Daily Pivots: (S1) 0.7594; (P) 0.7637; (R1) 0.7669; More...

Intraday bias in AUD/USD is turned neutral with lost of upside momentum as seen in 4 hour MACD. Another rise cannot be ruled out yet. But considering bearish divergence condition in 4 hours MACD, we'd expect strong resistance from this 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 treading 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.

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STOCKS

Dow and Dax may remain range bound with some possibility of moving higher in the medium term. Nikkei is trading above support and looks bullish while Shanghai may fall in the near term.

Dow (20090.29, +0.19%) and Dax (11549.44, +0.34%) closed at slightly higher levels. While Dow could remain in the 20200-20000 region for at least the next couple of sessions, Dax could test 11680-11820 region while support near 11400 holds in the near to medium term.

Nikkei (18875.57, -0.19%) is trading just above support near 18650 and if that holds, the index could bounce back towards 19000-19200 levels in the near term. But we need to keep a close watch on Dollar-Yen (112.13) which if breaks below 111.70 could pull down Nikkei with itself.

Immediate resistance on Shanghai (3141.53, -0.38%) is holding well for now and we could possibly see a fall towards 3125-3100 before pausing.

Nifty (8768.30, -0.37%) looks potentially bullish towards 8900 and could well move up in the next few sessions. All eyes on the RBI policy meet today which could also possible trigger an up move in case the central banks cut rates by 25bps.

COMMODITIES

Gold (1234.90) is stalling near our target/resistance of 1240 with no sign of fatigue yet but the highly overbought state of the metal and the stronger possibility of a reversal in Dollar in the near term warrant caution. In case, it rises and sustains above 1240, then much higher levels of 1280 may come into consideration but for now that remains the alternative scenario.

The bullish momentum in Silver (17.7290) remains intact above 17.60-50 which may push it to 18.00 or even 18.40 but any weakness in Gold may affect this precious metal too.

Brent (54.52) and WTI (51.53) are testing their immediate supports right now below which the chances of our preferred upside breakout from their respective 6-week ranges of 53-58 and 50-55 may weaken in the near term.

Copper (2.663) is bouncing back from the immediate support of 2.61 and may trade sideways in the range of 2.61-2.70 for the next few days before the next trending move.

FOREX

The initial signs of a bullish reversal in Dollar are visible but further confirmation required. Rupee will be dependent on the RBI meet today more than the global cues.

Dollar Index (100.31) has given the initial signal of a reversal to the upside in line with expectations but still needs further confirmation in the form of a break above 101.00. The Dollar bulls need to keep it above 100.15-00 to keep the chances of testing 101.00 open.

Euro (1.0685) has lost the upside momentum and the near term path depends on its success to hold above 1.0650 levels. If it manages to stay above 1.0650, then it may consolidate sideways in 1.0650-1.0800 for the next few sessions but a break below 1.0650 may drag it down to 1.0550-25 levels.

Dollar-Yen (112.12) has recovered above 112.00 just as expected and the downside may be arrested in the near term with chances of a rally to 114-115 getting slightly stronger now despite the downtrend still in play.

Pound (1.2473) had broken below the near term support of 1.24 but bounced back sharply on the back of an external member of the UK’s Monetary Policy Committee advocating a rate hike in the near future. The currency may trade sideways in the modified range of 1.2350-1.2700 for the coming few sessions.

Aussie (0.7638) is stuck in the narrow range of 0.76-0.77 for the last 3 sessions and but another fresh high near 0.7750 may be seen by the end of the week.

The near term path for Dollar Rupee (67.41) may be set by the RBI meet today and we prefer to wait and watch till the dust settles.

INTEREST RATES

The US 10-5Yr spread (0.54%) has come off from resistance levels and could fall towards 0.52% in the coming sessions. This could possibly indicate that the 10YR (2.38%) may fall in the near term towards 2.25% while the fall in the 5YR (1.84%) could be less compared the 10Yr yield.

The 30-5Yr (1.17%) and the 30-10YR (0.63%) are trading well above the horizontal supports and could move up towards 1.25% and 0.75% respectively in the near term.

