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February 26th- March 4th | Europe’s main inflation and employment data, PMI’s from various countries as well as US and Eurozone’s Consumer Confidence indicator’s in focus.

Next week’s market movers

• Germany’s, France’s and Eurozone’s inflation data are expected to draw some focus.

• Attention will be given also to UK and US Manufacturing PMIs

• Some market focus will also be shifted towards Germany’s, Eurozone’s and Japan’s Unemployment rates.

On Monday, no major events are expected.

On Tuesday, during the European morning, Eurozone’s consumer confidence indicator for February is to be released. The indicator is forecasted to drop to 0.1 compared to previous reading of 1.4.

EUR could weaken as the drop is significant and is the first time the indicator has dropped since July 2017. Please be advised that the indicator had also dropped in February 2017 and 2016, hence the market may be expecting it to rebounce the following month as it did in previous years.
Later on, Germany’s preliminary HICP rate for February is due out. The rate is forecasted to decelerate to +1.3% year on year (yoy) compared to previous reading of +1.4% yoy.

Should the actual prints meet the forecast, EUR could weaken especially after ECB’s meeting minutes release, last Thursday and as it would strengthen the argument for a lower Eurozone inflation rate on Wednesday.

In the American session the US consumer confidence for February is to be released. The indicator is forecasted to slightly increase to 126.0 from previous reading of 125.4.

USD could be supported as despite the small increase, there is still a positive outcome which could support a positive sentiment towards the greenback.

On Wednesday, in the Asian day, we get China’s NBS Manufacturing PMI for February. The indicator is forecasted to tick down to 51.2 compared to previous reading of 51.3.

Such a development could weaken AUD and NZD as their respective economies have high exposure in China. However as the difference is relatively small, market reaction can be somewhat muted.

During the European morning, France’s preliminary CPI (EU normalized) rate for February is to be released. The rate is forecasted to remain unchanged at +1.5% yoy.

If the forecasts are realized and the rate is seen in conjunction with the previous day’s German HICP, markets expectation for a lower Eurozone Inflation rate could strengthen and weaken the EUR.

Later on, Germany’s Unemployment rate for February is to be released. The rate is forecasted to remain unchanged at 5.4%. However the Unemployment Change SA tells a slightly better story as the indicator is forecasted to rise to -18k compared to previous reading of -25K.

Should the actual results meet the forecast, EUR could be somewhat supported due to the Unemployment Change. However, if the big picture is to be seen, EUR could weaken as the data could be interpreted as stagnant for Germany.

Last but not least, in the European day, Eurozone’s preliminary CPI rate for February is to be released. The rate is forecasted to decelerate to +1.2% yoy compared to previous reading of +1.3%yoy.

Should the actual results meet the forecasts, EUR could weaken as a weaker CPI rate could imply further delay in the normalization of the ECB monetary policy both for the interest rate as well as the Quantitative Easing program.

On Thursday, during the European morning, France’s, Germany’s and Eurozone’s final Manufacturing (Mfg) PMI’s for February are to be released. All the prementioned Mfg PMIs are forecasted to remain unchanged at 56.1, 60.3 and 58.5 respectively.

Should the forecasts be realized, the indicators could be sending mixed signals as their preliminary drop will be confirmed however they still remain at strong levels.

Also during the European morning, we get the UK Mfg PMI for February. The indicator is forecasted to tick down to 55.2 compared to previous reading of 55.3.

Should the actual prints meet the forecasts, GBP could weaken somewhat, however the reaction maybe somewhat muted as the difference is small and the market may prefer to focus more on the Services PMI on Monday.

Later during the US session, we get the ISM Mfg PMI for February. The indicator is forecasted to drop to 58.6 compared to previous reading of 59.1.

Should the actual results meet the forecast, USD could weaken somewhat.

On Friday, during the Asian morning, Japan’s Unemployment rate for January is due out. The rate is forecasted to remain unchanged at 2.7%.

JPY could strengthen as the rate is consistently low and remains at those levels, indicative of the tight labour market.

