Currency pair USD/JPY

The USD/JPY seems to have completed a bullish 5 wave (brown) pattern as part of a wave 1 (blue). Price could now be retracing back to the Fibonacci levels of wave 2 vs 1. A break below the 100% level invalidates this wave structure. A breakout above resistance (red) could confirm and start the wave 3 (blue).

The USD/JPY is probably building a bearish ABC zigzag (brown) correction within wave 2 (blue). Price could bounce at the Fibonacci levels of wave B vs A (brown) price could move lower within wave 2 (blue). A break above the 100% level of wave B vs A invalidates wave B (brown) and below 100% of wave 2 vs 1 invalidates wave 2 (blue).

Currency pair EUR/USD

The EUR/USD retraced back to the Fibonacci levels of wave X (blue) as price builds a WXY correction within a larger wave 2 (puple). The Fibonacci levels of wave 2 (purple) could therefore act as resistance. A break above the 100% level of wave 2 vs 1 invalidates the wave 1-2 (purple).

The EUR/USD showed a bearish bounce and price fell back to the 50% Fibonacci support level. Price will either break above resistance trend line (red) or retrace to deeper Fib levels of wave X vs W.

Currency pair GBP/USD

The GBP/USD is in between multiple support and resistance trend lines. At this moment price is close the support trend line (blue) which could be used as a bouncing spot within wave 2-3 (orange) and a larger wave C (blue).

The GBP/USD seems to have built a bearish ABC zigzag (grey) towards the Fibonacci levels of wave 2 (purple). A break below the 100% Fib level of wave 2 vs 1 (purple) invalidates the wave structure. A bullish breakout above resistance (red) could see price move towards the Fibonacci targets of wave 3 vs 1 (orange).

Daily Pivots: (S1) 112.43; (P) 112.97; (R1) 113.32; More...

Intraday bias in USD/JPY 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.

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Daily Pivots: (S1) 1.3056; (P) 1.3091; (R1) 1.3123; More...

Intraday bias in USD/CAD remains neutral for the moment. On the upside, break of 1.3211 resistance will argue that fall from 1.3598 has completed at 1.2968. And more importantly, rise from 1.2460 is still in progress. In that case, intraday bias will be turned back to the upside for 1.3598 and above. On the downside, below 1.2968 will revive the case that rise from 1.2460 is completed and turn outlook bearish for this low. Overall, choppy rise from 1.2460 is still seen as a corrective move.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. The second leg could be completed at 1.3598 and fall from there is tentatively seen as the third leg. Break of 1.2460 will target 50% retracement of 0.9460 to 1.4689 at 1.2075 before completing the correction. In case of another rise, we'd look for reversal signal above 61.8% retracement of 1.4689 to 1.2460 at 1.3838.

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Daily Pivots: (S1) 0.7643; (P) 0.7677; (R1) 0.7699; More...

Intraday bias in AUD/USD remains neutral for the moment. With 0.7605 minor support intact, further rise cannot be ruled out yet. However, considering bearish divergence condition in 4 hour MACD, we'd expect strong resistance from 0.7777/7833 resistance zone to limit upside and bring near term reversal. On the downside, break of 0.7605 support will indicate that rise from 0.7158 has completed already and turn bias back to the downside for 55 day EMA (now at 0.7534) first.

In the bigger picture, we're still treating price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seek to 55 month EMA (now at 0.8186) and above.

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The forex markets are generally staying in range as another week starts. FOMC minutes will be the main focus of the week. Recent comments from Fed officials were generally hawkish, maintaining the general view of three rate hikes this year. And there are some comments that raised the probability of a March hike mildly. The markets will look into the minutes of January 31 - February 1 meeting to confirm that it's a consensus among FOMC minutes. Meanwhile, it's generally expressed that fiscal policies were not taken into account in Fed's last projections, due to lack of details available. US president Donald Trump has promised to deliver "phenomenal" tax reforms within two or three weeks. And it's about time for Trump to deliver. And the announcement of Trump's tax overhaul could overwhelm the markets.

