast for 2017 was set to 6.5%, which is slightly lower than last year's forecast of 6.7%. This optimism is a clear sign that China is not ready to accelerate the deleveraging of its economy yet despite mounting concerns about bad banks loan. Indeed, since the financial crisis the world's second largest economy has been betting massively on debt to keep the economy running at full speed.

The zombification of the Chinese economy will remain one of the hottest topics of 2017. However, the country will also take advantage of a weaker presence of the USA in the area - thanks to Donald Trump's protectionist stance - which will ensure that China can strengthen its position as a regional leader. USD/CNY was down 0.10% this morning. Nevertheless, on the medium-term, the renminbi was trading with a downward momentum as the currency pair rose from 6.8315 in January to around 6.90 this Monday. We maintain our bearish view on the yuan, with 6.96 as medium-term target.

Yellen confirms rate hike

Fed Chair Yellen's Friday message all but confirms a rate hike in March (following a string of hawkish Fed comments), barring any unexpected developments. As if the Fed Chief needed any support, Vice-Chair Fischer stated that economic data was strong with no data “coming in badly in the last three months.” The USD weakened marginally as the rate market was already pricing in a near 98% chance of a 25bp March 14-15th hike. Markets are now focused on the steepness of the forward policy path as additional rate hikes are under-priced. Our current view is for an increase in policy rates in March, June and September. The highlight of the US economic data week will be the jobs report on Friday. A solid NFP read above 200k, unemployment rate at 4.7% and wage growth up 2.7% y/y will increase the probability of three rate hikes in 2017 and force USD demand. We do not anticipate that 75bp on tightening will derail the current equity markets rally. However, should the USD rally become too aggressive or Trump's pro-growth policy fail in congress we could see sudden deceleration in Fed hiking path expectations. For the FX markets, yield differentials will dominate pricing. On this thinking yield-sensitive USDJPY remains a strong candidate for a further rally. Trade will need to discount Trump's political nonsense (budget plans and ACA reforms are “expected” to be released) and remains forced on economic data. In addition to payroll, we will get factory orders, durable goods (today) and trade balance. Elsewhere, this week's ECB meeting will be a non-event as policy will remain unchanged and forward guidance will be limited ahead of political uncertainty. EURCHF remains the trade to handle increased European risk.

ECB meeting in focus this week

This Thursday, the ECB will deliver its rates decision with many expecting them to remain unchanged. However, we expect to see several announcements regarding monetary policy. Recent fundamental data has indicated an improvement. Industrial Production growth is also positive (+2% in December) and inflation has surged since the start of the year. Eurozone HCPI is now above the target of 2% according to Eurostat. It is the first time in four years that the central bank's target has been reached even though core inflation is stalling around 0.9%. We believe that ECB-Fed monetary policy divergence is becoming a reality while a US rate hike next week is now very likely. The ECB for the time remains largely all-in. We recall that from April the ECB will start buying €60bn bonds instead of €80bn until the end of the year. This should not last forever, because of bonds scarcity and the better data. This is why we believe that the ECB should start calling for a new monetary plan for 2018. Lower unemployment data and greater inflation should push policymakers to envisage tightening in the medium-term. At the meeting, political uncertainties should remain at the centre of attention and it is clear that further developments from the French and Dutch elections will prevent the ECB from making changes to this year's monetary policy.

Today's Key Issues (time in GMT):

