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Daily Pivots: (S1) 1.1656; (P) 1.1679; (R1) 1.1699; More...

Intraday bias in EUR/CHF remains neutral at this point. Near term outlook is unchanged. As noted before, persistent bearish divergence condition in 4 hour MACD and rising wedge like structure suggests that the cross is near to forming a top, if not formed. Hence, even in case of another rise, we'd expect limited upside potential. On the downside, sustained break of 1.1584 support will be a strong sign of trend reversal and should turn outlook bearish for 38.2% retracement of 1.0629 to 1.1736 at 1.1313.

In the bigger picture, while a medium term top could be around the corner, there is no change in the larger outlook. That is, long term rise from SNB spike low back in 2015 is still in progress and would extend. As long as 1.1195 resistance turned support holds, we'll hold on to this bullish view and expect another to prior SNB imposed floor at 1.2000. Though, we'll reassess the outlook if 1.1195 is firmly taken out.

STOCKS

Overall Global indices are all trading weak today. China looks weak in the near term while Dow and Dax could be in a short term consolidation mode. Nikkei and the Indian markets also look weak.

Dow (24180.64, -0.45%) has come down as expected and is on its way to test 24000. Note that some interim bounce could be seen from levels near 24000-23750 which could produce a slight bounce before resuming its fall.

Dax (13048. 54, -0.08%) continues to trade in the 13200-12900 region. The sideways movement is likely to continue for another 4-5 sessions before the index decides to move on either side of the range. Preference would be on the upside towards 13300-13400 levels.

Nikkei (22418.11, -0.90%) has fallen and could head towards 22250-22000 in the next few sessions.

Shanghai (3280.95, -0.69%) has broken below 3300, indicating continuation of the current fall towards much lower levels. The upside momentum is lost and the price action is dominated by the bears just now. While the index falls, it could test 3250-3200 levels in the medium term with some small interim upward corrections. Overall the view is bearish for the coming sessions.

Nifty (10118.2\5, -0.09%) was almost stable yesterday, fluctuating in the 10147-10069 region. AS mentioned yesterday, a break below support at 10050 could turn the index more bearish towards 9950-9900 in the medium term; else another up-move towards 10300-10400 is possible.

Sensex (32802.44, -0.20%) is trading just above important support at 32500 and while that holds, some scope of bullish possibility remains on the cards, A break below 32500 would confirm an upcoming fall targeting much lower levels.

COMMODITIES

Gold (1266.39) has fallen to test important support near 1260. A maximum downside of 1250 can be expected in the coming sessions followed by a sideways consolidation in the 1250-1285 region, if not a sharp rise towards 1300. 1260-1250 is a crucial resistance zone and in case that breaks on the downside, it could indicate a sharp fall to much lower levels. While above 1250, the downside possibility could be negated.

WTI (57.37) and Brent (62.60) both are stable just now. Note that there is scope for WTI to test lower levels of 57-56 in the near term while the longer term resistance near 59 holds. Brent, on the other hand, is trading ust above crucial support at 62 which if holds could prove to be bullish for Brent in the coming sessions. While immediate direction for Brent and WTI looks different just now, on the longer term the positive directional correlation is likely to remain.

Copper (2.9570) has come down to our initial downside target of 2.95, in a single session i.e much faster than we expected. Our view of a sideways movement in the 3.05-3.15 for some more sessions has not materialised and while the price remains below 3.00, near term looks bearish. An increase in the inventories, fall in the Chinese stock markets and doubts of strength in the Chinese demand for the red metal seem to be the reasons for such a sharp fall in a single session. Downside target below 2.95 would be important support at 2.90.

FOREX

Dollar-Index (93.279) touched a high of 93.49 yesterday and closed at 93.32, just above resistance near 93.20 (earlier mentioned as 93.25-93.30) on the daily charts. It is currently trading at levels around 93.28 and could move up towards resistance at 93.75-93.80 on the 3 day charts, while it stays above 93.20.

Euro (1.1830) broke support (1.185) on the daily charts to close at 1.1825 yesterday, and is currently trading at levels around 1.1830. While the Euro stays below 1.185, it could come off towards 1.1775-1.18 to test support on the 3 day charts in a week's time.