Yen Lower as Trade Surplus Shrank

Yen trades mildly lower today as trade deficit narrowed to JPY 0.16T in January, below expectation of 0.28T. Exports rose 1.3% yoy, much weaker than expectation of 4.7% yoy. That's, nonetheless, the second month of import growth, following 14 straight months of contraction. Some economists noted that's in line with strengthening global demand. However, the outlook ahead is unclear thanks US's trade policies. In particular, Donald Trump's protectionist policies could be a blow to Japanese exporters, in particular auto manufacturers.

Also released today so far, New Zealand PPI inputs rose 1.0% qoq in Q4 while PPI outputs rose 1.5% qoq. UK Rightmove house price rose 2.0% mom in February. Germany will release PPI today. UK CBI trends total orders, Eurozone consumer confidence and Canada wholesale sales will be featured. US in on bank holiday today.

FOMC Minutes, RBA Minutes and Eurozone PMIs and German Ifo to highlight the week

For the week ahead, FOMC and RBA minutes are the main feature. Meanwhile, Eurozone PMIs and German Ifo will be closely watched too. Euro is so far the second weakest major currency this month, next to Kiwi. The common currency is weighed down by political uncertainties in Europe. The closer ones include French election and Brexit negotiations. The PMIs and Ifo could be a gauge to see how sentiments in business are being affected by those uncertainties. Here are some highlights for the week:

• Monday: New Zealand PPI, Japan trade balance; German PPI; Eurozone consumer confidence; Canada wholesale sales
• Tuesday: RBA minutes; Japan PMI manufacturing, all industry index' Swiss trade balance; Eurozone PMIs; US PMIs
• Wednesday: Australia wage cost; German Ifo, Eurozone CPI final; UK GDP revision: Canada retail sales; US existing home sales, FOMC minutes
• Thursday: Australia private capital expenditure; German GDP final, Gfk consumer sentiment; US jobless claims
• Friday: UK BBA mortgage approvals; Canada CPI; US new home sales

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7643; (P) 0.7677; (R1) 0.7699; More...

Intraday bias in AUD/USD remains neutral for the moment. With 0.7605 minor support intact, further rise cannot be ruled out yet. However, considering bearish divergence condition in 4 hour MACD, we'd expect strong resistance from 0.7777/7833 resistance zone to limit upside and bring near term reversal. On the downside, break of 0.7605 support will indicate that rise from 0.7158 has completed already and turn bias back to the downside for 55 day EMA (now at 0.7534) first.

In the bigger picture, we're still treating price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seek to 55 month EMA (now at 0.8186) and above.

Economic Indicators Update

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STOCKS

Overall the equities are mixed. Dow and Shanghai looks bullish while Dax and Nikkei are sideways. Nifty could be on the verge of seeing a sharp fall in the near term.

The US markets are closed today on the eve of Washington’s birthday. Dow (20624.05, +0.02%) has moved up slightly and a small dip from 20800 can be expected in the near term. A break above 20800 could turn very bullish towards 21000 or higher. Near term looks strong.

Dax (11757.02, -0.22) is finding some difficulty in breaking above the previous high of 11893.08 and at the same time is holding well above the 11500-11400 support region. Unless we see a break on either side, the index may continue to trade sideways in the near term.

Nikkei (19207.30, -0.14%) is also stuck in the 19000-19620 region and may remain so for some more sessions. We could see a rise to 1950 over today and tomorrow.

Shanghai (3214.20, +0.38%) may bounce back from support at 3200 to rise again towards 3225-3250 levels. Near term looks bullish.

Immediate support near 8800 seen on the Nifty (8821.70, +0.50%) which could take it towards crucial resistance at 9000. A sharp corrective fall is expected in the coming sessions either from current levels or after testing crucial resistance near 9000.

COMMODITIES

Gold (1234) may test the support of 1215 due to fresh strength in Dollar (100.95). It may keep it stable in the range of 1215-40.

