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Daily Pivots: (S1) 1.2846; (P) 1.2883; (R1) 1.2916; More....

Intraday bias in USD/CAD remains neutral as consolidation continues. As 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.

Key Highlights

• Gold price started a fresh upside move from the $1236.50 swing low against the US Dollar.
• Buyers succeeded in pushing the price above a major bearish trend line at $1258 on the 4-hours chart of XAU/USD.
• The price is now heading towards a few major resistances – $1268, $1270 and $1274.
• The US Building Permits in Nov 2017 decreased by 1.4%, less than the forecast of -4.9%.

Gold Price Technical Analysis

After a major downtrend, Gold price found bids near $1236 against the US Dollar. The price started a fresh upside move, but it is now facing a few major resistance around $1270.

Looking at the 4-hours chart of XAU/USD, there was a decent support base formed at $1236.50. The price recovered nicely and moved above the 23.6% Fib retracement level of the last major drop from $1299.22 to $1236.50.

More importantly, there was a break above a major bearish trend line at $1258 on the 4-hours chart. It opened the doors for more gains above $1260. Having said that, the price is now facing an uphill task around $1270.

An initial resistance is around the 100 simple moving average (red, 4-hour) at $1268, which is near the 50% Fib retracement level of the last major drop from $1299.22 to $1236.50.

Above the mentioned $1268, the $1270 pivot level is a major resistance. Finally, the 200 simple moving average (green, 4-hour) is at $1274. Should the price succeed in settling above the $1274 level, the price could continue its uptrend and move towards the $1285 and $1290 levels.

On the downside, the broken resistance at $1258 may now act as a support going forward. Below $1258, the $1250 is a decent support.

Today, the US Existing Home Sales figure for Nov 2017 will be released. The sales are likely to increase by 1%, but if there is no increase in sales, Gold price may gain traction. On the other hand, a better outcome could spark a downside reaction towards $1250.

Currency pair EUR/USD

The EUR/USD break below the 100% Fib level of wave 2 vs 1 invalidates the wave 2 (pink) and indicates an expansion of wave 4 (light purple). It needs to break the support or resistance trend line before the short-term direction becomes clear.

The EUR/USD could still be in a wave X (blue) as long as price stays below the 138.2% Fibonacci level of wave X vs W. Price is probably completing a rising wedge chart pattern (red/blue lines) within wave X (blue).

Currency pair USD/JPY

The USD/JPY broke above the resistance (dotted red) of the triangle pattern and is now challenging the 61.8% Fibonacci resistance level of wave B (purple). A bearish bounce could see price fall towards the Fib levels of wave 2 or B.

A break above the 100% level at 113.75 would invalidate the ABC zigzag (purple).

Currency pair GBP/USD

The GBP/USD support and resistance trend line could be a large bull flag chart pattern. A bullish breakout could confirm the pattern and a wave 5 of wave C.

The GBP/USD seems to be building a potential wave 1-2 (green) pattern.

Headlines/Economic Data

General Trend: Asian indices trade mixed ahead of US Senate tax vote; vote passed sending dollar slightly stronger. Japan quiet ahead of Thursday’s BoJ policy statement.

Japan

Nikkei 225 opened -0.1%; closed +0.1%

Japanese megabanks trade generally higher: Mitsubishi UFJ +1.8%: MUFJ and Mizuho expected to raise certain fees in 2018 – Japanese Press

Japan Display: +5% (capital injection speculation)

TOPIX Construction Index -1%; Taisei -3.5% (lingering bid rigging concerns related to the Maglev project)

Telecom names continue to underperform following recent plan by Rakuten to enter the mobile business: KDDI -0.8%(down for 5th straight session)

Subaru Corp -6%: The company may have falsified certain mileage data, said a Japanese press report.

