Fed minutes lift likelihood of a May hike

Asia Mid-Session Market Update: Austalia CapEx falls more than expected; BOK on hold; Fed minutes lift likelihood of a May hike

US Session Highlights

(US) JAN EXISTING HOME SALES: 5.69M V 5.55ME (highest since Feb 2007)

OPEC Committee reports sees Jan OPEC cuts compliance at above 90%, sees non-OPEC cuts compliance near 60% - press

(US) Pres Trump: to submit a healthcare reform plan by mid-March

(US) Minutes from the previous FOMC meeting showed the committee said it would be appropriate to raise rates “fairly soon” should jobs and inflation come inline with expectations

US markets on close: Dow +0.2%, S&P500 -0.1%, Nasdaq -0.1%

Best Sector in S&P500: Utilities

Worst Sector in S&P500: Energy

Biggest gainers: GRMN +7.3%, DOW +4.0%, DD +3.4%, VFC +2.1%, AET +1.9%

Biggest losers: FSLR -8.3%, NFX -8.1%, CXO -6.8%, NEM -3.9%, MRO -3.8%

At the close: VIX 11.7 (+0.2pts); Treasuries: 2-yr 1.22% (-2bps), 10-yr 2.42% (-1bp), 30-yr 3.04% (flat)

US movers afterhours

UCTT: Reports Q4 $0.36 v $0.27e, R$174.5M v $173Me; Guides Q1 adj $0.40-0.45 v $0.26e, R$190-197M v $165Me; +13.8% afterhours

SQ: Reports Q4 $0.05 v -$0.09e, R$452M v $453Me; Guides Q1 adj 0.00-0.02 v -$0.10e; EBITDA $14-18M, adj Rev $440-452M v $450Me; +8.6% afterhours

CTRP: Reports Q4 $0.17 v -$0.01e, Total Rev $746M v $734Me; +5.0% afterhours

HPQ: Reports Q1 $0.38 v $0.37e, R$12.7B v $11.8Be; +2.4% afterhours

TSLA: Reports Q4 -$0.69 v -$0.13e, R$2.28B v $2.20Be; Model S and Model X K deliveries 22.3K units, -10% q/q, +27% y/y; +1.5% afterhours

FIT: Reports Q4 -$0.56 v -$0.48e, R$573.8M v $576Me; +1.2% afterhours

CAKE: Reports Q4 $0.67 v $0.67e, R$603.1M v $594Me; announces $100M share repurchase plan (3.6% of market cap); -0.5% afterhours

NVDA: Nomura Cuts NVDA to Reduce from Buy, price target: $90; -2.4% afterhours

SAM: Reports Q4 $1.75 v $1.19e, R$219.4M v $226Me; Guides initial FY17 $4.20-6.20 v $6.35e; -7.7% afterhours

JACK: Reports Q1 $1.18 v $1.24e, R$487.9M v $498Me; -9.7% afterhours

ARRS: Reports Q4 $0.79 v $0.70e, R$1.76B v $1.69Be; Guides Q1 $0.36-0.40 v $0.67e, R$1.44-1.49B v $1.66Be; -10.4% afterhours

LB: Reports Q4 $2.03 v $1.90e, R$4.49B v $4.50Be; Guides Q1 $0.20-0.25 v $0.50e; Guides initial FY17 $3.05-3.35 v $3.70e; -13.1% afterhours

TSRA: Reports Q4 $0.45 v $0.61e, R$70.1M v $72.0Me; changes name and stock symbol; -13.6% afterhours

Asia Key economic data:

(BR) BRAZIL CENTRAL BANK (BCB) CUTS SELIC TARGET RATE BY 75BPS TO 12.25%; AS EXPECTED

(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; AS EXPECTED

(AU) AUSTRALIA Q4 PRIVATE CAPITAL EXPENDITURE (CAPEX) Q/Q: -2.1% V -0.5%E

(JP) JAPAN JAN PPI SERVICES Y/Y: 0.5% V 0.5%E

Asia Session Notable Observations, Speakers and Press

Asia equity markets are modestly lower as investors digest the implications of the latest Fed policy minutes. Fed noted it may be appropriate to raise rates "fairly soon", while some members urged going at the upcoming meeting to give FOMC more flexibility. However, traders looked for a more concrete signal as March Fed funds futures probability remained below 20%, even as the odds for May has risen above 50%. The caveat is that May does not have an accompanying press conference while March does, and the Fed has never raised rates in a meeting when the Fed chair did not take the podium.

USD weakened in US hours on release of the Fed minutes and remains under pressure in Asian session. USD/JPY is down over 30pips from the highs below 113.10, EUR/USD up 30pips above 1.0570, while NZD/USD is up 40pips at 0.7215. AUD/USD is the only exception among the majors, trading unchanged on the day around $0.77 after falling some 30pips on soft headline Q4 Australia Capex data below $0.7670.

Australia Q4 capex declined for the 4th straight quarter, and while the decline was bigger than expected, it was also the smallest decline of the past four. Components are typically more critical for this release, and here the picture was more mixed. Economists found the 0.4% rise in Plant/Machinery spending vs decline of 1.9% prior especially noteworthy and shrugged off the initial estimate for next year's spending slowing to A$80.6B from the revised A$112.2B for this year. AUD/USD initially fell on the headline and then recovered all of its lost ground toward the market close.

Rate decisions from Brazil and South Korea were also on the docket today. Brazil was unanimous to cut for the 4th straight time by 75bps - in line with consensus - citing mixed economic activity signs and affirming next year's inflation outlook. BOK stood pat for its 9th straight time and also voted unanimously, though policymakers pledged to monitor external risks of protectionism and US-China policy along with domestic factors such as rising household debt.

