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'Growth is being driven by robust domestic demand, stemming in turn from buoyant consumers and increased investment spending by the energy sector in particular.' - Chris Williamson, IHS Markit

US manufacturing activity rose at a stronger-than-expected pace in February, official figures showed on Wednesday. The Institute for Supply Management reported its Purchasing Managers' Index for the manufacturing sector advanced to 57.7 points last month, the highest level since December 2014, following the previous month's 56.0 points. Meanwhile, analysts anticipated a mild increase to 56.2. Wednesday's survey suggested that the US economy expanded for 93rd straight month. Data also showed the New Orders Index climbed to 65.1 last month from 60.4 in January. However, the Employment Index fell to 54.2 in February from the prior month's 56.1, surpassing analysts' expectations for a decline to 55.9. Furthermore, the ISM survey showed the Prices Paid Index dropped to 68.0 points last month, meeting forecasts and following the preceding month's 69.0. Although the reading above 50 point level still indicated higher raw materials prices. The figures indicated strong growth of sales and demand, and painted a positive outlook for the manufacturing sector over the upcoming months. After the release, the EUR/USD pair rose from 1.0529 to 1.043. Nevertheless, the Greenback's gains on Wednesday were actually driven mostly by Donald Trump's address to Congress, which boosted investor optimism.

Daily Pivots: (S1) 1.0630; (P) 1.0646; (R1) 1.0655; More...

Intraday bias in EUR/CHF remains neutral as it's still bounded in range above 1.0629 temporary low. As long as 1.0706 resistance stays intact, deeper decline is still expected in the cross. Firm break of 1.0620 key support level will extend the larger decline from 1.1198 to 1.0485 fibonacci level. However, break of 1.0706 resistance will indicate short term bottoming and turn bias back to the upside. Further break of 1.0749 resistance will raise the chance of medium reversal.

In the bigger picture, the decline from 1.1198 is seen as a corrective move. Such correction is still in progress. Sustained trading below 38.2% retracement of 0.9771 to 1.1198 at 1.0653 will target 50% retracement at 1.0485. On the upside, break of 1.0897 resistance is needed to confirm completion of such fall. Otherwise, outlook will stay bearish.

'The latest PMI signals that the UK manufacturing sector continued its solid start to the year. Although rates of expansion in output and new business lost impetus in February, growth remained comfortably above the long-run averages.' - Rob Dobson, Markit

British manufacturing activity expanded at the slowest pace since November 2016 last month, a private survey revealed on Wednesday. Markit reported its PMI for the UK manufacturing sector dropped to a seasonally adjusted 54.6 points in February, while the preceding month's reading was revised up from 55.7 to 55.9 points. Market analysts anticipated a slighter decrease to 55.6 last month. Nevertheless, any reading above the 50 point level indicates industry expansion. Moreover, Markit said that production and new order growth remained solidly above the long-term average of 51.6 points. The figures suggested that the weaker Pound, which dropped around 12% since the Brexit vote, helped to boost sales for some manufacturing sector participants last month. The survey suggests that manufacturing output growth is likely to approach the 1.5% mark in the first quarter of 2017, which would be the best reading in the last seven years. However, some analysts claim that a high growth rate could not be maintained in the long-term. Data also showed employment rose for the seventh consecutive month in February, with job gains posted by businesses of different sizes. After the release, the British Pound fell against other major currencies, trading at 0.8521 against the Euro and 1.2371 against the Greenback.

'The Bank of Canada maintained a similar tone in its rate statement today even though activity indicators to close 2016 and in early 2017 have been generally stronger than anticipated.' - Mark Chandler, Royal Bank of Canada

As markets expected, the Bank of Canada left its key interest rate unchanged at its policy meeting on Wednesday, pointing to significant uncertainties in the Canadian economy. The Central bank acknowledged that the economy probably expanded at a stronger-than-expected pace in the final quarter of 2016 but left its benchmark rate at a record low of 0.50%, saying that the economy remained below its production capacity and inflation growth was driven mostly by temporary factors. The Bank was forced to cut its key rate twice in 2015 in order to cope with a sharp fall in oil prices. The BoC said it would continue to monitor the risks outlined at its January policy meeting. Back in January, the Central bank indicated Donald Trump's presidency as one of the biggest sources of economic uncertainty for Canada. Last month, the US President promised to start 'tweaking' the trade relationship between Canada and the US. However, his Wednesday's speech to Congress provided no details on the matter. The United States is by far the largest destination for Canadian products, with over 75% of Canada's total exports going to the US. After the statement , the Canadian Dollar hit its five week low against its US counterpart, as a higher probability of a rate hike by the Fed gave opportunity to the Greenback to climb against other currencies.