The Japanese 30YR (0.881%) has been steadily rising since Jul’16 and could test resistance near 0.90-0.95% where it could see some correction towards 0.8-0.7% before again moving up. The 10Yr (0.10%) could face some rejection near 0.15% which could lead to a fall towards 0.10-0.00% in the medium term.

The UK yields are falling sharply. The 5YR (0.46%), 10Yr (1.39%) and the 20Yr (1.87%) could possibly pause just below current levels and move up a little this week.

EUR/USD

The greenback started the day with a good footing, advancing against all of its majors rivals, but demand for the American currency lost pace early US session, with mixed results across the board. The EUR/USD plummeted to 1.0655, to settled around the 1.0700 level, still down for the day. The common currency was weighed by poor German Industrial Production that contracted by 3.0% during last December, resulting in a decline in the annual rate of growth to -0.7% from a previously revised 2.3% advance. Also, weighing on the EU was renewed political uncertainty in the region on news that Marine Le Pen is leading polls ahead of the Presidential election next April. Le Pen, has pledged to leave the EU and fight Islam if she becomes president.

In the US, the IBD/TIPP Economic Optimism Index for February improved to 56.4 vs. 55.6 in January, with the index now 6.4 points above its 12-month average of 50.0. The US trade deficit narrowed in December to $44.3b, the first improvement in three months, whilst November reading was revised to -45.7b from a previous estimate of -45.2b.

Technically, however, the risk remains towards the downside, given that late recovery stalled below the critical 1.0700/10 resistance area that contained declines for over a week. In the 4 hours chart, the 20 SMA has accelerated its decline well above the current level, while the Momentum indicator accelerated its decline below the 100 level, and the RSI hovers around 40, this last with a limited upward slope. A recovery above the mentioned resistance could see the pair returning to the 1.0760/1.0800 region, but as long as below it the risk is towards the downside, with scope to extend its decline down to 1.0590 on a break below the mentioned daily low.

Support levels: 1.0650 1.0620 1.0590

Resistance levels: 1.0710 1.0750 1.0800

USD/JPY

The USD/JPY pair managed to advance up to 112.57 early US session after falling down to 111.58 at the beginning of the day, but resumed its decline and challenges the 112.00 region ahead of the Asian opening, with the pair following the lead of US yields. The 10-year benchmark fell down to 2.371% this Tuesday, down from Monday's 2.41% settlement, while US equities retreated after a strong start of the day, adding to Yen's bullish case. The Bank of Japan will release its Summary of Opinions during the upcoming Asian session, which includes fresh inflation and growth forecast. Seems unlikely the Central Bank will be less optimistic about inflation, in spite of recent data, and therefore is also unlikely that the pair will react to the news. From a technical point of view, the ongoing bearish trend in the USD/JPY pair remains firm in place, given that the pair is setting lower lows and lower highs daily basis, whilst in the 4 hours chart, the pair continues developing well below a bearish 100 SMA, currently at 113.54, whilst the RSI indicator resumed its decline, now around 41. The 100 DMA stands around 111.55 for this Wednesday, and renewed selling interest that pushes the price below the level should lead to a test of the 109.90 level, the 50% retracement of the latest bullish run.

Support levels: 111.55 111.25 110.80

Resistance levels: 112.10 112.60 113.00

GBP/USD

The GBP/USD pair plummeted to 1.2346 early Europe, but jumped to a fresh weekly high of 1.2545 and settled around 1.2530, reversing course after BOE's Kristin Forbes, said that “in my view, if the real economy remains solid and the pick-up in the nominal data continues, this could soon suggest an increase in the bank rate.” UK data released this Tuesday, may confirm her view of the growing risk of a major inflation overshoot, as it confirmed consumers are worried about higher prices. The BRC like-to-like sales fell 0.6% in the year to January, below previous month reading when it stood at 1.0%. House prices also contracted according to the Halifax survey, down by 0.9% during the same month, and rising by 2.4% in the three months to January, from a previous 6.5% advance. Still, market seems to have overreacted to the headlines, as the latest BOE's minutes suggest a rake hike will remain out of the table at least for this year. From a technical point of view, the 4 hours chart shows that the pair recovered above its 20 SMA, whilst technical indicators have turned surged from oversold readings and are currently entering positive territory with sharp bullish slopes. The pair however, is unable to confirm a clear break of 1.2540 a Fibonacci resistance, with a clear break above it required to confirm further gains up to 1.2705, February monthly high.