After yesterday's property price data from China, Commerce Ministry official said the govt will continue to stabilize housing market and also doing preparation to roll out a property tax, while planning to maintain differentiated curbs across the cities.

China:

(CN) Morgan Stanley raises CNY forecast for 2017-end to CNY7.1 from CNY7.3 - press

(CN) China Deputy Housing Minister: China has the ability and methods to stabilize housing market

Japan:

(JP) Japan's pension fund GPIF had raised its holdings of short-term assets due to negative interest rates; Will switch to JGBs when rates rise - press

(JP) Bank of Japan (BOJ) Member Kiuchi (dissenter): Must make 2% inflation target a medium to long term target

(JP) BOJ considering dates of planned JGB buying operations ahead of time to avoid a jump in yields due to market uncertainty - Nikkei

Australia/New Zealand:

(AU) Economists with AMP, ANZ, and JPMorgan note today's Australia Q4 CAPEX data looks worse than it is given the rise in Plant/Equipment spending - SMH

Asian Equity Indices/Futures (00:00ET)

Nikkei -0.2%, Hang Seng -0.5%, Shanghai Composite -0.4%, ASX200 -0.3%, Kospi flat

Equity Futures: S&P500 -0.1%; Nasdaq flat; Dax -0.1%; FTSE100 -0.2%

FX ranges/Commodities/Fixed Income (00:00ET)

EUR 1.0540-1.0565; JPY 113.10-113.45; AUD 0.7665-0.7700; NZD 0.7175-0.7210

Apr Gold +0.4% at $1,238/oz; Apr Crude Oil +0.9% at $54.08/brl; Mar Copper -0.6% at $2.72/lb

(US) Weekly API Oil Inventories: Crude: -0.9M v +9.9M prior; first draw in 5 weeks

JGB: (JP) Japan's MoF sells ¥1.0T in 0.6% (0.6% prior) 20-year JGBs; Avg yield: 0.669% v 0.589% prior; bid-to-cover: 4.05x (highest since 2014) v 3.54x prior

(CN) PBOC SETS YUAN MID POINT AT 6.8695 V 6.8830 PRIOR; first stronger Yuan setting in 4 sessions

(CN) PBOC to inject combined CNY50B v CNY120B prior in 7-day, 14-day and 28-day reverse repos

SWIFT: CNY use in international transactions: 1.68% of total in Jan v 1.68% prior

Asia equities / Notables / movers by sector

Consumer discretionary: 493.HK Gome Electrical Appliances Holding +3.7% (profit warning); 2020.HK Anta Sports Products -2.3% (FY16 result); QAN.AU Qantas Airways +5.1% (H1 result); CWN.AU Crown Resorts +8.3% (H1 result); Invocare +9.0% (FY16 result); FLT.AU Flight Centre -2.6% (cuts guidance)

Consumer staples: AHY.AU Asaleo Care +7.4% (FY16 result)

Financials: AAD.AU Ardent Leisure -21.1% (H1 result); MMS.AU McMillan Shakespeare +3.2% (Citi raises rating)

Industrials: 7201.JP Nissan Motor Co -0.6% (names new CEO); RCR.AU RCR Tomlinson +7.2% (H1 result)

Technology: ISD.AU iSentia Group -7.5% (Deutsche Bank cuts rating); XIP.AU Xenith IP Group -19.3% (H1 result)

Materials: ILU.AU Iluka Resource -2.1% (FY16 result); AWC.AU Alumina -1.2% (FY16 result); AGO.AU Atlas Iron -9.3% (H1 result); ABC.AU Adelaide Brighton +4.3% (FY16 result)

Healthcare: EHE.AU Estia Health +12.6% (affirms guidance)

Utilities: EPW.AU ERM Power +5.4% (H1 result)

Daily Pivots: (S1) 1.0073; (P) 1.0107; (R1) 1.0136; More.....

Intraday bias in USD/CHF remains mildly on the upside for the moment. The rebound from 0.9860 has just resumed. Further rally would be seen to retest 1.0342 high. Based on neutral medium term outlook, we'd be cautious on topping at around 1.0342. On the downside, break of 0.9966 support is needed to confirm completion of the rebound. Otherwise, further rally will remain mildly in favor in case of retreat.

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.

Daily Pivots: (S1) 112.90; (P) 113.31; (R1) 113.72; More...

USD/JPY is staying in range of 111.58/114.94 and intraday bias remains neutral for the moment. Corrective fall from 118.65 could extend lower through 111.58. 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.

Dollar was unmoved by the hawkish FOMC minutes released overnight and struggles to extend gain. EUR/USD's break of 1.0520 minor support yesterday is seen as a sign of decline resumption. However, GBP/USD, USD/JPY, USD/CAD and AUD/USD are all held in established range. Similarly, the dollar index lost momentum ahead of near term resistance level at 101.76. The move in EUR/USD was more due to weakness in the common currency in general, due to political uncertainties. In other markets, DJIA closed at new record high at 20775.60, up 0.16%. But S&P 500 and NASDAQ closed slightly down by -0.11% and -0.09% respectively. 10 year yield continue to gyrate in sideway consolidation pattern and closed down -0.009 at 2.418. Gold and oil are both staying in tight range.

FOMC Signaled Rate Hike To Come 'Fairly Soon'

Although the FOMC minutes for the January meeting appeared to be a hawkish one, it failed to lifted speculations of a March rate hike. As suggested in the minutes, many members judged that would be "appropriate" to increase interest rate again "fairly soon". A few of them suggested removing policy accommodation in "a timely manner". However, there was no indication that it should arrive in as soon as March. Meanwhile, the minutes noted that "a few" members remained concerned about downside risks to the inflation outlook.

