EURUSD - The pair retains its downside pressure a recovery threat on Monday. 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 1.0550 level where a violation will aim at the 1.0500 level. A break of here will aim at the 1.0450 level. All in all, EURUSD faces further downside pressure short term.

AUD/NZD Precariously Poised At Resistance

Heading into Aussie GDP, AUD/NZD is precariously poised at resistance.

The pair is very choppy and whipsawing price action is quite normal on these sorts of lower liquidity currency crosses, but most of all I just love that the big fundamental announcements seem to coincide with major technical levels like this.

AUD/NZD Daily:

The daily chart shows an obvious higher time frame resistance level and as mentioned above, price action up into this zone looks very choppy. You can see the way that price has spiked in and out of the 25 pip zone that I've drawn.

Although the swift rejections out of a zone like this prove that the sellers are there and in charge at the moment, it also leaves you open to getting stopped out if you don't leave yourself enough room. Especially so close to a big announcement like GDP.

This is just a characteristic of trading a currency cross that you have to get used to and adjust your trading style around if it's something you're not normally familiar with.

AUD/NZD Hourly:

Now that the higher time frame resistance zone looks like having held, we zoom into an hourly and we can start to see price printing that familiar stepping down pattern.

• The updated estimate falls slightly short of market expectations for an upward revision to 2.1%.
• Consumer spending was stronger than previously estimated but that was offset by weaker government spending and business fixed investment.

Consumer spending growth was revised up to 3.0% in the second estimate of Q4/16 GDP from 2.5% previously, now matching the previous quarter's pace. While 2016 was a strong year for consumer spending, the 2.7% annual increase fell short of the previous two years' gains. Stronger Q4/16 household expenditure was offset by modest downward revisions elsewhere0most significantly government spending, which is now estimated to have edged up just 0.3%. Business fixed investment was also revised lower; at 1.3% in Q4/16, there is no longer evidence of a meaningful pickup relative to the previous two quarters. With residential investment still showing a near 10% increase, final domestic demand was revised up marginally to 2.6% from 2.5% previously. Net exports remained a significant drag (with an unwind of Q3/16's surge in food exports a major factor) while a stronger inventory build provided some offset.

Our Take:

Offsetting revisions to Q4/16's expenditure detail left growth unchanged, and it remains the case that a pickup in domestic spending relative to Q3/16 made for a more encouraging report than the headline GDP figure suggests. The upward revision to consumer spending indicates strong momentum in the household sector toward the end of the year, but a more modest increase in business investment is somewhat discouraging, leaving less evidence of rebalancing in domestic growth toward the end of last year. While the latter trend is less positive than previously estimated, we continue to expect non-residential investment will pick up modestly this year alongside improving business sentiment, supplementing another strong contribution to growth from consumer spending. Our forecast has also built in some fiscal stimulus, though much of the boost to annual growth could fall more in 2018 as indications that tax reform might not come before late-summer limit the scope for an add from fiscal policy this year.

The second estimate of U.S. real GDP growth for the fourth quarter of 2016 was unchanged at 1.9%(annualized), slightly disappointing expectations for an upward revision.

Consumers did not disappoint, however. Spending growth was revised up to 3.0%, from 2.5% in the advance estimate. Spending on both goods are services was revised higher.

One source of disappointment was a downward revision to non-residential business investment from 2.4% (adv.) to 1.3%. Spending on both equipment and intellectual property was revised lower. Meanwhile, the contraction in structures investment was slightly smaller than initially reported.

Residential investment saw only a very modest downgrade to 9.6%, from 10.2% in the advance estimate.

The drag from net-exports was unchanged, as a smaller contraction in exports offset slightly stronger growth in imports.

The contribution from inventory investment was revised down to 0.9 %-points (from 1.0 %-points previously).

