Daily Pivots: (S1) 1.3041; (P) 1.3099; (R1) 1.3139; More...

Intraday bias in USD/CAD remains neutral for the moment with mixed near term outlook. On the upside, break of 1.3387 resistance will confirm 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.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Daily Pivots: (S1) 0.7631; (P) 0.7660; (R1) 0.7702; More...

Intraday bias in AUD/USD remains neutral for the moment. With 0.7510 support intact, further rise cannot be ruled out. However, lost of upside momentum is seen in bearish divergence condition in 4 hours 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 0.7510 minor support will indicate that rise from 0.7158 has completed already and turn bias back to the downside for this key near term support level.

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 0.8205) and above.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Daily Pivots: (S1) 1.0608; (P) 1.0638 (R1) 1.0668; More.....

Intraday bias in EUR/USD remains the downside for the moment. Corrective rise from 1.0339 should have completed at 1.0838 already. Deeper decline should now be seen to retest 1.0339 low. Decisive break there will confirm resumption of medium term down trend. On the upside, however, above 1.0713 minor resistance will delay the bearish case and turn bias neutral first.

In the bigger picture, whole down trend from 1.6039 (2008 high) is in progress. Such down trend is expected to extend to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Daily Pivots: (S1) 1.2442; (P) 1.2481; (R1) 1.2523; More...

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

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There is no sign of medium term bottoming yet. Sustained trading below 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 will target 100% projection at 0.9532. Overall, break of 1.3444 resistance is needed to confirm medium term bottoming. Otherwise, outlook will remain bearish.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Daily Pivots: (S1) 0.9997; (P) 1.0029; (R1) 1.0054; More.....

Intraday bias in USD/CHF remains on the upside for the moment. As noted before, a short term bottom is formed at 0.9860 on bullish convergence condition in 4 hour MACD. Sustained trading above 55 day EMA (now at 1.0038) will pave the way for a test on 1.0342 high. On the downside, below 0.9935 minor support will turn focus back to 0.9860 instead.

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.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Daily Pivots: (S1) 112.72; (P) 113.28; (R1) 113.73; More...

USD/JPY's rebound from 111.58 extends to as high as 114.16 so far today. As noted before, correction from 118.65 should have completed at 111.58, on bullish convergence condition in 4 hour MACD. Intraday bias stays cautiously on the upside for 115.36 resistance. Break will confirm this bullish case and target 118.65 high next. In that case, the larger rally from 98.97 could be resuming. On the downside, below 112.85 minor support will dampen this bullish view and could extend the correction from 118.65. In that case, downside should be contained by 38.2% retracement of 98.97 to 118.65 at 111.13 and bring rebound.

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.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Risk appetite extends to Asian markets, following the records close in US last week. At the time of writing, Japan Nikkei is trading up 98 pts or 0.5%, HK HSI is up 120 pts or 0.5%. Yen trades broadly lower on risk appetite, together with Swiss Franc. On the other hand, Sterling and Dollar are trading mildly higher. In other markets, Gold dips back to 1230 on Dollar strength and it looks like recent pull back from 1246.6 would extend lower. WTI crude oil is still bounded in range of 50.8/55.3, without any direction. Released in Asian session, Japan Q4 GDP rose 0.2% qoq, below expectation of 0.3% qoq. GDP deflator dropped -0.1% yoy, above expectation of -0.2% yoy.

IMF Lagarde Optimistic on US...

IMF chief Christine Lagarde said on Sunday that "from the little we know", and "the little we hear", there are "reasons to be optimistic" about the US economy. She noted that "it is likely that there will be tax reform, it is likely there will be additional investment in infrastructure and as a result of that it is very likely that growth will be up in the US." However, she also warned of the effect of higher US interest rate and strong Dollar. She said that "currency higher, interest rate higher - that is a tightening that is going to be difficult on the global economy and for which economies have to prepare." Back in January, IMF raised US growth forecast to 2.3% in 2017 and 2.5% in 2018.

