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Yesterday's US retail sales data showed a boost in sales for the month of November which helped the US dollar post some gains during the US trading session. Data showed that Americans are spending more in this holiday season than expected. On the negative side, initial jobless claims for the week ended on 9 December decreased by 11,000 to an adjusted 225,000 as compared to the expected 235,000. Today is relatively a calm day in respect to data releases.

This morning at 10:00 GMT, the Eurozone trade balance will be released which is expected to hit 24.4 billion as compared to 25.0 billion in the previous month.

Canadian manufacturing sales for the month of November is due out at 13:15 GMT which is expected to increase by 0.9% as compared to 0.5% in the previous month.

The US has a busier schedule compared to other economies as three different data are due to be released today. At 14:15 GMT data for the Empire state manufacturing index is due with a forecast of 18.8 in November, it was 19.4 in the prior month. Industrial production data is expected to decrease to 0.3% from 0.9% in October and Capacity Utilization rate is forecasted to reach 77.2%, from a previous reading of 77%.

EUR/USD

EUR/USD keeps trading on the downside while proceeding towards the immediate support at 1.1764 (today's Asian session low so far) and also capped by the descending 20-period moving average, which crossed below the 50-period moving average hence restricting the upside movement. As far as price remains below 1.18619 (yesterday’s high) it is most likely to sink below 1.17640 and 1.7294 (last week’s low).

USD/CAD

USD/CAD is under pressure and expected to extend its downside movement. In the Asian session, the pair encountered a steep downward movement which is expected to extend in upcoming sessions as well. Both 50-period and 20-period moving averages are declining and the relative strength index is heading towards the bearish zone. So, as long as price remains below 1.28789 (last week’s high), look for new downward target at 1.2712 (yesterday’s low) and 1.2665 (last month’s low).

GBP/USD

GBP/USD is expected to trade with bullish outlook above 1.33671. The pair posted a rebound from the support and still above this key point. The relative strength index is above its neutrality area at 50. Continuation of consolidation cannot be ruled out though its extent should be limited. As long as 1.3367 (yesterday's low) is not surpassed look for targets at 1.13644 (yesterday's high) and 1.3537 (last week’s high).

USDCAD remains neutral as it continues to trade in a range from late October. Near-term risk is tilted to the downside. The retracement of the longer-term downtrend from 1.3793 to 1.2061 has not reversed yet. However, the market is capped at the 200-day moving average.

The bounce off the more than a 2-year low from 1.2061 in September to October has moved into a consolidation phase between two key Fibonacci retracement levels of the 1.3793 to 1.2061 downleg. The 38.2% and 50% Fibonacci levels now act as support and resistance at 1.2717 and 1.2922.

USDCAD may find it challenging to break above the zone between the 50% Fibonacci and the key 1.3000 level. But a sustained break would shift the bias to a more bullish one and improve the odds for a move towards 1.3500 and then to the peak at 1.3793.

Near-term momentum is weak and RSI is falling, keeping risk to the downside but strong support is expected at the lower range between 1.2717 (38.2% Fibonacci) and 1.2623 (December 5 low). A break below this area would increase downside pressure and send prices towards the 1.2500 handle and possibly the 1.2061 low.

Overall, USDCAD has changed very little since trading in its well-established more than 2-month old range. The odds are not strong for a change in the broader trend yet as long as the pair trades below the 200-day MA and below 1.3000.

Sunrise Market Commentary

• Rates: Trading expected to shift in lower gear
  Today's eco calendar is thin with only US empire manufacturing and industrial production. We don't expect them to influence trading. With the final key events of the year behind us, volumes will probably slow to a trickle. That could cause some erratic moves in coming days.
• Currencies: USD trading to shift into year-end modus
  Strong EMU/US eco data and a mixed ECB message failed to give clear guidance for EUR/USD trading yesterday. In the end, the topside in EUR/USD still looks rather well protected given divergent guidance from the ECB and the Fed. The fate of the US tax bill remains a wildcard for USD trading going into the end of the year.

The Sunrise Headlines

• US stock markets corrected up to 0.4% lower yesterday. Most Asian indices record losses as well this morning with China underperforming (-1%).
• President Trump's drive to win passage of a sweeping Republican tax bill in the US Congress hit potential obstacles as two more Republican senators insisted on changes, joining a list of lawmakers whose support is uncertain.
• EU leaders applauded British PM May for her work so far on Brexit, assuring her at a summit in Brussels that sufficient progress has been made to allow Britain to move on to the next stage of leaving the union.
• The Canadian dollar recovered its vim on Thursday after Bank of Canada governor Poloz said the central bank is growing 'increasingly confident' that the economy will need less stimulus over time.
• Business conditions in Japan improved still further in the fourth quarter as the Bank of Japan's Tankan index registered the best quarter for the country's big manufacturers in eleven years.
• A new dissenter on the Bank of Japan board calling for more stimulus has prompted the BOJ to adjust its communications to flag risks of additional easing, according to people familiar with the central bank's discussions.
• Today's eco calendar contains US industrial production data and empire manufacturing. ECB Nowotny and Rimsevics are scheduled to speak.

