'We are fairly neutral on the outlook for gold this week.' - Daniel Hynes, ANZ (based on Reuters)

Pair's Outlook

On Monday morning the yellow metal's price remained unchanged, as the bullion attempted and failed to move higher and break the resistance put up by the 20-day SMA at 1,234.09 and the monthly R1 at 1,237.68. As a result the bullion was set to fall down to the 38.20% Fibonacci retracement level at 1,219.20, which it failed to reach on Friday because comments from US monetary policy makers bashed the strength of the US Dollar lower. That caused the yellow metal to regain the losses it had suffered, as the Buck had strengthened.

Traders' Sentiment

SWFX traders have not changed their opinion, as 54% of open positions are long and 57% of trader set up orders are to buy the metal on Monday.

Weekly

• Last Candlesticks pattern: Shooting star 
• Time of formation: 03 May 2016
• Trend bias: Down

Daily

• Last Candlesticks pattern: Shooting star
• Time of formation: 3 May 2016
• Trend bias: Sideways

EUR/USD – 1.0633

As the single currency has staged another strong rebound after holding above previous support at 1.0493, a long white candlestick was formed on Friday and suggesting further consolidation above this level would be seen and test of the Kijun-Sen (now at 1.0661) cannot be ruled out, however, a daily close above resistance at 1.0714 is needed to signal the pullback from 1.0829 top has ended at 1.0493 earlier, bring further gain to1.0745-50 first but price should falter well below said resistance at 1.0829.

On the downside, whilst pullback to 1.0580 cannot be ruled out, reckon downside would be limited to 1.0520 and bring another rebound later. Only a drop below support at 1.0493 would signal the fall from 1.0829 top is still in progress for further weakness to support at 1.0454 but a sustained breach below there is needed to signal the rebound from 1.0340 (Jan low) has ended, bring further fall to 1.0400 and later retest of said support which is likely to hold from here.

Recommendation: Buy at 1.0580 for 1.0780 with stop below 1.0480.

On the weekly chart, euro continued finding support around 1.0493 and has recovered and consolidation above this level would be seen, hence gain to 1.0630-35 cannot be ruled out, however, reckon upside would be limited to 1.0700-05 and 1.0770-80 should hold, bring further consolidation. Only break of resistance at 1.0829 would suggest another leg of rise from 1.0340 low is underway, bring retracement of early decline to previous resistance at 1.0873 and later 1.0930-35 (61.8% Fibonacci retracement of 1.1300-1.0340) but reckon 1.1000 would limit upside and price should falter below 1.1050-60.

On the downside, although pullback to 1.0570-80 is likely, reckon said support at 1.0493-96 would remain intact, bring another rebound later. A drop below 1.0493-96 would extend the retreat from 1.0829 towards key support at 1.0454 but a sustained breach below this level is needed to signal the rebound from 1.0340 has ended, then further fall to 1.0390-00 and later retest of this January low would follow.

On the 4h chart of NZDUSD we can see a nice bearish breakdown to be in progress, with price now specifically trading in the middle of red wave three. As we know, wave 3 is known as the strongest and the steepest wave, which means in our case even more weakness may follow. Well, regarding the intraday view, we see price now trading in sub-wave three, which can see limited downside around the 100.0 Fibonacci ratio and make a temporary reversal into wave 4.

NZDUSD, 4H

Sunrise Market Commentary

• Rates: US yield resistance difficult to break ahead of payrolls or even Fed
  Fed chairwoman Yellen sealed the deal for a March rate, which is completely discounted in rate markets. Given this week's back loaded calendar (payrolls on Friday) and last week's failed test of US yield resistance (2y: 1.3%, 5y: 2%), we believe that consolidation is likely. On EMU bond markets, more French spread narrowing is likely if Juppe nevertheless replaces Fillon.
• Currencies: Dollar falls prey to profit taking. Euro remains well bid
  Late on Friday, the dollar was captured by a buy-the-rumour, sell-the fact-move after Fed's Yellen ‘approved' the scenario of a March Fed rate hike. The euro was well bid as French political uncertainty eased. Today, the eco calendar is thin. There is probably no trigger from a new USD up-leg short-term

