The AUD/USD has been ranging with a very low ATR (58), indicating low momentum in the market. At this point we can spot 2 possible zones for either a trend (POC) or counter trend move (POC CT). Slightly bullish bias has been prevailing in the market and POC for long trading opportunities comes within 0.7660-70 (trend line, 78.6, L3, ATR pivot). Target is 0.7725. However if the pair gets to POC CT (historical sellers, ATR projection high) 0.7720-35 it could provide a counter trend opportunity towards 0.7660. Drop below 0.7645 would put the pair in a high range scenario.

EURUSD

The EURUSD had a bearish momentum yesterday bottomed at 1.0525. The bias remains bearish in nearest term testing 1.0520/00 support area which remains a good place to buy with a tight stop loss. Immediate resistance is seen around 1.0575. A clear break above that area could lead price to neutral zone in nearest term testing 1.0620 or higher. On the downside, a clear break and daily close below 1.0500 would expose 1.0400 – 1.0350 region. Fundamental focus will be on the FOMC meeting minutes. Overall I remain neutral.

GBPUSD

The GBPUSD attempted to push lower yesterday bottomed at 1.2400 but closed higher and hit 1.2505 earlier today in Asian session. The bias is neutral in nearest term probably with a little bullish bias testing 1.2580 resistance area. Immediate support is seen around 1.2465. A clear break below that area could trigger further bearish pressure retesting 1.2400 area. Fundamental focus will be on the FOMC meeting minutes. Overall I remain neutral.

USDJPY

The USDJPY had a bullish momentum yesterday topped at 113.77 but traded a little bit lower earlier today in Asian session hit 113.32. The bias is neutral in nearest term. Immediate support is seen around 113.20. A clear break below that area could trigger further bearish pressure testing 112.65 area. Immediate resistance is seen around 113.70. A clear break above that area could trigger further bullish pressure testing 114.00/30 region but overall I still prefer a bearish scenario at this phase and any upside pullback should be seen as a good opportunity to sell. Fundamental focus will be on the FOMC meeting minutes.

USDCHF

The USDCHF had a bullish momentum yesterday topped at 1.0105. The bias remains bullish in nearest term testing 1.0150 – 1.0200. Immediate support is seen around 1.0060. A clear break below that area could lead price to neutral zone in nearest term testing 1.0000 region. Fundamental focus will be on the FOMC meeting minutes. Overall I remain neutral.

EUR/USD continues to head south this week. In the Wednesday session, the pair is trading at the 1.05 line, it's lowest level since January 11. On the release front, German Ifo Business Climate improved to 111.0, beating the estimate of 109.6 points. Eurozone Final CPI remained at 0.9%, matching the forecast. The US releases Existing Home Sales and the Federal Reserve will publish the minutes of the January policy meeting. On Thursday, the US releases unemployment claims, with an estimate of 242 thousand.

The Federal Reserve will be on center stage on Wednesday. The central bank finally pressed the rate trigger in December, a full year after the previous rate hike. Last week, Fed Chair Janet Yellen strongly hinted that that another hike is on the way, leaving the markets to speculate on the timing of a hike – will it be in March or June? Even though the US economy is solid and we could see several rate hikes in 2017, market uneasiness over the Trump administration continues to grow, dampening investor appetite for risk. Trump continues to have difficulty filling in key cabinet positions and the media continues to probe connections between Trump officials and Russia. Trump is yet to outline a clear and coherent economic policy, although he has promised to unveil a tax package in the next few weeks. After Trump's shock win in November, post-election euphoria boosted the markets. However, Trump's first month in office has been marked by controversy and confusion, which has unsettled the markets.

German numbers continue to impress this week. German Ifo Business Climate improved to 111.0 in February, up from 109.8 a month earlier. Inflation is pointing upwards, as PPI climbed o.7% in January, above the estimate of 0.3%. This marked a 3-month high. This was followed by strong Manufacturing PMI reports from Germany and the Eurozone, which continue to indicate expansion. On Thursday, Germany releases GDP and Consumer Climate.