Currencies: USD Trading To Shift Into Year-End Modus

USD/JPY and EUR/USD show mixed picture

There was plenty of eco and central bank news yesterday. Initially, no theme was able to give USD trading a clear direction. Eco data were strong both in the US and in EMU. The ECB brought a mixed signal with a sharp upward revision for its growth forecast but with inflation still expected to rise only very gradually. Finally EUR/USD drifted back south below the 1.18 barrier as EMU yields declined more than US ones. The pair closed the session at 1.1778, reversing part of the post-Fed rise. At the same time, USD/JPY traded with a negative bias (cautious risk-off, lower core yields). The pair finished at 112.39.

Major Asian equities indices mostly trade in negative territory showing losses between 0.5% and 1.0%. The closely watched large manufacturing index in the Q3 Japan Tankan report rose from 22 to 25, the highest level in 11 years. Other sub-indices also suggest an improvement in the broader economic performance including a tightening labour market and tentative signs of price rises. For now this is not enough for markets to expect that the BOJ will change its ultra-easy monetary policy in the foreseeable future. USD/JPY trades in the 112.15 area, near the post-Fed low. Uncertainty on the fate of the US tax bill might play a role. EUR/USD trades sideways in the 1.1785 area.

There are no important data Europe today. The US Empire manufacturing survey and November production data will be published. NY manufacturing confidence is expected to ease slightly further off very high levels reached over the previous months. US production growth is expected to ease to 0.3% after strong October data. These data are usually only of intraday significance for trading.

With most key eco data and key central bank meetings out of the way, FX markets will gradually shift to year-end modus. Declining market liquidity will result in more erratic trading. Markets will keep a close eye on the final outcome of the US tax debate. An agreement, even if ‘imperfect', might still be slightly positive for the dollar. The combined position of the Fed (ongoing policy normalisation) and the ECB (ongoing soft inflation assessment) in theory should cap any sustained EUR/USD gains for now. We maintain the working hypothesis that a break beyond the 1.1961 resistance will be difficult except in case of negative (political) news from the US.

Technical picture. EUR/USD set a post-ECB low mid-November, but the USD's momentum wasn't strong enough. EUR/USD settled in a directionless consolidation pattern in the 1.17/19 area.

The outcome of the ECB and Fed meetings were not able to push EUR/USD out of the recent tight consolidation pattern. A return below 1.1713 would signal an improvement in the ST USD momentum. Next support comes in at 1.1554 (November low). USD/JPY's momentum deteriorated early November, dropping below the 111.65 neckline. No aggressive follow-through selling occurred though. Over the previous two weeks, the pair rebounded, calling off the downside alert and returning to the 110.84/114.73 range. We amended our ST bias from negative to neutral. We maintain the view that a sustained break north of 115 will remain difficult.

EUR/USD: Fed nor ECB were able to unlock recent stalemate

EUR/GBP

Sterling gains, but within established ranges

Yesterday, UK November retail sales beat the consensus by a wide margin, but had only a temporary positive impact on sterling. The BoE as expected left is policy unchanged. The Bank saw last week's Brexit deal as reducing the chances of disorderly UK departure. However, the BoE also saw tentative signs that the economy might be slowing into the yearend. There were no specific indications that the BoE considers a next rate hike in the near/foreseeable future. Sterling developed a directionless trading pattern for most of the day. Sterling finally captured a better bid later in the session. The EU supporting PM May's efforts to make progress on Brexit might have been an sterling positive. A cautious EUR/USD decline also weighed on EUR/GBP¨. EUR/GBP finished the day at 0.8770. Cable closed at 1.3431.

Today, there are no important eco data in the UK. The EU will formally approve that the second phase of the Brexit negotiations can start as enough progress has been made in the separation topics. The approval might support a temporary positive sterling momentum, but we don't expect any sterling rebound to go far. The next phase of the Brexit negotiations will remain very tough, UK PM May faces political hurdles at home and there is no indication that the BoE will take additional action anytime soon. In this context we see little room for a protracted sterling rebound.

Recent developments pushed EUR/GBP lower in the 0.8690/0.9033 consolidation pattern. EUR/GBP tested 0.8693 support (62% retracement), but the test was rejected. Next support comes in at 0.8653. We assume that the 0.8653/90 area won't be easy to break short-term. We hold a neutral bias on EUR/GBP short-term. We consider a return to the bottom of this range as an opportunity to reduce sterling long exposure against the euro.

