Financial markets were on standby during early trading on Tuesday with most investors treading cautiously ahead of U.S President Donald Trump's speech to Congress this evening. Although global stocks have displayed phenomenal gains this month, the growing scepticism over the sustainability of the bull rally may encourage participants to heavily scrutinize Trump's first speech to a joint session of Congress. With the visible lack of clarity over the proposed pro-growth policies attributing to the market anxiety, investors will be paying extra attention to topics on tax cuts, infrastructure investments, trade, and deregulations. Although some participants remain cautiously optimistic over Trump providing further insights into his economic policies, the threat of today's speech mirroring the inaugural address could trigger a tidal wave of risk aversion. Global markets have been somewhat patient and even resilient against the persistent Trump uncertainties, but the crack could start to show if nothing new is brought to the table.

Dollar Index hovers above 101.00

The Greenback drifted lower during Tuesday's trading session as investors awaited Trump's market shaking stimulus plans. Although sentiment towards the United States is firmly bullish and domestic data continues to display signs of economic stability, the Dollar remains pressured. Sellers have exploited the ongoing anxiety to limit gains on the Greenback while the uncertainty over a March rate hike despite the rising odds have installed bears with further inspiration to attack prices. Although Trump remains the main focus for today, investors may direct some attention to the revised US GDP report for the fourth quarter. While a positive release may slightly uplift the Dollar, gains could be swiftly surrendered if Trump fails to deliver in his speech to Congress this evening.

Commodity spotlight - Gold

The growing uncertainty across the board and rising political risks have bolstered the appetite for safe-haven assets with Gold back in fashion. This yellow metal remains bullish on the daily charts with further upside expected in the short term if the Greenback continues to depreciate. With investors maintaining a cautious approach ahead of Trump's speech to Congress this evening, bulls may take advantage of the anxiety to elevate Gold prices higher back above $1260. From a technical standpoint, the $1250 intraday level could act as a minor support which encourages a further incline higher towards $1265.

A day after the Dow extended its winning streak to 12 straight session - the longest in 30 years - US futures look a little flat ahead of the open with all eyes firmly on Donald Trump's first appearance before Congress this evening.

The sustainability of this rally in the near term may well rest on how Trump performs this evening and whether promises of big spending and phenomenal tax reforms are accompanied by any insight into what they will entail. Trump's words, while lacking few if any actual details, have so far been effective in getting investors pumped up at the prospect of a stronger economy but the longer this goes on, the less effective these promises are going to become and higher the risk is that the rally will run out of steam.

The last few sessions may have seen the Dow extend its winning streak but the gains we're talking about have been tiny. The market may well already be experiencing Trump fatigue and he's now put himself in a position where he must deliver, and in a big way, or markets could quite quickly turn against him. I think Trump fully intends to deliver on the substantial promises and therefore in the longer term, these levels may be justified. The risk is that he's unable to do so as quickly as he hoped at which point doubt will set in and I think markets may be preparing for the prospect of that a little in recent days.

While Trump's appearance today is the clear stand out event, there are a number of others that could have an impact on the markets prior to this. Three Fed policy makers are due to appear throughout the day, only one of which though - Patrick Harker - is a voting member on the FOMC this year. The other two - John Williams and James Bullard - will both be voters over the next couple of years and will of course have insight and a voice in the discussions. Most policy makers have broadly stuck to the same line over the last couple of months, that a hike sooner rather than later will be appropriate, while offering little insight on when exactly that would be referring to. Market pricing would suggest that means May or June although the latter would make three hikes this year - as per the Fed's own forecasts - very difficult.

There's also a lot of economic data due today, including the second release of US fourth quarter GDP, which is expected to be revised up slightly from 1.9% to 2.1%. We'll also get CB consumer confidence data as well as some other lower level releases. Later this evening, API will report its inventory figures for last week, the last few of which have been fairly consistent with the EIA number, released on Wednesday.