Japan 2018 budget draft: Budget seen at ¥97.7T (in line with press speculation)

Japan End Sept Household Assets: ¥1,845T, +4.7% y/y - BoJ Q3 Flow of Funds Report

Japan Oct All Industry Activity Index M/M: 0.3% v 0.3%e

Looking Ahead: BoJ policy statement due on Thursday

Korea

Kospi opened -0.2%

Cosmetics firms trade lower for 2nd straight session, Amorepacific -2%; China said to be again banning tours to South Korea

Hyundai Motor -0.3% (Reached tentative wage agreement with union –US financial press)

Cheil Worldwide +4.5% (raised 2017 dividend payout ratio to 60%)

Hynix Semi +0.7% (To create foundry with a Chinese company - Korean press)

Samsung Electronics -1.1%: May quadruple OLED supplies to Apple in 2018 - Korean press

South Korea to announce 2018 economic policy direction next week

Bank of Korea (BOK) sells KRW2.41T in 2-yr monetary stabilization bonds at 2.08%

North Korea begins tests to load anthrax onto ICBMs - Japan press; US and China talk about possible North Korea regime collapse

US said to have given China a draft on new North Korea sanctions

South Korea President Moon: US-South Korea joint military drills may be delayed as a step to ease tensions on Korean peninsula - NBC

US Sec of State Tillerson: Pressure campaign on North Korea will intensify, they haven't shown willingness to talk

One of South Korea cryptocurrency markets, YouBit, was forced to shut down on Tuesday after a hacking attack

South Korea markets to be closed for trade on Dec 29th; to delay market opening by 1 hour on Jan 2nd

China/Hong Kong

Hang Seng opened -0.2%, Shanghai Composite flat

Hang Seng Information Technology Index -0.4%; Services Index +1.2% (gaming names trade generally higher on broker outlooks)

China Mobile: +1.1% (Reported Nov net adds 3.0M to 883.9M total mobile subscribers)

(CN) Former PBoC advisor Li Yang: China economy is in long process of gradual slowdown; views that China economy 'bottomed out are suspect'; China needs to stay vigilant to US economic conditions

(CN) China Researcher: China should seek responding plans to US tax cut

(CN) China Academy of Social Sciences (CASS): sees 2017 GDP at 6.8% and 2018 GDP at 6.7%; Sees Shanghai Composite trading between 3,200 and 3,700 in 2018

(CN) PBoC sets yuan reference rate at 6.6066 v 6.6098 prior

(CN) PBoC OMO: Injects CNY80B in 7,14 and 28-day reverse repos v CNY100B prior; Net injected CNY10B v CNY20B prior

(CN) China MoF sells 3-yr bonds at 3.7348% v 3.73%e, bid to cover 1.62x; 7-yr bonds at 3.9% v 3.92%e, bid to cover 2.4x

(CN) According to economists tighter monetary conditions with slower credit growth are possible in China next year - Chinese press

(CN) China updates regulation on economic crime investigation, effective Jan 1st; Clarifications and guidance were given on topics such as police jurisdiction, registration of cases, use of compulsory measures, obtaining evidence and the disposal of relevant assets.

(CN) China Researcher: China should seek responding plans to US tax cut

(HK) Hong Kong SFC said to plan to strengthen law enforcement in 2018 – Chinese Press

Australia/New Zealand

ASX 200 opened -0.1%; closed +0.2%

ASX 20 Utilities Index -0.7%

(AU) Western Australia sees iron ore price at $59.70 from 2020-2021; China steel demand slowdown risk to price over next year

(AU) Australia Nov Skilled Vacancies m/m: 0.3% v 0.7% prior

(AU) Financial press discusses when RBA could raise rates and how data is conflicting - financial press

(NZ) NEW ZEALAND Q3 CURRENT ACCOUNT BALANCE (NZ$): -4.7B V -4.2BE

(NZ) NEW ZEALAND NOV TRADE BALANCE (NZD): -1.19B V -550ME; YTD -3.44B V -2.71BE

(NZ) New Zealand Nov Net Migration: 5.6K v 5.6K prior (12-month low)

(NZ) New Zealand Nov Credit Card Spending m/m: 0.8% v 1.0% prior; y/y: 9.1% v 3.0% prior

(NZ) New Zealand Fin Min: Named 10 members to tax working group

AAD.AU Enters agreement to sell Bowling & Entertainment unit for A$160M on a debt and cash free basis to The Entertainment and Education Group; +12%

Looking Ahead: New Zealand Q3 GDP data due for release on Thursday.