Dollar-Yen (112.24) has dropped slightly on the back of a sharp rise in Japanese 10 yr yields (see Interest Rates below). However, it is likely to maintain its rise towards levels near 112.75-113 this week.

Pound (1.3429) has dropped from yesterday's high at 1.3482 and is moving towards support near 1.335 on the daily charts; thereby looking set for a round of range-wise oscillation between 1.335 and 1.35 for few days before it moves towards levels beyond 1.35.

Dollar Rupee (64.385) has stayed above support at 64.20-30 and while above that, can move up towards 64.60+ by next week. Weakness in the Euro and bearishness in Nifty are likely to help in this rise.

INTEREST RATES

The US yield differentials have all moved down sharply breaking below immediate support levels. The 10-5Yr (0.21%), 30-10Yr (0.38%) and the 30-5Yr (0.59%) are down from previous levels of 0.23%, 0.39% and 0.63% respectively. The fall could be attributed to the weakness in the 10YR (2.36%, prev 2.77%) and 30Yr (2.74%, prev 2.77%)

The US yields have paused a bit. The 5Yr (2.15%) is stable while the 10YR (2.36%) and the 30Yr (2.74%) are down by 2bps.

The Japan-US 10Y (2.29%) came off sharply after trading along the channel resistance for almost a month. If the resistance holds, good, the current fall would take the yield spread to lower levels of 2.2%, leading to the much awaited correction in Dollar Yen and Nikkei.

The German-US 10YR (-2.04%) has bounced a bit and could move up towards -2.02% or higher in the near term before resuming its fall back to current levels. Near term looks bullish within an overall longer term down trend.

The Japan 10Yr (0.07%) has risen sharply and is testing resistance at current levels. It could come off towards 0.055% in the near term.

Australian Dollar

A bit of a whipsaw over the Aussie GDP data which came in close to expectation, but the delta was well within consensus to support the Aussie. However, the economic data processing algorithms triggered on weak 0.1% increase in household consumption expenditure sending the Aussie toppling This sorry data print was the lowest result since the GFC. While the market has stabilised above the fundamentally key .7575 level, it was an unexpectedly weak reading, and the Aussie may see some downside follow-through when London enters the fray

The Japanese Yen

The Tax Reform euphoria, well what little there was for the dollar, is fading. And while our flow remains tentatively bid via Tokyo margin accounts on a mean reversion trade, there’s very little positive USD energy this morning which may open up a test of 112 in London.

Asia FX

Another low liquidity day, as various idiosyncratic storylines play out.

The USDKRW continues to trade bid on wall street losses in the absence of any local market drivers.

The USDMYR remains positively stable but very little speculative or exporter flow in play today.

The USDINR is opening flat ahead of the RBI rate decision where its widely expected the CB will remain unchanged.

Daily Pivots: (S1) 1.3381; (P) 1.3429; (R1) 1.3489; More....

GBP/USD is staying in consolidation from 1.3549 and intraday bias remains neutral. We'd expect downside of retreat to be contained by 1.3337 resistance turned support to bring another rise. Above 1.3549 will target 1.3651 and above. However, decisive break of 1.3337 will argue that rise from 1.3038 has completed and turn bias back to the downside for this support.

In the bigger picture, while the medium term rebound from 1.1946 low is strong, it's still 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.

Daily Pivots: (S1) 1.1792; (P) 1.1834 (R1) 1.1868; More....

Intraday bias in EUR/USD remains neutral as consolidation from 1.1960 is extending. Still, as long as 1.1712 support holds, rise from 1.1553 is expected to continue. On the upside, break of 1.1960 will turn bias to the upside for retesting 1.2091 high first. Break there will resume medium term up trend from 1.0339 and target 61.8% projection of 1.0569 to 1.2091 from 1.1553 at 1.2494, which is close to 1.2516 long term fibonacci level. We'd expect strong resistance from there to bring reversal. On the downside, break of 1.1712 will indicate completion of the rise from 1.1553 and turn near term outlook bearish.