The Sunrise Headlines

• US equities closed Friday's session nearly unchanged, as early losses were gradually erased. Asian equities trade modestly higher with Japan underperforming, suggesting a continuation of the global equity rally.
• China wants to strike a balance between growth and risk, PM LI said, trimming its GDP target to 6.5% and cutting its money supply target to about 12%. China also wants to liberalize further the yuan's FX rate, a change from last year.
• A Kantor Sofres poll showed Fillon lost ground in the first round (17%). Le Pen wins (26%), narrowly followed by Macron (25%). If Juppe would be candidate (24,5%), Macron (20%) would not make to the 2nd round, with Le Pen at 27%.
• Moody's affirmed the Belgian Aa3 rating (stable). It expects that Belgium will avoid a return to the excessive debt procedure (EDF) for the foreseeable future and that the structural debt reduction will resume in 2017.
• Fitch affirmed France's AA rating (stable), but will reassess its fiscal forecasts after the elections. S&P confirmed Sweden's AAA rating (stable).
• Brent crude is modestly lower at €55.70/barrel despite Libya halting exports from two of its biggest ports and cutting production.
• Francois Fillon said Sunday he won't give in to pressure from his party to quit the presidential race and be replaced by Juppe. Party leaders meet today to discuss the issue.
• Today, the market calendar contains only second tier eco releases. BoE Haldane and Hogg speak. Highlights this week are the ECB meeting (Thursday), the US payrolls (Friday) and the Chinese Congress

Currencies: Dollar Falls Prey To Profit Taking. Euro Remains Well Bid

USD profit taking: Euro better bid

Thursday's rejected test of the EUR/USD 1.0494 support triggered a further EUR/USD short-squeeze on Friday. Tensions surrounding the French elections eased. After European closure, Fed's Yellen rubberstamped the scenario of a March rate hike. The dollar already lost ground versus euro ahead of Yellen and a further buy-the-rumour sell- the fact reaction led to more dollar selling. A the same time, the euro was fairly well bid across the board. EUR/USD finished the session at 1.0622 (from 1.0507). The correction of USD/JPY was more modest. The pair closed the week at 114.04 (from 114.41).

Overnight, Asian equities are trading modestly positive, with Japanese equities underperforming as South Korea launched missiles towards Japanese waters. The modest reaction to Yellen's comments on Friday supports regional risky assets. The yen trades slightly stronger on the North Korean geopolitical tensions. USD/JPY is changing hands in the 113.85 area. The euro preserves Friday's gains. EUR/USD is changing hands near 1.06.

Today, the euro area February Markit retail PMI and the March Sentix investor confidence are up for release. In the US, the January factory orders will be published. We don't expected a lasting impact on USD trading. Further out this week, the ECB meeting on Thursday and the US payrolls on Friday will be the highlights. (Currency) markets will also keep an eye at the political developments in France. If Juppé would become the Republican candidate for the French Presidential election, it might reduce political uncertainty and be a temporary supportive for the euro. Markets will also ponder whether ECB's Draghi would sound a bit less soft at Thursday's press conference. We don't expect a material change in the ECB assessment, but uncertainty on the issue might be a tentative euro supportive. In a day-to-day perspective, we start the week with a USD neutral bias. The US currency fell prey to modest profit taking at the end of last week and there is no obvious trigger for the USD rally to restart right now. The rejected test of EUR/USD 1.0494 and of the high USD/JPY 114 area is also slightly USD negative. Investors are also scaling back euro shorts. We still look to sell EUR/USD into strength, but are in no hurry to do so right now. EUR/USD 1.0679 is a first ST reference

Global context: Last week, the focus shifted from US fiscal policy to the Fed's monetary policy, as the Fed prepared markets for a rate hike in March. EUR/USD 1.0874 is a solid resistance and we still favour a sell EUR/USD on upticks approach. On the downside, the test of the first intermediate support at 1.0494 was rejected as a March Fed rate hike is discounted. So, some ST USD consolidation might be on the cards. The payrolls are the next key issue for USD trading. The downside test of USD/JPY was rejected. USD/JPY 111.60/111.16 (Range bottom/38% retracement of the 99.02/118.66 rally) remains key support. On the topside, 114.96 is a first point of reference. Last week's correction suggests that it is too early for a break and a new USD/JPY up-leg.