Recent eurozone numbers have been steady, with the economy expanding and inflation levels moving upwards. Nonetheless, the ECB appears reluctant to make any changes to current monetary policy. The ECB released the minutes of its January policy meeting on Thursday. The minutes indicated that the central bank continues to have little appetite for reducing stimulus. Policymakers stated that the recent climb in inflation could prove to be temporary and there is political uncertainty ahead. France and Germany, the two largest economies in the eurozone, go to the polls later this year, as does the Netherlands. Inflation has moved close to the central bank's target of around 2 percent, prompting calls from Germany and elsewhere to tighten monetary policy. At this point in time, a majority of ECB policy makers are in favor of maintaining course the asset-purchase program, which ends in December. However, if growth and inflation numbers continue to climb, there will be increased pressure and louder voices calling for tighter monetary policy, which would be bearish for the stock market.

News and Events:

USD lagging yields

US equity markets wasted no time after the long weekend rallied to new record highs. The general optimism relies on the strong economic outlook. Fed speakers sounding increasingly hawkish, suggesting a steeper rate path but also US economic acceleration, which will support corporate earnings. Fed president Hackers added his name to members that support a March hike causing Fed Funds rate to jump. Given OIS underpricing a March hike (rate only pricing in two hikes and not three) we see possibility of a short term USD rally. Interestingly, US yields continue to rise on higher than expected CPI read, forcing spreads between US and DM to widen. However, the USD has failed to meaningfully follow this generally solid indicators. We suspect the lag between US interest rate differentials and USD is a function of increasing expectations for accelerating global growth. Given the considerable room for short term US rates to adjust higher we just need a catalyst. This could be Trump's 'phenomenal' tax reform, which has been promised to be released within a month. The merely materialization of stimulus will likely be enough to excite bullish economic forecasts and force markets to reevaluate underpricing.

UK: Hefty bill reinforces soft Brexit

On the surface European Commission President Jean Claude Junker's comments over the 'very hefty' bill for Brexit sounds like a dire warning. Yet in our view his words actually reinforce the view that a 'soft' Brexit is the only realistic path. In a speech to the Belgian Federal Parliament, Junker indicated that UK would face 'tough negotiations' and would not be 'at a discount or at zero cost'. Back of the envelope reports have the further payments to the EU at €60 billion. Money that will be used for UK spending commitments made during membership. It is unlikely that divorce settlements will be made in a single lump payments but rather steady payments which will ensure the UK's deep involvement in EU issues. We anticipate the Notification of Withdrawal Bill will passed into law allowing Prime Minister Theresa May to trigger Article 50, starting the long drawn-out process (despite political suggestions to the contrary). Sterling could come under short term selling pressure heading into March due to Article 50 uncertainty yet improving UK domestic and external fundamentals will further support economic recovery and GBP strength.

Switzerland: SNB can't stop the demand

SNB sight deposits indicated another significant round of FX intervention last week. In the last month the SNB has injected approximately 12bn CHF to support the EURCHF un-official floor at 1.06. Swiss economic data remains strong with CPI tuning positive and cross boarder M&A flow strong. In addition, mounting political risk in European will continue to haunt the SNB. CHF remains the primary safe haven trade for European investors. Heading into a contentious period for European with election cycle underway and UK article 50 preparing to be launch, short EURCHF remains one of our favorite plays.

No Greek Drama

Current negotiations over Greek debt could be the least suspenseful script since N. Shyamalan's 'The Happening.' After public clashes between EU, IMF and Greek officials over sustainability of Athens debts reports from Euro-group meeting indicate a deal is in reach for Greece's third bailout. Officials will head to Athens to finalize details of a deep reform package that include pension cuts and broader scope of income tax (convergence of EU and IMF views). This will allow Greece to receive the bailout funds to meet July's €7bn debt repayment. Despite marginal yield spread widening between German and Greek sovereign debt the market seems, correctly, unconcerned over the Greek bailout program. The reality is that even the current headwinds the EU is facing (Brexit, Trump administration, election cycle) the cost of 'kicking the can' down the road is a low risk solution. EU officials at this point need to contain the growing sentiment that the EU experience is unsustainable especially in Netherland and France. The hype around negotiations is a perfect example, in our view, of a key 2017 trend of market noise clouding fundamentals realities. In our view, current euro weakness is a function of mounting EU political risk emulating from impending Dutch and French elections. Moving forward, Greek debt sustainability must come with debt relief, especially with interest rates marching higher.