EUR/GBP: sterling momentum improves slightly, but within established range

Download entire Sunrise Market Commentary

USD/CHF - 0.9880

Most recent candlesticks pattern : N/A

Trend                                    : Near term up

Tenkan-Sen level                  : 0.9886

Kijun-Sen level                    : 0.9888

Ichimoku cloud top                 : 0.9976

Ichimoku cloud bottom              : 0.9869

Original strategy :

Bought at 0.9870, Target: 0.9970, Stop: 0.9835

Position : - Long at 0.9870

Target :  - 0.9970

Stop : - 0.9835

New strategy  :

Hold long entered at 0.9870, Target: 0.9970, Stop: 0.9835

Position : - Long at 0.9870

Target :  - 0.9970

Stop : - 0.9835

Although the greenback retreated after meeting resistance at 0.9905 yesterday and consolidation would be seen, as long as yesterday’s low at 0.9840 holds, mild upside bias remains for another rebound, above 0.9905 would extend gain to 0.9935-40 but break there is needed to retain bullishness and signal low is formed, bring further rise towards resistance at 0.9978, however, only break there is confirm recent upmove has resumed and extend headway to psychological resistance at 1.0000.

In view of this, we are holding on to our long position entered at 0.9870. Below said support at 0.9840 would extend the fall from 0.9978 top for retracement of recent rise to 0.9820, then towards 0.9790-95, having said that, near term oversold condition should limit downside and price should stay above 0.9755-60, bring rebound later.

GBP/USD - 1.3433

Most recent candlesticks pattern   : N/A

Trend                                 : Sideways

Tenkan-Sen level                 : 1.3435

Kijun-Sen level                    : 1.3429

Ichimoku cloud top              : 1.3400

Ichimoku cloud bottom        : 1.3376

Original strategy :

Buy at 1.3350, Target: 1.3450, Stop: 1.3315

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.3350, Target: 1.3450, Stop: 1.3315

Position : -

Target :  -

Stop : -

As cable staged a strong rebound after finding good support at 1.3303 earlier this week, suggest low has been made there and consolidation with mild upside bias is seen for this rebound from 1.3303 to extend gain to 1.3475-80, then 1.3500, however, near term overbought condition would limit upside and price should falter below indicated resistance at 1.3432, bring another decline later.

In view of this, we are looking to buy cable on dips as 1.3345-50 should limit downside. Below 1.3320-25 would defer and suggest the rebound from 1.3303 has ended, bring retest of this level first, break there would extend the fall from 1.3550 top to 1.3280 and later 1.3250 but price should stay well above previous support at 1.3221.

EUR/USD - 1.1793

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 1.1781

Kijun-Sen level                  : 1.1814

Ichimoku cloud top             : 1.1810

Ichimoku cloud bottom      : 1.1781

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

Despite yesterday brief bounce to 1.1863, lack of follow through buying and the subsequent sharp retreat suggest consolidation below this level would be seen and test of 1.1755-60 cannot be ruled out, however, reckon downside would be limited to 1.1730 and price should stay above this week’s low at 1.1717, bring another rebound later.

On the upside, whilst recovery to the Kijun-Sen (now at 1.1814) is likely, reckon upside would be limited to 1.1840 and said resistance at 1.1863 would hold. Only a break above this level would signal the rebound from 1.1717 is still in progress for further subsequent gain to 1.1880, then 1.1900 but price should falter well below resistance at 1.1940, bring retreat later. As near term outlook is mixed, would be prudent to stand aside for now.

USD/JPY - 112.18

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 112.26

Kijun-Sen level                  : 112.47

Ichimoku cloud top             : 113.11

Ichimoku cloud bottom      : 112.80

New strategy  :

Stand aside

Position :  -

Target :  -

Stop : -

As the greenback has slipped again after brief recovery and price has remained under pressure, suggesting a test of previous support at 111.99 would be seen, however, break there is needed to retain bearishness and signal the rebound from 110.84 low has ended at 113.75, then the fall from there may extend weakness to 111.65-70 but reckon previous support at 111.41 would hold from here.

In view of this, would not chase this fall here and would be prudent to stand aside in the meantime. Above the Kijun-Sen (now at 112.47) would bring recovery to 112.85-90 but reckon the upper Kumo (now at 113.11) would limit upside and price should falter below 113.45-50, bring another decline later.

Daily Pivots: (S1) 150.45; (P) 151.12; (R1) 151.63; More...