Support levels: 1.2470 1.2425 1.2390

Resistance levels: 1.2540 1.2585 1.2630

GOLD

Gold consolidated its latest gains this Tuesday, setting a fresh high for this 2017 at $1,235.71 a troy ounce. Spot hold within a tight range, just above the 50% retracement of the November/December decline around 1,230.00. The metal was pretty much immune to intraday dollar´s strength, supporting some additional gains ahead. Backing gold's gains was increasing political uncertainty in Europe, adding to that coming from the US. Daily basis, the RSI indicator has lost upward strength within overbought readings, whilst the Momentum indicator diverges lower, nearing its 100 level. The price, however, remains above its 20 and 100 SMAs, with the shortest crossing above the largest, something usually understood as a bullish signal. In the 4 hours chart, technical indicators are retreating modestly from overbought territory, but are far from signaling a bearish extension, whilst the price remains well above bullish moving averages, all of which supports the case for further gains.

Support levels: 1,230.00 1,221.65 1,215.00

Resistance levels: 1,237.30 1,245.20 1,255.05

WTI CRUDE

Crude oil prices fell for a second consecutive day, as speculators rushed to price in a large US stockpiles build, following a private survey and ahead of the release of official data. West Texas Intermediate US futures fell down to $51.81 a barrel and settled right above 52.00, also weighed by weak gasoline prices on decreasing consumption. WTI fell to the lower end of its latest range, and technical readings in the daily chart support additional declines as the price extended below a flat 20 DMA whilst technical indicators have turned bearish maintaining strong bearish slopes. In the shorter term, the 4 hours chart the 20 SMA turned south well above the current level, with the price also below the 100 and 200 SMAs, both still flat around 53.10, whilst technical indicators have lost their bearish strength, but remain near oversold readings and far from suggesting a bottom has been met. The commodity could extend its decline down to the critical 50.00 region on a break below the mentioned daily low.

Support levels: 51.80 51.10 50.40

Resistance levels: 52.40 53.00 53.65

DJIA

Wall Street opened the day with strong gains, resulting in the DJIA posting an all-time high of 20,157, but the negative momentum faded and indexes closed barely up around their daily openings. The Dow Jones Industrial Average closed at 20,089.88, up by 0.19%, while the Nasdaq Composite settled at 5,674.22, up 0.19% a record high. The S&P closed flat at 2,293.08 up by 0.02%. Within the Dow, Boeing was the best performer, up by 1.34%, but losers outnumbered gained, with Chevron topping loser's list, down by 1.46%, followed by Merck & Co that lost 1.33%. In the daily chart, the DJIA maintains its positive tone, as it holds well above its 20 DMA, currently horizontal at 19,932, while technical indicators present tepid bullish slopes within positive territory. In the shorter term and according to the 4 hours chart, technical indicators have pulled back from overbought readings reached earlier in the day, but lost downward strength within positive territory, whilst the 20 SMA maintains a sharp bullish slope, currently around 20,033, indicating a limited downward potential, at least as long as buyers defend the 20,000 level.

Support levels: 20,066 20,010 19,932

Resistance levels: 20,104 20,160 20,200

FTSE 100

The FTSE 100 gained 14 points or 0.20% this Tuesday, closing the day at 7,186.22, undermined by the positive momentum of mining-related equities. Gains were offset by oil's decline that resulted in BP leading losers' list with a loss of 4.49%. The best performers were Randgold Resources, up 8.38% and Fresnillo that added 6.60%, as gold hold on to its recent gains. The late recovery in the Pound, will likely dent sentiment among stocks' traders early Wednesday, particularly if the GBP/USD pair holds above the 1.2500 level. From a technical point of view, the daily chart for the Footsie shows that an intraday advance was rejected again by selling interest around the 20 DMA, whilst technical indicators have turned modestly lower around neutral territory, maintaining the risk towards the downside. In the 4 hours chart, the benchmark remains range bound between horizontal moving averages, whilst technical indicators have turned lower within positive territory, now approaching their mid-lines.

