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Here are the latest developments in global markets:

FOREX: The dollar hit a two-week high against a basket of currencies as optimism on US tax reform continued to support the currency, though concerns over a possible government shutdown restricted steeper upside movement. The euro and the pound were on track to post the third day of consecutive losses versus the greenback, while the loonie tumbled to a one-week low after the BOC expressed caution for further rate hikes. The aussie tumbled in the wake of worse-than-expected Australian trade data.

STOCKS: The Nikkei rebounded after yesterday’s sharp fall, closing 1.45% higher; stocks in mainland China recorded losses though. Euro Stoxx 50 futures traded 0.2% higher at 0751 GMT. Dow and S&P 500 futures were up by 0.1% and Nasdaq 100 equivalents traded higher by 0.4%.

COMMODITIES: Oil prices were trading near three-week lows touched yesterday following the release of the EIA report on US crude inventories. US crude stocks fell more than expected but gasoline and distillate inventories surged past forecasts. WTI crude and Brent were flat at $56.00 and $61.35 per barrel respectively. Gold retreated to a four-month low of $1,256.02 an ounce (-0.47%).

Major movers: Loonie loses ground on perceived BOC dovishness; antipodeans also down after Australian trade data drag

The loonie was on the backfoot during Asian trading, pushing dollar/loonie to a one-week high of 1.2824 (+0.30%) after the Bank of Canada held interest rates unchanged on Wednesday at 1.0% but remained cautious on future rate increases despite upbeat evidence on employment the previous day. The monetary policy statement following the decision stated that “while higher interest rates will likely be required over time”, upcoming data will determine the path of monetary policy, giving no clue about when the central bank will further normalize policy. Hence, investors priced that a hike in January will be less likely.

Meanwhile in the US, Senate Republicans and House policymakers agreed on Wednesday to extend talks on the tax overhaul, raising hopes that differences between them could be resolved soon. Dollar/yen climbed to 112.60, while euro/dollar was hovering around a two-week low of 1.1790, pressured by disappointing German data on industrial production released earlier today. Pound/dollar was close to one-week lows at 1.3338, being weighed by weakening momentum for a breakthrough in Brexit talks.

The aussie and the kiwi dipped into losses after Australia’s October trade surplus narrowed to A$0.105 billion compared to the forecasted A$1.410bn. Exports fell by 0.3% m/m after a rise of an equivalent percentage in September, and imports increased by 2.0%. The aussie dived to a six-month low of 0.7522 (- 0.54%) to $0.7522 and the kiwi sank to a one-week low of $0.6833 (-0.64%).

Day ahead: Beyond politics, eurozone GDP, US jobless claims and Canadian building permits on today’s calendar

The eurozone will see the release of revised third quarter GDP growth figures at 1000 GMT. The numbers are expected to remain unchanged relative to the initial estimates of growth which pointed to quarterly growth of 0.6% and annual expansion in the order of 2.5%.

Out of the US, weekly jobless claims – initial and continued – due at 1330 GMT will be gathering attention. The number of initial benefits claimants for the week ending December 1 is anticipated to be 240k, little changed from the preceding week’s 238k. The world’s largest economy will also see the release of October consumer credit data at 2000 GMT.

Canadian building permits for the month of October and the country’s November Ivey PMI due at 1330 GMT and 1500 GMT respectively are also considered of relative importance and could spur movements in the loonie.

Halifax house price data out of the UK will be released within minutes. Month-on-month, prices are expected to rise by 0.2% in November. This compares to October’s rise by 0.3%.

In politics, President Trump’s action to recognize Jerusalem as the capital of Israel could generate some uncertainty; developments will be watched. US lawmakers’ efforts on tax reform will also be closely watched. Senate Republicans yesterday agreed to engage in discussions with the House of Representatives in an attempt to reconcile the two versions of the tax bill they voted in favor of; a December 22 self-imposed deadline is in place. Attempts by Congress on averting a partial government shutdown by week-end will be generating interest as well. Lastly, UK PM Theresa May might also take some initiatives to move beyond the seeming impasse in Brexit talks.

Technical Analysis: WTI crude oil futures bearish in short-term, bullish medium-term outlook intact though

WTI crude oil futures maintain a bullish picture in the medium-term but in the short-term, the market turned bearish after the price moved off the 2-½-year high of 59.0 on November 27. The RSI is currently at the 50 neutral-perceived level but is heading lower. The MACD is below its signal line and the price has crossed below the 20-day exponential moving average, hinting that negative movements might occur in the near-term.

In the dips, the market might find support at the 38.2% Fibonacci of 55.20 of the upleg from 49.08 to 59.0. From here, the 50-day EMA at 54.85 and the 50% Fibonacci mark at 54.02 could also act as barriers to downside movements.