Long term (since April 2011) trend line resistance for Silver (17.94) poised at 18.35 region. Unless the same has been penetrated on an closing basis, silver may be range bound between 18.35-17.60.

Nothing changed for Brent (55.78) and WTI (53.43) in the last session. Repeat – both are trading exactly at the midpoint of their respective ranges of 53-58 and 50-55 with no directional bias and this horizontal movement may continue for a few more days. Brent-WTI ratio (1.63) is also moving downwards, may find support at 1.00.

Copper (2.71) is trading within the range of 2.60-83 with no directional bias.

FOREX

With the US market closed today, the forex market is expected to remain quiet for the day. This week, the volatility may come down.

Dollar Index (100.95) has bounced back from 100.40, a bit short of our target/support of 100.20 and a break above 101.25-40 may confirm a near term bottom at 100.40. The next 2-5 sessions may find Dollar trading in the range of 100.40-101.70.

Euro (1.0609) failed to retrace more than 50% of the decline from 1.0829 to 1.0519 and came down once again. Now a break below 1.0580 may extend the fall to 1.0500-1.0450 levels.

Dollar-Yen (113.08) has been only mildly affected by the January Trade Balance (-¥1086.9b versus -¥625.9b expected)missing expectations and bounced back from 112.60, slightly below our support of 112.85. But to hold above the low of 112.60, it must rise above 113.50 in the next couple of sessions.

Pound (1.2412) is trying to expand the near term range of 1.2400-1.2600 to the lower side in line with our expectations. The medium term upside chances remain open till the support at 1.2350-40 is protected.

Aussie (0.7670) is testing the near term support at 0.7650. It remains to be seen if it manages to bounce from the support or not as a break below 0.7650 may weaken the uptrend considerably. The major resistance remains unchanged at 0.7750-0.7800..

The GST council was successful in passing only a single draft law on Saturday but three other crucial laws were stuck. Dollar Rupee (67.01) may open slightly higher today with the trend up above the near term support at 66.90

INTEREST RATES

The US yields may possibly remain stable near current levels before coming off below immediate supports. The 5Yr (1.90%), 10YR (2.2%) and the 30Yr (3.02%) are almost stable and may remain so for another 2-3 sessions.

The Japanese 5YR (-0.10%) and the 10Yr (0.089%) have fallen disappointing trade figures came out this morning. However, the 30YR (0.917%) has risen from levels near 0.88% and looks bullish for the near term.

The UK yields are all trading lower. The 5YR (0.393%), 10Yr (1.3020%) and the 20YR (1.80%) are down by 1bps and could fall some more before bouncing back in the next few sessions.

The Indian 10YR GOI (7.00%) closed higher last week and we may expect it to trade in the 6.88-7.04% region for the coming sessions.

EUR/USD

The dollar received a vote of confidence late last week, advancing against most of its major rivals with the clear exception of the JPY, as data released during these last few days indicated a rebound in inflation and economic activity, whilst FED's head Yellen hawkish testimony before the Congress, boosted chances of a rate hike in March. The common currency, on the other hand, remained undermined by political woes, as adding to the upcoming elections were rising concerns about Greece, still struggling to meet austerity requirements to get bailouts. This upcoming week will start with a banking holiday in the US, anticipating some choppy trading across the board, although next Tuesday, the release of February preliminary PMIs figures in both economies could set the tone for the whole week.

The EUR/USD pair closed on Friday at 1.0610, pretty much flat when compared to its previous weekly close, and is technically poised to extend its decline during the upcoming days, given that in the daily chart, advances were contained by a bearish 100 DMA, around 1.0680, whilst the Momentum indicator maintains a strong bearish slope within negative territory, and the RSI indicator resumed its decline after a tepid upward correction, also developing within bearish levels. In the 4 hours chart, the price settled a few pips below a flat 20 SMA, while the RSI indicator turned flat around 44 and the Momentum indicator retreats from overbought readings, still above its 100 level. The key for the upcoming days is the Fibonacci support at 1.0565, as renewed selling interest below the level will open doors for an extension sub-1.0500. 