As US President Donald Trump has yet to announce his fiscal expansion plan, the FOMC members emphasized their "considerable uncertainty" about possible changes in "fiscal and other government policies" as well as "about the timing and magnitude of the net effects of such changes on economic activity". The members indicated that "the possibility of more expansionary fiscal policy as having increased the upside risks to their economic forecasts". Some, however, suggested that "several potential changes in government policies could pose downside risks". Such uncertainty has indeed diminished prospect for a March rate hike. More in FOMC Signaled Rate Hike To Come 'Fairly Soon'

US to release jobless claims

Elsewhere, Japan corporate service price index rose 0.5% yoy in January. Australia private capital expenditure dropped -2.1% in Q4. German GDP was finalized at 0.4% qoq in Q4. German Gfk consumer sentiment dropped to 10.0 in March. US initial jobless claims will be the main focus of the day. House price index will also be featured.

USD/JPY Daily Outlook

Daily Pivots: (S1) 112.90; (P) 113.31; (R1) 113.72; More...

USD/JPY is staying in range of 111.58/114.94 and intraday bias remains neutral for the moment. Corrective fall from 118.65 could extend lower through 111.58. 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.

Economic Indicators Update

Key Points:

• The pair seems to have reached a turning point.
• Failed to breach a very robust zone of resistance.
• Stochastics are heavily overbought.

If you're looking to side step some of the headline risk of the major crosses, the AUDNZD might be worth keeping half an eye on. Specifically, the pair has been quietly climbing over the past few weeks and this has left it in a rather precarious position. Indeed, the losses seen over the prior two sessions could extend rather significantly regardless of how high the AUD tracks against the greenback.

Specifically, as is shown below, the pair has run into that robust zone of resistance around the 1.0753 handle and, once again, has failed to break through. Even on its own, this fact would tend to support the argument that we are going to see another near to medium-term downtrend take hold. However, given a number of other technical signals also reaching a consensus, rather than a brief dip, we could have another downtrend akin to the August-September rout on our hands.

Notably, Wednesday’s candle is looking distinctly like a bearish shooting star which could be a bellwether of extensive losses yet to be realised. In addition to this, we have stochastics deep in overbought territory which is also severely capping upsides and generating selling pressure. What’s more, if we have another session of similar losses, the Parabolic SAR will almost certainly invert which will also be portentous of a fresh downtrend for the AUDNZD.

Whilst a downtrend is looking fairly likely, the endpoint of the decline is somewhat less clear. However, we do have some clues as to where we are likely to encounter some strong support. Currently, the lowest point that the pair is expected to reach in the near to medium-term is around the 1.0415 handle. Primarily, this is because this point represents the intersection of the 78.6% Fibonacci level and the upside constraint of the old bearish channel. Although, we might see some support from the 100 day moving average.

Ultimately, we will just have to wait and see if the Kiwis or the Aussies are going to pull ahead in terms of the economic data as both have been having a bit of a mixed bag as of late. However, as a result of the lack of consensus in this fundamental data, we could see the above technicals play a larger role than is usual in determining the movements of this pair. As a result, monitor the pair closely, especially in the coming session.

A note on lower timeframe confirming price action…

Waiting for lower timeframe confirmation is our main tool to confirm strength within higher timeframe zones, and has really been the key to our trading success. It takes a little time to understand the subtle nuances, however, as each trade is never the same, but once you master the rhythm so to speak, you will be saved from countless unnecessary losing trades. The following is a list of what we look for:

• A break/retest of supply or demand dependent on which way you're trading.
• A trendline break/retest.
• Buying/selling tails – essentially we look for a cluster of very obvious spikes off of lower timeframe support and resistance levels within the higher timeframe zone.
• Candlestick patterns. We tend to only stick with pin bars and engulfing bars as these have proven to be the most effective.

EUR/USD

In the early hours of yesterday's US segment, EUR bulls rose up and took charge of the 1.05 handle despite better-than-expected US housing data. Shortly after, another wave of buying came into view following the release of the FOMC minutes from the latest meeting, where rates, as expected, were left on hold.

For those who read Wednesday's report you may recall that our desk highlighted the 1.05/1.0520 region (yellow H4 box) as an area worthy of attention. It comprises of the following structures: The 2017 yearly opening level at 1.0515, a daily support at 1.0520, the 1.05 handle and the top edge of a weekly support area at 1.0502. There was, as you can see, a very tasty H4 buying tail that formed within the walls of this region, but the candle unfortunately closed below 1.0515. As such, there was a chance that this level could've acted as a resistance, so we passed on the setup. Well done to any of our readers who managed to pin down a position here!

Our suggestions: With the H4 mid-level number 1.0550 now providing support to the market, price could potentially continue advancing north today until we cross swords with December's opening base at 1.0590/the 1.06 handle. On account of the higher-timeframe structures now in motion, a long trade from 1.0550 may be something to consider. However, we would strongly recommend waiting for a lower-timeframe confirming setup to form here (see the top of this report) before pulling the trigger. This will help avoid both an unnecessary loss and the dreaded fakeout.

Data points to consider: US Jobless claims at 1.30pm, FOMC member Kaplan speaks at 6pm GMT.

Levels to watch/live orders:

• Buys: 1.0550 region ([wait for a lower-timeframe confirming signal to form before looking to execute a trade] stop loss: dependent on where one confirms this area).
• Sells: Flat (stop loss: N/A).

