Whatever debate there was regarding the March 15 FOMC was indeed settled by Fed Chair Janet Yellen's remarks to the Executives' Club of Chicago on Friday. March is on! Equity markets took the comments in stride as investors view the rate hike as a positive reflecting an economy that is strengthening. Forex markets reaction was somewhat guarded as the dollar came off intraday highs with the March rate hike is now completely priced. This price action suggests that further dollar upside is limited near term. We've moved from 30 to 80 % probability for a March hike in a mere two weeks, so post-Yellen profit taking was always in the cards. Although I view the March hike as a preemptive strike, I suspect at this stage only an outlier NFP similar to last May which derailed the Fed's June 2016 rate hike, would alter the FOMC decision for March. But the real concern for dollar traders is the trajectory for interest rates in 2017. Dr Yellen did take the sting out her Hawkish delivery, by referencing data dependency. However, if the data suggests that employment and inflation are close and if President Tump follows through with infrastructure spending and tax cuts, traders will then start thinking about the possibility of the fourth hike in 2017, and this will boost the US dollar outlook significantly

Australian Dollar

Eyes will be on today's RBA cash rate decision, and while the RBA is unlikely to shift away from its neutral stance, as usual, the markets will be attuned to the Central Banks views of both domestic and international markets evolution

In early trading, the Aussie is perched just below 76 on a combination of USD longs profit taking and buoyant risk sentiment after equity markets took Dr Yellen remarks well. So long as the global growth story line remains firmly intact, support for the Aussie dollar should remain robust near-term

Japanese Yen

USDJPY continues to hold, but the topside momentum based on March has slowed considerably. As we enter the Fed blackout period, the dollar will get zero support like it did last week from the hawkish chorus of Fed speakers that were underpinning the Greenback. Dealers are looking at 114.95 ( FEB High) as the key for further topside momentum, but at his stage, it's looking like a bridge too far to cross.

Euro

The EUR risk profile in EUR changing with high PMI and inflation was surging. Rate curve volatility is picking up so the higher rates should keep EUR supported near term even more so as French election risk is abating with Le Pen losing ground in the polls.

Welcome back to your screens for another week. I hope your weekend was refreshing and you’re back ready to crush another trading week!

What better way to spend your Monday Asian session than analysing EUR/USD starting with a clear as day 4 hourly support level on the 4 hourly.

EUR/USD 4 Hourly:

So as you can see, we have a pretty obvious support level at the bottom of the chart thanks to that juicy double bottom.

Both touches of the level come within just a 6 pip zone and more importantly, both touches of the level were met with immediate buying to push out of the level HARD.

EUR/USD 15 Minute:

Zooming into the intraday chart with the period separators on to represent days of the week, you can see that last Thursday push into the higher time frame level was then followed by the multiple chances to get long on any short term pullback into previous resistance that we’d look to act as support.

As the market opens for the week, the highest one shows that the bulls are still in control and we still have a long entry available to start the week if you don’t think the ship has already sailed.

Finally, I just wanted to bring up this daily EUR/USD support level that price held before Draghi helped pull the pair back down again.

USDCHF: The pair rejected higher prices the past week leaving risk lower. On the downside, support lies at the 1.0000 level. A turn below here will open the door for more weakness towards the 0.9950 level and then the 0.9900 level. On the upside, resistance resides at the 1.0100 level where a break will clear the way for more strength to occur towards the 1.0150 level. Further out, resistance comes in at the 1.0200 level. All in all, USDCHF remains biased to the downside on price weakness.

EURUSD: The pair saw a price rejection the past week, leaving risk higher in the new week. On the upside, resistance comes in at 1.0650 level with a cut through here opening the door for more upside towards the 1.0700 level. Further up, resistance lies at the 1.0750 level where a break will expose the 1.0800 level. Conversely, support lies at the 1.0600 level where a violation will aim at the 1.0550 level. A break of here will aim at the 1.0500 level. All in all, EURUSD faces further downside pressure medium term but faces recovery higher.