Last but not least, during the US session, we get Canada’s GDP growth rate for December. The indicator’s previous reading was +0.4% month on month (mom).

Any reading indicative of further growth could support the CAD.

US Stock-markets bypass inflation

• US Dollar strengthened upon release of the inflation rates, but the markets quickly got over it, with the dollar being on the defensive side currently. Analysts suggest that confidence in a strong economy may have overshadowed the higher than expected inflation rate. However the paradox exists were the US Dollar is weakening despite the higher inflation. It may be the case that the US Dollar is losing its appeal against its major counterparts as other central banks start slowly normalizing their monetary policy. We see the case for the weakening momentum of the US Dollar to continue in the short term at least.
• Cable, dropped upon release of the US inflation data, however it quickly regained any losses and continued trading on higher grounds aiming for the 1.4040 (R1) resistance line. We see the case for the pair to continue to have a positive momentum, however the rise may not be that sharp anymore, and stabilize later on during the day. We also see the case for the pair to continue to trade above the upward trend-line incepted since the 11th of January for the next couple of days. Should the bears take the driver’s seat we could see the pair breaking the prementioned upward trend-line and aim for the 1.3750 (S1) support line. Should the bulls have the reins of the pair’s direction we could see the pair breaking the 1.4040 (R1) resistance line and hover above it or even try to aim for the 1.4168 (R2) resistance zone.

German coalition deal in the balance, again

• German SPD leader Martin Schulz resigned yesterday, in hope of ending inner SPD turbulence about the deal struck with CDU-CSU. The deal is about to come to a vote from SPD party base early March and the outcome seems to be in the balance. Merkel on the other side, in an attempt to appease CDU reactions for the loss of the finance ministry, promised not to allow any deficits in future budgets. On other news, the German economy seems to be doing well, despite the political uncertainty, based on strong exports and business confidence. Currently, we see the case for the economic side to overshadow the political side and support the EUR, maybe until the 4th of March, when the SPD vote results will be announced.

• EUR/USD followed a similar path as cable yesterday reflecting the course of the US Dollar, by heading south and breaking the 1.2355 (S1) support line and later on breaking it again by moving upwards and continuing to trade in higher grounds. We see the case for the positive momentum to continue for the pair, however at a slower pace as the US Dollar side could stabilize. We also see the case for the pair to continue to trade above the upward trend-line incepted since the 18th of December 2017, at least for the short term. Should the pair find selling orders, we could see it aiming or even breaching the 1.2355 (S1) support line. On the other hand should cable find fresh buying orders, the pair could break the 1.2455 (R1) resistance line and aim for the 1.2600 (R2) resistance hurdle.

As for today’s other economic events:

• From Sweden we get the Unemployment rate for January which could weaken the SEK somewhat, as it is forecasted to accelerate to 7.0% compared to previous reading of 6% and from the Eurozone the Trabe Balance surplus figure for December, which could support the EUR as it is forecasted to increase. Later on, we get the US Core PPI for January and the US industrial production for January. As for speakers, ECB’s Mersch, Praet and Lautenschlager speak. Later on BoC Gov. Council member Schembri speaks.

GBP/USD

• Support: 1.3750(S1), 1.3590(S2), 1.3338(S3)

• Resistance: 1.4040(R1), 1.4168(R2), 1.4325(R3)

EUR/USD

• Support: 1.2355(S1), 1.2230(S2), 1.2100(S3)

• Resistance: 1.2455(R1), 1.2600(R2), 1.2766(R3)

No change in the ECB horizon

• ECB‘s January meeting minutes were released yesterday, had a rather dovish tone however had little impact on the EUR. The minutes reveal that the Bank is not in a hurry even to communicate the start of a policy normalization. Some members expressed a preference of dropping the easing bias, however it was decided that it was premature. Analysts consider, it may be the case that the ECB may start discussing a possible policy normalization in the first semester 2018. EUR could weaken in the long run as the accommodating monetary policy period seems to be prolonged.

