• Touch softer, but busy when Asia fully opened in a tight 1.2993-1.3008 range

• EU-UK trade talks to begin Monday, with little hope of early progress

• IFS believes fin min Sunak should resist rewriting fiscal rules nL4N2AP119

• Sunak must increase revenue to fund Johnson's post election spending plans

• Yesterday's bounce leaves momentum studies basing, 5, 10 & 21 DMAs conflict

• Neutral setup at familiar levels - 1.3000 555M, and 1.3030 211M strikes cap

• Well tested 1.2843-1.3133 21 day Bollinger bands define the broad range

• NY 1.2952-1.3018 range is initial support-resistance

• AUD/USD traded down to 0.6588 earlier when mood in Asia was risk-off

• Move lower also due to very weak Aus construction data nAPN04MI00

• Support around 0.6585 held for the fourth trading day in a row

• AUD/JPY buying late morning underpinning AUD/USD into the afternoon

• AUD/USD unchanged at 0.6600/05 and AUD/JPY up 0.20% at 72.90

• Resistance @ the 10-day MA at 0.6656 and break would suggest bottom in place

• AUD/USD has been resilient, but break below 0.6580 would be bearish

The continued expansion of the coronavirus around the world has hit global confidence and the outlook for growth.
The S&P 500 has fallen 6.3% this week and the ASX 200 5.5%, as risk is sold and yields tumble.
Central bank expectations have become significantly more dovish.
A Fed rate cut at the April 29 meeting is now 65.5% priced on the CME and OIS fully price an RBA cut in August rather than September following a rise in unemployment to 5.3% last weeknL4N2AK0BB.
Meanwhile the AUD/USD has consolidated in a tight range around 0.6600, but the underlying downtrend remains intact.
Charts are bearish with daily, weekly and monthly 5, 10 and 21 moving averages tracking south. Twenty-one-day Bolli bands are a very good indicator of an overextended market.
The falling lower band comes in at 0.6587, which is close.
Technically the current consolidation is healthy price action in a strong trending market, which eventually targets a test of long-term support at 0.6263, 76.4% of the 0.4775-1.1081 climb between 2001 and 2011. Authorities are trying desperately to control the coronavirus, but it appears to spread very easily and the incubation term is uncertain at this point nL1N2AP0TC.
Sadly, this could be the next black swan event.

• AUD/USD was under pressure during US session when Wall Street cratered nL1N2AP1IK

• AUD/USD traded to 0.6586 and AUD/JPY threatened key support at 72.30/50

• The 61.8 of 69.93/76.52 is at 72.45 and daily lows in early Feb at 72.35/45

• Standing buy orders in the 72.30/50 window held and the AUDJPY low was 72.50

• The subsequent bounce in AUD/JPY to 72.80 has taken the pressure off AUD/USD

• AUD/JPY resistance is at 73.50/60 where the 10 & 21-day MAs converge

• A break above 73.60 would ease downward pressure significantly

  
  

Citi discusses GBP outlook and maintains a structural bullish bias in the medium-term.

"EU member states are due to finalize their negotiating priorities for a future trade deal with Britain. It will say that a trade deal should be based on EU rules in some areas as "a reference point". Meanwhile, UK ministers will also meet to discuss the government's opening stance for negotiations. The final agreement is due to be published online and presented in Parliament on Thursday. Chatter here could be a source of short term volatility for GBP," Citi notes. 

"Bigger picture, we maintain our structurally bullish view on GBP as 1) political risks recede and economic recovery carries on 2) long term investors are still structurally underweight GBP and UK assets," Citi adds. 

• Global yields dive, US yields fall faster than AU,AU-US spreads tighten

• Iron-ore, copper & oil trade lower, equity markets extend the recent drop

• Probability for Fed cuts increases FEDWATCH; USD/CNH drops slightly

• AUD/USD holds near 0.6600 for most of NY & Europe trading sessions

• Another daily doji forms, consolidation persists, suggests new lows likely

• Investors continue to worry about Covid-19 impact on global econ growth

• GBP/USD Bid in NY aft, +0.63% at 1.3008, NY range 1.3018-1.2952

• Cable traders shrug off coronavirus, Brexit; focus on lower Fed rate outlook

• Sterling mounts another run at 1.3000 with BoE, US rates help nL1N2AP0BQ

• EU-UK final status talks begin Mar 2 nB5N2AK01G, may temper further gains

• Res at 1.3018 Tues high, then 1.3052 55-DMA; Support at Feb 20 low 1.2849

• EUR/GBP -0.43% at 0.8362, Tues range 0.8395-0.8339; GBP gains outstrip EUR

NAB Research discusses EUR/USD outlook and sees a scope for further consolidation in the near-term before breaking back lower.