Support levels: 7,163 7,128 7,091

Resistance levels: 7,205 7,258 7,312

DAX

European equities closed with modest gains this Tuesday, as sentiment improved for a short time-spam, with the German DAX closing the day at 11,549.44, up by 39 points. Mining and pharmaceutical equities surged, but bank and energy-related ones fell, leading to the neutral close. Vonovia was the best performer in Germany, up 2.09%, while Commerzbank closed 1.21% and Deutsche shed 0.51%. The benchmark recovered from a daily low of 11,463, but the main support is 11,425, January 17th low. In the daily chart, the index remains below a horizontal 20 SMA, now at 11,637, whilst technical indicators present modest downward slopes within neutral territory, indicating a limited upward potential. In the 4 hours chart, the 20 and 100 SMAs converge at 11,623, whilst technical indicators have recovered from near oversold territory, but turned flat within negative territory, in line with the longer term perspective.

Support levels: 11,518 11,463 11,425

Resistance levels: 11,572 11,630 11,680

Daily Pivots: (S1) 139.19; (P) 139.89; (R1) 141.25; More...

GBP/JPY recovered after hitting 138.53 and intraday bias is turned neutral first. Overall, price actions from 148.42 are viewed as a corrective pattern, with fall from 144.77 has a leg. On the downside, below 138.52 will target 136.44 first. Break will target 50% retracement of 122.36 to 148.42 at 135.39. But we'd expect strong support from there to bring rebound. On the upside, above 141.96 will turn bias to the upside and probably extend the rise from 136.44 through 144.77.

In the bigger picture, price actions from 122.36 medium term bottom are still seen as a corrective pattern. Main focus is on 38.2% retracement of 195.86 to 122.36 at 150.42. Rejection from there will turn the cross into medium term sideway pattern with a test on 122.36 low next. Though, sustained break of 150.42 will extend the rebound towards 61.8% retracement at 167.78.

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Daily Pivots: (S1) 119.64; (P) 119.93; (R1) 120.32; More...

Intraday bias in EUR/JPY remains on the downside as the decline from 124.08 extends. Such choppy fall is seen as a corrective move. Hence, we'd expect strong support from 118.45 cluster support (38.2% retracement of 109.20 to 124.08 at 118.39) to bring rebound. On the upside, above 120.54 minor resistance will turn bias back to the upside for 123.30/124.08 resistance zone.

In the bigger picture, price actions from 109.20 medium term bottom are seen as part of a medium term corrective pattern from 149.76. There is prospect of another rise towards 126.09 key resistance level before completion. But even in that case, we'd expect strong resistance between 126.09 and 141.04 to limit upside, at least on first attempt. Nonetheless, decisive break of 118.45 cluster support (38.2% retracement of 109.20 to 124.08 at 118.39) will argue that rise from 109.20 is completed and turn outlook bearish for 61.8% retracement at 114.88 and below.

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Daily Pivots: (S1) 1.0642; (P) 1.0655; (R1) 1.0670; More...

EUR/CHF is staying in range above 1.0635 and intraday bias remains neutral. Neutral term outlook stays bearish as long as 1.0749 resistance holds and deeper decline is expected. Decisive break of 1.0620 key support level will confirm resumption of whole fall from 1.1198. In that case, next downside target will be 1.0485 fibonacci level. Break of 1.0749 will raise the chance of medium term reversal and turn focus back to 1.0897 key resistance.

In the bigger picture, the decline from 1.1198 is seen as a corrective move. Such correction is still in progress. Sustained trading below 38.2% retracement of 0.9771 to 1.1198 at 1.0653 will target 50% retracement at 1.0485. On the upside, break of 1.0897 resistance is needed to confirm completion of such fall. Otherwise, outlook will stay bearish.

