Daily Pivots: (S1) 1.0333; (P) 1.0412 (R1) 1.0484; More.....

Intraday bias in EUR/USD stays cautiously on the downside for the moment. Prior breach of 1.0351 support suggests down trend resumption and EUR/USD should target parity next. Meanwhile, above 1.0489 minor resistance will turn bias neutral again. In that case, outlook will stay bearish as long as 1.0562 resistance holds. However, break of 1.0652 will now confirm short term bottoming and turn near term outlook bullish for stronger rebound.

In the bigger picture, break of 1.0461 key support indicates that consolidation from there has completed as a triangle at 1.1298. And, the down trend from 1.6039 (2008 high) is resuming. Current downtrend is now expected to target 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.

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Dollar trades mildly softer today as markets await FOMC minutes. Besides the discussion over the 25 bps rate hike decision made on the month, we are closely watching for the discussion of potential monetary policy changes as Trump takes office. The president-elect has been proposing pro-growth fiscal policy. We would also look for the rationale behind the more hawkish shift in the dot plot which signals 3 rate hikes in 2017. Currently, fed fund futures are pricing in around 70% chance of another rate hike by June this year.

Eurozone CPI rose to 1.1% yoy in December, up from 0.6% yoy and beat expectation of 1.0% yoy. CPI core rose to 0.9% yoy, also above expectation of being unchanged at 0.8% yoy. The headline number was also the highest since 2013 even though it's still around just half of ECB's target of 2%. Also, the number justified the central bank's decision December to lower the size of asset purchase from EUR 80b to EUR 60b a month while extending it. ECB executive board member said in an interview published last Friday that policy makers "are still waiting for signs that core inflation is on the rise and will clearly exceed 1%. That said, our assessment of the balance of risks, including for inflation, is shifting." Today's number should be welcomed by the central bank. Also from Eurozone, services PMI was revised up to 53.7 in December. Italy services PMI dropped to 52.3 in December.

UK PMI construction rose to 54.2 in December, up from 52.8 and well above expectation of 52.6. That's also the highest number in nine months. Markit noted that "UK construction companies noted that the weaker sterling exchange rate had resulted in higher costs for a wide range of imported materials." Also from UK, mortgage approvals was unchanged at 67.5 k in November, below expectation of 68.7k. M4 money supply rose 0.4% mom in November, below expectation of 1.4% mom.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0333; (P) 1.0412 (R1) 1.0484; More.....

Intraday bias in EUR/USD stays cautiously on the downside for the moment. Prior breach of 1.0351 support suggests down trend resumption and EUR/USD should target parity next. Meanwhile, above 1.0489 minor resistance will turn bias neutral again. In that case, outlook will stay bearish as long as 1.0562 resistance holds. However, break of 1.0652 will now confirm short term bottoming and turn near term outlook bullish for stronger rebound.

In the bigger picture, break of 1.0461 key support indicates that consolidation from there has completed as a triangle at 1.1298. And, the down trend from 1.6039 (2008 high) is resuming. Current downtrend is now expected to target 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.

Economic Indicators Update

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Daily Pivots: (S1) 1.2187; (P) 1.2247; (R1) 1.2296; More...

Intraday bias in GBP/USD remains neutral as consolidation from 1.2200 extends. Another rise cannot be ruled out but upside 1.2200 should be limited 1.2509 resistance and bring fall resumption. Corrective rise from 1.1946 has completed at 1.2774. Below 1.2200 will target a test on 1.1946 low. Decisive break there will confirm larger down trend resumption.

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.

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The indicated wave C of larger degree wave 2 took place in most part of 2016, indicated downside retracement target at 124.00, 121.90-00 (50% Fibonacci retracement of entire wave I from 94.12-149.79) and 120.00 had all been met, price dropped to as low as 109.49 by mid-2016, however, the single currency found good support there and has staged a strong rebound in H2 2016, suggesting wave C or at least the wave iii of C has ended at 109.49, hence consolidation with upside bias is seen for gain to 125.20-30 (50% Fibonacci retracement of 141.06-109.49), then towards 128.20-25 but break of resistance at 132.33 is needed to signal the entire A-B-C has ended, bring further rise to 134.40-50 (61.8% Fibonacci retracement of 149.79-109.49) but upside should be limited to 139.00-05 and price should falter below resistance at 141.06 (wave B top), bring retreat later.

On the downside, whilst pullback to 121.50-60 and possibly 120.00 cannot be ruled out, reckon 118.70-75 would limit downside and bring another rebound later to aforesaid upside targets. Only below previous resistance at 116.29 (minor wave i top) would defer and suggest rebound from 109.49 has ended instead (which means only minor wave iii of C has ended at 109.49), then further fall to 114.00 would follow but break of 112.60-65 is needed to bring retest of 109.49. Looking ahead, a drop below 109.49 would signal the wave v of C of larger degree wave 2 is still in progress for weakness to 107.00 but reckon downside would be limited to 105.00 and price should stay above 102.70-75 (1.618 times projection of wave A), bring another rebound later.