EUR/USD: test of 1.0494 support rejected even as Yellen keeps door wide open for a March Fed rate hike

EUR/GBP

EUR/GBP regains first technical resistance

On Friday, sterling was heavily sold, as the UK services fell more than expected for the second consecutive month. The rift between PM May and the Scottish PM Sturgeon was also sterling negative. May accused PM Sturgeon of sacrificing living standards in Scotland in her pursuit of a breakaway from the UK. EUR/GBP rose above the first resistance at 0.8592 and closed the session at 0.8631. Underlying euro strength also supported the EUR/GBP rebound. Cable dropped to the 1.2215 area after the PMI's were released but rebounded later on USD softness. The pair closed the session at 1.2291.

Today, the UK eco calendar is nearly empty. Later this week, sterling traders will look out for the continuation of the Brexit debate and for the Budget statement (on Wednesday). The UK government will probably indicate that it will set aside some money to counter the consequences of Brexit, but the budget might stay rather restrictive. If anything, we don't expect the budget to be a supportive sterling factor. Sterling sentiment has softened of late. At the same time, the euro was in better shape at the end of last week, helping EUR/GBP to regain the 0.8592 support. The break above this level improves the short-term picture of EUR/GBP. We don't expected the EUR/USD rebound to go far, but a combination of a temporary improving euro sentiment and at the same time ongoing sterling softness might trigger some further EUR/GBP gains short-term. A sustained break north of 0.8645 might reinforce the ST positive momentum. Longer term, we have a sterling negative view, as the Brexit will negatively impact the UK.

EUR/GBP: clears first resistance at 0.8592. 0.8645 resistance on the radar

Download entire Sunrise Market Commentary

Investors across different asset classes are no longer waiting for clarity from the U.S. administration to base their decisions, at least in the short run. The significant rally in U.S. equities and the U.S. dollar last week occurred without any new fresh fiscal signals, in fact, President Trump's speech on Tuesday left many questions unanswered, and still investors reacted as if tax cuts and stimulus plans will be implemented regardless.

Interestingly, last week was the repricing of interest rates expectations, which was the main reason behind the strong greenback's performance. Per CME's Fedwatch tool, the probability of a 0.25% interest rate increase rose from 30% to more than 80%, reflecting the sharp shift in market's sentiments. With only 10 days left for the next FOMC decision, there's nothing likely to reverse that, unless a terrible NFP report release on Friday.

The U.S. jobs reports is expected to show the economy has added 190,000 jobs in February, compared to 227,000 in January. If the figure matches the estimates this shows that the U.S. economy added an average of 185,000 jobs in the past 6 months, strong enough to consider reducing monetary support. However, wage growth is the key figure that matters most. Given that U.S. PCE index, the preferred inflation measure for the Fed hit its highest level since 2012 in January, there's a risk of the economy overheating, especially if oil prices continued to rise. Wage growth have been disappointing analysts, coming in well below expectations for the past three month. However, if February figures buck this trend, not only this will strengthen the case for a March move, but even accelerates the expected pace of tightening policy, leading to a stronger dollar.

On the other side of the Atlantic, investors would like to know if the ECB is becoming worried after inflation in the Eurozone hit the magical 2% benchmark. This might provide ECB hawks, especially from Germany, the ammunition to call for adjusting the ECB's loose monetary policy. Still, most of the governing council may view the recent spike in prices as temporary and no need to rush to exit from current measures. EUR traders should focus instead on the communicated language on Thursday and decide whether it suggests a possible near term shift in policy to scale down purchases of monthly assets. Any indication of such a shift will likely to provide the EUR a boost.

Weekly

• Last Candlesticks pattern: Hanging man
• Time of formation: 22 May 2016
• Trend bias: Down

Daily

• Last Candlesticks pattern: Shooting star
• Time of formation: 15 Feb 2017
• Trend bias: Down

USD/JPY – 113.73

Despite last week’s late rise to 114.75, as the greenback has retreated after faltering below previous chart resistance at 114.96, suggesting further consolidation within recent established broad range would be seen and weakness to the Tenkan-Sen (now at 113.22) cannot be ruled out, however, reckon downside would be limited to 112.75-80 and 112.20-25, price should stay well above support at 111.69, bring rebound later. Only a break of said support at 111.59-69 would extend the decline from 118.66 top to previous support at 111.36 but reckon downside would be limited to 110.50-60 and price should stay well above 109.90-95 (50% Fibonacci retracement of 101.19-118.66).