GBP/USD 

In Wednesday's report our team underscored the 1.2520/1.25 H4 zone (yellow box) as a strong area of resistance. The zone was supported by the following structures: H4 bearish AB=CD (black arrows) 127.2% ext. at 1.2503, December's opening level at 1.2516, the 1.25 handle and the underside of a H4 supply coming in at 1.2547-1.2520. As is evident from the chart, the pair responded beautifully from here! Well done to any of our readers who managed to net some green pips on the basis of this trade call.

Going forward, the H4 candles appear to be compressing amid two converging H4 trendlines (1.2523/1.2346).

Seeing as how the unit lacks higher-timeframe (structural) direction at present, we still favor the 1.2520/1.25 H4 zone. Only this time, we (as of yet) do not have a H4 AB=CD approach, we instead have a H4 trendline resistance!

Our suggestions: As of current prices, the bears seem to be getting squeezed around the H4 mid-level number 1.2450. A H4 close above this hurdle could see price attempt to approach the aforementioned H4 sell zone. Assuming one shorts this area at market, stop-loss orders should ideally be placed above the H4 mid-way resistance at 1.2550. For the more conservative traders out there, you may want to consider waiting for additional confirmation in the form of a reasonably sized H4 bearish candle. This would, in effect, give you the choice of either placing stops above the trigger candle or beyond the current H4 supply.

Data points to consider: US Jobless claims at 1.30pm, FOMC member Kaplan speaks at 6pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.2520/1.25 ([wait for a H4 bear candle to form before pulling the trigger] stop loss: ideally beyond the trigger candle or above the current H4 supply zone/ H4 mid-way resistance at 1.2550).

AUD/USD

Kicking this morning's report off with a quick look at the weekly chart shows that price remains teasing the underside of a weekly trendline resistance taken from the high 0.8163. The other key thing to note here is that a few pips above this line is a weekly supply zone marked at 0.7849-0.7752, which happens to merge with a weekly trendline resistance extended from the high 0.7835. Moving down a level to the daily chart, daily price is currently seen trading within striking distance of a daily resistance at 0.7720/daily Quasimodo resistance at 0.7734.

Swinging over to the H4 chart, the commodity currency received a boost to the upside during yesterday's US session following the FOMC meeting. What is quite notable from a technical perspective is that price aggressively pushed above both the 0.77 handle and the H4 supply coming in at 0.7713-0.7706. Although price is now seen trading back below 0.77 at the moment, buy stops above the H4 supply zone have very likely been weakened.

Our suggestions: On the assumption that price will attempt to trade above the current H4 supply today, the next hurdle on the horizon is the aforementioned daily resistance, followed closely by the daily Quasimodo resistance (see yellow H4 box) that converges with the weekly trendline resistance (0.8163). In addition to this, we also have a potential H4 AB=CD formation in play taken from the low 0.7650 (see black arrows), which terminates around the 0.7726 neighborhood – the center of the above noted H4 yellow box!

While a short from the H4 yellow zone is tempting, one must remain cognizant of the H4 161.8% Fib ext. level at 0.7747 (not seen on the screen). This level connects beautifully with the underside of the weekly supply zone mentioned above at 0.7752. Therefore, there's a chance that price could ignore the H4 yellow zone and head higher before selling off. So, waiting for additional confirmation within the H4 yellow zone is advised (a reasonably sized H4 bear candle should suffice).

Data points to consider: Australian private capital expenditure at 12.30am, RBA Gov. Lowe speaks at 10.30pm. US Jobless claims at 1.30pm, FOMC member Kaplan speaks at 6pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 0.7734/0.7720 ([wait for a H4 bear candle to form before pulling the trigger] stop loss: ideally beyond the trigger candle). 0.7747 region ([wait for a H4 bear candle to form before pulling the trigger] stop loss: ideally beyond the trigger candle).

USD/JPY

As of current price, the H4 candles are seen loitering mid-range between a H4 supply zone visible at 113.84-113.62 and a psychological support drawn from 113. To make a long story short, the main interest here is the 114 handle seen above the current H4 supply, and the H4 supply seen above this at 114.93-114.57.

Here's why:

With the 114 handle sitting directly above the current H4 supply, there is a good chance that this will act as a magnet to price and therefore fake above the H4 supply zone. In addition to this, there's a possible H4 AB=CD bearish formation in play taken from the low 112.63 that terminates just above 114 at 114.06 (the H4 AB=CD 127.2% Fib ext.).

The H4 supply seen at 114.93-114.57 is also interesting. Supporting a bounce from this zone is a H4 161.8% Fib ext. at 114.53 (taken from the AB=CD formation highlighted above), a H4 trendline resistance from the high 115.62, December's opening level at 114.68 and it is also situated within the lower limits of a daily resistance area drawn from 115.62-114.60.

Our suggestions: On account of the above, we will be watching both zones carefully today. However, we must point out that in order for a trade to be permitted around the 114 level, it must be accompanied by a lower-timeframe confirming signal (see the top of this report). As for the H4 supply above, we would, dependent on time of day, look to short from here at market with stops placed above the H4 supply around the 114.95 mark.

Data points to consider: US Jobless claims at 1.30pm, FOMC member Kaplan speaks at 6pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 114 region ([wait for a lower-timeframe confirming signal to form before looking to execute a trade] stop loss: dependent on where one confirms this area).114.93-114.45 region ([an area one could possibly look to short at market] stop loss: ideally beyond the H4 supply zone at 114.95).

USD/CAD

Going into the early hours of yesterday's US session, the pair received a boost to the upside as Canadian retail sales came in lower than expected. The rally, however, was a short-lived one as the buyers failed to sustain gains beyond the 1.32 psychological handle, which eventually led to a selloff from here following the release of the FOMC minutes from the latest meeting.