...but worried about Europe

On the other hand, Lagarde expressed her worries "about some of these elections" in Europe, including France, the Netherlands and Germany. Nonetheless, she sounded calm as she noted that win of populist candidates might not be totally negative. She pointed to Italy and Greece as examples. Lagarde noted that when "Matteo Renzi" was elected as Italian prime minister back in 2014, " everyone thought 'oh my god, what is going to happen with this maverick?'" But then, Renzi's administration was "not much mavericking". meanwhile, after Alexis Tsipras's win in Greece in 2015, it has been "difficult" and "laborious" dealing with Greece but "changes are taking place".

Fed Yellen to Highlight the Week

Looking ahead, Fed chair Janet Yellen's semiannual testimony to Congress is the main focus of the week. Yellen will testify before the Senate on Tuesday and the House on Wednesday. Markets would look for signals on any change on Fed's forecasts of three rate hike this year. Some might also want to get hints on chance of March high. However, based on uncertainties over the fiscal policies Trump would adopt, it's likely that Yellen would sound non-committal. As of Friday, fed fund futures are pricing in 13.3% chance of March hike, and 67.3% chance of hike by June.

Here are some highlights for the week ahead:

• Tuesday: Australia NAB business confidence; China CPI, PPI; German GDP, CPI final, ZEW; Italy GDP; Eurozone ZEW, industrial production; Swiss CPI, PPI; UK CPI, PPI; US PPI
• Wednesday: UK employment; Eurozone trade balance; US CPI, retail sales, Empire state manufacturing, industrial production, business inventories, NAHB housing index
• Thursday: Australia employment; ECB monetary policy accounts; US housing starts and building permits, jobless claims, Philly Fed survey
• Friday: New Zealand retail sales; Eurozone current account; UK retail sales; Canada foreign securities purchases; US leading indicator

USD/JPY Daily Outlook

Daily Pivots: (S1) 112.72; (P) 113.28; (R1) 113.73; More...

USD/JPY's rebound from 111.58 extends to as high as 114.16 so far today. As noted before, correction from 118.65 should have completed at 111.58, on bullish convergence condition in 4 hour MACD. Intraday bias stays cautiously on the upside for 115.36 resistance. Break will confirm this bullish case and target 118.65 high next. In that case, the larger rally from 98.97 could be resuming. On the downside, below 112.85 minor support will dampen this bullish view and could extend the correction from 118.65. In that case, downside should be contained by 38.2% retracement of 98.97 to 118.65 at 111.13 and bring rebound.

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

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

EUR/USD

After being under pressure for seven consecutive weeks, the American dollar managed to change course against the common currency, and the EUR/USD pair closed the week around 1.0630, its lowest settlement in almost a month. Renewed hopes about the US government applying policies to boost growth and inflation, after President Donald Trump promised a "phenomenal" tax reform, was behind dollar's strength. The American currency advance was uneven across the board, with the Pound and the Aussie the most reluctant to give up. The EUR on the other hand, is among the most vulnerable, given the ongoing political woes in the region, with upcoming elections in Germany and France, a possible referendum in Italy, and Greece's bailout on "shaky ground," according to the European Commission President Jean-Claude Juncker.

The week with probably start in slow motion, with no major data scheduled in Europe and America. That said, political headlines could continue to affect currencies one way or the other. From a technical point of view, the EUR/USD pair´s daily chart shows that, after reaching the 50% retracement of the November/January decline, the pair is back below the 38.2% retracement of the same decline and poised to test the next Fibonacci support at 1.0565. Technical indicators in the mentioned time frame head sharply lower within negative territory, whilst the price is below its 20 and 100 DMAs, this last with a strong downward slope around 1.0700. In the shorter term, and according to the 4 hours chart, technical readings also favor the downside, as a bearish 20 SMA kept capping the upside, currently around 1.0660, whilst the Momentum indicator turned south after failing to overcome its mid-line, and the RSI indicator consolidates around 38.