USD/JPY has recorded losses in the Tuesday session, erasing the gains from Monday. Currently, USD/JPY is trading at 112.20. On the economic front, Japanese numbers were mixed. Preliminary Industrial Production declined 0.8%, well off the estimate of +0.4%. This was the first decline in 8 months. Retail Sales improved to 1.0%, edging past the forecast of 0.9%. In the US, Preliminary GDP is expected at 2.1%. As well, CB Consumer Confidence is forecast to dip to 111.3 points. As well, President Donald Trump will address a joint session of Congress.

President Trump will deliver his first major speech on Tuesday, as he delivers remarks to a joint session of Congress. Although it is not officially a State of the Union address, the speech could have huge ramifications for the financial markets. Since Trump's election win, the stock markets are sharply higher and the US dollar has improved, but the greenback has lost ground since Trump has become president. It's crunch time, as the markets want to hear 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, dragging down the US dollar.

The DAX Index has posted small losses in the Tuesday session. Currently, the DAX is trading at 11,816.00 points. On the release front, there are no major events in the eurozone. In the US, Preliminary GDP is expected at 2.1%. As well, President Donald Trump will address a joint session of Congress. On Wednesday, Germany releases three key events – Preliminary CPI, Unemployment Change and Final Manufacturing PMI.

Eurozone indicators started the week with mixed results. M3 Money Supply, which measures growth in the amount of money circulating in the eurozone, slowed to 4.8%, down from 5.0% a month earlier. This indicator is closely watched, as it often predicts economic activity. There was more positive news from bank lending to households, which improved for a third straight month, rising to 2.2% in January. Credit levels have been moving upwards since 2015, but have only recently shown strong gains. With inflation indicators also pointing upward, the ECB's stimulus program could finally be producing results. The central bank last took action in December, when it extended its asset-purchase program for six months until December 2017, but reduced purchases from EUR 80 billion to 60 billion/mth. If Eurozone indicators continue to indicate modest growth, the ECB is unlikely to tinker with the asset-purchase program.

Investors across the globe will be watching closely, as President Trump delivers remarks to a joint session of Congress on Tuesday. Although it is not officially a State of the Union address, the speech could have significant ramifications for the financial markets. Since Trump's election win, the stock markets are sharply higher and the US dollar has jumped 3.7% against the euro, but the greenback has lost ground since Trump has become president. It's crunch time, as the markets want to hear 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.

News and Events:

NZD stable despite trade balance miss

Since the RBNZ's last meeting on February 8th, the New Zealand dollar has been unable to get that positive momentum back. Indeed at its last meeting, the central bank took the market by surprise by delaying any tightening move, brutally interrupting the kiwi's run that was initiated in late December. Moreover, Donald Trump decision to finally start unveiling his plans for the US economy, is adding some downside risk to the pair as a USD rally would eventually squeeze investors out of long NZD positions. Indeed, in this low-yield environment, investors are desperately seeking higher returns; something that New Zealand is offering.

The kiwi rallied strongly during January and this groundswell has not been without consequences for the economy. Exports beat estimates rising to NZ$4.19bn in January, versus an expected 3.9bn amid a solid recovery in commodity prices. Imports also beat median forecasts and printed at NZ$4.19bn versus an expected 3.90bn as the rising NZD gave higher buying power to local customers. NZD/USD is trading sideways this morning ahead of Trump's address later today. The market's expectations are very high and we therefore believe that risk has slightly shifted to the upside. On the downside, a first support stands at 0.7130 (low from February 21st), while on the upside a resistance lies at 0.7247 (high from February 23rd).