In view of weekly price seen trading from a weekly demand base at 1.3006-1.3115, further upside could still be on the cards. Before this can be achieved, nevertheless, daily price would need to consume the 1.3212 neighborhood (yellow box – 7th February high).

Our suggestions: A H4 close above 1.32 today would be interesting. This would not only further confirm upside strength from the weekly demand base, but it would also possibly open up the gates for price to challenge the H4 supply coming in at 1.3299-1.3265 (positioned just beneath a daily supply area drawn from 1.3387-1.3317 – the next upside target on the daily chart after the 1.3212 region).

To take advantage of this potential move, waiting for price to retest 1.32 and chalk in a reasonably sized H4 bull candle would, at least in our opinion, be the better path to take here.

Data points to consider: Crude oil inventories at 4pm. US Jobless claims at 1.30pm, FOMC member Kaplan speaks at 6pm GMT.

Levels to watch/live orders:

• Buys: Watch for a H4 close above 1.32 and then look to trade any retest seen thereafter ([waiting for a reasonably sized H4 bull close to form following the retest is advised] stop loss: ideally beyond the trigger candle).
• Sells: Flat (stop loss: N/A).

USD/CHF

Trade update: stopped at 1.0125. See Wednesday's report for details).

The pair began the session robustly, though one price struck highs of 1.0140 it spent the rest of the day receding lower. As you can see, the H4 demand at 1.0077-1.0093 is currently supporting this market which could, given that there is room to move north on both the weekly and the daily charts (up to the 2017 yearly opening level at 1.0175/ daily supply at 1.0248-1.0168), eventually see the bulls take things higher from here.

This begs the question, would we consider a buy from this angle? While there is, technically speaking, little wrong with this zone, we have our eyes on the 1.0197/1.0170 neighborhood for a sell. This area brings together a collection of noteworthy resistances:

• A H4 channel resistance extended from the high 1.0044.
• A H4 Quasimodo resistance at 1.0197.
• December and January's opening levels at 1.0175/1.0170.
• A potential H4 AB=CD (see black arrows) 127.2% ext. at 1.0172.
• A minor H4 161.8% Fib ext. taken from the low 1.0077 at 1.0181.
• Located within the lower limits of a daily supply zone coming in at 1.0248-1.0168.

Our suggestions: In light of the strong confluence noted above, our desk has set a pending sell order at 1.0170 with a stop placed 5 pips above 1.02.

Data points to consider: US Jobless claims at 1.30pm, FOMC member Kaplan speaks at 6pm GMT.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1.0170 ([pending order] stop loss: 1.0205).

DOW 30

In recent sessions, US equities closed higher for a third consecutive day, tapping fresh record highs of 20790.

With absolutely no higher-timeframe resistance levels in sight, the best we feel we can do for the time being is continue looking to ‘buy the dips'. The nearest higher-timeframe area can be seen at 20527-20626: a newly-formed daily demand.

Our suggestions: The next area of support on the H4 chart, however, now falls in at 20690-20720. While this zone boasts no higher-timeframe (structural) convergence, we feel it is still worthy of attention simply because it was formed in line with the current uptrend. Just to be clear here though, placing pending orders at this zone is not advised, since there's little stopping price from ignoring this area and heading to the H4 demand zone below at 20621-20650, which happens to be positioned around the top edge of the current daily demand base. Waiting for additional confirmation such as a lower-timeframe buy signal (see the top of this report) or a reasonably sixed H4 bull candle would, at least in our opinion, be the safer, more logical, path to take.

Data points to consider: US Jobless claims at 1.30pm, FOMC member Kaplan speaks at 6pm GMT.

Levels to watch/live orders:

• Buys: 20690-20720 ([waiting for additional confirmation is advised before looking to execute a trade] stop loss: dependent on how one chooses to confirm the zone).
• Sells: Flat (stop loss: N/A).

GOLD

Gold has been a rather monotonous market to monitor so far this week. The weekly candles, although price is effectively now capped by a weekly resistance level at 1241.2, show little direction at present. This likely has something to do with daily buyers seen defending the daily support area coming in at 1232.9-1224.5, which happens to be bolstered by a daily trendline support etched from the low 1127.2.

Looking over to the H4 chart, we can see that price remains trading between a H4 trendline support taken from the high 1236.8 and a H4 161.8 % Fib ext. level at 1241.9. This – coupled with the higher-timeframe structures in place, leaves traders in somewhat of a precarious position: buy from the daily support area/H4 trendline support into potential weekly sellers, or sell from the weekly level of resistance/H4 161.8 % Fib ext. into possible daily buyers.

Our suggestions: In the absence of clearer price action, opting to stand on the sidelines today may very well be the better path to take.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Flat (stop loss: N/A).

Global Markets:

• Asian stock markets: Nikkei down 0.30 %, Shanghai Composite fell 0.40 %, Hang Seng lost 0.45 %, ASX 200 declined 0.25 %
• Commodities: Gold at $1237 (+0.35 %), Silver at $17.98 (+0.20 %), WTI Oil at $54.10 (+0.95 %), Brent Oil at $56.35 (+0.90 %)
• Rates: US 10-year yield at 2.41, UK 10-year yield at 1.20, German 10-year yield at 0.28

News & Data:

• Bank of Korea Leaves Base Rate Unchanged at 1.25%
• Japan Services PPI (YoY) Jan: 0.5% (est 0.5% rev prev 0.5%)
• Australian Private Capex (QoQ) Q4: -2.1% (est -1.0% rev prev -3.3%)
• Australian Building Capex (QoQ) Q4: -4.1% (rev prev -3.6%)
• Australian Plant/Machinery Capex (QoQ) Q4: 0.4% (rev prev -3.0%)
• PBoC Fixes USDCNY Reference Rate At 6.8695 (prev fix 6.8830 prev close 6.8781)
• Asia stocks ease, dollar steadies after Fed-led losses

Markets Update:

The Dollar declined overnight, after the FOMC minutes showed that the US central bank remains cautious. The Fed said that it may be appropriate to raise rates again fairly soon should jobs and inflation data be in line with expectations. However, the minutes did not clearly signal that a rate hike will follow next month, and did not reveal much information that wasn't already known.