Support levels: 1.0620 1.0590 1.0565

Resistance levels: 1.0660 1.0710 1.0750

USD/JPY

The USD/JPY pair closed the week with modest gains around 113.20, down on Friday after failing to regain the 114.00 level. Risk appetite was not enough to fuel the pair, with bulls probably disappointed by the outcome of the Abe-Trump meeting, as both leaders shook hands and praise one another, but said nothing about a possible trade deal or on how the relationship between the two countries will continue. Despite Wall Street closed at record highs for a second consecutive day on hopes for an upcoming tax cut and recovering US Treasury yields, the USD/JPY pair closed the week with a lower low and a lower high, somehow suggesting that yen's rally is not yet over. Risk aversion may re-surge with the weekly opening, as over the weekend, North Korea fired an unidentified ballistic missile, triggering condemnatory comments from both, Abe and Trump, with the first saying that missile tests "can absolutely not be tolerated." Technically, the daily chart shows that the pair was unable to break below a bullish 100 DMA, currently at 111.85, while the 38.2% retracement of the latest bullish run stands at 111.95, providing a major support for the upcoming days. In the same chart, however, technical indicators have lost upward strength right below their mid-lines, and the RSI is slowly turning south, leaning the scale towards the downside. In the 4 hours chart, the price is struggling with a bearish 100 SMA, while the RSI indicator pulled back from overbought readings, now heading lower around 54, whilst the Momentum indicator maintains its bullish strength near overbought readings.

Support levels: 112.85 112.40 111.90

Resistance levels: 113.60 114.00 114.55

GBP/USD

The GBP/USD pair closed the week flat a few pips below the 1.2500 threshold, hit by dollar's strength by the end of the week and in spite of strong UK data. Industrial and manufacturing production more than doubled expectations in December, with the first up 1.1% and the second 2.1% when compared to the previous month. The year-on-year figures came in at 4.3% and 4.0% respectively, while previous month's reading were revised higher. Also, the goods trade balance for the same month showed a deficit of £-10.89B, better than the expected £-11.500B or previous £-11.55B, whilst the NIESR GDP estimate for the three months to January came in at 0.7%, beating expectations and above previous. Adding strong macroeconomic figures to the Brexit bill passing smooth through the Parliament, seems Pound's declines are set to be limited. Technically, the daily chart shows that the pair is right below a bullish 20 DMA, whilst technical indicators head modestly lower within neutral territory. The chart also shows that the pair bounced strongly from the 38.2% retracement of its latest bullish run at 1.2430 a key support for the upcoming days. In the 4 hours chart, the price is trading below horizontal moving averages, with the 200 EMA a few pips above the mentioned Fibonacci support, while technical indicators are also standing within neutral readings, with a modest bearish potential.

Support levels: 1.2470 1.2430 1.2390

Resistance levels: 1.2535 1.2585 1.2620

GOLD

Gold prices extended their gains this past week, with spot reaching a fresh three-month high of $1,244.67 a troy ounce, to close the week at 1,234.01, down on Thursday amid re-surging risk appetite. Despite broad dollar's strength, demand for gold remained high, amid reduced hopes of three rate hikes coming from the FED this year, with speculators foreseeing the most, two hikes one in June and one in December. Gold prices will depend much on the upcoming Federal Reserve Chair Janet Yellen semi-annual testimony before congress, with a hawkish stance probably taking gold down. From a technical point of view, the upside is still favored given that in the daily chart, the price is well above a bullish 20 DMA that crossed above a bearish 100 DMA, whilst technical indicators have advanced within positive territory, with the Momentum indicator heading north at fresh monthly highs. In the 4 hours chart, however, the price is right below a horizontal 20 SMA, the Momentum indicator retreats from its 100 level within bearish territory, whilst the RSI indicator lacks strength around 55, suggesting a break above Friday's high of 1,237.10 is required to confirm further gains.

Support levels: 1,230.00 1,219.40 1,210.10

Resistance levels: 1,237.10 1,244.70 1,255.15

WTI CRUDE

West Texas Intermediate crude oil futures advanced for a second consecutive day, with the commodity setting a couple of cents above 53.00. WTI set a daily high of $53.20 a barrel, still underpinned by Wednesday's news, showing an unexpected draw in US gasoline stockpiles that suggest rising demand for the commodity. Despite a large build in crude inventories, the commodity advanced for a second consecutive day, although the price continues developing within the range set mid December. Technically, the daily chart shows that the price is now around a flat 20 SMA, whilst technical indicators have turned flat around their mid-lines, indicating a limited upward scope. In the 4 hours chart, the price advanced beyond a still bearish 20 SMA, but is currently struggling with the 100 and 200 SMAs, both flat, whilst the Momentum indicator heads higher above its 100 level and the RSI remains flat around 54, in line with the longer term view.