• EUR/USD traded in a rather sideways manner yesterday and any bearish tones were corrected during the day, staying well within the 1.2230 (S1) support line and the 1.2355 (R1) resistance level. We see the case for the pair to continue to trade in a sideways manner with some bearish tones, in the short term. Should the pair find selling orders along its path we could see it breaking the 1.2230 (S1) support level and aim for the 1.2100 (S2) support barrier. Should it find buying orders, we could see it breaking the 1.2355 (R1) resistance level and aiming for the 1.2455 (R2) resistance hurdle.

Weak Japanese inflation

• Japan’s headline and core CPI rate were released during the Asian morning, headline CPI rose from +1% to +1.4% and core CPI rate remained unchanged at +0.9%. The prints seem to be interpreted by analysts as weak. Despite headline CPI rate rising, the underlying inflation pressures are more evident by the Core CPI rate which remained unchanged. Lack of wage growth is cited as one of the main reasons for failing to increase the core inflation rate. We could see the JPY weakening over the long run should this situation continue.

Today’s other economic highlights:

• During the European morning, we get the German Detailed GDP for Q4, Riksbank’s meeting minutes will be released and Eurozone’s final inflation rate is due out for January.

• Later on we get Canada’s inflation data for January. The headline CPI rate is forecasted to drop to +1.4% year on year (yoy) from previous reading of +1.9% yoy, while the core CPI rate’s previous reading was +1.2% yoy. Analysts view the case for the core CPI rate to remain somewhat muted. Should the actual prints meet the forecasts, CAD could weaken against it’s major counterparts.

• USD/CAD traded with a slightly bullish mood in the past few days, breaking the 1.2610 (S1) resistance level (now turned to support). We see the case for the pair to continue to trade in that manner in the short term as a possible substantial deceleration of the Canadian inflation data could overshadow current fundamental news and financial data. Should the bulls continue to be in the driver’s seat, we could see the pair breaking the 1.2800 (R1) resistance level and aim for the 1.2910 (R2). On the other hand should the bears have the upper hand, we could see the pair breaking the 1.2610 (S1) support line and aim for the 1.2450 (S2) support level.

• As for today’s speakers, ECB’s Board Member Coeure, FOMC member Mester and FOMC member Williams speak.

EUR/USD

• Support: 1.2230(S1), 1.2100(S2), 1.1920(S3)

• Resistance: 1.2355(R1), 1.2455(R2), 1.2600(R3)

USD/CAD

• Support: 1.3850(S1), 1.3750(S2), 1.3615(S3)

• Resistance: 1.4040(R1), 1.4168(R2), 1.4325(R3)

Inflation boost expected in Fed’s minutes

• Fed’s January meeting minutes were released yesterday, had a more hawkish tone and boosted the US dollar. Minutes reveal that recent strengthening of economy increases likelihood of further gradual rate hikes and saw upside risks coming. Despite some FOMC members advising patience, most analysts forecast a possible shift from three to four rate hikes in 2018. March rate hike becomes imminent after the release of the minutes, though the 4 rate hike path may not be communicated in March as the Fed may want to retain flexibility. USD may continue to strengthen in the short term, as market expectations may grow.

• EUR/USD dropped yesterday, breaking the upward trend line incepted since the 18th of December and aimed for the 1.2230 (S1) support line. We see the case for the pair to continue to drop in the short term, albeit at a slower pace as the main effect of the FOMC minutes release weakens. Some support may be provided by the release of the ECB minutes during the day. Technically, in the 1 hour chart the 100 moving average crossed the 200 moving average possibly signaling a more bearish market and the RSI is approaching 30 in the 4 hour chart possibly signaling an approach of an overcrowded short position. Should the bears keep the upper hand on the pair we could see it breaking the 1.2230 (S1) support level and aim for the 1.2100 (S2) support barrier. Should the bulls take the reins we could see the pair breaking the 1.2355 (R1) resistance line.

Brexit time for UK Cabinet

• The UK Cabinet is to retreat today in order to reach decisions regarding Brexit with just about one year to go for the UK to leave EU. UK’s negotiating targets are to be released via a speech delivered by May next week and today’s meeting is to bring more consensus. On other headlines, UK prime minister May seems to be in favor of EU citizens staying in the UK after Brexit. Also it seems to be the case that the UK aims to strike a deal with the EU for a longer transition period by March. GBP could strengthen in the short term as positive headlines could emerge for Brexit in the next few days.