Although sterling's retreat from 195.85 (2015 high) turned out to be much deeper than expected, as the British pound found support at 120.50 and staged a rebound in Q4 2016, retaining our view that further consolidation above 116.85 (tentatively circle wave V trough) would be seen and mild upside bias is seen for recovery to 150.00 and then 160.00, however, reckon upside would be limited to 175.00 and price should falter below 180.40-50, bring further choppy trading within 116.85-195.85 range. In the event sterling is able to penetrate resistance at 195.85, this would add credence to our view that low has been formed at 116.85 and revive our bullishness for major correction to take place, bring subsequent gain to 199.80-85 (61.8% Fibonacci retracement of 251.10-116.85). We are keeping our count that the circle wave V has ended at 116.85, hence major correction of early downtrend is unfolding for further gain to 199.80-200.00 (61.8% Fibonacci retracement of 251.10-116.85 and psychological resistance), next upside target is pointing at chart resistance at 215.85.

On the downside, whilst initial pullback to 140.00 and 138.00 cannot be ruled out, reckon 135.00 would contain downside and bring another rebound. Below 129.00 would abort and signal the rebound from 120.50 has ended instead, risk weakness to 126.50, then 124.80-85. Only a drop below said support at 120.50 would shift risk back to downside and signal the rebound from 116.85 has ended, bring further fall to 118.00, then retest of 116.85.

Daily Pivots: (S1) 0.8458; (P) 0.8493; (R1) 0.8537; More...

The break of 0.8488 minor support suggests that recovery from 0.8303 is completed at 0.8666, ahead of 38.2% retracement of 0.9304 to 0.8303 at 0.8685. Intraday bias is turned back to the downside for 0.8303 low. More importantly, the larger fall from 0.9304 could be resuming and break of 0.8303 might be seen. In that case, we'd look for bottoming again at around 0.8116.

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 around 55 weeks EMA (now at 0.8230) 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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Daily Pivots: (S1) 1.4325; (P) 1.4440; (R1) 1.4523; More...

EUR/AUD is staying in range of 1.4072/4880 and intraday bias remains neutral. On the downside, break of 1.4072 will extend the correction from 1.6587 towards next key support level 1.3671. Meanwhile, decisive break of 1.4880 resistance will indicate that such correction from 1.6587 is completed and turn near term outlook bullish for 1.5094 resistance next.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a consolidative pattern. 50% retracement of 1.1602 to 1.6587 at 1.4095 was already met. 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 1.5094 will be the first sign of resumption of up trend from 1.1602 and target retesting 1.6587 resistance first.

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Daily Pivots: (S1) 143.25; (P) 144.32; (R1) 145.15; More...

Intraday bias in GBP/JPY is mildly on the upside for 148.42 resistance. Pull back from there could have completed at 142.16 already. Break of 148.42 will resume the larger rise from 122.36. Still, such rally is seen as a corrective move. Hence, we'd expect strong resistance from 150.43 long term fibonacci level to limit upside. Break of 142.16 should confirm short term topping and bring decline to 55 day EMA (now at 140.33) and below.

In the bigger picture, the down trend from 195.86 top (2015 high) should have made a medium term bottom at 122.36 after hitting 100% projection of 195.86 to 154.70 from 163.87 at 122.71. Rise from there is now expected to develop into a medium term corrective pattern. Upside should be limited by 38.2% retracement of 195.86 to 122.36 at 150.4 for setting the medium term range.

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Daily Pivots: (S1) 122.07; (P) 122.69; (R1) 123.14; More...

EUR/JPY is staying in range below 124.08 and intraday bias remains neutral for the moment. Consolidation could extend but overall, further rally is in favor as long as 120.90 support holds. Above 124.08 will target 126.09 key resistance next. Considering bearish divergence condition in 4 hours MACD, we'd be cautious on topping around 126.09. Meanwhile, break of 120.90 will indicate short term topping and turn bias to the downside for 55 days EMA (now at 119.89).

In the bigger picture, price actions from 109.20 medium term bottom are seen as correcting whole down trend from 149.76 to 109.20. 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.

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Daily Pivots: (S1) 1.0697; (P) 1.0727; (R1) 1.0745; More...

EUR/CHF is staying in consolidation above 1.0677 and intraday bias remains neutral. Above 1.0762 will extend the corrective rise from 1.0677. But overall, outlook will stay bearish as long as 1.0897 resistance holds. Corrective pattern from 1.1198 is still in progress and another fall is expected. Below 1.0677 will target key support level at 1.0620 next. Though, decisive break of 1.0897 resistance will suggest reversal and turn near term outlook bullish.

In the bigger picture, the decline from 1.1198 is seen as a corrective move. Such correction is still in progress and retest of 38.2% retracement of 0.9771 to 1.1198 at 1.0653 could be seen. Sustained trading below 1.0653 will target 50% retracement at 1.0485. Meanwhile, break of 1.0897 resistance is needed to be the sign of completion of the correction. Otherwise, risk will stay on the downside in case of recovery.

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