Other Asia

(MY) Malaysia Nov CPI Y/Y: 3.4% v 3.4%e (**Note: 11th straight month above target. Malaysia Central Bank has CPI range between 2.0-3.0%)

(MY) Malaysia Finance Ministry: To leave stamp duty for property above MYR1.0B at 3%

Looking Ahead: Taiwan Nov Export orders and Bank of Thailand rate decision due later today

North America

US equities closed lower ahead of Senate vote on tax reform: Dow -0.2%, S&P500 -0.3%, Nasdaq -0.4%, Russell 2000 -0.8%

S&P 500 Real Estate Sector -1.9%, Utilities -1.8%

FedEx +1.4% in afterhours (Q2 results and FY18 guidance above ests)

Micron +5.4% in afterhours (Q1 results, Q2 guidance above ests)

(US) Fed's Kashkari (dovish dissenter; non-voter in 2018): reiterates there is still slack in the labor market; Fed should not raise interest rates right now

Tax Reform: (US) US House passed the tax reform bill (as expected) by a 227 to 203 vote (all Democrats opposed the measure)

(US) SENATE HAS ENOUGH VOTES TO PASS REPUBLICAN TAX LEGISLATION; final vote 51 to 48

Following the US House vote, the Senate parliamentarian ordered the House to re-vote on the tax bill because three provisions of the House-passed bill violated Senate rules, according to a press report; Senate said to aim to vote on bill stripped of problematic provisions tonight; House will have to re-vote on edited bill tomorrow (Wednesday)

(US) Sen Maj Leader McConnell: expects to finish tax bill sometime tonight (Tuesday); Have held talks with Dem Leader Schumer on govt spending

Energy: (US) Weekly API Oil Inventories: Crude: -5.2M v -7.4M prior

Looking Ahead: US Nov Existing Home Sales and DoE Weekly Crude Oil Inventories due on Wednesday

Europe

(UK) Prime Min May spokesperson: May and Trump agreed in phone call on importance of swift post-Brexit bilateral trade agreement

(UK) Bank of England (BOE) expected to say EU banks to be allowed to operate in the UK ‘as normal’ following Brexit – BBC

(EU) EU reportedly pushing for ECB to take supervision over large investment banks - press

Looking Ahead: BoE Gov Carney due to speak during the NY Morning

Levels as of 01:00ET

Nikkei225 %, Hang Seng -0.1%; Shanghai Composite -0.3%; ASX200 +0.1%, Kospi -0.3%

Equity Futures: S&P500 +0.2%; Nasdaq100 +0.2%, Dax +0.2%; FTSE100 +0.1%

EUR 1.1847-1.1836; JPY 113.08-112.85; AUD 0.7665-0.7651;NZD 0.6986-0.6954

Feb Gold +0.1% at $1,266/oz; Feb Crude Oil +0.3% at $57.74/brl; Mar Copper +0.1% at $3.15/lb

For the 24 hours to 23:00 GMT, the AUD declined 0.1% against the USD and closed at 0.7659.

LME Copper prices declined 0.01% or $1.0/MT to $6845.0/MT. Aluminium prices rose 0.7% or $13.5/MT to $2061.0/MT.

In the Asian session, at GMT0400, the pair is trading at 0.7657, with the AUD trading marginally lower against the USD from yesterday's close.

Overnight data revealed that Australia's Westpac leading index registered a rise of 0.10% on a monthly basis in November, after recording a revised rise of 0.14% in the previous month.

The pair is expected to find support at 0.7641, and a fall through could take it to the next support level of 0.7624. The pair is expected to find its first resistance at 0.7679, and a rise through could take it to the next resistance level of 0.7700.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the EUR rose 0.49% against the USD and closed at 1.1841, shrugging off downbeat economic releases across the Euro-zone.

Data showed that the Euro-zone's seasonally adjusted construction output slid 0.4% on a monthly basis in October, dropping for the first time in seven months. Construction output had risen 0.1% in the previous month.

Separately, Germany's Ifo business climate index unexpectedly eased to a level of 117.2 in December, as German Chancellor, Angela Merkel's efforts to form a stable government clouded the nation's economic outlook. The index had registered a revised record high level of 117.6 in the previous month, while markets were expecting for a drop to a level of 117.5. Moreover, the nation's Ifo business expectations index declined more-than-anticipated to a level of 109.5 in December, compared to market expectations for a drop to a level of 110.7. The index had registered a reading of 111.0 in the previous month.