• Cable traded in a sideways manner, however with a bearish tone as UK’s employment data had a negative surprise in store for the market. The pair aimed for the 1.3850 (S1) support line however did not break it. We see the case for the pair to trade with a bearish mood as a positive USD sentiment may overshadow any Brexit news. Technically the 100 moving average crossed the 200 moving average possibly signaling a bearish market. Should the bears continue to be in the driver’s seat we could see the pair breaking the upward trend line incepted since the 11th of January as well as the 1.3850 (S1) support line, aiming for the 1.3750 (S2) support barrier. Should the bulls have the upper hand, we could see the pair aiming and even breaching the 1.4040 (R1) resistance line.

In today’s other economic events:

• During European morning we get France’s HICP for January and Business Climate indicator for February and from Germany we get the Ifo Business Climate indicator for February. Later on, ECB’s January meeting minutes will be released. In the American session, the Canadian retail sales data for December are to be released and later on from the US the Crude Oil Inventories. Last but not least, New Zealand’s retail sales data for quarter 4 are due out.

• As for speakers, FOMC members Dudley, Bostic and Dallas Fed President Kaplan speak.

EUR/USD

• Support: 1.2230(S1), 1.2100(S2), 1.1920(S3)

• Resistance: 1.2355(R1), 1.2455(R2), 1.2600(R3)

GBP/USD

• Support: 1.3850(S1), 1.3750(S2), 1.3615(S3)

• Resistance: 1.4040(R1), 1.4168(R2), 1.4325(R3)

Theresa May under Fire

• Theresa May came under “friendly” fire yesterday as a group of 62 Tory Parliament members signed a letter demanding a clear Brexit. The group amounts enough members to trigger a leadership bid against May within the Conservative party. The timing of the letter is also crucial as the UK cabinet is to retreat to the country side in order to reach Brexit decisions tomorrow. Further uncertainty regarding Brexit and the inner political stage could undermine the GBP in the short term.

• Cable, traded in a sideways manner the past few days below the 1.4040 (R1) resistance level. The UK employment data as well as the Inflation report hearing could subdue any possible negative Brexit headlines at least for today and support the pound, however the US financial data and especially the FOMC January meeting minutes could support the USD. We see the case for the pair to continue in a sideways manner in the short term, however some bullish tones could be expected for the pair. For our view to change to the negative, we would require a clear break of the upward trend-line incepted since the 11th of January and tested on the 9th and 14th of February. Should the pair find buying orders along its path, we could see it breaking the 1.4040 (R1) resistance line and aim for the 1.4168 (R2) resistance hurdle. Should the pair come under selling interest, we could see it breaking the prementioned upward trend-line and the 1.3850 (S1) support line.

A trade war in sights?

• The EU Commission has expressed its concern about possible US measures to curb imports of steel and aluminium. German officials stated that “We must first wait and see” however also clearly stated that the EU will respond accordingly should the US proceed with tariffs or import curbs. On other news Japan’s steel industry stated that US Commerce Department proposal to President Trump violates the principles of free trade. Should there be further headline escalation of a possible trade war we could see JPY and EUR weakening in the short term.

• EUR/USD as analysed yesterday traded in a sideways manner with a bearish mood, breaking the 1.2355 (R1) support level (now turned to resistance). We see the case for the pair to continue to trade in that manner as both, fundamentals and technicals seems to convert in that direction. On the technical side, we would like to point out that the pair is currently testing once more the upward trend line incepted since the 18th of December. Should the bulls take the driver’s seat we could see the pair breaking the 1.2355 (R1) resistance level and aim for the 1.2455 (R2) resistance hurdle. On the other hand should the bears have the upper hand on the market, the pair may break the prementioned upward trend line and the 1.2230 (S1) support line and aim for the 1.2100 support barrier.