In the bigger picture, rise from 1.0339 medium term bottom is seen as a corrective move for the moment. Therefore, in case of another rally, we'd be expect 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516 to limit upside and bring reversal. Meanwhile, sustained trading below 55 week EMA (now at 1.1393) will suggest that such medium term rebound is completed and could then bring retest of 1.0339 low.

Daily Pivots: (S1) 0.9844; (P) 0.9865; (R1) 0.9894; More....

USD/CHF breached 0.9881 resistance briefly but fails to sustain so far. Intraday bias remains neutral first. On the upside, decisive break of 0.9881 resistance will indicate completion of the pull back from 1.0037. Intraday bias will then be turned back to the upside for retesting 1.0037. Below 0.9734 will extend the pull back. But we'll look for bottoming again below 61.8% retracement of 0.9420 to 1.0037 at 0.9656.

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) 112.35; (P) 112.60; (R1) 112.84; More...

USD/JPY's pull back from 113.08 extends lower today. Near term outlook is a bit unclear and intraday bias stays neutral first. On the upside, above 113.08 will extend the rebound from 110.83 to retest 114.73 key resistance. Decisive break there will extend the rally from 107.31 to retest 118.65 high. On the downside, break of 110.83 will resume the decline from 114.73 instead. But in that case, we'll look for bottoming again below 61.8% retracement of 107.31 to 114.73 at 110.14.

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) 1.2637; (P) 1.2670; (R1) 1.2724; More....

Intraday bias in USD/CAD remains neutral as consolidation form 1.2916 is still in progress. We'd expect downside to be supported by 1.2598 resistance turned support to bring rise resumption. Above 1.2726 minor resistance will turn intraday bias back to the upside for 1.2916. Break of 1.2916 will resume the rally 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 1.2880). 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.

Daily Pivots: (S1) 0.7584; (P) 0.7618; (R1) 0.7642; More...

AUD/USD's recovery was limited at 0.7653 and weakened again. Outlook remains unchanged that price actions from 0.7531 are forming a consolidation pattern. Intraday bias stays neutral for the moment. In case of another rise, upside should be limited by 0.7729 resistance to bring fall resumption. Break of 0.7550 will resume whole decline from 0.8124 and target next key cluster level at 0.7322/8. Nonetheless, break of 0.7729 will indicate near term reversal, with bearish divergence condition in 4 hour MACD. And stronger rebound would be seen back to 0.7896 resistance and above.

In the bigger picture, corrective rise from 0.6826 medium term bottom is likely completed at 0.8124, after hitting 55 month EMA (now at 0.8033). Decisive break of 0.7328 key cluster support (61.8% retracement 0.6826 to 0.8124 at 0.7322) will confirm. And in that case, long term down trend from 1.1079 (2011 high) will likely be resuming. Break of 0.6826 will target 61.8% projection of 1.1079 to 0.6826 from 0.8124 at 0.5496. This will now be the favored case as long as 0.7729 near term resistance holds.

The direction in the forex markets isn't too clear for the moment. Dollar firmed up mildly overnight and is maintaining broad based gains over the week. But there is clearly no follow through momentum while USD/JPY has indeed dipped notably in Asian session. Sterling continues to stay soft on Brexit dead lock but than the sellers are refusing to jump in yet. There are still hopes of a breakthrough in Brexit negotiation by the end of the week. Meanwhile, Aussie tumbles broadly today after GDP missed expectation and showed very weak consumption. BoC rate decision is the biggest feature today but could be a non-event. Instead, ADP job data from US could sparkle some moves in the greenback.

Australia GDP showed weak spending growth

Australian Dollar tumbles broadly today as weighed down by disappointing GDP data. Q3 GDP rose 0.6% qoq 2.8%, below expectation of 0.7% qoq, 3.0% yoy. Despite the miss, the headline numbers are not bad at all. Treasurer Scott Morrison described the figures as indicating "solid" economic growth. And he said that "this is above the OECD average and puts Australia back up towards the top of the pack for major advanced economies around the world." However, weak household consumption is seen as the most worrying part of the details. Consumer spending grew just 0.1% qoq and was at the lowest rate in more than a decade since 2005. Sluggish wage growth, as pointed out by RBA rate statement released yesterday, was a key factor and would likely continue to be.

