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Personal income rose 0.3% in November, a hair below the consensus expectation for a 0.4% gain. Controlling for inflation and removing taxes, real disposable income edged up just 0.1% on the month.

Personal spending increased by 0.6% in nominal terms, ahead of expectations for a 0.5% print. In real terms, spending was up a robust 0.4%, following October's flat reading.

By component, real spending on non-durable goods led the way, up 0.7%, but services (up 0.4%) and durable goods (up 0.2%) also had good months.

Prices rose 0.2% month-on-month in November, largely due to a rise in energy costs (+4.2%) with inflation accelerating to 1.8% year-on-year (from 1.6%) Core prices rose a softer 0.1% (m/m) in November, and core inflation (y/y) edged up to 1.5% (from 1.4%).

The personal saving rate fell to 2.9% from 3.2% in October.

Key Implications

With the gain in November, consumer spending looks to grow by close to 3% in the fourth quarter, broadly in line with our recent forecast.

Consumers have been a lynchpin of economic activity and are likely to remain so over the next year. With tax cuts giving a lift to take home pay as soon as February and some nascent wage gains, we expect household spending to advance by 2.5% on average during 2018.

Inflation is still the missing part of the puzzle. Today's report will do little to change the mind of those worried that the Fed will continue to undershoot its target. This was the 67th month that core PCE inflation was below 2% and near-term momentum suggests it will remain there well into 2018. This may be the factor that stays the Fed's hand even as the pace of economic growth suggests more hikes should be at hand.

The Euro sharply depreciated against the Dollar during early trading on Friday after pro-independence parties in Catalonia triumphed in Thursday's regional elections.

With three pro-independence parties winning a combined 70 seats of the 135 available, concerns are once again heightened that tensions between Barcelona and Madrid could escalate. Although political uncertainty in Spain has the ability to punish the Euro short-term, losses are likely to be limited by the growing optimism over Europe's economic recovery.

Taking a look at the technical picture, the EURUSD remains supported above 1.1850 on the daily charts. Prices are trading above the 50 SMA while the MACD has also crossed to the upside. A weekly close above 1.1850 could signal a further incline towards 1.1920 and higher. Alternatively, a failure of prices to keep above the 1.1850 pivotal level may reopen a path back towards 1.1730.

WTI Crude losing steam?

WTI Crude was under pressure during Friday's trading session, with prices dipping below $58.00 as investors booked profits ahead of the upcoming New Year's break.

Oil prices have been supported by supply disruptions and optimism over OPEC's production cuts rebalancing markets but the question is, for how long? While the OPEC-led group may be commended for their efforts to limit production, U.S. Shale remains a threat to higher oil prices. It must be kept in mind that, with WTI Crude oil trading around $58.00, shale producers are currently profitable – a factor that could ultimately increase oil production. A situation where activity in the shale industry rises further next year has the potential to limit oil's upside gains.

Commodity spotlight – Gold

Gold prices hit a two-week high at $1269 in thin pre-holiday liquidity on Friday amid a softer US Dollar. With investors sitting on their hands and simply observing the markets ahead of the upcoming Christmas holiday break, Gold could remain range bound. Taking a look at the technical picture, the yellow metal still remains at risk of further downside losses despite the impressive appreciation witnessed this week. There is a suspicion that Gold is in the process of a technical bounce, with resistance found at $1267. A failure of prices to keep above this level may trigger a drop to $1250. Alternatively, a daily close above $1267 could encourage an appreciation towards $1280.

Bitcoin tumbles…

It has certainly been a volatile trading week for Bitcoin, which plunged 20% during Friday's trading session, with prices briefly dipping below $13000 before recovering towards $14000. The aggressively bearish price action witnessed this week may prompt investors to start questioning if Bitcoin will recover from the selloff or remain depressed moving into the New Year. From a technical standpoint, Bitcoin is at risk of dropping further if prices fail to keep above $13000. Sustained weakness below this level could encourage a decline back towards $11000.

USD/CHF - 0.9900

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9895

Kijun-Sen level                    : 0.9892

Ichimoku cloud top                 : 0.9868

Ichimoku cloud bottom              : 0.9862

Original strategy :

Buy at 0.9860, Target: 0.9960, Stop: 0.9825

Position : -

Target :  -

Stop : -

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

* FINAL UPDATE, HOPE TO SEE U ALL AGAIN SOON ! *

As the greenback found support at 0.9828 and staged a strong rebound, retaining our view that further consolidation would be seen with mild upside bias for gain to 0.9915-20, however, break of resistance at 0.9935-36 is needed to signal low has been formed, bring a stronger rebound to 0.9960-65 but indicated resistance at 0.9978 should hold from here.