Intraday bias in GBP/JPY remains neutral. As long as 149.74 support holds, outlook remains bullish in the cross. Break of 153.39 will resume the medium term up trend and target 61.8% projection of 139.29 to 152.82 from 146.96 at 155.32. However, break of 149.74 will dampen our bullish view and turn bias back to the downside for 146.96 key support instead.

In the bigger picture, current development suggests that medium term rise from 122.36 is resuming. Sustained trading above 38.2% retracement of 196.85 to 122.36 at 150.43 will carry long term bullish implications. In that case, GBP/JPY could target 61.8% retracement at 167.78. However, break of 146.96 support will indicate rejection from 150.43 key fibonacci level. And the three wave corrective structure of rebound from 122.36 will argue that larger down trend is resuming for a new low below 122.26.

Thursday saw the latest Monetary Policy Committee (MPC) report from the Bank of England. The BoE stated that 'further modest increases' in interest rates are probable, as the Bank tries to bring inflation in line with its 2% target in the coming years. The MPC appeared to be unconcerned with inflation rising to 3.1% last month and voted unanimously at their December meeting to leave interest rates at current levels. The MPC is waiting to see where inflation will be in early 2018, along with the progress of Brexit negotiations, which will form a major part of their February Inflation Report.

The European Central Bank kept its ultra-easy monetary policy unchanged on Thursday, keeping interest rates low for an extended period and pledging to provide additional stimulus if required. At a press conference, ECB President Draghi commented 'The difference in the monetary policy decisions and therefore interest rate decisions (with the US) reflects the different position in the economic recovery, which incidentally is stronger now in Europe. However, it is more advanced in the US. We haven’t seen (any negative effect on the euro zone economy from the divergence in policy).' Going on to say, 'The incoming information, including our staff projections – our new staff projections – indicates a strong pace of economic expansion and a significant improvement in the growth outlook.'

The Swiss National Bank (SNB) kept its current monetary policy in place on Thursday, although the SNB does expect Swiss inflation to exceed its target in 3 years, a possible insight as to when it might end its ultra-loose monetary policy. SNB Chair Jordan stated that they were in 'no rush at all' to start normalizing policy, whilst other central banks have started to hike rates. Jordan commented that the CHF remained 'highly valued', despite the currency losing approximately 7% in value over the last 6 months.

With inflation a somewhat 'hot-topic', the US Commerce Department on Thursday released data showing US retail sales rose more than forecast in November and the previous month was revised higher, indicating a broad strengthening of consumer demand as the holiday shopping season got underway. November retail sales rose 0.8% with a revision of Octobers data up to 0.5% from the previously released 0.2%. In the UK, the Office for National Statistics released Retail Sales data for November that showed sales volumes were up 1.1% in the month, exceeding the 0.4% forecast by the market.

EURUSD is little changed overnight, trading around 1.1783.

USDJPY is unchanged in early session trading at around 112.35.

GBPUSD is trading around 1.3436.

Gold is 0.15% higher in early Friday trading at around $1,255.

WTI is 0.1% higher, trading around $57.20.

Major data releases for today:

At 10:00 GMT: Eurostat will release Trade Balance data for the Eurozone for October.

At 13:15 GMT: Bank of England Chief Economist, Andrew Haldane, is scheduled to speak at the 26th International Rome Money Banking and Finance Conference in Italy.

At 14:15 GMT: The Board of Governors of the Federal Reserve will release US Industrial Production (MoM) for November. Forecasts suggest a release of 0.3%, which is significantly lower than the previous release of 0.9%. The markets could experience USD volatility if the release is dramatically different from forecast.

At 14:15 GMT: US Capacity Utilization for November will be released by the Federal Reserve Board. Forecasts suggest a modest improvement to 77.2% from Octobers’ 77.0%.

At 18:00 GMT: The Baker Hughes US Oil Rig Count will be released. The number of active US Oil Rigs has grown throughout 2017, with the last release showing a count of 751. As more active rigs come online production increases which can dampen crude prices.

Daily Pivots: (S1) 131.81; (P) 132.78; (R1) 133.32; More....

EUR/JPY is still bounded in range of 131.16/134.48 and intraday bias remains neutral. Further rise is expected as long as 131.16 support holds. Decisive break of 134.48 will resume medium term rise from 114.84 and target 141.04 resistance next. However, sustained break of 131.16 support will now indicate near term trend reversal and turn outlook bearish for 127.55 key support.

In the bigger picture, medium term rise from 109.03 (2016 low) is seen as at the same degree as the down trend from 149.76 (2014 high) to 109.03 (2016 low). Sustained break of 61.8% retracement of 149.76 to 109.03 at 134.20 will pave the way to key long term resistance zone at 141.04/149.76. However, break of 127.55 support will suggest medium term topping and will turn outlook bearish for deeper fall back to 114.84/124.08 support zone at least.