Support levels: 52.50 51.80 51.10

Resistance levels: 53.20 53.65 54.20

DJIA

US equities extended their Thursday's rally, with all of the three major indexes closing the day at all-time highs. On Friday, the Dow Jones Industrial Average added 96 points or 0.48% to end at 20,269.37, while the S&P gained 0.36% to 2,316.10. The Nasdaq Composite settled at 5,734.13, up by 18 points. Stocks rallied on Trump's promises of an upcoming tax reform, and a recovery in oil prices that lifted the energy sector. Within the Dow, Caterpillar led gainers, up by 2.50%, followed by NIKE that added 1.65% and Boeing, up by 1.19%. On the losing side, Coca-Cola topped losers' list, down 1.62%, followed by Wal-Mart Stores that shed 1.53%. From a technical point of view, the upside is favored given that in the daily chart the Dow is well above a modestly bullish 20 SMA, whilst the RSI indicator heads higher around 70, with the Momentum indicator, however, diverging, neutral around its 100 line. In the 4 hours chart, the bias is firmly bullish with the index well above a bullish 20 SMA, the Momentum indicator heading north near overbought readings and the RSI hovering around 72.

Support levels: 20,228 20,157 20,090

Resistance levels: 20,297 20,350 20,415

FTSE 100

London shares got a boost from China last Friday as a better-than-expected trade surplus in the country sent mining-related equities higher, helping the FTSE 100 to add 29 points and close at 7,258.75. A weaker Pound also lifted the mood among local traders. Rio Tinto was the best performer, up 5.63%, followed by Antofagasta that gained 4.65% and Anglo American that added 4.40%. Reckitt Benckiser was the worst performer, down 2.96%, followed by Royal Bank of Scotland that lost 1.80%. The index closed at its highest in three weeks, and technical readings in the daily chart support additional gains, given that the benchmark has extended above a still flat 20 SMA, but indicators maintain bullish slopes within positive territory. In the 4 hours chart, the 20 SMA advanced to converge with the 100 SMA at 7,208, providing a strong dynamic support, while the RSI indicator consolidates at 71 and the Momentum indicator turned higher within positive territory, in line with the longer term perspective.

Support levels: 7,208 7,163 7,128

Resistance levels: 7,275 7,326 7,354

DAX

European equities closed marginally higher on Friday, with the German DAX finishing at 11,666.97, up 24 points. Despite staring the day with a strong footing, shares failed to extend the risk-appetite rally triggered by the US president on Thursday, but remained afloat on strong earnings reports released earlier in the week, and positive trade data coming from China. In Germany, banks were among the worst performers, with Commerzbank down 2.37%, leading losers' list, and Deutsche Bank down 1.35%. ThyssenKrupp was the best performer by adding 2.35%, followed by Heidelberg Cement that closed 1.58% higher. Technically, the pair presents a modest upward potential in the daily chart, as it´s just holding at the upper end of its latest range, and a few points above a flat 20 SMA, whilst technical indicator in the mentioned time frame barely aim higher within neutral territory. In the 4 hours chart, the index settled above all of its moving averages, but the 20 and 100 SMAs lack clear directional strength, whilst technical indicators have turned lower within positive territory, limiting chances of a steeper recovery as long as the benchmark is unable to advance beyond 11,720, Friday's high and the immediate resistance.

Support levels: 11,605 11,545 11,498

Resistance levels: 11,720 11,794 11,845

STOCKS

Dow, Dax and Nikkei may face resistances above current levels and could possible come off by the end of the week while Nifty and Shanghai looks bullish for now. Nifty is also heading towards crucial resistance from where it may come off sharply.

Dow (20269.37,+0.48%) is trying to move up. Immediate resistance is seen in the 20300-20400 region which could push off the index in the near term back towards 20000.

Dax (11666.97, +0.21%) is trading at important resistance of 11700 and could turn bullish towards 11820-11930 levels only on a break above current resistance. In case 11700 holds, we could see some consolidation in the 11700-11500 region again.