Today's Key Issues (time in GMT):

• Feb 17 Money Supply Narrow Def, last 8.74t RUB / 08:00
• Feb IFO Business Climate, exp 109,6, last 109,8, rev 109,9 EUR / 09:00
• Feb IFO Expectations, exp 103, last 103,2 EUR / 09:00
• Feb IFO Current Assessment, exp 116,6, last 116,9 EUR / 09:00
• Jan CPI FOI Index Ex Tobacco, exp 100,4, last 100,3 EUR / 09:00
• Jan F CPI EU Harmonized YoY, exp 0,70%, last 0,70% EUR / 09:00
• Feb Credit Suisse Survey Expectations, last 18,5 CHF / 09:00
• 4Q P GDP QoQ, exp 0,60%, last 0,60% GBP / 09:30
• 4Q P GDP YoY, exp 2,20%, last 2,20% GBP / 09:30
• 4Q P Private Consumption QoQ, exp 0,70%, last 0,70%, rev 0,90% GBP / 09:30
• 4Q P Government Spending QoQ, exp 0,10%, last 0,00% GBP / 09:30
• 4Q P Gross Fixed Capital Formation QoQ, exp 0,20%, last 0,90% GBP / 09:30
• 4Q P Exports QoQ, exp 2,00%, last -2,60% GBP / 09:30
• 4Q P Imports QoQ, exp 0,30%, last 1,40%, rev 1,30% GBP / 09:30
• Dec Index of Services MoM, exp 0,10%, last 0,30% GBP / 09:30
• Dec Index of Services 3M/3M, exp 0,80%, last 1,00%, rev 0,90% GBP / 09:30
• 4Q P Total Business Investment QoQ, exp 0,10%, last 0,40%, rev 0,70% GBP / 09:30
• 4Q P Total Business Investment YoY, exp 0,30%, last -2,20%, rev -2,30% GBP / 09:30
• Jan CPI MoM, exp -0,80%, last 0,50% EUR / 10:00
• Jan F CPI YoY, exp 1,80%, last 1,80% EUR / 10:00
• Jan F CPI Core YoY, exp 0,90%, last 0,90% EUR / 10:00
• Jan Unemployment Rate, exp 5,40%, last 5,30% RUB / 11:00
• Jan Real Disposable Income, exp -2,90%, last -6,10% RUB / 11:00
• Jan Real Wages YoY, exp 2,00%, last 2,40% RUB / 11:00
• Jan Retail Sales Real MoM, exp -27,00%, last 18,30% RUB / 11:00
• Jan Retail Sales Real YoY, exp -5,10%, last -5,90% RUB / 11:00
• BOE Deputy Governor Jon Cunliffe Speaks in London GBP / 11:00
• Feb FGV Consumer Confidence, last 79,3 BRL / 11:00
• Feb FGV Construction Costs MoM, exp 0,35%, last 0,29% BRL / 11:00
• Feb Real Sector Confidence SA, last 100,5 TRY / 11:30
• Feb Real Sector Confidence NSA, last 97 TRY / 11:30
• Feb Capacity Utilization, exp 74,70%, last 75,50% TRY / 11:30
• BOE Deputy Governor Shafik Answers Questions in Twitter Q&A GBP / 11:30
• Feb IBGE Inflation IPCA-15 MoM, exp 0,50%, last 0,31% BRL / 12:00
• Feb IBGE Inflation IPCA-15 YoY, exp 4,98%, last 5,94% BRL / 12:00
• Feb 17 MBA Mortgage Applications, last -3,70% USD / 12:00
• Feb 20 CPI WoW, last 0,00% RUB / 13:00
• Feb 20 CPI Weekly YTD, last 0,70% RUB / 13:00
• Dec Retail Sales MoM, exp 0,00%, last 0,20% CAD / 13:30
• Dec Retail Sales Ex Auto MoM, exp 0,50%, last 0,10% CAD / 13:30
• Conference Board China January Leading Economic Index CNY / 14:00
• Bank of England Bond Buying Operation GBP / 14:50
• Revisions: Existing Home Sales USD / 15:00
• Jan Existing Home Sales, exp 5.55m, last 5.49m USD / 15:00

The Risk Today:

EUR/USD is back 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 that the current underlying move is a bearish 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 has exited symmetrical triangle. However, the pair is still lying below strong resistance given at 1.2771 (05/10/2016 high). Support is given at 1.2254 (19/01/2016 low). 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 demand is fading after its increase from support given at 111.36 (28/11/2016 low). Bearish pressures arise around hourly resistance given at 115.62 (19/01/2016 high). The technical structure suggests further weakness. 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 bullish momentum is back to 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). We believe that the pair is likely to strengthen again above parity. 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.