Surge in Swiss KoF

The economic barometer will further enforce CHF strengthening, while making the SNB's job considerably more difficult. In February, the leading indicators increased by 5.2 points to 107.2, indicating that the Swiss economy will grow at a quicker than normal pace. Despite the dire warning of the sharp CHF appreciation in early 2015, the Swiss economic backdrop seems to have weathered the lack of currency competitiveness well. Case in point, the highest contribution came from the manufacturing industry, which relies significantly on exports and therefore currency pricing should be critical to improvement. Data indicates a weakening sensitivity to FX valuations. Moving forwards, the economic improvement in both growth and inflation outlook will enable the SNB to allow greater flexibility in EURCHF pricing. The central bank will continue to move but action will be limited to smoothening rather than reversing the trend. We continue to view short EURCHF as the primary trade for navigating the impending European political uncertainty. EURCHF 1.0632 base support will provide the key test for traders and SNB (providing insight on how much CHF “overvaluation” they are willing handle).

Japanese retail sales positive in no wage growth environment

Since reaching its lowest level in a year against the dollar in December, the yen continues to strengthen. However, the BoJ has been unable to stimulate the economy over the past decade and fundamental data continues to concern. Industrial production came in last night at -0.8% m/m for January after financial markets were expecting a positive read. The yen is strengthening despite its economy being ironically out of control. Japan's economy is clearly a market risk indicator.

Japanese policymakers are still expecting the Fed to raise rates in order to hold off some pressures from the economy. However, as we believe that the Fed is not going to raise rates we remain cautious as there will clearly be further room for disappointment. Uncertainties over Trump's economic policies loom large.

It is also worth noting that retail sales have increased for the third consecutive month with a 0.5% m/m for January (1% increase annualized). Furthermore, wage growth slowed in December, which should reflect at some point in the retail sales. The truth is that wages are not at a sufficient level to support the economic recovery especially knowing that, once inflation is stripped away, wage growth for 2016 will in fact be negative.

Today's Key Issues (time in GMT):