Nikkei (19500.91 +0.63%) could test 19615/20 on the upside before coming off slightly from there. Only on a break above 19620 can we shift our focus to higher levels for the near term.

Shanghai (3209.83, +0.41%) has broken above the immediate resistance at 3200 and is now headed towards 3225-3300 levels in the near term. The index looks bullish on the 3-day candle chart.

Nifty (8793.55, +0.17%) has created some room on the upside towards 8900 after consolidating in the last week. The index looks potentially strong towards 8900-9000 in the near term from where a sharp correction is possible.

COMMODITIES

Gold (1230.09) has held above 1220 to bounce a bit as expected and now may test 1240-50 in the next couple of sessions. It may oscillate in the range of 1220-1250 this week.

Silver (17.94) has rallied to the near term target/resistance of 18.00-10 sooner than expected but may stall and correct from these levels in the near term. A consolidation in the range of 17.50-18.10 may be more likely for the week.

Both Brent (56.73) and WTI (53.87) are approaching the higher end of their respective medium term ranges of 53-58 and 50-55. It remains to be seen if profit booking emerges at the higher levels once again, keeping the range intact.

Copper (2.81), contrary to expectations, enjoyed a huge breakout above the medium term resistance of 2.75-80 as the supply from the two largest mines of the world has been shut down. With this momentum, it may rise to 2.90-95 levels very soon.

FOREX

Not only the US equities but Dollar is also boosted by the Trump promise of a huge tax plan and a smooth meeting between the US President and the Japanese PM has weakened Yen.

Dollar Index (100.92) is testing the resistance of 101.00 for the second time in as many days which must be broken above to extend the rise to 101.75-102.00. The near term path depends on the congressional testimony of the Fed chair Yellen but the near term downside may be limited to 100.00 even if it fails to rise above 101.00 immediately.

Euro (1.0620) is trading near the previous week’s low of 1.0607 and may decline below 1.06 if Dollar manages to break above 101.00. The near term upside may be limited to 1.07 in case any short covering emerges.

Dollar-Yen (113.93) has been rising gradually for the last 3 sessions and may rally to 115-116 if it manages to stay above 113.50.

Pound (1.2488) is unaffected by the global cues at this point and it may continue the sideways movement inside the range of 1.2350-1.2700 for a few sessions more.

Aussie (0.7670) is trading at the higher end of the 6-day range of 0.76-0.77 but while the trend is still up, the proximity of the major resistance near 0.7750-0.7800 warrants caution as the chances of a sudden reversal can’t be ruled out.

Dollar Rupee (66.88) has managed to stay above 66.80 till now but it is yet to confirm a reversal. Unless it rises above 67.07 in the next couple of sessions, the possibility of a break below 66.80 may strengthen, bringing the long term support of 66.50-35 into consideration and we may have to abandon our preferred bullish view.

INTEREST RATES

The US yields have risen from immediate supports on the daily near term charts but while crucial resistances hold, the medium term outlook remains bearish. 3.10-3.25% levels on the 30Yr (3.02%) and 2.50-2.75% on the 10Yr (2.43%) are important resistance zones to keep an eye on.

The UK-US 10Yr (-1.08%) has fallen sharply from resistance near -0.90% and could come off a little more in the next few sessions pulling down the Pound also to lower levels.

The UK yields have risen slightly but the longer term charts look potentially bearish in the near term. The 5Yr (0.45%), 10Yr (1.35%) and the 20YR (1.83%) may fall some more in the coming sessions.

The German-US 2YR (-2.01%) has fallen exactly in line with our expectation and while the spread continues to move down, the Euro could also fall in the near term. Look at Currencies section above)

EURUSD - With the pair closing lower the past week on correction, further weakness may occur in the new week. However, we think a move back up could happen. On the upside, resistance comes in at 1.0700 level with a cut through here opening the door for more upside towards the 1.0750 level. Further up, resistance lies at the 1.0800 level where a break will expose the 1.0850 level. Conversely, support lies at the 1.0600 level where a violation will aim at the 1.0550 level. A break of here will aim at the 1.0500 level. All in all, EURUSD faces further downside pressure but with caution.