In view of this, would not chase this rebound here and would be prudent to stand aside for now. Below 0.9860 would bring test of said support at 0.9828, break there would revive bearishness and extend the decline from 0.9978 to 0.9795-00, however, reckon downside would be limited to 0.9750 and risk from there has increased for a rebound later.

GBP/USD - 1.3387

Most recent candlesticks pattern   : N/A

Trend                                 : Sideways

Tenkan-Sen level                 : 1.3378

Kijun-Sen level                    : 1.3365

Ichimoku cloud top              : 1.3377

Ichimoku cloud bottom        : 1.3371

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

* FINAL UPDATE, HOPE TO SEE U ALL AGAIN SOON ! *

As the British pound found support at 1.3332 yesterday and rebounded, retaining our view that further consolidation would be seen, however, reckon downside would be limited to support at 1.3331-32, bring another rebound. Only a drop below 1.3331 would signal the rebound from 1.3302 has ended and revive bearishness for a retest of 1.3302 first, break there would extend weakness towards 1.3265-70.

On the upside, whilst recovery to 1.3400 cannot be ruled out, reckon upside would be limited to said resistance at 1.3420 and bring another retreat later. Above 1.3420 would extend the rebound from 1.3302 to 1.3445-50, however, reckon indicated resistance at 1.3466 would hold from here, bring retreat later. As near term outlook is still mixed, would be prudent to stand aside for now. 

EUR/USD - 1.1852

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.1853

Kijun-Sen level                  : 1.1848

Ichimoku cloud top             : 1.1872

Ichimoku cloud bottom      : 1.1847

Original strategy  :

Bought at 1.1820, Target: 1.1920, Stop: 1.1820

Position : - Long at 1.1820

Target :  - 1.1920

Stop : - 1.1820

New strategy  :

Hold long entered at 1.1820, Target: 1.1920, Stop: 1.1820

Position : - Long at 1.1820

Target :  - 1.1920

Stop : - 1.1820

* FINAL UPDATE, HOPE TO SEE U ALL AGAIN SOON ! *

Although the single currency retreated after meeting resistance at 1.1902 earlier this week and consolidation below this level would be seen, reckon downside would be limited and bring another rise later, above 1.1880 would signal the pullback from 1.1902 has ended, bring retest of this level, break there would extend the erratic upmove from 1.1717 towards resistance at 1.1940 which is likely to hold from here.

In view of this, we are holding on to our long position entered at 1.1820. Below 1.1800 would defer and bring test of 1.1775 support but only break there would suggest top is formed instead, then subsequent retreat to 1.1750 would follow but support at 1.1737 should remain intact.

USD/JPY - 113.38

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 113.38

Kijun-Sen level                  : 113.43

Ichimoku cloud top             : 113.43

Ichimoku cloud bottom      : 113.08

Original strategy  :

Buy at 112.80, Target: 113.70, Stop: 112.45

Position :  -

Target :  -

Stop : -

New strategy  :

Stand aside

Position :  -

Target :  -

Stop : -

* FINAL UPDATE, HOPE TO SEE U ALL AGAIN SOON ! *

Although the greenback retreated after rising to 113.64 and consolidation below this level would be seen, reckon pullback would be limited to 113.00-10 and renewed buying interest should emerge around 112.80, bring another rise later, above said resistance would extend the move from 112.03 to resistance at 113.75, however, break there is needed to signal the rise from 110.84 low has resumed for headway towards 113.95-00, then towards 114.30-35 later.

On the downside, below 112.50-55 would suggest top is formed, bring test of 112.31 support but only break of latter level would signal the rebound from 112.03 has ended instead, bring retest of this level later. As near term outlook is mixed, would be prudent to stand aside for now.

Dollar shows little reaction to mixed economic data released from the US. Personal income rose 0.3% in November, below expectation of 0.4%. Spending rose 0.6%, above expectation of 0.5%. Inflation data are positive. Headline PCE accelerated to 1.8% yoy, up from 1.6%, in line with consensus. Core PCE accelerated to 1.5% yoy, up from 1.4% yoy, meeting expectation of 1.5% yoy. However, durable goods orders disappoint. Headline durable goods orders rose 1.3% in November, below expectation of 2.2%. Ex-transport orders dropped -0.1%, below expectation of 0.5% rise. The greenback continues to trade as the third weakest one for the week, just next to Yen and Swiss Franc.