In today’s other economic events:

• During European morning we get Germany’s, France’s and Eurozone’s preliminary PMI’s for February, all dropping slightly and could weaken the EUR somewhat. Later on, we get the UK employment data which could support the GBP. Please bear advised for the upcoming Inflation Report hearing in the UK and any possible mentioning of more future rate hikes by Bank of England could also support the GBP. In the American session, we get the US preliminary Manufacturing PMI for February and the US existing home sales for January. Last but not least, the January FOMC meeting minutes will be released and any hawkish tone in their content could support the USD.

EUR/USD

• Support: 1.2230(S1), 1.2100(S2), 1.1920(S3)

• Resistance: 1.2355(R1), 1.2455(R2), 1.2600(R3)

GBP/USD

• Support: 1.3850(S1), 1.3750(S2), 1.3615(S3)

• Resistance: 1.4040(R1), 1.4168(R2), 1.4325(R3)

BoJ to continue policy normalization

• Former BoJ member Kiuchi stated that a de-facto normalization process for BoJ’s policy has begun and will gradually continue under Kuroda. He also stated that BoJ will not give up its ultra-easing but gradually moderate the degree of monetary support. Also, finance minister Aso stated that Japan has essentially escaped from the uneasiness linked to asset price deflation but policy makers have to do more. On other headlines, over half of Japan firms do not plan base pay rise this year, which was essential to governments’ plans to fight deflation. These developments could be detrimental for the JPY in the long run, as the last point may overshadow the former two.

• USD/JPY traded in a sideways manner yesterday near the 106.95 (R1) resistance level. We see the case for the pair to continue to trade in that manner with a bullish mood. Should the bulls, have the upper hand in the market we could see the pair breaking the 106.95(R1) resistance line and aim for the 108.30(R2) resistance hurdle. On the bearish scenario, we could see the pair trying to reach the 104.66 (S1) support level.

Luis De Guindos chosen as ECB new Vice President

• The finance ministers of the Eurozone chose Spain’s Economy minister Luis De Guindos as new ECB vice president. De Guindos is considered as “hawkish” as some remarks he made in the past were interpreted as such. The choice may pave the way for a Nordic presidency, possibly German and should that be the case we could see also a more hawkish ECB president as well. De Guindos responded to criticism of him being accepting the position while being an active politician, by stating that he will defend ECB’s independence. The appointment could enhance hawkish market anticipation for the EUR and hence support it in the long run.

• EUR/USD traded in a sideways manner yesterday, above the 1.2355 (S1) support level. We see the case for the pair to trade in a slightly bearish mood today. Should the pair find selling orders we could see it breaking the 1.2355 (S1) support line and aim for the 1.2230 (S2) support level. Should the pair find buying orders along its path we could see it trying to reach the 1.2455 (R1) resistance barrier.

In today’s other economic events:

• During European morning we get Germany’s PPI rate for January, Sweden’s CPI rate for January which could support the SEK and some volatility on the EUR/SEK could be expected and Germany’s ZEW economic sentiment indicator for February. Later on we get New Zealand’s milk auction data and dairy prices are to be released, Canada’s wholesale trade prints for December and last but not least Eurozone’s preliminary consumer confidence indicator for February.

USD/JPY

• Support: 104.66(S1), 103.65(S2), 102.68(S3)

• Resistance: 106.95(R1), 108.30(R2), 109.20(R3)

EUR/USD

• Support: 1.2355(S1), 1.2230(S2), 1.2100(S3)

• Resistance: 1.2455(R1), 1.2600(R2), 1.2766(R3)

Brexit fog starts clearing up

• Media suggest that May’s Cabinet may attempt to settle any differences regarding Brexit on Thursday, on a day in the countryside. Theresa May’s vision for the post Brexit reality may include a “pick and choose” strategy regarding EU rules, however EU reaction to such a strategy remains to be seen. On other headlines, it seems to be the case that not only the banking sector but also UK farmers are to face Post Brexit problems. On the bright side, there seems to be some convergence regarding the military and security aspect of Brexit between UK and EU. As unity strengthens within the UK, we expect the pound to strengthen as well.