• Feb Markit France Retail PMI, last 53,1 EUR / 09:10
• Feb Markit Italy Retail PMI, last 45,6 EUR / 09:10
• Mar Sentix Investor Confidence, exp 18,5, last 17,4 EUR / 09:30
• BOE Chief Economist Andy Haldane Speaks in London GBP / 09:30
• Central Bank Weekly Economists Survey (Table) BRL / 11:25
• Feb Effective Exchange Rate, last 88,17 TRY / 11:30
• BOE Deputy Governor Hogg Speaks in Lincoln GBP / 11:30
• Feb Markit Brazil PMI Composite, last 44,7 BRL / 13:00
• Feb Markit Brazil PMI Services, last 45,1 BRL / 13:00
• Bank of England Bond Buying Operation GBP / 14:50
• mars.03 Bloomberg Nanos Confidence, last 58,1 CAD / 15:00
• Jan Factory Orders, exp 1,00%, last 1,30% USD / 15:00
• Jan Factory Orders Ex Trans, last 2,10% USD / 15:00
• Jan F Durable Goods Orders, exp 1,00%, last 1,80% USD / 15:00
• Jan F Durables Ex Transportation, exp 0,10%, last -0,20% USD / 15:00
• Jan F Cap Goods Orders Nondef Ex Air, last -0,40% USD / 15:00
• Jan F Cap Goods Ship Nondef Ex Air, last -0,60% USD / 15:00
• mars.05 Trade Balance Weekly BRL / 18:00
• RBNZ Governor Wheeler Speaks in Auckland (Not Public) NZD / 18:00
• Kashkari speaks at NABE conference USD / 20:00
• RBNZ's Spencer Speaks on Bank Capital Requirements NZD / 22:00
• Feb AiG Perf of Construction Index, last 47,7 AUD / 22:30
• mars.05 ANZ Roy Morgan Weekly Consumer Confidence Index, last 119,1 AUD / 22:30

The Risk Today:

EUR/USD is moving sideways. 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). Hourly resistance is given at 1.2570 (24/02/2017 high) w). The road is wide-open for further decline. 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.

USD/JPY - 113.80

USD/JPY – Wave V of larger degree circle V has possibly ended at 75.31 and major correction has commenced and already met indicated target at 125.00.

Although the greenback fell briefly to 111.69, as dollar found renewed buying interest there and has staged a strong rebound, retaining our view that further choppy trading above previous support at 111.59 would be seen and test of 114.96 resistance cannot be ruled out, however, break there is needed to revive bullishness and signal low has been formed at 111.96, bring a stronger rebound to indicated resistance at 115.62, once this level is penetrated, this would add credence to this view and suggest the pullback from 118.66 has ended, bring further gain to 116.00-10 first. Looking ahead, a sustained break above resistance at 116.87 would signal early upmove has resumed for further the pullback from 118.66 has ended, bring further gain to another previous resistance at 117.53 first.

Our preferred count is that, triangle wave IV (with circle) ended at 101.45 and the circle wave V brought dollar down to the record low of 75.31 in 2011 and the subsequent rebound signal major correction has commenced with A leg ended at 84.19, followed by wave B at 77.14 and impulsive wave C is now unfolding (indicated upside target at 125.00 had been met) for gain towards 127.00 level. In the event dollar drops below support at 99.01, this would confirm medium term decline from 125.86 top (2015 high) has resumed for subsequent weakness to 98.00 and possibly 97.00.

Under this count, this wave C is unfolding as impulsive waves with (1) (2), 1 2 ended at 80.67, 79.07, 82.84 and 81.69 respectively, hence the extended wave 3 has ended at 103.74 and wave 4 correction of recent upmove should bring weakness to 92.57, then towards 90.88 but psychological support at 90.00 should limit downside and bring another rally later in wave 5, indicated target at 125.00 had been met and gain to 127.00 cannot be ruled out but reckon price would falter below 130.00.

On the downside, whilst initial pullback to 113.15-20 cannot be ruled out, reckon downside would be limited to 112.70-80 and bring another rebound later. Below 112.00-10 would bring test of indicated support area at 111.59-69, however, dollar needs to penetrate indicated support at 111.36 to retain bearishness, bring retracement of recent upmove to 110.90-00, then 109.90-95 (50% Fibonacci retracement of 101.19-118.66) but downside should be limited to 109.50 and price should stay above 109.00, bring rebound later.

Recommendation: Stand aside for this week.