"We think the current EUR slide may have temporarily run its course with the declines to 1.0775 in EUR/USD and 0.8275 in EUR/GBP. Consolidation looks to be in order before heading to new lows in the coming weeks and months," NAB notes. 

"For EUR/USD in the months ahead however think 1.04-1.09 or 1.05-1.10 ranges. For EUR/GBP think 0.80-0.85. The lagged nature of a new spate of negative economic data won’t really start revealing itself for a few weeks and may last well into Q2, 2020, plays to the idea of consolidation before lower. Here flash Feb PMIs and Ifo have held up but will likely fade in the coming weeks and months," NAB adds. 

• USD/JPY's broken below Thur's low, Jan's peak & the kijun at 110.33/30/27

• Reports of more COVID-19 cases in Europe, hits to businesses weigh

• Travel restrictions to contain the virus trample transports, trade, etc

• 10-yr Tsy yields sliding toward 2016's record low at 1.32% nL1N2AP060

• Next potential 10yr support below 1.32% is a 161.8% Fibo target at 1.24%

• And S&Ps are now below Jan. 31's 3,214 pullback low: close below bearish

• S&Ps would be at risk of reversion to the 200-DMA, last 3,045

• Risk-off moves of those magnitudes put USD/JPY cloud base at 109 in play

MUFG Research discusses the USD outlook in light of its trajectory for the Fed policy over the coming months. 

"Market participants continue to build up expectations for further Fed easing. According to Bloomberg, the US rate market is now pricing in almost a 50:50 chance of 0.25 point rate cut by the April FOMC meeting, and for the year as a whole is expecting the Fed to now deliver between 0.50 to 0.75 bps of easing...

If the Fed delivers more aggressive easing in response to downside risks form the coronavirus disruption, it has the potential to at least put a dampener on US dollar strength. Former Fed President Kocherlakota has even called on the Fed to deliver an insurance cut of 0.50 point as soon as next month," MUFG notes. 

"The comments fit with our view that the Fed’s upcoming policy review and potential dovish shift in Fed policy poses some downside risk for the US dollar," MUFG adds. 

UOB discusses USD/JPY technical outlook and adopts a neutral bias in the near-term.

"We highlighted yesterday (24 Feb) that “if USD were to break 111.20, it would indicate it need more time to muster enough momentum to challenge to the critical 112.40 level”. However, the manner by which USD cracked 111.20 and the subsequent plunge to a low of 110.32 came as a surprise. The price action suggests that last Thursday’s (20 Feb) high of 112.21 is a top, albeit likely a temporary one," UOB notes. 

"From here, USD could continue to trade in volatile manner but is expected to stay to within last week’s broad 109.64/112.21 for a while," UOB adds. 

For months, USD/JPY implied vols were low, risk reversals showed a premium for JPY calls over puts (spot downside), and demand for upside protection was limited.
That all changed when spot rallied almost 200 pips, after breaking October's 110.30 peak last week.
Short covering drove spot and option demand.
Risk reversals saw that JPY call/USD put premium plummet to a two-year low at 0.25 in the one-month expiry, and implied volatility, which determines the price of an options premium, shot higher.
That risk reversal met good demand even before spot fell back under 111.00 Monday, and has since fully retraced its losses to a 1.2 premium for JPY calls over puts.
Vols have peaked, but they are still very high and meet good demand on dips - one-month implied volatility 4.5 to 7.0 since last Wednesday (high since October), and paid 6.5-6.6 on good size today.
For now, wait-and-see seems to be the response, but option market price action shows increased actual/realised volatility remains a big concern, with a clear spot bias to the downside.

