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Retail sales surged 0.8% in November according to the advance Census Bureau report. This was well ahead of expectations for a 0.3% rise and came atop of large upward revisions to October sales - which are now reported to have risen by 0.5% instead of 0.2%.

Sales at motor vehicle & parts dealers (-0.2%) did little for the headline unlike gasoline station sales which rose by a robust 2.8% - partly a price story. Still, excluding autos and gas, retail sales were up just as much as the headline (0.8%) on the month, also beating expectations of a 0.3% gain.

Building materials (1.2%) had a good month as rebuilding from hurricane damage continued - the series is up 4% since August and 11.2% higher than a year ago - as did eating and drinking place sales (+0.7%). Excluding gas, autos, building materials, and food services, the so-called 'control group' used in calculating GDP was up 0.8% on the month - more than double the consensus call. All the categories in the control group rose, with non-store retailers (+2.5%), electronics (+2.1%), and furniture (+1.2%) leading the pack.

Key Implications

This was a terrific report with a consensus-busting headline that suggests that Americans are finally using the fruits of their labor to buy things for themselves and their loved ones. Strong payroll growth and solid wage gains have together manifested in a windfall of income gains which appears to have been put to use during the Black Friday and Cyber Monday sales ahead of Christmas. Non-store retailers, a category which includes many e-commerce sales, posted a healthy gain that was up 10.5% from last year.

Other encouraging features of the report included the broad-based strength, with just one major category (motor vehicles & parts), lower on the month, and only slightly. Sales of electronics were up higher, likely helped by the release of the new iPhone, but taken together with strength in restaurants suggest that consumers are increasingly comfortable spending on discretionary categories - not just the essentials.

Strength in building materials and furniture was also encouraging. While this partly stems from the rebuilding effort in Texas and Florida following the devastation caused by Harvey and Irma, respectively, it also is a sign of improving housing market activity related to higher existing home sales this year.

Together with the upward revisions, this report suggest that PCE growth during the fourth quarter will be nearly 0.2 percentage points stronger at 2.8% annualized - a fact that has also boosted our GDP tracking for the quarter to 2.8%. The report should also assuage some anxieties amongst the FOMC membership. The Fed rose rates yesterday and pointed to three hikes for 2018. While we think the latter is a bit optimistic, with our baseline forecast having two hikes next year, this report suggests some upside to that call, particularly if it spurs on stronger price growth with it.

EURUSD: The pair continues to retain its upside pressure with price extension expected. Resistance comes in at 1.1900 level with a cut through here opening the door for more upside towards the 1.1950 level. Further up, resistance lies at the 1.2000 level where a break will expose the 1.2050 level. Its daily RSI is bullish and pointing higher suggesting more strength. Conversely, support lies at the 1.1800 level where a violation will aim at the 1.1750 level. A break of here will aim at the 1.1700 level. Below here will open the door for more weakness towards the 1.1650. All in all, EURUSD faces further downside weakness

EURUSD has a neutral to bullish bias in the very short-term timeframe as it struggled within the 38.2% and the 50.0% Fibonacci retracement levels with high at 1.1960 and low at 1.1716. During yesterday's trading session, the common currency pair penetrated above the descending trend line that was holding since December 1st, on the 1-hour chart, and hit the 1.1843 price level.

Further potential upside move is expected until 61.8% Fibo level, near 1.1867. On the reverse side, if the price plunges below the 1.1810 barrier (also the 38.2% Fibonacci level), it will open the way for the 1.1792 level. Momentum indicators are still developing within positive territory but with weakening momentum. The MACD oscillator slipped below its trigger line, whilst the RSI indicator is slightly sloping to the upside. It is worth mentioning that the 50-simple moving average (SMA) created a bullish crossover with the 100-SMA, signaling a bullish tendency in the near term.

Looking at the bigger picture, the pair posted a green day on Wednesday, surging more than 0.7%, following the rebound on the 1.1716 strong support level and the downside pressure has paused for now.

The U.S dollar has moved sharply lower against the Japanese yen following the FOMC monetary policy decision, hitting 112.40. The USDJPY tumbled after the policy statement was released, after already being under selling pressure on Wednesday, following softer November CPI inflation figures from the U.S economy. The pair currently trades around the 112.70 technical level, managing just a marginal recovery from the weekly-low thus far. Heading into the U.S session, the dollar will again take center stage, as U.S Retail Sales and weekly jobs data is released.

The USDJPY pair remains strongly bearish while trading below the 113.10 technical level, intraday sellers may look to test the 112.40 and 112.00 technical support levels.

Should price-action on the USDJPY pair move above the 113.10 technical level, buyers may again test demand towards the 113.34 and 113.75 resistance levels.

USD/CAD - 1.2848

Trend:  Near term up

 
Original strategy       :

Buy at 1.2765, Target: 1.2915, Stop: 1.2705

Position: -

Target:  -

Stop: -

 
New strategy             :

Buy at 1.2765, Target: 1.2915, Stop: 1.2705

Position: -

Target:  -

Stop:-

The greenback retreated after meeting resistance at 1.2880 and further consolidation below this level would be seen, however, reckon downside would be limited to 1.2750-60 and bring another rise, above 1.2880 would extend the rebound from 1.2623 towards resistance at 1.2917 but break there is needed to confirm upmove has resumed for headway to 1.2975-80 (61.8% Fibonacci retracement of 1.3547-1.2061), then towards psychological resistance at 1.3000.

