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The British pound has moved sharply higher against the U.S dollar, hitting 1.3523, following a better than expected UK Construction PMI reading and encouraging reports coming from UK and EU negotiators. The GBPUSD pair currently trades close to the price-highs of the day, after finding interim support just below the 1.3450 technical level. British PM Theresa May has released a statement saying 'good progress' is being made on Brexit negotiations, encouraging pound buying. GBPUSD traders will now be focused on her meeting with EU President Donald Tusk, at 15.00GMT this afternoon.

The GBPUSD pair is strongly bullish while trading above the 1.3520 level. Further upside towards 1.3549 and 1.3610 appears likely.

An intraday decline back below the 1.3450 level, would like signal a deeper price correction towards the 1.3400 and 1.3360 support regions.

The euro has opened the trading week gap down against the U.S dollar after the Democrat party passed the tax reform plan through Congress late on Friday. The U.S dollar has reacted by moving sharply higher, as investors price-in lower U.S tax rates and U.S higher interest rates in 2018. The EURUSD pair currently trades around the 1.1855 level, after spending the European trading session on the backfoot, finding support at the 1.1836 level. Traders now await the release of U.S Factory Orders data, and shorter maturity bond auctions coming out of the United States.

The EURUSD pair remains intraday bearish while trading below the 1.1875 level. Further downside towards 1.1845 and 1.1790 appears possible.

Should EURUSD price-action move above the 1.1875 technical level, further buying towards 1.1900 and 1.1930 seems likely.

The CAC has started the week with strong gains. In the Monday session, the CAC is at 5384.00, up 1.30% since the Friday close. On the release front, Eurozone Sentix Investor Confidence dropped to 31.1, short of the estimate of 32.3 points. Eurozone PPI gained 0.4%, matching the forecast. On Tuesday, the eurozone releases Service PMI and retail sales.

President Trump has been pressing for a major legislative win before the end of the year, and it looks like he'll get tax reform all wrapped up in time for Christmas. The Republicans have pushed through tax legislation through the House and the Senate at breakneck speed. After a false start on Friday, the US Senate passed a tax reform bill on the weekend. The 51-49 was razor thin, vote was a squeaker, with 51 Republicans voting yes, against 48 Democrats and 1 Republican. Republican lawmakers hope to have Trump sign a bill before the end of the year. The Senate and House must now reconcile their two bills, and the new uniform bill will then have be passed in both houses. Investors are pleased with the bill, and the US dollar has responded to the vote with broad gains.

Are the bumpy Brexit talks back on track? Prime Minister May and European Commission President Jean-Claude Juckner are meeting in Brussels, hoping to move closer to wrapping up the first phase of the talks. Britain wants to move to talk trade with the Europeans, and has given in on EU demands of a divorce bill around EUR 50 billion. Still, two thorny non-trade issues have yet to be resolved. One is the border between the UK (Northern Ireland) and Ireland, which is a member of the EU. The UK will clearly not remain in a customs union with the EU, but Ireland is insistent that there not be a hard border. The second issue is whether the European Court of Justice will have a role protecting European citizens in the UK. The EU is in favor of a role for the court, while many British lawmakers feel that such a move would impinge on British sovereignty.

USD/CAD - 1.2673

Trend:  Near term up

 
Original strategy       :

Bought at 1.2820, stopped at 1.2760

Position: - Short at 1.2820

Target:  -

Stop: - 1.2760

 
New strategy             :

Sell at 1.2800, Target: 1.2600, Stop: 1.2860

Position: -

Target:  -

Stop:-

The greenback faltered below resistance at 1.2917 and has tumbled, suggesting further consolidation below said resistance would be seen and the breach of previous support at 1.2665 suggests bearishness remains for weakness to 1.2600-10, however, loss of near term downward momentum should prevent sharp fall below 1.2550 and price should stay well above 1.2500-10.

In view of this, we are looking to turn short on recovery as 1.2790-00 should limit upside and bring another decline later. Above 1.2850-60 would risk test of 1.2890-00 but only break of said resistance at 1.2917 would revive bullishness and extend recent upmove to 1.2975-80 (61.8% Fibonacci retracement of 1.3547-1.2061), then towards psychological resistance at 1.3000.

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.

Here are the latest developments in global markets:

Forex: Sterling rallied above 1.35 against the dollar and touched a fresh one-month high versus the euro after EU parliamentary members of the Brexit group said there was a "very good chance" of a deal and that May's meeting with the President of the European Commission could resolve main issues. The euro was on track to post a second red daily candle on the back of a stronger dollar despite the Eurozone's Sentix investors confidence index in December and PPI readings in October remaining robust. Dollar/yen broke above the113.00 key-level (+0.70%).