• Cable, dropped on Friday breaking the 1.4040(R1) support line (now turned to resistance). The pair continued to trade near that level and we see the case for the pair to continue to trade in a sideways manner for the short term. Should the bulls take the driver’s seat we could see the pair breaking the 1.4040 (R1) resistance level again and aim for the 1.4168 (R2) resistance hurdle. On the other hand should the bears take the reins we could see the pair reaching the 1.3850 (S1) support level.

Bitcoin slowly surges

• Bitcoin has surged during the past week, breaking above the $10,000 threshold today. Analysts point out that the rise coincides with the surge in the US stock markets, indicative that the cryptocurrency may be influenced by a risk on sentiment. On other news, ECB’s Yves Mersch warned against the cryptocurrency, while ECB’s Draghi stated last week, that it is not his job to regulate Bitcoin. Warnings were also issued by various other authorities. Also computer hacks and cryptocurrency headlines appear frequently on the headlines, however seem to have little impact. We see the case for Bitcoin to continue to surge in the short term however remain quite hesitant to call for a rally.

• As mentioned before Bitcoin surged in the past few days, however opened with a negative gap today, below the 8650 USD (S1) support level, only to catch up and break the $10,000 threshold. We see the case for bitcoin to continue to be in a bulls market in the next few days. For our opinion to change we would require Bitcoin to break clearly the upwards trend line incepted on the 6th of February. We consider this morning’s break as false, as it lasted only a few minutes and was attributed mostly to the Chinese New Lunar Year festivities. Should the cryptocurrency find fresh buying orders we could see it breaking the $11600 (R1) resistance line and aim for the 12365 (R2) resistance hurdle. Should it find selling orders, it could break the $8650(S1) support line and aim for the $7425(S2) support zone.

In today’s other economic events:

• During the early morning in the Asian session tomorrow, we get New Zealand’s PPI Input for Q4.

As for this week’s economic highlights:

• On Tuesday we get the Swedish CPI rate for January and Germany’s ZEW economic sentiment report for February.

• On Wednesday, UK’s employment data for December is to be released.

• On Thursday, Germany’s Ifo business climate report for February.

• And on Friday Japan’s Core CPI rate for January, Germany’s final GDP growth rate for Q4 and Canada’s Core CPI rate also for January.

GBP/USD

• Support: 1.3850(S1), 1.3750(S2), 1.3615(S3)

• Resistance: 1.4040(R1), 1.4168(R2), 1.4325(R3)

Bitcoin

• Support: 8650(S1), 7425(S2), 5710(S3)

• Resistance: 11600(R1), 12365(R2), 13560(R3)

Week ahead: February 19th-25th | Japan’s inflation data and trade balance, Germany’s ZEW and Ifo reports, UK’s employment data, Sweden’s CPI rate as well as Canada’s core CPI rate in focus.

Next week’s market movers

• Japans Core CPI rate and Trade Balance are expected to draw some focus.

• Attention will be given also to UK’s employment data, as well as the German ZEV and Ifo reports

• On Friday, focus is expected to shift to Canada’s inflation data and especially the Core CPI rate.

On Monday, during the Asian morning, Japans Trade Balance figures for January are to be released. Market’s interest may focus on the Trade Balance Surplus figure as well as the growth rate of exports. The trade balance figure is forecasted to drop and turn to a deficit of -1 Trillion JPY from previous surplus reading of 359 Billion JPY. Exports growth is forecasted to accelerate to +10.3% year on year (yoy), compared to previous reading of +9.3% yoy.

The substantial drop and switch of signs could have an adverse effect on the JPY, and overshadow any positive news stemming from the exports acceleration. However, please be advised that the same effect (ie. Japan Trade Balance dropping to a deficit), occurs almost every January, so the market may be prepared for the sign of the Trade Balance figure.

On Tuesday, during the European morning, the Swedish CPI rate for January is to be released. The indicator is forecasted to accelerate to +1.8% yoy compared to previous reading of +1.7% yoy.