'The Bloomberg dollar index was up 0.3 percent, paring a gain of as much as 1 percent from its Tuesday low that was spurred by two Fed officials signaling that a rate hike would be under consideration at the central bank's March meeting.' - Dennis Pettit, Bloomberg

Pair's Outlook

During the early hours of Thursday's trading session the common European currency continued its way lower against the Greenback in accordance with the previous forecast. Previously, during Wednesday's trading session it seemed that the rate will fall below the 1.05 mark. However, that did not occur due to various fundamental reasons. As a result the rate managed to slightly gain by the end of the day, and with it the fall to the weekly S1 at 1.0491 has been delayed. Although, it is still clear that the rate is set to fall to the before mentioned support level.

Traders' Sentiment

SWFX traders are neutral bullish on the pair, as 51% of open positions are long on Thursday. Meanwhile, 62% of trader set up orders are set to sell the Euro.

'On top of soft data from the UK recently ... these fresh signals of a 'hard Brexit' and the risk of another Scottish referendum, enhances our view that the broader outlook for sterling remains negative.' – IronFX (based on Business Recorder)

Pair's Outlook

The Cable experienced another decline on Wednesday, with concerns over Brexit continuing to weigh on the British Pound. Another slide down is expected, which would be the fifth consecutive one, with the pair slowly approaching the multi-year low of 1.1947. The closest significant support is the monthly S1, located at 1.2250, although its breach would not be a surprise. As a result, the 1.22 major could soon be pierced, and another step closer to multi-year low made. Meanwhile, technical indicators are bolstering the possibility of the negative outcome, as they keep giving bearish signals today.

Traders' Sentiment

Bullish traders sentiment remains unchanged at 59% today, but the portion of purchase orders edged higher in the last 24 hours, namely from 43 to 52%.

'I think the Fed will get a green light [to raise rates] unless a very bad [U.S.] jobs data comes out next week.' – Yukio Ishizuki, Daiwa Securities (based on Reuters)

Pair's Outlook

Expectations of the Fed raising rates in March caused the US Dollar to strengthen against a basket of currencies on Wednesday, particularly against the Yen. The US Dollar, however, was unable to reclaim the 114.00 level, although did try to do so. The bearish trend-line was pierced, which suggests that another rally today is likely, with the 114.60 area being the ceiling, as a number of significant levels form a strong resistance area there. Technical studies, on the other hand, are unable to confirm this outlook, as they keep giving mixed signals. Nevertheless, the base case scenario is a close above 114.00 today.

Traders' Sentiment

Traders retain a positive outlook towards the Greenback, with 62% of all open positions being long (previously 66%). At the same time, the share of buy orders remains unchanged at 55%.

'Gold price may see a little bit of selling pressure at this moment on hawkish comments coming from the Fed officials.' – Mark To, Wing Fung Financial Group (based on Reuters)

Pair's Outlook

On Thursday the yellow metal traded below the combined resistance cluster of the 50.00% Fibonacci retracement level at 1,248.96 and the weekly PP, which is located at 1,247.55 level. Previously, during Wednesday's trading session the bullion traded exactly as forecasted, as the commodity price dropped and rebounded against the strong uptrend line near the 1,236.70 level. On Thursday the trend line's support was located at 1,238.83 level. It is possible that the bullion would once more retreat to find support in the trend line. However, a break of the before mentioned resistance is more likely.

Traders' Sentiment

Traders have not changed their opinions, as 53% of traders remain bullish. In the meantime, 58% of trader set up orders are to buy the metal.

Although the single currency fell to as low as 0.8403 (just missed our downside target at 0.8400), lack of follow through selling and the subsequent rebound suggest the fall from 0.8857 has ended at 0.8403, hence consolidation above this level is seen with mild upside bias for gain to 0.8630 (50% Fibonacci retracement of 0.8857-0.8403) but a daily close above resistance at 0.8646 is needed to add credence to this view

EUR/GBP – 0.8581

EUR/GBP – The major (A)(B)(C)-(X)-(A)(B)(C) correction from 0.9805 is unfolding and 2nd (A) has possibly ended at 0.6936.

Although the single currency fell to as low as 0.8403 (just missed our downside target at 0.8400), lack of follow through selling and the subsequent rebound suggest the fall from 0.8857 has ended at 0.8403, hence consolidation above this level is seen with mild upside bias for gain to 0.8630 (50% Fibonacci retracement of 0.8857-0.8403) but a daily close above resistance at 0.8646 is needed to add credence to this view and encourage for further gain to 0.8680-85 (61.8% Fibonacci retracement). Having said that, as broad outlook remains consolidative, reckon upside would be limited to 0.8750-60 and price should falter well below said resistance at 0.8857.