Support levels: 1.0590 1.0565 1.0520

Resistance levels: 1.0650 1.0680 1.0720

USD/JPY

The USD/JPY pair trimmed all of its previous week gains after a failed attempt to surge beyond 115.00, resuming the bearish trend that began with the year. The pair topped at 114.95 last Wednesday, when a hawkish FED's Yellen opened doors for a rate hike in March. And while US stocks surged to record highs, US yields were unable to hold on to gains, and finished the week near February lows. Also, supporting the yen is the ongoing political uncertainty in Europe and the US that at the end of the day pushes speculative interest into safe-haven assets. From a technical point of view, the daily chart shows that the pair is holding a few pips above its 100 DMA currently around 112.45, while a major Fibonacci support comes at 111.95. In the same chart, technical indicators have turned south around their mid-lines, but lack enough downward momentum to confirm a bearish extension. In the shorter term, and according to the 4 hours chart, the bearish bias is firmer, as indicators maintain their sharp bearish slopes within negative territory, whilst the price has settled below bearish 100 and 200 SMAs, with the shortest acting as dynamic resistance around 113.40.

Support levels: 112.45 112.10 111.60

Resistance levels: 113.00 113.40 113.85

GBP/USD

After spending the week struggling to regain the 1.2500 level, the GBP/USD pair plunged on Friday, following the release of much worse-than-expected UK Retail Sales figures. Sales declined 0.3% in January, while excluding fuel, rose by 0.2% in the month, well below market's expectations. Year-on-year, sales rose by 1.5% against the 3.4% advance expected, while ex fuel sales grew by just 2.6%. December readings suffered downward revisions, adding to evidence that rising inflation is finally affecting consumption in the UK. The daily chart for the pair shows that it settled below 1.2430, the 38.2% retracement of the latest bullish run, while technical indicators resumed their declines within negative territory. Early attempts to break higher were contained by a now modestly bearish 20 SMA, currently at 1.2510. In the 4 hours chart, the price is also developing below its 20 SMA which converges with a horizontal 200 EMA around 1.2460, while the Momentum indicator turned lower within neutral territory, but the RSI heads south around 36, maintaining the risk towards the downside. February low at 1.2346, at the 50% retracement of the mentioned rally, is the level to break to confirm a new leg lower sub-1.2200 for these next few days.

Support levels: 1.2380 1.2345 1.2300

Resistance levels: 1.2430 1.2460 1.2510

GOLD

Spot gold closed with gains for a third consecutive week, although off its February highs as the dollar gained momentum ahead of the weekly close. The bright metal settled at $1,235.57 a troy ounce, posting a solid recover from a low of 1,1216,64, which followed Yellen's statement. The upward momentum seems to be slowing, as in the daily chart, the commodity has settled a double top around 1,244.00, with the neckline of the figure being the mentioned low, whilst technical indicators head modestly lower, within positive territory. A bullish 20 DMA offers support a few cents above the mentioned low, all of which suggests that bulls won't give up as long as the 1,215.00 region holds. In the 4 hours chart, the metal presents a bullish stance, as the 20 SMA heads north around 1,233.90, while indicators have pared their declines well above their mid-lines and after correcting overbought conditions. A break above 1,244.60, however, will favor an extension up to 1,255.10, the 61.8% retracement of the post-US election slide.

Support levels: 1,233.90 1,222.50 1,216.60

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

WTI CRUDE

Crude oil prices closed the week marginally lower but still within familiar ranges, with West Texas Intermediate futures settling at $53.73 a barrel. Rising US stocks and production offset the optimism surrounding the so far, successful OPEC's output cut, leaving the commodity directionless for one more week. News on Friday showed that the number of active oil rigs increased by 6, up to 597, the highest number since early October 2015. Ever since the OPEC announced its agreement, US rigs increased by 120. The technical picture for US crude futures remains neutral, as in the daily chart, the price rests above a flat 20 DMA, while technical indicators head nowhere around their mid-lines. In the 4 hours chart, the commodity also presents a neutral stance, as moving averages remain horizontal and within a tight range, whilst technical indicators continue hovering around their mid-lines with no certain directional strength.