Canadian Dollar suffers a setback after disappointing data. GDP grew 0.0% mom in October, below expectation of 0.2% mom. After yesterday's strong inflation and retail sales data, markets are pricing in over 75% chance of another BoC hike in Q1. But traders could likely hold their bets before January BoC meeting. There, we could get more affirmation on the Q1 hike expectation.

Euro trades as the second weakest one for today, but it's maintaining gain across the board for the week except Aussie. Three pro-independence Catalonia parties, Together for Catalonia (JxCat), Republican Left of Catalonia (ERC) and Popular Unity (CUP) together won more than majority of seats in the regional election. The results suggested a still-divided Catalonia and has done little to resolve the existing political crisis.

Released earlier today, UK Q3 GDP was finalized at 0.4% qoq, unrevised. Total business investment was finalized at 0.5% qoq, revised up from 0.2% qoq. Index of services rose 0.3% 3mo3m in October. UK current account deficit narrowed to GBP -22.8b in Q3. Swiss KOF economic barometer rose to 111.3 in December. German Gfk consumer confidence rose to 10.8 in January.

Wish all our readers happy holidays. We'll be back on December 27.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2678; (P) 1.2758; (R1) 1.2819; More....

While USD/CAD's fall from 1.2919 was steep, the pair is still holding in range between 1.2598/2919. Intraday bias stays neutral at this point. As noted before, as s long as 1.2598 resistance turned support holds, near term outlook remains bullish. On the upside, firm break of 1.2916 will resume the rise from 1.2061 and target 1.3065 medium term fibonacci level next. However, sustained break of 1.2598 will argue that rebound from 1.2061 has completed after hitting 55 week EMA (now at 1.2885). Near term outlook will be turned bearish in this case.

In the bigger picture, USD/CAD should have defended 50% retracement of 0.9406 (2011 low) to 1.4689 (2016 high) at 1.2048. And with 1.2048 intact, we'd favor the case that fall from 1.4689 is a correction. Rise from 1.2061 medium term bottom should now target 38.2% retracement of 1.4689 to 1.2061 at 1.3065. Firm break there will target 1.3793 key resistance next (61.8% retracement at 1.3685). We'll now hold on to this bullish view as long as 1.2450 support holds.

Economic Indicators Update

USD/CAD - 1.2705

Trend:  Near term up

 
New strategy             :

Stand aside

Position: -

Target:  -

Stop:-

FINAL UPDATE, HOPE TO SEE U ALL AGAIN SOON

Despite this week’s anticipated resumption of recent rise, as the greenback has retreated sharply after faltering below indicated dynamic level at 1.2927 (50% Fibonacci retracement of 1.3547-1.2061), suggesting top has possibly been formed at 1.2920, hence downside risk is seen for weakness to 1.2650-55, however, as broad outlook remains consolidative, reckon support at 1.2623 would remain intact, bring rebound later.

As near term outlook is still mixed, would be prudent to stand aside in the meantime. Above 1.2750-55 would bring recovery to 1.2790-00, however, reckon upside would be limited to 1.2835-40 and 1.2880-85 should hold from here, price should falter well below 1.2920-27 level and bring another retreat later. 

To recap, wave B from 1.3066 is unfolding as an a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c is a 5-waver with i: 1.1983, ii: 1.2506, extended wave iii with minor iii at 1.0206, wave iv ended at 1.0781 and wave v as well as wave iii has ended at 0.9931, hence the subsequent choppy trading is the wave iv which is unfolding as (a)-(b)-(c) with (a) leg of iv ended at 1.0854, followed by (b) leg at 1.0108 and (c) leg as well as the wave iv ended at 1.0674. The wave v is sub-divided by minor wave (i): 0.9980, (ii): 1.0374, (iii): 0.9446, (iv): 0.9913 and (v) as well as v has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3700 and 1.4000 had been met and further gain to 1.4700 would be seen later.

Aside from the 20-30% decline in the price of cryptocurrencies, which may be occuring due to falling spreads and eroding arbitrage opportunities, prospects for the year ahead are improving for the loonie as domestic data turns higher. The Canadian dollar was the top performer Thursday while the Swiss franc lagged. In a last minute decision, the Premium Insights issued a short on GBPUSD 15 minutes before yesterday's release of Canada retail sales and CPI. The pair fell 100 pips as both figures overshot expectations. Recall that CAD (not USD) was the highest performing currency of 2016.Canada GDP and US PCE report are both due at 8:30 EST (13:30 GMT/London).

