AUD/NZD: Long At 1.0840, EUR/CHF: Buy At 1.1100

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GOLD: Weak US ISM And Dovish Comments From Fed Supported Gold

• Gold edged to a three-month high yesterday after weak US manufacturing activity data.

• US ISM implied contraction in the manufacturing sector for a third straight month, coming in at 48.2 for January. At least that was a hair better than market expectations, which had it ticking up to 48.1 from December's 48.0. Last month's print was the lowest since June 2009.

• Among the components, at least new orders (51.5) and production (50.2) edged back into positive-growth territory after two months in the wilderness. The employment index sank 2.1 to 45.9, its worst since June 2009 – bad news before Friday's employment report. The inventories index remained at 43.5, now below 50 for seven months straight, apparently continuing to work down the sector's moderate inventory overhang, at least on the inputs side. It seems likely that inventories will contribute negatively to GDP again this quarter, if current patterns continue.

• Outside of the headline's components, it looks like trade could also pull down first-quarter GDP, as the exports index sank back down four points to 47.0, but the imports index bounced back up 5.5 to 51.0.

• Fed Vice Chairman Stanley Fischer said the US economy could suffer, with inflation remaining too low, if recent volatility in financial markets persists and signals a slowdown in the global economy. He warned about jumping to conclusions given that some past bouts of financial market turbulence have not harmed the world's largest economy. Fischer said, oil price drops and the dollar's rise suggested inflation "would likely remain low for somewhat longer than had been previously expected" before moving back to the Fed's 2% target.

• Though he is more of a centrist at the Fed, Fischer gave two other hints that his thinking has shifted dovish: he said there is "some benefit to maintaining a larger balance sheet for a time" to support the economy. The central bank's portfolio of bonds is worth about USD 4.5 trillion after years of post-crisis stimulus.

• Fischer also argued that a "modest" drop in unemployment below its current 5.0% level, which is around the Fed's target, would be "appropriate" to help under-employed workers and to boost inflation, which is 1.4% by the Fed's preferred measure.

• Spot gold broke above 1130.00 an ounce today, its strongest since November 3. A break above 1136 could lift gold towards 1157, a level reached in late October. We stay XAU/USD long.

• Gold price is falling now but it is still above the 7-day exponential moving average (currently about 1118.00), which is the nearest support level. A stronger support is 14-day exponential moving average, currently at 1109.50.

EUR/CHF: Bid Raised To 1.1100

• Swiss National Bank Chairman Thomas Jordan said that the country's currency remains "significantly overvalued" compared to the EUR and that the central bank remains ready to intervene, if necessary, to keep it from strengthening.

• Jordan said that a combination of negative interest rates, the SNB's willingness to intervene and the overvaluation of the Alpine republic's currency have led to declines in the franc's value in recent weeks. He declined to say whether the SNB had recently intervened in currency markets. Thomas Jordan said that inflation should become positive again in early 2017. He reiterated 1.5% growth forecast in 2015.

• The EUR/CHF is heading back towards the 1.1165 peak from Friday. We have raised our bid to 1.1100. The stop-loss level would be 14-day exponential moving average at 1.1025. We expect further EUR/CHF rise towards 1.1671 (76.4% fibo of 1.2650-0.8500 drop) in the medium term.

AUD/NZD: Long At 1.0840

• Australia's central bank held its cash rate steady at 2.0% on today. The Reserve Bank of Australia left the door open to a move after its first policy meeting of the year, saying that a background of subdued inflation meant there was scope for a reduction if needed to support the economy.

• The Board specifically noted that coming data would allow it to better judge if turmoil in financial markets truly augured tougher times for the global economy, and whether recent strength in employment at home would prove long lasting. The Board judged also that there were reasonable prospects for continued growth in the economy, with inflation close to target.

• Investors still assume the global outlook argues for at least one more cut in rates. Interbank futures imply around an even chance of a move by May and are fully priced for 1.75% by October. GrowthAces.com does not expect a rate cut this year.

• The AUD/USD initially rallied to 0.7130 after the RBA did not sound as dovish as some bears had been wagering on. Yet, it quickly ran out of puff as investors were keen to lock in profits. We remain AUD/USD bullish with our long opened at 0.7070. The 10-dma is crossing above the 21-dam that should bolster bull sentiment.

• We went AUD/NZD long at 1.0840 today, in line with our short-term trading strategy. We also keep our bullish long-term outlook on this pair. We think that the RBNZ remains close to cutting rates after New Zealand inflation surprised on the downside in the fourth quarter with a 0.5% decline in prices vs. the previous quarter and a mere 0.1% increase on annual basis. This should allow the AUD to outperform the NZD.

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