EUR/USD rose from 1.0495 to 1.0570 post-FOMC. However, the on-going concerns about the upcoming elections will likely prevent larger gains. The rally in the British Pound after the FOMC minutes release was weaker. GBP/USD rose from 1.2410 to only 1.2460 and retraced most of the gains in the Asian session. The weak UK GDP numbers are still weighing on the currency.

USD/JPY declined from 113.60 to 113.00, but support held and the pair bounced to 113.45 in Asia. Nevertheless, the outlook remains negative and a retest of 112.55 support likely.

Upcoming Events:

• 07:00 GMT – German GDP
• 07:00 GMT – German GfK Consumer Climate
• 13:30 GMT – US Initial Jobless Claims
• 14:00 GMT – US House Price Index

The FOMC minutes for the January meeting were a hawkish one. Many members expressed the view that it would be 'appropriate' to increase interest rate again 'fairly soon'. A few of them suggested removing policy accommodation in 'a timely manner'. However, there was no indication that it should arrive in as soon as March. Indeed, more clarity on the fiscal stimulus plan is needed before the members could decide on the timing of the rate hikes. While the general outlook to the economy remained upbeat (the description on the employment market was especially constructive),'a few' members were concerned about downside risks to the inflation outlook.

On the timing of rate hikes, the minutes unveiled that 'many participants' judged that 'it might be appropriate to raise the federal funds rate again fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations or if the risks of overshooting the committee's maximum-employment and inflation objectives increased'. It added that 'a few participants' believed that 'continuing to remove policy accommodation in a timely manner, potentially at an upcoming meeting, would allow the Committee greater flexibility in responding to subsequent changes in economic conditions'. It appears that, during the January meeting, few members had strong conviction for a rate hike in March. Meanwhile, the minutes noted that 'a few' members remained concerned about downside risks to the inflation outlook. The members also briefly talked about the balance sheet strategy. They generally 'agreed that the committee should begin discussions at upcoming meetings about the economic conditions that could warrant changes in the existing policy of reinvesting proceeds from maturing Treasury securities and principal payments from agency debt and mortgage-backed securities, as well as how those changes would be implemented and communicated'.

As US President Donald Trump has yet to announce his fiscal expansion plan, the FOMC members emphasized their 'considerable uncertainty' about possible changes in 'fiscal and other government policies' as well as 'about the timing and magnitude of the net effects of such changes on economic activity'. The members indicated that 'the possibility of more expansionary fiscal policy as having increased the upside risks to their economic forecasts'. Some, however, suggested that 'several potential changes in government policies could pose downside risks'.

The minutes revealed little news after the accompanying statement, released in early February, and Chair Yellen's testimony last week. The encouraging economic developments, in particular the employment market, and the upbeat outlook of the members signals the median forecast of three rate hikes this year remains intact. However, March might still be a bit early for a move, as the members would like to have more clarity on the fiscal stimulus plan.

EUR/USD

The EUR/USD pair plunged to 1.0493 following London's opening, with the dollar gaining some traction as stocks jumped higher, and the common currency undermined by political woes. Data coming from Germany surprised to the upside, as the IFO survey showed that business sentiment improved in February, rising up to 111.00 from previous 109.8, with the assessment of the current situation up to 118.4 and expectations also on the rise, up to 104. Euro area annual inflation matched initial estimates, as the CPI was 1.8% in January 2017, up from 1.1% in December 2016, while it fell monthly basis by 0.8%, as expected.

In the US, existing home sales soared in January, up 3.3% to a seasonally adjusted annual rate of 5.69 million, but the EUR/USD pair turned higher, in the US afternoon, hitting 1.0565 after centrist Francois Bayrou confirmed he will not stand in France's presidential election and has offered an alliance to independent candidate Emmanuel Macron, joining forces against far-right candidate Marine Le Pen. Despite the price reaction was limited, as investors were waiting for FOMC Minutes, it clearly indicated how sensitive the common currency is to political risk.

The EUR/USD pair spiked beyond the mentioned high, after the FED Minutes showed that many FED officials see a rate hike happening "fairly soon," if the economy remains on track, but also consider that there's a modest risk of significant inflation. Also, policymakers didn’t advance their plans for the balance sheet, saying they will discuss the matter in later meetings.

Technically, the 4 hours chart shows that the price is struggling around the mentioned Fibonacci level, with the 20 SMA heading lower above the current level, and technical indicators recovering from oversold readings, but holding within negative territory, indicating limited buying interest at current levels. A recovery beyond 1.0590 could favor additional gains, but it would take an advance through 1.0635, to reduce chances of a new leg lower below 1.0500.