• EUR/USD precisely filled 2017 gap then bounced modestly

• Gap 1.0778-1.0821 in April 2017. Feb 2020 low 1.0778

• Pair since rising to 1.0872 then slipping back to 1.0835

• 1.0850 is the middle of likely new range nL2N2AP05R so neutral level

• Traders shorter EUR/USD 12bln from USD 6bln. Not too short. Record USD 30bln

• Interest to sell strength is likely to be large through 1.09-1.10

• No tech support nearby. Option related support @ 1.0750 and 1.0700

• 
  

• 
  

It's likely EUR/USD has dropped from a 1.09-1.12 range to one closer to 1.07-1.10.
The downtrend might have gained pace, but risk aversion has blunted that possibility.
The probability of a strong rebound is low.
Traders are short but not too short, far from it nL2N2AO04D.
Short covering is likely and that'll underpin this new range.
A short squeeze is extremely unlikely.
Expected stimulus will strengthen the case to be short funding currencies and to invest in risky but high-yielding currencies nL2N2AP04Q.
A EUR/USD correction to 1.0955 would fulfil the requirement for a minimum technical correction of this year's drop.
That would strengthen the downtrend.
The 21-DMA is 1.0921 and significant psychological resistance lies at 1.1000, which will draw sellers who now fear a deeper drop yet are ill-prepared for it nL2N2AO04D.
Traders may witness a period during which they can sell strength to better prepare for the trend.
That will limit gains and may eventually lead EUR/USD through 1.06-1.09 and 1.05-1.08 ranges in the next three to six months.

• EUR/USD saw two weekly closes in a row under 1.0879 low and huge 1.0863 Fibo

• 1.0863 Fibo, a 76.4% retrace of the 1.0340 to 1.2556 (2017 to 2018) rise

• Last week EUR/USD filled a gap under the 1.0778-1.0821 gap

• Gap: April 20 2017 1.0778 high and April 24 2017 1.0821 low

• We are short at 1.0850 in anticipation for a bigger drop in coming sessions

• Previous EUR/USD update nL2N2AO048. EUR/USD trader TGM2334

• Dollar set for even bigger gains as virus spreads nL2N2AO05R

• Options expire at 10-am New York/15GMT Tuesday Feb 25

• EUR/USD: 1.0800 (1BLN), 1.0810-15 ( 630M), 1.0825-35 (1.1BLN),

• 1.0850-60 (900M), 1.0875-80 (1BLN), 1.0910 (400M)

• EUR/GBP: 0.8430 (250M)

• AUD/USD: 0.6635 (380M), 0.6675 (1.4BLN), 0.6700 (250M), 0.6720 (280M)

• USD/JPY: 110.80 (450M), 111.00 (266M)- NB: 2.6-bln 111.00 expiry Wednesday

• EUR/JPY: 119.90 (873M)

• Up 0.1%, at the top of a 1.2912/1.2942 range, busy once Asia fully opened

• BoE's Haldane - potential growth in UK business investment nL5N2AO5SW

• EU and UK Brexit talk starting positions will be defined today nL5N2AO2DK

• Charts - momentum studies base, 21 day Bolli bands, 5, 10 & 21 DMAs slip

• Net negative setup - well tested lower 21 day Bolli - 1.2838 major support

• Initial significant support comes in at 1.2822 late November range base

• London 1.2887-1.2954 range is initial support-resistance

Danske Research discusses USD/CAD outlook and maintains forecast profile unchanged at 1.32 in 3M, 1.29 in 6M and 1.27 in 12M.

"The CAD is caught between suffering energy (warm weather, virus fears and strong USD) and a global investor preference for US assets, which indirectly has supported the broad CAD. Bank of Canada has turned significantly more dovish in recent months and we keep our baseline call of two 25bp rate cuts over the coming 12M. In comparison, markets price 35bp worth of cuts," Danske notes. 

"Fundamentally, we still regard USD/CAD as overvalued, with fair-value estimates in the low 1.20s. According to CFTC IMM data, speculative CAD positioning is neutral but investors have recently added significant amount of shorts," Danske adds. 

• EUR/USD traded 1.0845/64 and is at session high into the afternoon

• Market is Asia tried to settle as S&P futures raced higher nL3N2AP04K

• EUR/USD appears to be correcting as it remains above 10-day MA (1.0833)

• Correction higher targeting 21-day MA at 1.1921

• A break below 1.0800 would signal the M/T trend lower is resuming

• If markets settle - US yields might move higher and underpin USD

• EUR/USD unchained after breaking out of bearish rut on EBS

• Exit from Bollinger downtrend channel spurs more short-covering

• Sharp drop in US Treasury yields driving USD into the ground

• Coronavirus impact broadening prompts Fed rate cut speculation

• EUR/USD could reach 20 DMA at 1.0916 before rally peters out

• Breach of 20 DMA exposes 1.0945 ceiling of weekly downtrend channel