Our latest preferred count is that the wave V of a 5-wave series from 0.5682 ended at 0.9805 earlier and major from there has possibly ended at 0.8067 as A-B-C-X-A-B-C. We are keeping our view that the entire correction from 0.9805 has possibly ended at 0.7756 and as labeled as the attached daily chart and impulsive move from 0.9084 has ended at 0.7756 as a 5-waver which marked either the (C) wave or the A leg of (C), a daily close above resistance at 0.8831 would suggest (C) leg has ended and headway towards 0.9084.

On the downside, whilst pullback to 0.8510-15 cannot be ruled out, reckon 0.8495 (previous resistance) should hold and bring another rebound later. Below 0.8422 support would abort and signal the rebound from 0.8403 has ended, bring another test of this level, once this support is penetrated, this would signal the fall from 0.8857 is still in progress and may extend weakness to 0.8350, a sustained breach below there would suggest the rebound from 0.8304 has ended at 0.8857 (tentatively wave b top), then further fall towards said support at 0.8304 which is likely to hold on first testing.

Recommendation: Buy at 0.8515 for 0.8680 with stop below 0.8415.

Euro's long term uptrend started in Feb 1981 at 0.5039 and is unfolding as a (A)-(B)-(C) move with (A): 0.8433 (Feb 1993), (B): 0.5682 (May 2000) and impulsive wave (C) should have ended at 0.9805 with wave III ended at 0.7254 (May 2003), triangle wave IV at 0.6536 (23 Jan 2007) and wave V as well as wave (C) has ended at 0.9805.

We are keeping an alternate count that only wave III ended at 0.9805 and the correction from there is the wave IV and may extend weakness to 0.7700, however, it is necessary to see a daily close above resistance at 0.9143 would change this to be the preferred count.

USD/CAD – 1.3312

USD/CAD – Wave v ended at 0.9407 and a-b-c correction may extend gain to 1.4700

Although the greenback retreated from 1.3210, as the pair found decent demand at 1.3056 late last week and has rallied from there, suggesting low has been formed at 1.2969 back in Jan, hence consolidation with mild upside bias is seen for further gain to resistance at 1.3388, however, break there is needed to signal the fall from 1.3599 has ended and extend further subsequent rise to 1.3450-60 but price should falter below 1.3500-10, bring retreat later.

We are keeping our view that the wave b from 1.0657 (a leg top) has possibly ended at 0.9633 with (a): 0.9800, wave (b): 1.0447 and wave c at 0.9633, the subsequent rise from there is now treated as wave c exceeded indicated upside target at 1.3770-80 and 1.4000 and wave (3) has possibly ended at 1.4690 and wave (4) correction has commenced for retracement back to 1.2832 support, then 1.2410-20.

On the daily chart, our latest preferred count remains that the A of (B) rally from 0.9059 low (7 Nov 2007) unfolded into an impulsive wave with i: 0.9059-1.0380, ii ended at 0.9819, iii at 1.3019 followed by triangle wave iv at 1.2026 , then wave v formed a top at 1.3066 and also ended the wave A. The wave B is unfolding as an double three a-b-c-x-a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c at 1.0784, followed by wave x at 1.1725, another set of a-b-c unfolded with 2nd a at 0.9931, 2nd b at 1.0674. the 2nd c has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3900 had been met and gain to 1.4700 would follow.

On the downside, whilst pullback to 1.3250 cannot be ruled out, reckon previous resistance at 1.3210-12 (now support) would limit downside and bring another rise later to aforesaid upside targets. Only a break of said support at 1.3056 would abort and signal top is formed, bring test of support at 1.3009, below there would revive bearishness for retest of 1.2969. Looking ahead, a break of this level is needed to signal the fall from 1.3599 top has resumed and bring further fall to 1.2950, then 1.2890-00 but reckon downside would be limited to 1.2822 support and the pair should stay above another previous support at 1.2763.

Recommendation: Buy at 1.3210 for 1.3400 with stop below 1.3110.

Longer term - The selloff from 1.6194 (21 Jan 2002) to 0.9059 (07 Nov 2007) is viewed as (A) wave which is a 5-waver as labeled on the monthly chart as below, the subsequently rally is labeled as (B) with impulsive A leg of (B) ended at 1.3066, wave B of (B) is unfolding which has either ended at 0.9407 or would extend one more fall but downside should be limited to 0.9200 and 0.9000 should hold.