Today the main event will be in the US, where the Fed releases the minutes from its February policy meeting. Considering this was one of the meetings that was not accompanied by a press conference or updated forecasts, we think that the market may look through the minutes for extra details on the Fed's forward guidance and on the timing of the next rate increase. Last week, in her semi-annual testimony before Congress, Chair Yellen was quite optimistic with regards to a near-term hike, indicating that such action will likely be appropriate at one of the upcoming meetings if employment and inflation evolve in line with the Fed's expectations. Following her appearances, the probability for a March hike rose somewhat, though it has since reverted back to its prior levels. We believe that in case we get another set of optimistic signals from the minutes, that probability could increase once again. Considering that the data the Committee had access to at that time were solid, since the disappointing wage growth print for January had yet to be released, we could indeed get some hawkish signals, something that may bring the dollar under renewed buying interest.

Our favorite proxy for exploiting further USD gains has now changed from USD/JPY to EUR/USD, which we expect to test once again the 1.0500 (S1) territory soon. If the bears prove strong enough to overcome that key support hurdle, then we may experience extensions towards our next support of 1.0450 (S2). The reason behind the change is the increased market attention Eurozone's politics have gained in the last couple of weeks.

Overall, we maintain our view that the FOMC is unlikely to rush into a March hike amid lackluster wage growth and heightened uncertainty around fiscal policy. Our model which is based on the yields of the Fed funds futures shows a 28% probability for a March hike, but we see even that number as somewhat optimistic if we take into account that the Committee has turned more dovish this year through the rotation of voting rights. Therefore, we still expect the next rate hike to come in June. We would like to see some clarity around fiscal reform, some acceleration in wage growth, as well as an uptick in the core PCE price index rate, before we reconsider this view.

RBA Governor confirms the bar for further easing is high

In a speech overnight, RBA Governor Philip Lowe suggested that the Bank is unlikely to ease its policy any further in the foreseeable future, as it is concerned with the already-high levels of household debt. He said that although the Bank would like to achieve its double mandate sooner than currently projected, if that is done by reducing rates further, it would encourage even more borrowing and thereby amplify financial stability risks. These comments confirm our view that the RBA is likely to remain on hold in the foreseeable future. Combined with the surge in iron ore prices over the past months, we believe that these factors could keep the Aussie supported moving forward. However, given the uncertainty surrounding fiscal policy in the US, we would avoid AUD/USD. We prefer EUR/AUD as a proxy for any future Aussie gains, considering that the political risks in Eurozone could keep the common currency on the back foot in coming months. EUR/AUD has been trading in a downtrend since the 30th of December and since the beginning of February, it appears to be trading within a downside channel. At the time of writing, the pair looks to be headed towards the 1.3675 (S1) support zone, marked by the lows of the 28th and 29th of April 2015. A clear break below that zone is possible to trigger extensions towards our next support of 1.3600 (S2), defined by the inside swing high of the 31st of May 2013. The broader trend appears negative as well. What's more, on the 10th of February the pair broke below the downside support line drawn from the 10th of March 2016, which enhances the case for the pair to continue trading south in the weeks to come.

As for the rest of today's highlights

During the European day, we get Germany's Ifo survey for February. The forecast is for both the expectations and the current conditions indices to have declined marginally, which is also supported by the slides in both the ZEW indices. Something like that could hurt the common currency somewhat. However, following the surprising surge in Eurozone's composite PMI for February, we do not expect a modest slide in the Ifo indices to be particularly worrisome for ECB policymakers.

In the UK, the 2nd estimate of Q4 GDP is due out. The 1st estimate showed that economic growth held steady at +0.6% on a quarterly basis, beating the consensus for a slight slowdown. This was another confirmation that the UK economy has not been hit by Brexit uncertainties, at least not yet. With regards to the 2nd revision, the forecast is for GDP growth to remain unchanged. We see the risks surrounding that forecast as skewed to the upside given that industrial production for December, which was released after the 1st estimate of GDP, beat expectations significantly. Thus we think that if there is any revision, it is likely to be upwards, something that could extend sterling's gains from yesterday.