• 4Q P GDP SA QoQ, exp 0,40%, last 0,40% DKK / 08:00
• 4Q P GDP SA YoY, exp 1,90%, last 1,20% DKK / 08:00
• Jan Foreign Tourist Arrivals YoY, last -11,10% TRY / 08:00
• Dec Total Mortgage Lending YoY, last 16,90% EUR / 08:00
• Dec House Mortgage Approvals YoY, last 32,20% EUR / 08:00
• Feb KOF Leading Indicator, exp 102,1, last 101,7, rev 102 CHF / 08:00
• Jan PPI MoM, last 2,10% SEK / 08:30
• Jan PPI YoY, last 6,50% SEK / 08:30
• Jan Trade Balance, exp 1.7b, last 1.0b, rev -0.8b SEK / 08:30
• 4Q GDP QoQ, exp 0,80%, last 0,50%, rev 0,30% SEK / 08:30
• 4Q GDP WDA YoY, exp 2,30%, last 2,80%, rev 2,40% SEK / 08:30
• Dec Wages Non-Manual Workers YoY, last 2,20% SEK / 08:30
• Jan Retail Sales MoM, exp 1,50%, last -2,90%, rev -2,60% SEK / 08:30
• Jan Retail Sales NSA YoY, exp 2,00%, last 0,60%, rev 1,00% SEK / 08:30
• Dec Current Account Balance, last 3.3b EUR / 09:00
• Mar Norges Bank Daily FX Purchases, exp -1000m, last -1000m NOK / 09:00
• BOE's Charlotte Hogg Speaks at Appointment Hearing in London GBP / 09:15
• Feb P CPI EU Harmonized MoM, exp -0,10%, last -2,00%, rev -1,70% EUR / 10:00
• Feb P CPI NIC incl. tobacco MoM, exp 0,10%, last 0,20%, rev 0,30% EUR / 10:00
• Feb P CPI NIC incl. tobacco YoY, exp 1,30%, last 0,90%, rev 1,00% EUR / 10:00
• Feb P CPI EU Harmonized YoY, exp 1,30%, last 1,00% EUR / 10:00
• Jan Fiscal Deficit INR Crore, last 43254 INR / 11:00
• Dec House Price Index YoY, last 12,26% TRY / 11:30
• Dec House Price Index MoM, last 0,72% TRY / 11:30
• Jan Trade Balance Rand, exp -3.4b, last 12.0b ZAR / 12:00
• Jan South Africa Budget, last 22.7b ZAR / 12:00
• 4Q GVA YoY, exp 6,00%, last 7,10% INR / 12:00
• 4Q GDP YoY, exp 6,10%, last 7,30% INR / 12:00
• 2017 GDP Annual Estimate YoY, exp 6,80%, last 7,90% INR / 12:00
• 4Q S GDP Annualized QoQ, exp 2,10%, last 1,90% USD / 13:30
• 4Q S Personal Consumption, exp 2,60%, last 2,50% USD / 13:30
• 4Q S GDP Price Index, exp 2,10%, last 2,10% USD / 13:30
• Jan Industrial Product Price MoM, exp 0,50%, last 0,40% CAD / 13:30
• 4Q S Core PCE QoQ, exp 1,30%, last 1,30% USD / 13:30
• Jan Raw Materials Price Index MoM, exp 1,20%, last 6,50% CAD / 13:30
• Jan Advance Goods Trade Balance, exp -$66.0b, last -$65.0b, rev -$64.4b USD / 13:30
• Jan P Wholesale Inventories MoM, exp 0,40%, last 1,00% USD / 13:30
• Jan Retail Inventories MoM, last 0,00% USD / 13:30
• Dec S&P CoreLogic CS 20-City MoM SA, exp 0,70%, last 0,88% USD / 14:00
• Dec S&P CoreLogic CS 20-City YoY NSA, exp 5,40%, last 5,27% USD / 14:00
• Dec S&P CoreLogic CS 20-City NSA Index, last 192,14 USD / 14:00
• Dec S&P CoreLogic CS US HPI YoY NSA, last 5,64% USD / 14:00
• Dec S&P CoreLogic CS US HPI NSA Index, last 185,23 USD / 14:00
• Feb Chicago Purchasing Manager, exp 53,5, last 50,3 USD / 14:45
• Bank of England Bond Buying Operation GBP / 14:50
• Feb Conf. Board Consumer Confidence, exp 111, last 111,8 USD / 15:00
• Feb Conf. Board Present Situation, last 129,7 USD / 15:00
• Feb Conf. Board Expectations, last 99,8 USD / 15:00
• Feb Richmond Fed Manufact. Index, exp 10, last 12 USD / 15:00
• Feb QV House Prices YoY, last 13,50% NZD / 16:00
• Finance Minister Padoan, Bank of Italy's Rossi Speak at Event EUR / 17:00
• BIS's Caruana Speaks in Geneva CHF / 17:30
• Fed's Harker Speaks on Economy in Philadelphia USD / 20:00
• Fed's Williams Speaks in Santa Cruz USD / 20:30
• 4Q Terms of Trade Index QoQ, exp 4,00%, last -1,70% NZD / 21:45
• Feb AiG Perf of Mfg Index, last 51,2 AUD / 22:30

The Risk Today:

EUR/USD is trading sideways within a fifty-pip range below 1.0600. Hourly resistance is given at 1.0679 (16/02/2017 high) while hourly support can be found at 1.0521 (15/02/2017 low). The technical structure suggests deeper consolidation. 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 is trading with some volatility. Hourly resistance is given at 1.2582 (09/02/2017 high) while support area is given around 1.2400. Hourly support is given at 1.2347 (07/02/2017 low). The pair is still lying below strong resistance given at 1.2771 (05/10/2016 high). Expected to see continued monitoring of the support area around 1.2400. 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's momentum is bearish. Hourly resistance is given at 115.62 (19/01/2016 high). The technical structure suggests further weakness around support given at 111.36 (28/11/2017 low). 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's short-term momentum is definitely bullish. The pair lies within an uptrend channel. 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.

EUR/USD

Current level - 10596

Yesterday's rise after 1.0550 low has managed to reach a new peak below 1.0630 resistance and only a break through 1.0550 crucial level will signal, that a downtrend is on the run, towards 1.0450. 