The CAD gains on Thursday came after a rise in the CPI and a sizzling retail sales report. Prices rose 2.1% y/y compared to 2.0% expected and most core measures climbed. Retail sales rose 1.5% compared to 0.3% expected.

Poloz on the weekend said that the note about 'caution' in the BOC statement doesn't mean they won't hike so the market will be forced to stay on guard in the weeks ahead. Oil prices are also nearing the best levels of the year.

Additionally, China could help lift all commodity prices next year and on Friday the China Daily reported that the PBOC is not expected to raise interest rates in 2018.

The problems for the Canadian dollar include the huge gap in Canadian oil, which is still trading at a $26 discount and NAFTA worries.

The USD/CAD chart tells the story as the pair ranges between 1.2650 and 1.2915. A break on either side will be increasingly important. The risk is that it comes in low liquidity in the next week or so. In that case, it might be best to wait until the dust settles.

It's a similar story in AUD/USD as it rose above the 200-day moving average Thursday and is now threatening the November high. That's a greenlight but a whopping $3.5B in expirations at 0.7700 on Friday could pin it down and then it's into the year-end doldrums, when signals can be deceiving.

To close out the week, watch for the November US PCE report and Canadian GDP for October. In the US report, eye the personal spending metrics and for any signs of wage growth or inflation.

Here are the latest developments in global markets:

FOREX: The euro remained around Friday's lows as investors were worried that tensions between Madrid and Catalonia would escalate after regional elections on Thursday gave a narrow majority to secessionists. The euro stood against the dollar at 1.1851 (-0.19%) while versus the pound it slipped to 0.8856 (-0.05%) after final British Q3 GDP growth readings came in higher than expected on a yearly basis. Pound/dollar approached the 1.34 key level in the wake of the data but soon fell back to 1.3380 (-0.12%). The aversion of a government shutdown in the US on late Thursday and the passage of the tax overhaul continued to underpin the dollar, with the dollar index trading near the day's highs at 93.37. Dollar/yen was moving sideways around 113.36 and dollar/loonie approached yesterday's lows at 1.2703. The aussie was on track to hit a fresh one-month high at 0.7718 (+0.23%).

STOCKS: Political noise in Catalonia dragged European stocks on Friday, sending the Spanish IBEX 35 lower by 1.13% at 1030 GMT. The blue chips STOXX 50 declined by 0.13% on the back of weaker financial shares, the German DAX 40 retreated by 0.17% and the French CAC 40 was down by 0.25% weighed by telecommunications.

COMMODITIES: Oil prices retreated from two-year highs on expectations of the Forties pipeline reopening probably in January and on concerns over rising US output. However, remarks by the Russian energy minister on Friday stating that supply cuts might be extended beyond 2018 provided some support to the market. Brent fell by 0.15% to $64.81 per barrel and WTI crude pulled back by 0.33% to $58.13. Gold edged up by 0.10% to $1,268.60 per ounce.

Day ahead: US PCE inflation & Canadian GDP awaited; Catalonia attracts attention

With traders breaking up for Christmas holiday and the UK markets operating partially, the coming session is expected to be quieter.

However, in Catalonia, Thursday's regional elections which surprisingly gave a slim majority to the pro-independence parties are said to prolong political tensions in Spain and therefore hit sentiment for the euro. Recall that the Spanish Prime Minister, Mariano Rajoy, called the polls in October after he took control of the region to prevent a declaration of independence. Now, secessionists parties have enough seats to reassemble the parliament and potentially agree on a new coalition.

In the rest of the day, the US and Canada will report on economic indicators. At 1330 GMT, the Bureau of Economic analysis will publish readings on the core PCE price index – the Fed's preferred inflation measure. Expectations are for the index to inch up by 0.1 percentage points to 1.5% y/y in November, but the dollar might not react much given that the Fed still expects to raise rates three times in 2018. Moreover, since the US tax story is almost complete, markets feel more confident in the performance of the US economy.

Readings on the US personal spending and personal income as well as on durable goods orders, new home sales and University of Michigan consumer sentiment will be also be released during the day.

Meanwhile, the Canadian GDP growth figures might bring some volatility to the loonie as the Statistics Canada provides final readings only, unlike to its US counterpart which also gives early predictions. Analysts forecast the Canadian economy to grow at September's pace at 0.2% m/m in October.

In energy markets, investors will look forward to the weekly Baker Hughes oil rig counts to give an indication of the US oil supply.