Support levels: 1.0520 1.0470 1.0440

Resistance levels: 1.0590 1.0635 1.0660

USD/JPY

After spending most of the day under pressure, the USD/JPY pair bounced from a daily low of 112.90 mid American afternoon, as market's sentiment improved following news that French candidate Francois Bayrou withdrew from the presidential race to join Emmanuel Macron against Marine Le Pen. US Treasury yields bounced with the 10-year benchmark up to 2.45% from previous 2.43%. The pair stabilized around 113.50 ahead of the FED's Minutes, but fell after the release of the document, as the dollar was unable to rally following policymakers' pledge to raise rates "fairly soon," should the economy remains in the growing path. The pair was once again weighed by yields, as the 10-year benchmark fell back to 2.42% following FED's news. From a technical point of view, the risk remains towards the downside, as intraday advances remained contained by a bearish 200 SMA, currently around 113.70, whilst the price pressures its 100 SMA, and technical indicators turned lower around their mid-lines. Another attempt below 112.90, particularly if Asian shares fall, will probably open doors for additional declines towards the 112.00/20 region this Thursday.

Support levels: 112.90 112.50 112.10

Resistance levels: 113.70 114.20 114.60

GBP/USD

The GBP/USD pair continued struggling for direction this Wednesday, surging up to 1.2507 at the beginning of the day amid EUR/GBP falling to fresh yearly lows, and later falling to 1.2422, in spite of an upward revision to UK quarterly growth. The second estimate of Q4 GDP, was revised slightly higher to 0.7% from 0.6%, although the annualized figure came in at 2.0%, below the first estimate of 2.2%. Business investment fell by 1.0% in the same quarter, when compared to the previous one. The dollar gained some strength ahead of the release of the FOMC Minutes, backed by FED's Powell comments, who said that the risk facing the US economy and more in balance, allowing the Central Bank to raise rates. The Minutes failed to boost the greenback, helping the GBP/USD to bounce back to mid-range. Technically, the pair has made no progress, still neutral as in the 4 hours chart, the price continues moving back and forth around a horizontal 20 SMA, whilst technical indicators are back around their mid-lines, with no clear directional strength.

Support levels: 1.2430 1.2380 1.2345

Resistance levels: 1.2480 1.2530 1.2565

GOLD

Gold prices advanced modestly at the beginning of the day, but trimmed gains and returned to opening levels ahead of the FOMC Minutes release, late in the US afternoon, and also paring gains as news coming from France took some pressure off the EU. Spot gold recovered back and settled at $1,237.80, as dollar's bulls didn't get enough from the minutes, which made no references to a certain date when it comes to rising rates. The technical picture for the commodity, however, hasn't changed, as the price remains within its latest range. In the daily chart, the 20 DMA maintains a strong bullish slope, now converging with the 50% retracement of the post-US election decline around 1,230.00, the RSI indicator continues consolidating around 62, whilst the Momentum indicator extended its slide within positive territory, now pressuring its 100 level. In the 4 hours chart, technical readings present a neutral stance, as technical indicators hover around their mid-lines with no clear directional strength, whilst the price moves back and forth around a horizontal 20 SMA.

Support levels: 1,231.20 1,226.10 1,216.60

Resistance levels: 1,244.60 1,255.10 1,261.60

WTI CRUDE

Crude oil prices retreated after flirting with multi-month highs on Tuesday, weighed by comments from Qatar's oil minister Mohammed al-Sada, who said that major oil producers outside the OPEC weren't cutting production as much as agreed last November, adding that compliance by non-OPEC members is about 50% of what has been promised. Adding to the bearish case news showed that US oil producers exported a record of 7 million barrels during the first week of February. West Texas Intermediate crude oil futures settled at $53.55 a barrel, the lower end of its weekly range. The daily chart shows that the price is now around a flat 20 SMA, whilst the Momentum indicator remains flat around its 100 level. The RSI indicator in the mentioned chart has returned to the 50 region, with a modest downward slope. In the 4 hours chart, the price has accelerated lower after breaking below an anyway flat 20 SMA, whilst technical indicators settled within negative territory with no clear directional strength.

Support levels: 53.40 53.00 52.50

Resistance levels: 54.10 54.75 55.30

DJIA

US stocks closed the day mixed, with the Dow Jones Industrial Average extending its rally to record highs, after an intraday decline following FOMC Minutes, up by 32 points to settle at 20,775.60. The Nasdaq Composite and the S&P closed in the red, with the first down 0.09%, to 5,860.63 and the second ending at 2,362.82 after losing 2 points. US equities pared early gains after the Minutes from the latest FED meeting showed that policymakers, despite supporting a soon rate hike, are still concerned about Trump's fiscal policy. The daily chart for the DJIA shows that the benchmark holds at its daily highs after the close, not far from the mentioned close, whilst technical indicators maintain their upward momentum, despite being in extreme overbought territory. The index has posted its largest bullish streak in three decades, and despite technical readings continue supporting an upward extension, the possibility of a downward corrective movement can't be dismissed at this point. In the shorter term, and according to the 4 hours chart, the 20 SMA continues leading the way higher, with buying interest surging on approaches to it, and technical indicators holding well into positive territory, albeit losing their upward strength.

Support levels: 20,730 20,692 20,638

Resistance levels: 20,780 20,825 20,860

FTSE 100

The FTSE 100 managed to advance 27 points or 0.38%, ending the day at 7,302.25, helped by a recovery in Unilever, as the company announced it will review ways to increase value for shareholders, with the share ending the day up 6.85%, right behind Capita, which added 8.66%. Lloyds Bank was also among the best performers, adding 4.39% after reporting an increase in its statutory profits from £1.6 billion in 2015, to £4.2 billion, and confirmed a £2.2 billion dividend payout to shareholders. Mining shares were among the worst performers, with Anglo American ending the day3.75% lower and BHP Billiton shedding 2.70%. The index has advanced within range, still holding above its 20 DMA in the daily chart, and with technical indicators consolidating within positive territory, with no clear directional strength. In the shorter term, and according to the 4 hours chart, the index maintains a neutral stance, hovering around a horizontal 20 SMA and with technical indicators heading nowhere around their mid-lines.