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Daily Pivots: (S1) 1.3948; (P) 1.4001; (R1) 1.4057; More...

With 1.4075 minor resistance intact, intraday bias in EUR/AUD remains on the downside for the moment. Current fall from 1.4721 is seen as part of the larger decline from 1.6587. Next target is key support level at 1.3671. As the fall from 1.6587 is seen as a corrective move, we'd expect downside to be contained by 1.3671 to bring reversal. On the upside, above 1.4075 minor resistance will turn intraday bias neutral first. Break of 1.4289 resistance will indicate short term bottoming and turn bias back to the upside for 1.4721 resistance.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a consolidative pattern. While further fall cannot be ruled out, we'd expect strong support above 1.3671 to contain downside and bring rebound. Up trend from 1.1602 should not be finished and will resume later. Break of 1.4721 resistance will indicate completion of such correction and outlook bullish for retesting 1.6587 high.

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Daily Pivots: (S1) 0.8500; (P) 0.8570; (R1) 0.8608; More...

EUR/GBP dips further today but it's staying in range above 0.8469. Intraday bias remains neutral for the moment. Structure of the rise from 0.8469 affirmed our view that it's a corrective move. And this, in turn, affirmed the view that fall from 0.8851 is the third leg of the corrective pattern from 0.9304. Overall, we'd expect upside to be limited by 50% retracement of 0.8851 to 0.8469 at 0.8660 in case the consolidation from 0.8469 extends. On the downside, break o.8469 will target 0.8303 low next.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. Deeper fall cannot be ruled out yet. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside. Overall, the corrective pattern would take some time to complete before long term up trend resumes at a later stage. Break of 0.9304 will pave the way to 0.9799 (2008 high).

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The financial markets are lacking clear direction for the moment. DJIA hit new record high at 20155.35 overnight but pared back much gain to close at 20090.29, up only 0.19%. Treasury yields dropped rather notably with 10 year yield closed down -0.024 at 2.389 as recent consolidation extends. Dollar index reached as high as 100.72 but failed to break through 55 day EMA and retreated, currently at 110.40. Dollar's rebound lost momentum as weighed down mildly by dovish comments from a Fed official. Meanwhile, Sterling regained footing after hawkish comments from BoE policy maker. Some more time is needed for the markets to seek clarity on the directions.

Fed Kashkari Indicated He's Patient on Hike

Minneapolis Fed President Neel Kashkari's views expressed in an unusual blog post "Why I Voted to Keep Rates Steady" indicated that he's in no rush to hike interest rate. He pointed out that monetary policy has been accommodative for several years without rapid tightening of job market, nor sudden surge in inflation. And hence, "this suggests monetary policy has only been moderately accommodative over this period." And, job markets has "improved substantially" and the US is "approaching maximum employment". However, "we aren't sure if we have yet reached it. We may not have." He concluded by noting that "from a risk management perspective, we have stronger tools to deal with high inflation than low inflation."

BoE Forbes: Rates Could Rise Soon

Sterling recovers after some hawkish comments. BoE policy maker Kristin Forbes said "if the real economy remains solid and the pickup in the nominal data continues, this could soon suggest an increase in bank rate." She noted that it's "increasingly difficult" for her to justify "tolerating" a "large and likely overshoot of inflation". Meanwhile, "the forecasted sharp deterioration in unemployment and growth in the immediate aftermath of the referendum has not transpired." Swaps are pricing in around 30% of a BoE rate hike by year end.

BoJ Cautious on Global Developments

BoJ released the summary of opinions from the January 30-31 meeting today. The board generally saw improvements in exports, consumer spending and capital expenditure. One policy maker noted that Japan's economic recovery has "strengthened" since the second half of 2016. And, "positive synergy effects are being produced by improvement in overseas economies, economic stimulus measures by the government, and enhanced monetary easing." However, there was a tone a caution in general over political developments globally, including US president Donald Trump's policies and Brexit.

EUR/GBP Daily Outlook

Daily Pivots: (S1) 0.8500; (P) 0.8570; (R1) 0.8608; More...