Support levels: 53.00 52.60 52.00

Resistance levels: 54.40 55.20 55.70

DJIA

Wall Street advanced modestly on Friday, but it was enough for the three major indexes to end at all-time highs. The Dow Jones Industrial Average closed the week at 20,624.05, adding 4 points on Friday and 1.75% for the week. The Nasdaq Composite ended at 5,838.58, after adding 23 points or 0.41%, while the S&P finished at 2,351.16, after adding roughly 4 points on Friday. Within the Dow, Verizon Communications was the best performer, up 1.51%, followed by Boeing that added 1.11%. Energy and banking-related equities were in the losing side, with Exxon Mobil down 0.66% and JPMorgan Chase shedding 0.33%. Technically the daily chart shows that the index held above far above a bullish 20 DMA, whilst technical indicators have turned flat within overbought territory, limiting chances of a downward move. In the 4 hours chart, the benchmark stands above a bullish 20 SMA, the RSI indicator holds flat around 69, but the Momentum indicator diverges lower, heading sharply lower around 100 and presenting a bearish divergence still to be confirmed.

Support levels: 20,552 20,506 20,467

Resistance levels: 20,652 20,700 20,750

FTSE 100

The FTSE 100 added 22 points or 0.30%, to close the week at 7,299.96, with food-related equities offsetting banks and mining equities´ declines, after Kraft Heinz Co. announced a merger proposal that Unilever decline. The bid was of £112 billion, the fourth-biggest in corporate history, resulting in Unilever adding 13.43% to top winners' list. Coca-cola followed through, up 4.03%. In the losing side, Standard Chartered was the worst performer, down 4.36%, followed by Rolls Royce that shed 3.97% and Royal Dutch Shell that closed 1.80% lower. From a technical point of view, the benchmark presents a bullish stance, as it is holding above a bullish 20 SMA, while the Momentum indicator heads higher within positive territory, and the RSI indicator consolidates around 64, this last reflecting the limited intraday ranges seen lately rather than suggesting upward exhaustion.

Support levels: 7,291 7,254 7,208

Resistance levels: 7,354 7,390 7,430

DAX

The German DAX closed flat at 11,757.02 last Friday, as the banking sector underperformed over growing uncertainty, while mining and energy equities also edged lower. Volkswagen was the worst performer, down 1.81%, while Deutsche Bank lost 1.16% and Commerzbank 1.15%. Encouraging earnings reports, on the other hand, provided net support to the index, which ended the week up by 0.77%. Technically, the index presents a neutral-to-bullish stance, given that in the daily chart, the benchmark held above a modestly bullish 20 SMA, but technical indicators continue to lack directional strength. In the 4 hours chart, the index closed the week with a modest positive tone, as it settled a few points above a bullish 20 SMA, whilst technical indicators have entered positive territory, with clear upward slopes. A recovery beyond 11,800 will open doors for a retest of this year high at 11,891.

Support levels: 11,728 11,694 11,640

Resistance levels: 11,800 11,848 11,891

Risk Aversion Percolates

Markets oozed that distinctly risk-averse mindset on Friday, as jitters were apparent in numerous pockets of the market. One could almost sense the currency markets antipathy for risk as we entered week’s end. However, this is not too surprising given the current French election climate and just how consistently unpredictable President Trump has been on the policy front.

Bloomberg reports a new poll by IFOP which shows 65% of French want Fillon to drop from the Presidential race. Recall the French want conservative candidate Francois Fillon’s campaign is marred by Penelope -Gate to drop out of the presidential race. However, 88% of the French believe Fillon will stay in the contest until the vote.