Support levels: 7,296 7,253 7,212

Resistance levels: 7,319 7,354 7,390

DAX

European equities opened with a strong footing, but the upward momentum faded as the session went back, and the German DAX closed the day modestly higher at 11,998.59, up by 31 points, anyway the highest close since March 2015. ThyssenKrupp was the best performer by adding 4.29%, followed by Fresenius Medical Care that closed 2.02% higher. Volkswagen on the other hand was the worst performer, down 1.72%, followed by Bayer that shed 1.20%. The index briefly advanced above 12,000, overall maintaining the positive tone, as in the daily chart, it settled above a bullish 20 DMA, whilst technical indicators have lost upward strength, but hold well above their mid-lines. In the 4 hours chart, the index is far above a now sharply bullish 20 SMA, whilst technical indicators have barely retreated within overbought territory, with no signs of changing bias any time soon.

Support levels: 11,965 11,920 11,873

Resistance levels: 12,031 12,079 12,128

STOCKS

Dow and Dax are trading higher; Dax and Shanghai looks bullish for the near term. Nikkei is consolidative. Nifty has crucial resistance just above current levels.

Dow (20775.60, +0.16%) and Dax (11998.59, +0.26%) are trading higher. We need to watch price action of Dow near 20800 which is an immediate resistance and could produce small rejection in the near term. On the other hand, Dax looks bullish towards 12090- 12100 levels.

Nikkei (19312.07, -0.35%) is almost stable and lacks momentum just now. Stuck within the 19000-19620 region, iwould be difficult to get any immediate directional clarity unless we see a break on either side of the range.

Shanghai (3251.59, -0.30%) is trading perfectly within the daily up-channel and while that holds, we could see a rise towards 3275-3300 in the coming sessions with some small intermediate dips. Overall trend is up for the near term.

Nifty (8926.90, +0.21%) has come up to test the previous high near 8968 seen in Sep’16 and while that could act as an immediate resistance, we could see a corrective fall from current levels towards 8700. Only a break above 9000, if seen (less likely)can we negate an immediate correction from current levels.

COMMODITIES

Gold (1237) and Silver (17.98) both are trading within their sideways channel of 1217-47 and 17.60-18.35 respectively with no directional bias. A break below 1226 (Gold) and 17.90 (Silver) could open up the lower bands of the channels.

Copper (2.71) was unable to close above its pivot of 2.76 of its recent trading range of 2.60-83, though it is still holding its upward trend line support at 2.68-70 since October 16. A close below that could open up 2.55-60 levels.We have US unemployment data at 7.00 pm IST, which could influence the price of copper as well as silver.

Brent (56.29) and WTI (54.06) both are trading within their respective ranges of 54-59 and 50-56.Today we have US crude inventories data at 9.30 pm IST, which may add volatility.

FOREX

Although the FOMC Minutes yesterday talked about a rate hike "fairly soon", US Yields (10Yr 2.41%) have dipped a little and the US Dollar Index (101.37) has also paused for a while just below 101.50. The overall Dollar strength still dominates while above 100.50, but a rise past immediate crucial Moving Average Resistances near current levels need to be broken in order to propel the Dollar Index higher towards 102+.

The Euro (1.0550) indeed saw a limited downside at 1.0500 yesterday and has bounced slightly. While the overall trend suggests an eventual break below 1.0500 while the Euro stays below 1.07, a couple of days of sideways movement between 1.05-06 could be seen.

Dollar-Yen (113.25) has good Support at 113.00 and can rise to 114+ while that holds, in line with the view expressed yesterday. The Euro-Yen (119.60) could test 120.20 in the near term (today).

Despite attempts to the upside, there has been weakness in the Pound (1.2445) since yesterday as it has been unable to rise above 1.2525. A break below 1.2400 could be bearish towards 1.2250 next week. A two-way possibility here.

The Aussie (0.7683) may be finding Resistance near 0.7700 in the near term. Stronger Resistance also available at 0.7800. Upside might be limited while these hold.

Dollar-Rupee (66.97) could see a bit of a rise if the Sensex/ Nifty were to fall today, especially since the RBI seems to have been buying continously above 66.90. The market is closed for Mahashivaratri tomorrow.

INTEREST RATES

The US yields have come down to re-test immediate support on the near term charts. A break below the support levels could initiate a sharp fall in the near term. Else we could possibly see some more sideways movement before a break on the downside.

The German-US 2Yr (-2.11%) has bounced slightly from -2.13% and in case it fails to rise immediately from current levels, we could see a further fall in the spread favoring Dollar strength in the near term. In that case, Euro could move down at a faster pace. (Refer to FOREX section above)

The Japanese yields have fallen. The 5YR (-0.117%), 10Yr (0.08%) and the 30Yr (0.85%) have fallen from levels near -0.115%, -0.09% and 0.87% respectively. The 5Yr and the 30YR has support at current levels and could possibly recover in a few sessions while the 10Yr may fall a little more in the near term.

The 10YR GOI (7.0964%) has been rising sharply and could test immediate resistance at 7.10%. Failure to fall from 7.10% could turn very bullish towards 7.2% in a short span of time. Surprisingly Dollar-Rupee has lost its correlation with the GOI in the recent sessions and the rise in the GOI is unable to pull up Dollar-Rupee to higher levels. So the GOI may possibly not act as an important cue for Rupee in the near term.