On the upside, whilst recovery to 114.20-25 cannot be ruled out, reckon last week’s high at 114.75 would hold. Only above resistance at 114.96 would suggest an upside break of recent established broad range, bring further gain to 115.60-65 but upside should be limited to 116.00 and price should falter well below 117.00, bring another decline later.

Recommendation : Stand aside for this week.

On the weekly chart, the greenback staged a strong rebound after holding above previous support at 111.59, suggesting further consolidation above this level would be seen and test of 114.96 resistance cannot be ruled out, however, a weekly close above there is needed to suggest the pullback from 118.66 top has ended at 111.59, bring further gain to resistance area at 115.38-62, Once this level is penetrated, this would provide confirmation and signal early upmove has resumed for stronger rebound to 116.40-50, then test of 116.87 resistance first.

On the downside, expect pullback to be limited to 112.80-90 and b ring another rebound. Below 112.00 would bring another test of 111.59-69 support but break there is needed to signal the retreat from 118.66 top is still in progress for retracement of recent upmove to support at 111.36, then towards 110.90-95 (50% Fibonacci retracement of 101.19-118.66), however, reckon downside would be limited to 110.00 and the Kijun-Sen (now at 109.38), bring another rebound later.

USD/CHF - 1.0086

Most recent candlesticks pattern : N/A

Trend                                    : Sideways

Tenkan-Sen level                  : 1.0086

Kijun-Sen level                    : 1.0106

Ichimoku cloud top                 : 1.0125

Ichimoku cloud bottom              : 1.0106

Original strategy :

Bought at 1.0065, stopped at 1.0095

Position : - Long at 1.0065

Target :  -

Stop : - 1.0095

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As the greenback ran into resistance at 1.0135 and has retreated again after faltering below resistance at 1.0146, suggesting consolidation below this level would be seen and weakness to 1.0060-65 (61.8% Fibonacci retracement of 1.0009-1.0146 and previous support), however, as broad outlook remains consolidative, reckon downside would be limited to 1.0035-40 and price should stay well above support at 1.0009, bring rebound later.

On the upside, expect recovery to be limited to 1.0120 and price should falter well below resistance at 1.0146, bring retreat later. Only above said resistance at 1.0146 would extend recent erratic rise from 0.9661 to 1.0170-80 but reckon 1.0200 would hold from here. 

GBP/USD - 1.2272

Most recent candlesticks pattern   : N/A

Trend                                 : Near term down

Tenkan-Sen level                 : 1.2283

Kijun-Sen level                    : 1.2258

Ichimoku cloud top              : 1.2315

Ichimoku cloud bottom        : 1.2272

Original strategy :

Sell at 1.2350, Target: 1.2250, Stop: 1.2385

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 - 1.0602

Most recent candlesticks pattern   : N/A

Trend                      : Sideways

Tenkan-Sen level              : 1.0607

Kijun-Sen level                  : 1.0568

Ichimoku cloud top             : 1.0537

Ichimoku cloud bottom      : 1.0517

Original strategy  :

Sold at 1.0570, stopped at 1.0575

Position : - Shoer at 1.0570

Target :  -

Stop : - 1.0575

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 test of strong resistance at 1.0630-31, however, a sustained breach above this level is needed to retain bullishness and extend the erratic rise from 1.0493 low for retracement of early decline to 1.0660-65 (50% Fibonacci retracement of 1.0829-1.0493) and later test of resistance at 1.0680.

In view of this, would not chase this rise here and would be prudent to stand aside in the meantime. Below the Kijun-Sen (now at 1.0568) would prolong consolidation and risk weakness to 1.0540 , 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.

Daily Pivots: (S1) 139.62; (P) 140.05; (R1) 140.52; More...

GBP/JPY is staying in range of 138.53/142.79 and outlook is unchanged. Initial bias stays neutral for the moment. Price actions from 148.42 are seen as a corrective pattern. Below 138.53 will bring deeper fall, possibly through 136.44 support. But strong support could be seen at 50% retracement of 122.36 to 148.42 at 135.39 to bring rebound. Above 142.79 will turn bias back to the upside for 144.77 and above.

In the bigger picture, price actions from 122.36 medium term bottom are still seen as a corrective pattern. Main focus is on 38.2% retracement of 195.86 to 122.36 at 150.42. Rejection from there will turn the cross into medium term sideway pattern with a test on 122.36 low next. Though, sustained break of 150.42 will extend the rebound towards 61.8% retracement at 167.78.