In view of this, would not chase this rise here and would be prudent to buy on subsequent pullback as 1.2750-60 should limit downside. Only below 1.2705-10 would abort and prolong choppy trading, bring weakness to 1.2650-55, however, downside should be limited and price should stay above said support at 1.2623, bring another rebound 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.

The British pound has turned lower against the U.S dollar, following the Bank of England monetary policy decision. The GBPUSD pair fell towards the 1.3400 support level, after BOE policy member kept rates unchanged at 0.50 percent, with all MPC members voting to keep rates unchanged. The pair had previously spiked to 1.3466, after UK Retail Sales came in better than expected, rising 1.1 percent in November. Traders now await the release of November Retail Sales data from the American economy.

The GBPUSD pair remains intraday bullish while holding key the 1.3400 technical level. Buyers will likely target the 1.3442 and 1.3470 resistance levels while above 1.3400.

Should price-action on the GBPUSD pair move back below the 1.3400 level, sellers will likely target the 1.3380 and 1.3340 levels.

The CAC index has posted losses in the Thursday session. Currently, the index is at 5380.80, down 0.35% on the day. In France, Final CPI remained unchanged at 0.1%, matching the forecast. Manufacturing PMI accelerated for a seventh straight month, improving to 59.3 points. This easily beat the forecast of 57.2 points. The news was not as good from the services sector, as Services PMI dipped to 59.4, shy of the estimate of 59.8 points. Still, this is in indicative of strong expansion.

Thursday's French indicators are reflective of current economic conditions. The manufacturing and services sectors continue to point to expansion, with readings well above the 50-point level. However, inflation remains a sore point in France, reflective of low inflation levels across the eurozone. In the second half of 2017, French CPI has not cracked above 0.1%, with the exception of the August release. Still, the year is ending on an optimistic note in the eurozone's second largest economy. Growth has been steady, unemployment is lower, and investor and business confidence has been boosted by the election of pro-business Emmanuel Macron as president.

As expected, the Federal Reserve raised the benchmark interest rate on Wednesday, to a range between 1.25% and 1.50%. This marked the third rate hike in 2017, and is reflective of a strong performance of the US economy. The Fed statement was optimistic about the economy, noting that the labor market "remained strong". It also lowered its unemployment forecast in 2018 from 4.1% to 3.9%, and revised growth for 2018 from 2.1% to 2.5%. Despite this rosy prognosis, the US dollar was broadly down after the announcement. Why? One reason is the sore point in the economy – inflation. The Fed has not changed its September forecast for rate hikes next year, with the Fed dot plot indicating that three rate hikes are projected for 2018. This disappointed some investors who would like to see four increases next year. As well, the rate statement said that the Fed did not expect the tax reform legislation to have any long-term effect on the economy, contradicting White House claims that the legislation would trigger substantial economic growth.

Daily Pivots: (S1) 112.13; (P) 112.85; (R1) 113.25; More...

Intraday bias in USD/JPY remains neutral at this point. Decline from 113.74 is still seen as a correction. As noted before, as long as 111.98 support holds, further rally is expected in the pair. On the upside, above 113.68 will extend the rise from 110.83 to 114.73 resistance first. Decisive break there will resume whole rise from 107.31. More importantly, that will confirm completion of medium term correction from 118.65 at 107.31. In that case, retest of 118.65 should be seen next. However, break of 111.98 support will extend the correction from 114.73 with another fall, possibly to 61.8% retracement of 107.31 to 114.73 at 110.14 before completion.

In the bigger picture, we're holding on to the view that correction from 118.65 is completed a 107.31. And medium term rise from 98.97 (2016 low) is resuming. Sustained break of 114.73 should affirm our view and send USD/JPY through 118.65. However, break of 107.31 will dampen this will and extend the medium term fall back to 98.97 low.

Daily Pivots: (S1) 0.9821; (P) 0.9874; (R1) 0.9908; More....

As long as 0.9895 minor resistance holds, intraday bias in USD/CHF remains on the downside for deeper fall. Decline from 0.9977 is part of the correction pattern from 1.0037. It could target 0.9734 support and below. But we'd We'd expect strong support from 61.8% retracement of 0.9420 to 0.1.0037 at 0.9656 to contain downside and bring rebound. On the upside, above 0.9895 minor resistance will turn bias back to the upside for 0.9977 instead.

In the bigger picture, range trading continues between 0.9420/1.0342. At this point, 0.9420 appears to be a strong support level. Therefore, in case of decline attempt, we don't expect a firm break of this level. Nonetheless, strong break of 1.0342 is also needed to confirm upside momentum. Otherwise, medium term outlook will stay neutral.

Daily Pivots: (S1) 1.3342; (P) 1.3384; (R1) 1.3458; More....

GBP/USD is still bounded in the corrective pattern from 1.3549 and intraday bias remains neutral. Another fall cannot be ruled out yet. But after all, as long as 1.3220 support holds, we'd continue to favor another rise. On the upside, break of 1.3549 will target 1.3651 high next. However, firm break of 1.3220 will turn near term outlook bearish for 1.3038 key support level.

In the bigger picture, while the medium term rebound from 1.1946 low was strong, it's limited below 1.3835 key support turned resistance. As long as 1.3835 holds, we'd view such rebound as a correction. That is, we'd expect another leg in the long term down trend through 1.1946 low. However, sustained break of 1.3835 should at least send GBP/USD to 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466.