Should the actual results meet the forecast, SEK could strengthen, as the inflation rate increases. Please also note, that SEK may prove to be quite sensitive after Wednesday’s Riksbank’s decision to remain on hold.

Later on, Germany’s ZEW economic sentiment report for February is to be released. The indicator is forecasted to drop to 15.5 from previous reading of 20.4.

Such a marked decrease could influence the direction of the EUR negatively. The indicator could prove of importance given that the Ifo Business climate report is to be released on Thursday.

On Wednesday, during the European morning, UK’s employment data for December are to be released. The ILO Unemployment rate is forecasted to remain unchanged at 4.3% compared to previous reading, average earnings growth also to remain unchanged at 2.5% compared to previous reading and employment change to increase to 180K compared to previous reading of 102K.

The data could support the GBP as they are indicative of a rather tight labour market and especially the increase of the employment change figure could generate a positive sentiment for the pound.

On Thursday, during the European morning, the Ifo Business Climate for February is to be released. The indicator is forecasted to drop to 117.0 from previous reading of 117.6.

Given that the ZEW economic sentiment indicator is also forecasted to drop and should the actual indicator meet the forecasts it could be the case that the EUR may weaken somewhat.

On Friday, during the Asian morning, Japan’s Core CPI rate is due out. The rate is forecasted to slow down to +0.8% yoy compared to previous reading of +0.9% yoy.

JPY could weaken as the rate decrease could be perceived as inflationary pressures may be in retreat. Especially should also the headline CPI rate bear a reading equal or lesser than of +1.0% (which is the previous reading), the effect could magnify.

Later on during the European morning, the final German GDP growth rate for quarter 4 will be released. The rate is forecasted to decelerate to +0.6% quarter on quarter (qoq) compared to previous reading of +0.8% qoq.

The drop could be somewhat of a surprise, as the market may already have reacted to the preliminary rate release and the EUR could weaken somewhat.

Last but not least, Canada’s Core CPI rate for January will be released. The rate’s last reading was at +1.2% yoy.

As no forecast has been released yet, any acceleration of the rate could be perceived as a positive reading for the CAD as it could imply that inflationary pressures remain in place.

EU to soften Brexit Transition stance

• Media suggested yesterday that the EU Council may soften its stance towards the Brexit transition deal. Analysts predict that a clearing of the fog regarding the transition deal will play a central role in sterling investors’ minds. Other headlines suggest that London may lose its appeal as a financial center to New York City or other Asian cities after Brexit. It could be indicative, that some professionals such as doctors may already have started to avoid the UK as a destination country. We expect some confusion and further headlines effecting the GBP, as we approach the EU Council’s summit near the end of March. A possible confirmation of the EU stance softening towards a transition period could currently strengthen the GBP.

• Cable, was in a bulls market yesterday breaking the 1.4040(S1) resistance line (now turned to support). We see the case for the pair to continue its upward trend in the short term, contingent mainly to the US Dollar further weakening. Should the pair continue to find buying orders, it could break the 1.4168 (R1) resistance level and aim for the 1.4325 (R2) resistance hurdle. Should it on the other hand, find selling orders along its path we could see it see it breaking the 1.4040 (S1) support line and aim for the 1.3850 (S2) support barrier.

Haruhiko Kuroda reappointed BoJ Governor

• Japan’s government reappointed Mr. Kuroda as Governor of the Bank of Japan. Also, Mr. Masazumi Wakatabe was appointed as BoJ’s Deputy Governor. The appointment of Mr. Wakatabe as Deputy Governor could complicate a possible gradual change of BoJ’s ultra-light monetary policy in the near future. On other headlines, Mr. Kuroda stated that the Central bank should not prematurely announce plans for withdrawing its massive monetary policy stimulus program, a statement which is in line with what was mentioned before. The news could have an adverse effect on the JPY.

• USD/JPY continued to trade in a bearish market yesterday, breaking the 106.95 (R1) support line now turned to resistance. We see the case for the pair to continue in a bearish market as the US Dollar weakening may currently overshadow Kuroda’s reappointment. Should the bears continue to be in the driver’s seat, we could see the pair breaking the 104.65 (S1) support line and aim for the 103.65 (S2) support zone. Should the bulls take the reins we could see the reaching the 106.95 (R1) resistance line and probably remaining below the downward trend-line incepted since the 8th of January and tested by the 2nd of February’s peak.