On the other hand, the nation's Ifo current assessment index climbed to a level of 125.4 in December, exceeding market expectations for a rise to a level of 124.7, suggesting that firms were more optimistic about their current economic situation. The index had registered a reading of 124.4 in the prior month.

The greenback gained ground against most of the major currencies, amid growing expectations that the US House of Representatives would pass the US tax reform bill.

Gains in the US Dollar were further boosted, after data indicated that housing starts in the US unexpectedly climbed 3.3% on monthly basis to an annual rate of 1297.0K in November, surging to its highest level since October 2016, amid a spike in single-family home construction. Housing starts had registered a revised level of 1256.0K in the previous month, while markets were anticipating for a fall to a level of 1250.0K. On the contrary, the nation's building permits fell 1.4% on a monthly basis to an annual rate of 1298.0K in November, compared to a revised reading of 1316.0K in the prior month, while market participants had envisaged for a drop to a level of 1270.0K.

In the Asian session, at GMT0400, the pair is trading at 1.1846, with the EUR trading marginally higher against the USD from yesterday's close.

Meanwhile, the US House of Representatives approved the biggest US tax overhaul in 30 years.

The pair is expected to find support at 1.1805, and a fall through could take it to the next support level of 1.1764. The pair is expected to find its first resistance at 1.1868, and a rise through could take it to the next resistance level of 1.1890.

Moving ahead, traders would focus on Germany's producer price index for November, slated to release in a few hours. Moreover, the US existing home sales for November and weekly MBA mortgage approvals data, both set to release later in the day, will garner significant amount of market attention.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP slightly rose against the USD and closed at 1.3387.

In the Asian session, at GMT0400, the pair is trading at 1.3396, with the GBP trading 0.07% higher against the USD from yesterday’s close.

The pair is expected to find support at 1.3351, and a fall through could take it to the next support level of 1.3305. The pair is expected to find its first resistance at 1.3422, and a rise through could take it to the next resistance level of 1.3447.

Trading trend in the Pound today is expected to be determined by a speech from the Bank of England (BoE) Governor, Mark Carney, due later in the day.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.28% against the JPY and closed at 112.87.

On the macro front, Japan’s final machine tool orders advanced 46.8% on an annual basis in November, revised lower from a preliminary print that had indicated a rise of 46.9%. Machine tool orders had climbed 49.8% in the previous month.

In the Asian session, at GMT0400, the pair is trading at 112.93, with the USD trading slightly higher against the JPY from yesterday’s close.

Data released overnight showed that the nation’s all industry activity index rebounded 0.3% on a monthly basis in October, at par with market expectations. The index had recorded a drop of 0.5% in the previous month.

The pair is expected to find support at 112.60, and a fall through could take it to the next support level of 112.27. The pair is expected to find its first resistance at 113.17, and a rise through could take it to the next resistance level of 113.41.

Going ahead, investors would closely monitor the Bank of Japan’s (BoJ) monetary policy decision, due to be announced in the early hours tomorrow.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD marginally declined against the CHF and closed at 0.9851.

Yesterday, the Swiss Government raised its economic growth forecasts for this year and next, citing a rebound in its export-led economy and a recent weakness in the Swiss Franc.

The State Secretariat for Economic Affairs (SECO), stated that it expects the Swiss economy to expand 1.0% in 2017, before accelerating to 2.3% and 1.9% in 2018 and 2019.

In the Asian session, at GMT0400, the pair is trading at 0.9849, with the USD trading slightly lower against the CHF from yesterday’s close.

The pair is expected to find support at 0.9830, and a fall through could take it to the next support level of 0.9810. The pair is expected to find its first resistance at 0.9874, and a rise through could take it to the next resistance level of 0.9898.

Amid no economic releases in the Switzerland today, investor sentiment would be governed by global macroeconomic factors.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.12% against the CAD and closed at 1.2879.

In the Asian session, at GMT0400, the pair is trading at 1.2873, with the USD trading a tad lower against the CAD from yesterday’s close.

The pair is expected to find support at 1.2843, and a fall through could take it to the next support level of 1.2812. The pair is expected to find its first resistance at 1.2912, and a rise through could take it to the next resistance level of 1.2950.

In the absence of any macroeconomic releases in Canada today, investors would look forward to global macroeconomic events for further direction.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.