House named tax bill conference committee member, Senate to follow

US House Speaker Paul Ryan has always named nine Republicans to join the conference committee on reconciling the tax bills with Senate. Senate Majority Whip John Cornyn indicated that a couple of days are needed to appoint the conference committee members. The so called corporate Alternative Minimum Tax is a sticky point which House and some Senators would try to repeal. It's an insurance policy to prevent companies from using various breaks to pay too little tax under the current law. And Senate made a last minute change to preserve this AMT in their bill. House Ways and Means Chairman Kevin Brady criticized that preserving AMT would "undermine the pro-growth provisions in that code." And it's seen by tax experts to result in higher than intended taxes in particular for the technology sector. That's a major reason for NASDAQ underperforming DOW recently.

Chicago Fed Evans wants to push next rate move to mid 2018

Chicago Fed President Charles Evans, a known dove, said in an interview by NY Times that the case for a December rate hike is not "obvious". And he urged a cautious approach to delay the next move till next summer. He noted that "maybe it's time to stop and see whether inflation expectations are going to move in line with our 2% objective. And if the judgment was that we're still likely to be underrunning our 2% objective, maybe we would stop briefly and assess for more information, maybe wait until mid-2018."

Brexit Secretary Davis: Everything applies to whole UK

In UK, Brexit Secretary David Davis told the parliament that regarding the issue of Irish border, the government is just seeking "regulatory alignment" with EU. He added that "alignment isn't harmonization. It isn't having exactly the same rules. It is sometimes having mutually recognized rules, mutually recognized inspection – that is what we are aiming at." And, he emphasized that "the presumption of the discussion was that everything we talked about applied to the whole United Kingdom." This is in response to Northern Irish DUP, which interrupted the meeting between Prime Minister Theresa May and European Commission President Jean Claude Juncker. DUP leader Arlene Foster was deeply concerned that the deal of Irish border will make Northern Ireland leaving EU on different terms then other part of the UK.

The collapse of the Brexit talk and failure to reach any agreement left many EU officials in frustration. It's reported that the May will need to confirm the final proposal by this Friday, or Sunday as the last resort, for review in the EU summit on December 14/15. It's pointed out that the collapse was just the symptom of a wider problem. Weakness of the UK government is the main obstacle to the negotiation. And, May seems unable to make her decisions as there is not even unified stance within her own party, not to mention with her coalition partners. The upcoming developments will be watched as May is expected to go back to Brussels by the end of the week.

Looking ahead

Bank of Canada rate decision will be the main focus of the day. BoC is widely expected to keep interest rate unchanged at 1.00%. Attention will be on whether BoC would sound more upbeat in the statement after recent solid data. And, traders will reassess the chance of more rate hike by BoC next year.

Germany factory order, Swiss CPI and Eurozone retail PMI will be released in European session. US ADP employment, non-farm productivity and Canada labor productivity will be featured in US session.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7584; (P) 0.7618; (R1) 0.7642; More...

AUD/USD's recovery was limited at 0.7653 and weakened again. Outlook remains unchanged that price actions from 0.7531 are forming a consolidation pattern. Intraday bias stays neutral for the moment. In case of another rise, upside should be limited by 0.7729 resistance to bring fall resumption. Break of 0.7550 will resume whole decline from 0.8124 and target next key cluster level at 0.7322/8. Nonetheless, break of 0.7729 will indicate near term reversal, with bearish divergence condition in 4 hour MACD. And stronger rebound would be seen back to 0.7896 resistance and above.

In the bigger picture, corrective rise from 0.6826 medium term bottom is likely completed at 0.8124, after hitting 55 month EMA (now at 0.8033). Decisive break of 0.7328 key cluster support (61.8% retracement 0.6826 to 0.8124 at 0.7322) will confirm. And in that case, long term down trend from 1.1079 (2011 high) will likely be resuming. Break of 0.6826 will target 61.8% projection of 1.1079 to 0.6826 from 0.8124 at 0.5496. This will now be the favored case as long as 0.7729 near term resistance holds.

Economic Indicators Update