On the monthly chart, we have changed our preferred count that an impulsive wave is unfolding with major wave III with circle ended at 79.75, then followed by wave IV with circle and is labeled as a triangle with A: 147.64 (11 August, 1998), B: 101.25, C: 135.20, D: 101.67 and E leg ended at 124.14 to end the wave IV with circle. Hence, wave V with circle commenced from there and hit a record low of 75.31, however, the subsequent strong rebound signals this circle wave V has possibly ended there, hence gain to (indicated upside target at 122.00 and 125.00 had been met), the retreat from 125.86 suggests wave A of major correction has ended there and wave B correction back to 99.00, then 95.00 would be seen, however, reckon downside would be limited to 90.00, bring another rebound in wave C next year.

EUR/USD has edged lower on Monday, after posting strong gains in the Friday session. Currently, the pair is trading at the 1.06 level. In the Eurozone, retail sales were stable in February, as Retail PMI came in at 49.1, down slightly from 50.1 a month earlier. The Sentix Investor Confidence report improved to 20.7, beating the estimate of 18.8 points. In the US, today's highlight is Factory Orders, with the indicator expected to dip to 1.1%. On Tuesday, Germany releases Factory Orders, with the markets bracing for a sharp decline of 2.5%.

The euro dropped below the 1.05 line on Thursday, as EUR/USD dropped close to 7-week lows. Investors seized the opportunity and locked in profits on Friday, which helped boost the sagging euro. The pair gained 1.0% on Friday, marking its strongest 1-day gain since January 5. German Retail Sales disappointed, but this didn't impede the euro's rebound. Retail Sales declined 0.8%, well off the forecast of +0.2%. This marked a fifth decline of six releases, pointing to weakness in German consumer spending. Meanwhile, Eurozone inflation levels pointed higher in February. German Preliminary CPI rebounded posted a strong gain of 0.6%, matching the estimate. The Eurozone CPI Flash Estimate rose to 2.0%, hitting the ECB inflation target. Policymakers are now faced with a concern that they haven't experienced in years – will inflation rise too fast, too quickly? The central bank could curb inflation by tightening monetary policy, but will be hesitant to tinker with interest rates or its asset-purchase program unless growth and inflation indicators heat up significantly.

With the US economy continuing to perform well, market sentiment has heated up regarding a Fed rate hike. Federal Reserve policymakers continue to sound hawkish about a rate move on March 15, when the Fed next meets for a policy meeting. Last week, FOMC members William Dudley and John Williams both hinted at an imminent hike by the Fed. Dudley said the case for a hike is compelling, while Williams noted that a rate increase will be up for “serious consideration” at the March policy meeting. The markets are taking these statements at face value, as the odds of a March move have increased dramatically. The likelihood of a rate this month has jumped to 80%, compared to 33% just a week ago. Why the huge jump in odds? One reason is that policymakers are now saying they won't wait for Donald Trump to outline tax reform or other economic packages before making a monetary move. This is a significant departure from a few weeks ago, when the Fed sent out signals that it would stay on the sidelines until it had a clearer picture of the economic stance of the new administration.

'The ongoing steep upturn in costs suggests that consumer-price inflation has significantly further to rise'. - Chris Williamson, Markit/CIPS

Activity in the British services sector, which accounts for almost 80% of the economy, dropped more than expected last month amid inflationary pressures linked to the weak Pound, a private survey revealed on Friday. Markit/CIPS reported its Purchasing Managers' Index fell to 53.3 in February from 54.5 points seen in the preceding month, while market analysts anticipated a slight decrease to 54.2. Markit said that the latest PMI surveys were consistent with economic growth slowing to 0.5% in the Q1 of 2017 from the previous quarter's 0.6%, in line with the Bank of England's forecasts. Data suggested that the widely-expected Brexit economic slowdown finally started to hit the UK economy. Moreover, some analysts said that retail sales data, scheduled for the release on March 23rd, would probably paint even worse picture of the post-Brexit recession as the weak Sterling pushed prices sharply higher. Since the June 23 referendum, the Pound lost nearly 18% of its value. Back in February, input prices and prices charged by service providers advanced at the fastest pace in more than eight years.

After the release, the Pound dropped 0.4% against the US Dollar to trade at 1.2215, its seven-week low. Against the Euro, the Sterling fell 0.6% to trade at 86.16.