Key Implications

The domestic economy is picking up speed. While GDP growth was unchanged, private domestic demand was revised up to 3.0% (from 2.8%), an acceleration from 2.4% in the third quarter. Looking ahead to the first quarter of 2017, we continue to expect a decent follow-through of around 2%. As a result, economic slack will continue to diminish and the Fed will continue to push interest rates higher. While we expect the first hike to come in June, a March hike is certainly not off the table if economic data surprises to the upside.

Over the past six quarters, real GDP growth has been revised up 0.7 percentage points (at an annualized rate) between the BEA's advance and third estimate. The fourth quarter of 2016 has bucked that trend, so far, but here is still a good chance growth could be revised up in the third estimate.

The downward revision to business investment is a tad disappointing, but there is ample scope for optimism over the year ahead. Business spending has been the missing piece in economic growth over the past several years. We continue to see a confluence of factors driving stronger spending growth in 2017 (please see our recent report for more details).

The big question mark for the outlook is the future of fiscal policy. The new Congress and President's first priority is repealing and replacing the Affordable Care Act, likely dealing with tax reform and infrastructure spending later this spring and summer. Unless the President shows his hand in his speech tonight, we are likely going to be waiting a while longer to know the precise details of fiscal policy. At this point, it is safe to say it is more of a 2018 story, with limited impact this year. (For more details, please see our recent report on the ins and outs of tax reform.)

USD/CAD has posted slight losses and is under pressure in the Tuesday session. Early in North American session, the pair is trading slightly above the 1.32 level. On the release front, Canadian RMPI, which measures manufacturing inflation, dropped to 1.7%, but this beat the estimate of 1.3%. In the US, revised GDP remained unchanged at 1.9%, shy of the forecast of 2.1%. Next is CB Consumer Confidence, which is expected to drop to 111.3 points. As well, President Donald Trump will address a joint session of Congress.

Canadian inflation levels were unexpectedly strong in January, as higher gasoline and crude prices boosted inflation. CPI, climbed 0.9%, and RMPI rose 1.7%, as both indicators beat expectations. Still, the unexpected rise in inflation is unlikely to sway any opinions at the Bank of Canada, which is expected to hold rates at 0.50% at its policy meeting on Wednesday. Last year, the BoC adopted three new indicators to measure inflation, and these averaged 1.6% in January, below the central bank's inflation target of 2.0%. So, the central bank is in no rush to raise interest rates for now.

President Trump delivers his first speech before Congress on Tuesday, and the speech could have huge ramifications for the financial markets. Since Trump's election win, the stock markets are sharply higher, but the markets will be expecting some details about Trump's economic agenda. Trump recently promised to unveil a "phenomenal" tax reform package and significant spending on infrastructure, but hasn't provided any details. Tuesday's speech marks a critical opportunity for the new administration, which is still trying to find its bearings after a rocky first month. If Trump fails to present specifics in terms of numbers or at least some timelines, market sentiment will likely sour and this could hurt the US dollar.

Daily Pivots: (S1) 1.0548; (P) 1.0589 (R1) 1.0627; More.....

Intraday bias in EUR/USD strays neutral as consolidation from 1.0493 temporary low continues. With 1.0678 minor resistance intact, deeper decline is still expected. We're viewing fall from 1.0828 as resuming the larger down trend. Below 1.0493 will target 1.0339 low first. Break will confirm our bearish view and target parity. However, break of 1.0678 will dampen our view and turn focus back to 1.0828 resistance instead.

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.

Daily Pivots: (S1) 1.2390; (P) 1.2434; (R1) 1.2486; More...

Intraday bias in GBP/USD remains neutral as it's bounded in range of 1.2346/2705. Price actions from 1.1946 are viewed as a consolidation pattern, with rise from 1.1986 as the third leg. In case of another rise, we'd expect upside to be limited by 1.2774 to bring larger down trend resumption. On the downside, below 1.2346 will revive the case that such consolidation is completed at 1.2705 already. In that case, intraday bias will turn back to the downside for retesting 1.1946 low.

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) 112.13; (P) 112.48; (R1) 113.06; More...