On the upside, prices could find resistance at the 20-day EMA at 56.72, which is also the 23.6% Fibonacci level. Steeper increases could also open scope for a test at the 2 ½-year high of 59.0, while a breach of this point would paint a bullish picture in the short-term as well.

USD/CHF –  0.9908

 
Although the greenback extended recent fall from 1.0039 to as low as 0.9735 late last week, as dollar found decent demand there and has staged a strong rebound, suggesting low has been formed there and consolidation with upside bias is seen for gain to 0.9947 resistance, however, a daily close above 0.9987 is needed to add credence to this view and signal entire correction from 1.0039 has ended at 0.9735, then retest of this level would follow. Looking ahead, a break of 1.0039 would confirm early upmove from 0.9421 low has resumed and extend headway to previous resistance at 1.0100.

Our preferred count on the daily chart is that early selloff to 0.9630 is an end of the larger degree wave III and major correction is unfolding from there with a leg ended at 1.2298 (Nov 2008 with (a): 1.0625, (b):1.0011 and (c):1.2298), wave b ended at 0.9910 with (a): 1.0370, (b): 1.1967, (c): 0.9910. The rise from there to 1.1730 is the wave c which also marked the end of wave IV and wave V has possibly ended at 0.7068.

On the downside, whilst pullback to 0.9840-50 cannot be ruled out, downside would be limited and support at 0.9794 should contain weakness, bring another rise later. Only a drop below said support at 0.9735 would abort and signal the erratic decline from 1.0039 top is still in progress for retracement of early upmove to 0.9705 support, then towards 0.9640-45 but reckon previous support at 0.9589 would hold from here, bring rebound later. 

Recommendation: Buy at 0.9850 for 1.0050 with stop below 0.9750.

Dollar's long-term downtrend started from 2.9343 (Feb 1995) and it was unfolding as a (A)-(B)-(C) with (A): 1.1100, (B): 1.8310 (26 Oct 2000), then followed by another impulsive wave (C) with wave III ended at 0.9630 (Mar 2008). Under this count, correction in wave IV has possibly ended at 1.1730 and wave V already broke below support at 0.9630 and met indicated downside target at 0.7500 and 0.7400. The reversal from 0.7068 suggests the wave V has possibly ended and the breach of resistance at 0.9595 add credence to this view and indicated upside target at 1.0000 had been met, however, the sharp retreat from 1.0296 to 0.7401 suggests choppy trading would be seen but price should stay above said record low at 0.7068.

EUR/USD

Current level - 1.1791

The outlook is negative for test of the support level at 1.1735. In positive direction the price movement might test the level of resistance at 1.1808. If the breakthrough at this level is successful, the next resistance will be at 1.1840.

USD/JPY

Current level - 112.10

The unsuccessful breakthrough of the support level at 111.95 leaded to uptrend and the outlook is positive for test of the resistance level at 113.13. In negative direction  the support levels are at 111.95 and after that at 111.05.

GBP/USD

Current level - 1.3371

The unsuccessful breakthrough of the resistance level at 1.3550, leaded to test of the support level at 1.3370. Next support level might be at 1.3219.

AUD/USD – 0.7525

Original strategy:

Sold at 0.7620, Target: 0.7470, Stop: 0.7660

Position: - Short at 0.7620
Target:  - 0.7470
Stop:- 0.7660

New strategy :

Hold short entered at 0.7620, Target: 0.7470, Stop: 0.7610

Position: - Short at 0.7620
Target:  - 0.7470
Stop:- 0.7610

Although aussie rose briefly to 0.7654, as renewed selling interest emerged there and the pair has dropped again below previous support at 0.7532-51, adding credence to our bearish view that recent decline from 0.8125 top has resumed and downside bias remains for this move to extend further weakness to 0.7500, then 0.7470, however, near term oversold condition would limit downside to 0.7440 and price should stay above 0.7390-00.

In view of this, we are holding on to our short position entered at 0.7620. Above 0.7600 would risk test of 0.7640 and then 0.7654 but only break of latter level would abort and signal low is formed  instead, bring a stronger rebound towards resistance at 0.7701 which is likely to hold from here.

On the 4-hour chart, recent upmove from 0.7329 is unfolding as an impulsive rise with wave 3 as well as smaller degree wave (iii) extending, only minor wave v of (iii) has ended at 0.8125, hence bullishness remains for this move to extend headway to 0.8200, then towards 0.8300, however, reckon upside would be limited to 0.8400 and the final wave 5 should falter below 0.8500, bring correction later.