EUR/GBP dips further today but it's staying in range above 0.8469. Intraday bias remains neutral for the moment. Structure of the rise from 0.8469 affirmed our view that it's a corrective move. And this, in turn, affirmed the view that fall from 0.8851 is the third leg of the corrective pattern from 0.9304. Overall, we'd expect upside to be limited by 50% retracement of 0.8851 to 0.8469 at 0.8660 in case the consolidation from 0.8469 extends. On the downside, break o.8469 will target 0.8303 low next.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. Deeper fall cannot be ruled out yet. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside. Overall, the corrective pattern would take some time to complete before long term up trend resumes at a later stage. Break of 0.9304 will pave the way to 0.9799 (2008 high).

Economic Indicators Update

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Calm Before another Storm?

Markets seem to have weathered the initial wave of Eurozone politically-induced risk aversion. Euro bond yield stabilised after a recent sell-off in France and peripheral markets, and major equity indexes closed flattish on either side of the pond.

These are only the initial tremors, as the market is turning its focus on to potential event risk in France and Germany. Consider the double-barrelled risks from both President Trump's delaying his economic agenda, and from China re-entering the risk fray, as their foreign reserve data recently fell below the psychological USD3tn, which wobbled the markets. Given the current level of Investor anxiety, it will not take much of an event for investors to reinstate the distinctly risk-averse mindset that gripped the market yesterday.

Australian Dollar

The Australian dollar was hit hard overnight after Chinese reserves data came in below the psychological 3 trillion level. While the broader USD caught a tailwind, commodity currencies, which have been holding up well, versus more general USD moves of late, have been hit hard as there remain some concerns that China might reduce their purchases of commodities. However, there are heightened risks, especially as the market is conceding, and if reserves fall further in China, it will weigh on Chinese traders.

Yesterday's RBA statement was very neutral, as expected, with AUD trading higher after the release. However, I think that was more position related as traders were leaning for a dovish bias, or at least expecting the central bank to acknowledge headwinds from recent weakness in GDP and inflation.

With Fed-speak not letting go of a March rate hike as the Fed are stubbornly behind the curve and in danger of falling even more so, the dollar bulls are digging in for a real battle zone at the current significant technical levels.

The oil patch offered little support for commodity currencies this morning, as WTI is getting hammered after US crude oil inventories increased an eye-watering 14,227 million barrels, the second largest buildup in US history.

At stake too, according to a Bloomberg report, are “cracks appearing in Australia's trillion dollar debt pile,” as Australian households struggle to pay down personal debt.

Euro

Coming off overnight lows, the Euro is trading poorly with an offered tone in early Asia trade. While it is premature to draw any definitive conclusion, the political landscape in both France and Italy are coming under immense scrutiny from investors, which should keep EURO upticks limited. If we factor in a possibly divisive German election, risks are rising immensely on the European political stage.

Chinese Yuan

In my view, the breach of 3 trillion is not in itself a significant incidence.But the trend is worrying , and if there is anything that the PBOC policy makers can take away from this reserve erosion, it is a fact the current financial market model they rely on is stale and in need of an overhaul.

These financial market woes are nothing new to mainland policymakers who continue to find themselves in a terrible place. Despite their heavy-handed interventions, the reserve data clearly signals greater than anticipated capital flight and highlights the ineffectiveness of current policies.

Letting the currency float will not help ease the pressure, as this current issue is more about capital flight. Who can blame mainland investors that want to escape financial markets that regularly change the rules of market engagement?

Buying dollars is the correct move, but do not fall for the perverse perception that 3 trillion is some sacred threshold and that the Mainland market is about to spiral downward. Nothing could be further from the truth, but I am sure yesterday's data will be a revelation to Chinese authorities about the ineffectiveness of current policies.

Japanese Yen

The recent ‘rinban' operations and hawkish Fed-speak have offered some near-term support for USDJPY. Yen dealers are turning their focus to the Trump-Abe meeting scheduled for 10 February 2017.

EM APAC

There is a RBI rate decision at 5:00 PM SGT today and the market expects a .25 bp cut.