USD/JPY weakens mildly today but stays inside range of 111.58/114.94. Intraday bias remains neutral at this point. The corrective fall from 1118.65 could extend lower. But 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, above 114.94 resistance should confirm completion of pull back from 118.65. In such case, intraday bias will be turned back 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) 1.0058; (P) 1.0077; (R1) 1.0110; More.....

USD/CHF continues to stays in consolidative trading below 1.0140. Intraday bias remains neutral at this point. With 0.9966 support intact, further rise is in favor. Above 1.0140 will turn bias to the upside and target a test on 1.0342 resistance. Based on neutral medium term outlook, we'd be cautious on topping at around 1.0342. Meanwhile, break of 0.9966 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.

Dollar continues to trade mixed in early US session. The greenback is seen weaker against European majors and Yen. Nonetheless, Dollar trades mildly up against Canadian Dollar thanks to pull back in oil price. Released from US, Q4 GDP growth was unrevised at 1.9% annualized in Q4, below expectation of 2.1%. GDP price index was revised lower to 2.1%. Trade deficit widened to USD -69.2b in January. Wholesale inventories dropped -0.1% in January. From Canada, IPPI rose 0.4% mom in January while RMPI rose 1.9% mom. Focus will turn to US president Donald Trump's address to Congress.

In his speech at the National Governors Association meeting on Monday, Trump told the state governors that he would delegate them "the powers that have been taken away from states and great people and great governors" so that the states "can control it better than the federal government". Trump also previewed the economic policies that would help the states. These include infrastructure spending, tax cuts, and fairer trade policies. He also indicated to talk about healthcare issue in the joint session address.

BoE Hogg warned of sudden drop in consumption

BoE deputy governor designate Charlotte Hogg warned that "households are beginning to face a squeeze on their incomes.:" She pointed to MPC forecast that "assumes steadily slowing growth in consumption, facilitated by a continued fall in the savings rate". And she envisaged "scenarios in which the reaction of consumption could be more sudden." Regarding inflation, she noted that her "tolerance for temporarily above-target inflation will depend on events." And she emphasized that "I would have no tolerance for a less than credible path back to target -- from either above or below the target."

The British Chambers of Commerce published a report based on feedback from more than 400 businesses. It urged the government to give "solutions and certainty" to business before Brexit. BCC director general Adam Marshall said that "business communities across the UK want practical considerations, not ideology or politics, at the heart of the Government's approach to Brexit negotiations". Meanwhile, the report also urged the government to "aim to minimise tariffs, seek to avoid costly non-tariff barriers, grandfather existing EU free trade agreements with third countries, and expand the trade mission programme".

Swiss KOF rose markedly

The Swiss KOF leading indicator jumped sharply to 107.2 in February, up from 102.0 and beat expectation of 102.1. That's also the highest level since 2013. KOF noted that "the Swiss franc appreciation shock from early 2015 hence by now appears to have been largely overcome." And Swiss economy should growth at "rates above average. It also said in the release that "the strongest positive contributions to this result come from the manufacturing industry, followed with a clear gap by the hospitality industry." And, "the markedly improved sentiment in manufacturing as a whole is primarily a reflection of the more positive assessment of incoming orders, followed by the production and employment outlook as well as by the profit situation."

Elsewhere, New Zealand trade deficit widened sharply to NZD -285m in January. NBNZ business confidence tumbled to 16.6 in February. Australia current account deficit narrowed to AUD -3.9b in Q4. Japan industrial production dropped -0.8% mom in January, retail sales rose 1.0% yoy in January. UK Gfk consumer confidence dropped to -6 in February. French GDP rose 0.4% qoq in Q4.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.0058; (P) 1.0077; (R1) 1.0110; More.....

USD/CHF continues to stays in consolidative trading below 1.0140. Intraday bias remains neutral at this point. With 0.9966 support intact, further rise is in favor. Above 1.0140 will turn bias to the upside and target a test on 1.0342 resistance. Based on neutral medium term outlook, we'd be cautious on topping at around 1.0342. Meanwhile, break of 0.9966 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.

Economic Indicators Update