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 112.35

A minor reversal has been confirmed at 111.90, but a break through 112.90 is needed in order to signal a rise towards 114.95.

GBP/USD

Current level - 1.2422

The overall outlook remains bearish, for a break through 1.2380, towards 1.2240. Key resistance lies at 1.2505.

Near-term tone is neutral as the pair is holding within narrow consolidation range.

Larger picture, however, remains bullish as rising 20SMA contained pullback from upside rejection at 0.7739, keeping overall bullish bias in play.

Recent repeated failures to clearly break above 0.7700 barrier suggest that the pair may spend some more time in consolidation, before larger bulls resume.

Lift above 0.7700/39 triggers is needed to open target at 0.7776 (08 Nov 2016 high).

Meantime, 20SMA is expected to ideally contain and underpin the action, however, extended dips should be contained by daily Kijun-sen (Currently at 0.7624) to prevent generating stronger reversal signals that could emerge on loss of 0.7624/00 triggers.

Res: 0.7685, 0.7705, 0.7739, 0.7758
Sup: 0.7664, 0.7624, 0.7600, 0.7575

Rising daily cloud base contained bear-leg from 113.02 (21 Feb lower top) at 111.90 for now, with near-term price action consolidating ahead of fresh attempts lower.

Bearish bias is supported by daily MA's and Tenkan / Kijun-sen lines in bearish setup and upside attempts remain limited under pivotal 113.00 resistance zone (converging daily 10/20 SMA's).

The pair is looking for firm break below daily cloud base (currently at 112.33), for extension towards key near-term supports at 111.60 zone and nearby top of thick weekly Ichimoku cloud at 111.36.

Conversely, immediate downside risk would be sidelined on sustained bounce above 113.00 trigger, but lift above 113.76 (21 Feb lower top) is needed to neutralize and shift near-term focus higher.

Res: 112.86, 113.00, 113.47, 113.76
Sup: 112.33, 111.90, 111.60, 111.36

Near-term tone remains bearishly aligned following past two days fall that cracked strong support at 1.2400 (100SMA) and was contained by daily cloud top at 1.2380 for now). Prevailing bearish tone on daily studies, following recovery rejection at 1.2567 Fibo resistance and subsequent fall, keep near-term focus at the downside. However, sustained break below 55/100 SMA's (that now formed bearish cross) and penetration into daily cloud, is needed to generate stronger bearish signal for further retracement of 1.1986/1.2704 upleg. On the flip side, daily Tenkan-sen offers solid resistance at 1.2475, followed by daily Kijun-sen at 1.2525 and upper breakpoints at 1.2567/80. Past two days weakness was driven by news about Brexit/Scottish referendum, with focus turning on the speech of Donald Trump, which may push the pound further down or trigger fresh acceleration higher, if he fails to satisfy traders' expectations.

Res: 1.2448, 1.2460, 1.2475, 1.2525
Sup: 1.2398, 1.2380, 1.2345, 1.2300

The Euro continues to tick higher on profit-taking action from fresh low at 1.0492 (22 Feb), but upside remains limited, as indicated by long upper shadows of daily candles of past two days.

Also, converged 10/55SMA's on daily chart (currently at 1.0590) are still acting as strong resistance, as the pair failed to close above in past three days, despite the price spiking to 1.0620/30 zone (next barrier that marks Fibo 38.2% of 1.0827/1.0492 descend.

Overall bearish daily studies so far offset bullish signal on daily cloud twist, with upticks expected to stay capped under falling 20SMA (1.0639).

Speech of US President Donald Trump is in focus and would likely give stronger direction signals.

Pivotal barriers lay at 1.0639 (20SMA) and 1.0678 (16 Feb lower top), break of which will be bullish, while first downside trigger lies at 1.0550 (yesterday's low) guarding 1.0492 pivot, loss of which will be bearish.

Res: 1.0590, 1.0620, 1.0639, 1.0678
Sup: 1.0568, 1.0550, 1.0520, 1.0492