US equity investors, on the other hand, appear immune to any market hiccup taking U.S. equities higher for the week as the Dow industrials extended its streak of record closes to seven sessions. However, with US Treasury yield backpedalling on Friday, softer bond yields likely helped the Dow squeak out those gains on Friday.

AS for today we typically expect a calm session during a US holiday, but in politically driven markets, I am not taking any holiday session lightly.

Australian Dollar

The Australian dollar has been on an incredible tear the past five weeks supported by a massive rally in Iron Ore and mellowing expectations of Fed rate hikes. However, the current “ death valley “ .77-7750 remains intact suggesting that investors continue to grow cautious of not only the long Aussie position overhang but also question the sustainability of iron ore prices. While the much-speculated correction in iron ore prices has yet to evolve, however, both China and US fiscal spending expectations should prevent prices from falling off the cliff, and likewise, we should not expect the Aussie dollar to fold up tent anytime soon.

On the carry trade front, this week’s Minutes of the recent RBA meeting will contain little new. However, Governor Lowe is slated to make two speeches this week which will be closely monitored by Aussie dealers. Given the recent strength in both employment and NAB business confidence, I think the tail risk would be for a more hawkish lean from the RBA than the market has priced in, but at a minimum, there’s little impetus for the RBA to veer from its current neutral tack. On the other side of the carry, the Federal Reserve continues to serve up their best version of a waffle, as forever cautions Dr Yellen again used the Fed’s time -honoured use of verbal gymnastics to avoid any direct answer to whether or not the Feds are close to flipping the interest rate switch.

Relatively quiet open as traders digest the weekend news. One of the key regional pieces is on the diplomacy front. Specifically, the China -US olive branch exchange appears to be gearing up as over the weekend China hit North Korea with a massive blow by suspending its coal imports from North Korea.While Beijing is mum, it’s worth noting that North Korea fired a ballistic missile last weekend the first such incident since Donald Trump took office. One can not help but think this is an encouraging sign that Mainland is ready to deal on multiple fronts.

Japanese Yen

It was a very soggy Friday for risk appetite, and predictably the JPY was the favoured parking spot amongst G10 currencies. It was not so much a USD storyline as the EURJPY led the charge taking it on the chin from the opening bell in London. The cross came off from 121 to eventually settle below the 120 handle primarily driven by investor queasiness over upcoming French elections. Then came the predictable follow-through price action on USDJPY as risk-off mode kicked in as safe havens rallied, and US yields tanked. Once again leaving dollar bull’s mired in a wool-gathering session musing where the next catalyst for a significant US$ move will come from, if at all. Reuters reports that “speculators reduced bullish bets on the USD to their lowest since the week ended early October 2016, cutting net longs for a sixth straight week, according to CFTC data released Friday for week up to Feb 14

Japan Finance Minister Aso is planning to start an economic dialogue with Trump administration in April. While they have not decided the agenda, I am sure Tokyo is hoping that the Trump administration will be less severe than Presidents Trump’s campaign currency rhetoric. April is setting up to be a very testy period for Asia currency markets as first FX report under the Trump government is due out then. Let’s face it Currency/trade war is Asia’s biggest horror story, and while the sense of relief came over markets after the civility expressed during Xi-Trump call and US-Japan summit, the topic remains an emotional issue.

Chinese Yuan

The Yuan continues to track the broader USD, more specifically the USDJPY.

ON the domestic front, given the uptick in inflation and the PBoC’s recent policy tightening moves, the big question is will the Pboc start to use the Short Term Lending Facility ( SLF) to manage their currency policy s. Indeed this month’s surprise tightening is being viewed as part of a PboC policy overhaul as the central bank gradually move to a more liberalised policy stance.