USD/CHF - 0.9906

Most recent candlesticks pattern : N/A

Trend                                    : Near term up

Tenkan-Sen level                  : 0.9902

Kijun-Sen level                    : 0.9884

Ichimoku cloud top                 : 0.9866

Ichimoku cloud bottom              : 0.9854

Original strategy :

Buy at 0.9825, Target: 0.9925, Stop: 0.9790

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.9825, Target: 0.9925, Stop: 0.9790

Position : -

Target :  -

Stop : -

As the greenback has maintained a firm undertone after staging a strong rebound from 0.9735 (last Friday’s low), adding credence to our view that a temporary low has been formed there and consolidation with upside bias remains for this move to bring at least a strong retracement of recent decline to 0.9920 and later towards resistance at 0.9947 but reckon 0.9990-00 would hold from here due to near term overbought condition.

In view of this, we are looking to buy dollar on dips as 0.9820-25 should limit downside and bring another rebound. Below 0.9790 would defer and risk weakness to 0.9755-60 but still reckon said last week’s low at 0.9735 would remain intact.

GBP/USD - 1.3380

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.3378

Kijun-Sen level                    : 1.3392

Ichimoku cloud top              : 1.3455

Ichimoku cloud bottom        : 1.3424

Original strategy :

Sold at 1.3440, Target: 1.3340, Stop: 1.3465

Position : - Short at 1.3440

Target :  - 1.3340

Stop : - 1.3465

New strategy  :

Hold short entered at 1.3440, Target: 1.3340, Stop: 1.3440

Position : - Short at 1.3440

Target :  - 1.3340

Stop : - 1.3440

Cable traded narrowly after falling to 1.3358 yesterday and further sideways trading is seen for the fall from 1.3550 resumes, below said support would add credence to our bearish view that top has been formed at 1.3550, hence downside bias remains for at least a retracement of recent rise to 1.3340-50 (61.8% Fibonacci retracement of 1.3221-1.3550) but near term oversold condition should prevent sharp fall below 1.3300 and reckon 1.3260-65 would hold, bring rebound later. 

In view of this, we are holding on to our short position entered at 1.3440. Only above said resistance at 1.3461 would defer and risk test of resistance at 1.3483 but break there is needed to signal an intra-day low is formed instead, bring another bounce to 1.3530-35 first.

EUR/USD - 1.1796

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 1.1797

Kijun-Sen level                  : 1.1810

Ichimoku cloud top             : 1.1840

Ichimoku cloud bottom      : 1.1835

Original strategy  :

Sell at 1.1865, Target: 1.1765, Stop: 1.1900

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.1865, Target: 1.1765, Stop: 1.1900

Position : -

Target :  -

Stop : -

As the single currency has remained under pressure after recent selloff, adding credence to our bearish view that the erratic decline from 1.1961 top (last week’s high) is still in progress and downside bias remains for further weakness to to 1.1770 and possibly towards support at 1.1736 but near term oversold condition should limit downside and price should stay above previous key support at 1.1713.

In view of this, we are looking to sell euro on recovery as 1.1870-75 should limit upside and bring another decline. Above 1.1900 would risk test of last Friday’s high at 1.1940 but only break there would revive bullishness, bring retest of 1.1961 later.

USD/JPY - 112.59

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 112.46

Kijun-Sen level                  : 112.30

Ichimoku cloud top             : 112.58

Ichimoku cloud bottom      : 112.41

Original strategy  :

Bought at 112.10, Target: 113.30, Stop: 111.75

Position :  - Long at 112.10

Target :  - 113.30

Stop : - 111.75

New strategy  :

Hold long entered at 112.10, Target: 113.30, Stop: 111.95

Position :  - Long at 112.10

Target :  - 113.30

Stop : - 111.95

As the greenback found renewed buying interest just below 112.00 and has staged a rebound, suggesting the pullback from 113.09 has possibly ended at 111.99, retaining our bullishness and gain to 112.85-90 is likely, break there would confirm this view and bring retest of 113.09, above there would extend recent upmove to resistance at 113.33 and later towards 113.60-70.

In view of this, we are holding on to our long position entered at 112.10. Below 111.99 support would defer and risk weakness to 111.60 but only break of said support at 111.37-41 would abort and signal top is formed instead. 

Daily Pivots: (S1) 150.62; (P) 151.21; (R1) 151.91; More...

Intraday bias in GBP/JPY remains neutral at this point. As long as 146.96 support holds, near term outlook remains bullish. Break of 152.93 will resume medium term rally and target 61.8% projection of 139.29 to 152.82 from 146.96 at 155.32.

In the bigger picture, medium term rebound from 122.36 is still expected to resume after consolidation from 152.82 completes. Firm break of 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 46.96 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.

Daily Pivots: (S1) 132.06; (P) 132.63; (R1) 133.01; More....

EUR/JPY recovers mildly today but it's staying in corrective trading below 134.37 temporary top. We're favoring the case that medium term up trend is nearly ready to resume. Break of 134.48 will target 61.8% projection of 127.55 to 134.48 from 131.16 at 135.44 and then 100% projection at 138.09. However, firm 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). 61.8% retracement of 149.76 to 109.03 at 134.20 is already met. Sustained break there 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.