Stocks: European stocks extended their gains, with the pan-European STOXX 600 surging by 1.0%. The German DAX 30 gained 1.35%, while the Spanish IBEX 35 jumped by 1.24% with all component sectors being in the green. The British FTSE 100 was up by 0.50%. Futures markets pointed to a higher open on Wall Street.

Commodities: Oil prices extended losses despite the Saudi Arabian energy minister saying on Monday that the OPEC will not alter supply curbs in the second half of 2018, refuting concerns of an early exit from the deal. However, he added that oil producers might discuss when to raise output in June. WTI crude declined by 1.11% on the day to $57.71 per barrel and Brent fell by 0.90% to $63.16. Gold was 0.56% down at $1,272.70 per ounce as demand for riskier assets increased.

Day ahead: US factory orders coming up; Brexit updates attract attention

The calendar will be light of data for the remainder of the day, with US factory orders being the only major pending figures (1500GMT). The numbers published by the US Census Bureau are expected to show a contraction of 0.4% m/m in new manufacturing orders in October after a growth of 1.4% in September. The US currency would be eyed ahead of the release.

Besides that, any political news out of the country could have a dominant effect on the dollar. On the one hand, investors will be keen to hear any updates on the tax front, which promises massive tax cuts to businesses and provides some relief to individuals, after Senators approved their tax version of the relevant bill on Saturday. Note that the House of Representatives and the Senate will reconcile their tax plans this week. If they manage to reach an agreement, then the promised tax cuts can then be signed into law by US President Donald Trump.

On the other hand, any developments in the investigation of the Russian meddling into the 2016 US presidential campaign could shake the dollar. The latest developments revealed that the former security council, Michael Flynn, made fake statements regarding the conversations he had with the Russian ambassador.

In other areas of interest, markets will keep a close eye on May's meeting with the President of the European Council, Jean Claude Junker, in Brussels. May who will probably be accompanied by the UK Brexit secretary David Davis and his EU counterpart, Michel Barnier, is expected to provide progress on three key elements (Irish border, the withdrawal bill, rights of the EU citizens) demanded by the EU for negotiations to move to the next stage of future relations. This is May's last attempt to break the deadlock ahead of the EU summit on December 14.

Daily Pivots: (S1) 1.1851; (P) 1.1896 (R1) 1.1941; More....

Intraday bias in EUR/USD remains neutral for consolidation below 1.1960. With 1.1712 support intact, rise from 1.1553 is expected to resume later. 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) 1.3423; (P) 1.3486; (R1) 1.3529; More....

Intraday bias is GBP/USD remains neutral for consolidation below 1.3549 temporary top. Downside of retreat should 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) 0.9701; (P) 0.9786; (R1) 0.9836; More....

Intraday bias in USD/CHF stays neutral for the moment. On the upside, 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) 111.40; (P) 112.14; (R1) 112.89; More...

Intraday bias in USD/JPY remains on the upside. Rebound from from 110.83 should target a test on 114.73 key resistance next. Decisive break there will extend the rally from 107.31 to retest 118.65 high. In case of another fall, 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.

The Canadian dollar has steadied on Monday, after surging in the Friday session. In North American trade, USD/CAD is trading at 1.2684, down 0.02% on the day. On the release front, there are no Canadian events on the schedule. The US will release Factory Orders, with an estimate of -0.3%. On Tuesday, Canada releases Trade Balance and the ISM Non-Manufacturing PMI.

After some stumbling on Friday, the US Senate passed a tax reform bill on the weekend. The vote was a squeaker, with 51 Republicans voting yes, against 48 Democrats and 1 Republican. The Senate vote is a big win for President Trump, who wants to sign a tax bill before Christmas. The Senate and House must now reconcile their two bills, and the new uniform bill will then have be passed in both houses. Investors are pleased with the bill, and the US dollar has responded to the vote with broad gains.

There was unexpected positive news on Friday, as Canadian employment change soared to 79.5 thousand, crushing the estimate of 10.2 thousand. This marked 12 straight months of job gains and helped drive the unemployment rate down to 5.9%. There was more good news, as the September GDP rebounded with a gain of 0.2%, edging above the estimate of 0.1%. The impressive numbers boosted the Canadian dollar by some 1.6% on Friday, its strongest 1-day gain in 2017. Will the Bank of Canada reconsider its monetary policy? A rate hike remains unlikely before April 2018, although red-hot numbers in the fourth quarter could mean that the BoC will adjust and raise rates more quickly.