As for today’s other economic events:

• From the UK we get the Retail Sales for January which are forecasted to accelerate, supporting the GBP. Later on from the US we get the Housing starts and Building Permits figures for January. At the same time we get Canada’s Manufacturing Sales for December which could weaken the CAD. As for speakers ECB Board Member Benoit Coeure speaks.

GBP/USD

• Support: 1.4040(S1), 1.3850(S2), 1.3750(S3)

• Resistance: 1.4168(R1), 1.4325(R2), 1.4525(R3)

USD/JPY

• Support: 104.66(S1), 103.65(S2), 102.68(S3)

• Resistance: 106.95(R1), 108.30(R2), 109.20(R3)

Riksbank expected to remain on hold today

• Riksbank is expected to announce it’s interest rate decision today and is expected to remain on hold at -0.5%. SEKOIS imply that the market has priced in Riksbank to remain on hold with a probability of 85%. Financial data and fundamentals support the case for the bank to remain on hold as well. Specifically, the inflation rate is currently at +1.7% yoy, below Riksbank’s target of +2.0% yoy and unemployment is at 6.0% evident of the existing slack in the labour market. On the fundamental side, Sweden maybe facing a housing bubble with Riksbank trying to achieve a “soft landing” of the prices. Hence, focus may shift to the accompanying statement and the press conference. The tone is expected to be neutral, maybe even a bit dovish. SEK could be weakened by the developments and some volatility could be expected upon the announcement of the rate decision.

• EUR/SEK has been trading in a sideways manner the past few days, well between the 9.8594(S1) support line and the 9.9716 (R1) resistance line. We see the case for the pair to trade sideways with a bullish sentiment in the short term, due to the fundamentals mentioned before. Should the bears get in the driver’s seat, we could see the pair breaking the 9.8594 (S1) support line and aim for the 9.8035 (S2) support zone. On the other hand should the bulls take the reins, we could see the pair breaking the 9.9716 (R1) resistance line and aim for the 10.0300 (R2) resistance hurdle.

A speech to Unite a Kingdom

• The first speech about Brexit is to be delivered today by Boris Johnson. Media reports suggest that the speech may call for unity and present Brexit not as “grounds for fear but hope”. Other headlines suggest that the UK’s border and immigration system is unprepared for Brexit, providing further uncertainty. The EU side on the other hand seems to be focusing more on inner politics, as France’s Macron concentrates on EU reforms and Germany is still struggling to form a government. We expect the speech to overshadow any other Brexit development today and its content to create a positive sentiment which could support the GBP.

• Cable, as analysed yesterday moved in a sideways manner with bullish tendencies and broke the downward trend-line incepted on the 2nd of February, however failing to reach the 1.4040(R1) resistance line. We see the case for the pair to continue to trade in a sideways manner with bullish tendencies and it could be influenced by the fundamentals mentioned before as well as the US inflation data which are to be released today. Should the pair find new selling orders, we could see it breaking 1.3750 (S1) support line and aim for the 1.3590 (S2) support zone. On the other hand should the pair come under buying interest we could see it breaking the 1.4040 (R1) resistance level.

As for today’s other economic highlights:

• In the European morning, we get the German preliminary GDP growth rate for Q4 and the German final HICP rate for January. Also during the European morning, Riksbank’s interest rate decision will be announced and later on the much anticipated US inflation data are due out. Last but not least, US Crude Oil Inventories are to be released. As for speakers, ECB Board member Yves Mersch speaks.

GBP/USD

• Support: 1.3750(S1), 1.3590(S2), 1.3338(S3)

• Resistance: 1.4040(R1), 1.4168(R2), 1.4325(R3)

EUR/SEK

• Support: 9.8594(S1), 9.8035(S2), 9.7115(S3)

• Resistance: 9.9716(R1), 10.0300(R2), 10.1500(R3)