As for the US economic data, we get existing home sales for January, though market focus is likely to be on the FOMC minutes.

In Canada, retail sales for December are due to be released and the forecast is for the print to have stagnated from the previous month, something that may hurt the Loonie somewhat.

We have only one speaker scheduled for today: BoE Deputy Governor for Financial Stability Jon Cunliffe.

EUR/USD

Current level - 10524

The downtrend is intact, currently testing 1.0520 support zone and next hurdle lies at 1.0450. Crucial on the upside is 1.0560 and only a violation of that level will signal a reversal of the slide.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 113.40

A reversal has been confirmed at 113.80 and my outlook is already bearish, for a slide towards 112.50, en route to 111.60.

GBP/USD

Current level - 1.2491

The outlook is already positive, for a break through 1.2520, towards 1.2610 area. Crucial on the downside is 1.2440 zone.

'Traders tracking the US Dollar Basket should note that the Index is again trending higher after a short retracement last week.' - Walker England, Daily FX

Pair's Outlook

The common European currency did not stop its major fall against the US Dollar on Tuesday, as the currency exchange rate continued the decline into Wednesday's trading session. Previously, on Tuesday the pair fell down to the weekly S1 at 1.0529, which managed to hinder the fall of the rate. However, on early Wednesday morning the pair passed the support level and began to move further lower. The closest support level to the currency exchange pair is at 1.0488, where the monthly S1 is located at. Due to that it is most likely that the rate will surely fall below the 1.05 mark.

Traders' Sentiment

SWFX traders are firmly bullish on the pair, as 54% of open positions are long. In the meantime, 55% of set up orders are to sell the Euro

'The recent negative undertone has eased with the sharp bounce and this pair has likely moved into a 1.2400/1.2580 consolidation range. In other words, the overall neutral phase that started earlier this month is still intact.' – UOB Group (based on FXStreet)

Pair's Outlook

Despite strong downside volatility, the GBP/USD pair managed to recover from its intraday low and even close trade in the green zone. The Cable now faces the 1.25 resistance, which is bolstered by the 20-day SMA and the weekly R1. However, a breach of this area does not ensure further bullish momentum is to follow; for that the Sterling is required to climb over the 1.2540 level, as that would slightly reassure the current three-week down-trend is to come to an end. A strong support area just above 1.24 is likely to help the British currency remain afloat, as it has been doing for a whole a month now.

Traders' Sentiment

There are 58% of traders being long the Pound today, compared to 59% on Tuesday. At the same time, the share of sell orders returned to its Monday's level of 55% (down from 58% previously).

'I don't feel there was incentive-backed selling [of the dollar].' – Kenji Yoshii, Mizuho Securities (based on Market Watch)

Pair's Outlook

The USD/JPY currency pair successfully climbed over the immediate resistance area on Tuesday, but was unable to reach the 114.00 major level. The main target is the 115.00 mark, with an interim resistance lying on the pair's path around 114.40, represented by the weekly R1 and the monthly PP, which could prevent the Buck from reaching its goal. However, a strong impetus is required for a surge beyond 115.00, otherwise the consolidation trend is to be maintained. Today's FOMC Minutes could provide such a boost for the Greenback, but lately this particular event has been failing to strengthen the US currency substantially.

Traders' Sentiment

Bulls are barely outnumbering the bears, as 52% of all open positions are long. The portion of buy orders surged from 38 to 63% in 24 hours.

'We are relatively agnostic on the outlook for gold, with our 3-, 6-, and 12-month targets at $1,200, $1,200 and $1,250 an ounce respectively.' – Goldman Sachs (based on Reuters)

Pair's Outlook

The yellow metal remained near the 1,235 level for the fifth consecutive trading session during the early hours of Wednesday's trading session. However, during Tuesday's trading the bullions price increased its volatility to the downside, as the commodity price once more confirmed the uptrend line at 1,226.12. The bullion seems to have formed a short term triangle, as there is another trend line, which together with the uptrend line forms a triangle pattern. Although, for the clues regarding the direction of the upcoming break out market participants need to look at fundamental data coming out from the Federal Reserve.

Traders' Sentiment

SWFX traders remain bullish regarding the bullion, as 55% of open positions are long on Wednesday. Meanwhile, 63% of trader set up orders are to buy the metal.