In a policy shift applauded across all trading desks Friday, Beijing loosened its iron grip on stock index futures trading by reducing margins from 40 % to 20 % while relaxing both positions limits and fees. In the same manner, mainland investor jumped all over the opportunity almost doubling the five-day average of contracts traded. It looks like we may have a simple cure for capital outflow, just make mainland financial markets a friendlier place to do business

On the diplomacy front, the China -US olive branch exchange appears to be gearing up as over the weekend China hit North Korea with a massive blow by suspending its coal imports from North Korea.While Beijing is mum, it’s worth noting that North Korea fired a ballistic missile last weekend the first such incident since Donald Trump took office. One can not help but think this is an encouraging sign that Mainland is ready to deal on multiple fronts.

EM Asia

It is a trade fraught with peril but the longer the wait if for US policy clarity on both the Fiscal and Monetary policy fronts especially with commodity prices booming and global growth on the ups. It is tough not putting money to work in regional undervalued equity markets or even to resist the temptation of the ASEAN Carry Trade. However, we know the trade is fraught with danger if not from the Fed flipping the March Rate hike switch it can certainly come in the form of a “currency manipulator” tweet from President Trump.

Monday Morning Futures Run

ENERGY

WTI

US oil markets were in consolidation mode ahead of the US long weekend with Oil Traders doing little more than the position shifting shimmy ahead of Tuesday’s March Futures Contract expiration. Adding to the oil and gasoline supply overhang, data from Baker Hughes on Friday revealed that the number of active US oil drilling rigs rose by 6 to 597, marking the 5th consecutive weekly increase.

US Nat Gas

Henry Hub Nat Gas trade saw a brief short covering rally ahead of the US long weekend but failed to make any dent in market sentiment as the North East USA basks in a balmy January with temperatures topping +12 degrees Celsius.Moreover, the weather outlook continues to trend warmer. Not a convincing outlook for nat gas prices.

Metals

Gold

Given the politically charged climate in Europe surrounding French elections and growing pessimism over the US administration’s fiscal policy or lack thereof, gold prices could shift higher to the 1250-65 level before encountering any significant resistance. However, one thing we can all agree within the gold pit is the biggest threat to the current gold rally is a resurgent USD, and all eyes remain glued to the Greenback.

Copper

Copper could fall further in the near term given that recent supply concerns over the recent strike in Chile could start to unwind as a dialogue between BHP and striking miners at the massive Escondida copper mine gain traction.

Iron ore

Chinese steel demand and prices continue to outpace even the most optimistic of views and the and as such Iron Ore prices continue to froth.Despite record high inventories, as the global economy exits several trying year in secular stagnation and with China’s characteristic Q2 strong seasonality demand barking, Iron ore prices are likely to remain well supported through the first half of 2017

EURUSD - With the pair closing strongly lower on Friday, further weakness is envisaged. On the upside, resistance comes in at 1.0650 level with a cut through here opening the door for more upside towards the 1.0700 level. Further up, resistance lies at the 1.0750 level where a break will expose the 1.0800 level. Conversely, support lies at the 1.0550 level where a violation will aim at the 1.0500 level. A break of here will aim at the 1.0450 level. Its daily RSI is bearish and pointing lower suggesting further weakness. All in all, EURUSD faces further downside pressure.

Levels To Short NZD/USD?

At the end of January, Kiwi was looking very toppy as NZD/USD pushed into a confluence of resistance.

Looking at the daily chart from back then, you can see price pushing into both trend line resistance as well as the horizontal zone. Both levels combined to cap further gains and as we said in that January blog post, the way price made a lower high AND lower low each time after capping out at resistance, was fairly telling.

The daily shows the confluence of higher time frame resistance we were talking about:

NZD/USD Daily:

The hourly shows the confluence of higher time frame resistance holding, and price rejecting down from it.

From here, we have lower time frame, previous short term support turned resistance. Combined with higher time frame resistance, this is the obvious spot to short:

NZD/USD Hourly:

And finally, the 15 minute chart shows a further intraday level holding where an add on entry could look to be taken off and most importantly, risk managed around:

NZD/USD 15 Minute:

How are you looking to trade the Kiwi?