Dollar strength dominated the forex markets most of the time last week as speculations of a Fed hike in March heated up. Markets were also relieved as US president Donald Trump's first address Congress didn't deliver anything dramatic. Stock indices surged to new record high, taking yields and Dollar up too. Nonetheless, as most of the positive factors in greenback were priced, traders took profit on Dollar long positions after Fed chair Janet Yellen's comments. And more importantly, Euro staged a U turn after polls showed that far-right French president candidate Marine Le Pen lost ground, thus reducing Frexit risks. Euro has indeed ended as the strongest major currency, followed by Swiss France and Dollar. On the other hand, Canadian dollar ended as the weakest on the sharp pull back in oil price.

Fed Yellen affirmed March hike "would" likely be appropriate

After a chorus of hawkish Fed comments, fed fund futures are now pricing 79.7% chance of a rate hike at March 14/15 FOMC meeting. That's more than double of prior week's pricing. Fed chair Janet Yellen's speech on Friday affirmed such expectations. Yellen said that "at our meeting later this month, the committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate." And, she also emphasized that "the process of scaling back accommodation likely will not be as slow as it was in 2015 and 2016." This affirmed Fed's last projection of three rate hikes this year. Meanwhile, the new staff projections to be released this month will now be even more important if Fed does hike. We'd like to see if Fed would project a total of four hikes this year.

Euro rebounded as Le Pen lost ground

However, Dollar's strength was overwhelmed by the common currency. Euro has been under much pressure recently due to political uncertainties. It's indeed the weakest one last month. A key factor to watch is French election in April and the run-off in May. A win of anti-Euro far-right leader Marine le Pen will significantly increase risk of Frexit. On Friday, a poll by research firm BVA found that Le Pen would get 26% of votes in the first round in May, down 1.5% from the prior poll on February 23. On the other hand, centrist Emmanuel Macron got 24%, up 3% from prior poll. Conservative Francois Fillon's support was unchanged at 19%. This is consistent with the base case of most analysts. That is, no one will get majority in the first round and Le Pen will face Macron in the run-off. According to BVA, Macron will defeat Le Pen by 62 to 32 in the one-on-one vote.

TNX struggling to breakout

Technically, there are two developments to note. Firstly, the strong rebound in 10 year yield last week eliminated that case of a deep correction to 2.130 retracement level. However, despite all the optimism, the TNX is still held inside established range and struggled to take out 2.5 handle decisively. That is seen as one of the factors that's holding back the rally in the greenback. The markets will look into the non-farm payroll report to be released this Friday. And as noted above, new economic projections by Fed could hold the key. After all, near term outlook in TNX stays neutral for the moment as the consolidation from 2.621 could still extend, even with another fall. But sustained trading above 2.500 will bring a retest of 2.621. Break will resume the medium term up trend from 1.336.

Dollar index strength doubtful

Dollar index resumed the rebound from 99.23 and hit as high as 102.26. Friday's sharp pull back suggests temporary topping and the index could turn into sideway trading initially this week. As long as 100.66 support holds, further rise is still mildly in favor to retest 103.82 high. However, we'll stay cautious for two reasons. Price actions from 99.23 are not clearly impulsive yet and that mixes up the outlook in the index. Also, EUR/USD could have a take on 1.0630 near term resistance soon. And break there will likely drag the Dollar index down. Break of 100.66 support will argue that the rebound from 99.23 is completed and turn bias back to the downside for this support.

Opportunity to turn long in Euro

Our EUR/JPY short strategy last week was totally wrong as Yen reversed with treasury yield and Euro staged a strong rebound. Technically, it looks like a good timing to turn long in Euro. That's from the considerations that EUR/JPY defended 118.23 cluster support and rebounded. EUR/AUD defended 1.3671 support and rebounded. Both crosses are likely in near term reversal. 1.0630 resistance in EUR/USD and 0.8643 in EURGBP, if taken out, will affirm the turn in overall trend in Euro too. However, we will be very cautious as it's highly affected by political developments. To play safe, we will buy EUR/AUD on a dip to 1.3900, with a stop at 1.3800 this week.

EUR/USD Weekly Outlook

EUR/USD's decline attempt was contained at 1.0494, above 1.0493 support and rebounded. Initial bias stays neutral this week first. On the upside, 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.

In the long term picture, the down trend from 1.6039 (2008 high) is still in progress and there is no clear sign of completion. We'd expect more downside towards 0.8223 (2000 low) as long as 1.1298 resistance holds.

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