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Daily Pivots: (S1) 0.9818; (P) 0.9844; (R1) 0.9869; More....

USD/CHF recovery from 0.9776 is in progress but kept well below 0.9946 resistance. Intraday bias remains neutral at this point. Also, with 0.9946 intact, fall from 1.0037 is still expected to extend to 61.8% retracement of 0.9420 to 1.0037 at 0.9656. We'll look for bottoming again below 0.9656 and above 0.9420. On the upside, break of 0.9946 resistance will indicate that the decline from 1.0037 has completed and bring retest of this resistance.

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) 111.47; (P) 111.80; (R1) 112.27; More...

USD/JPY's rebound from 110.83 is still in progress. But it's staying well below w112.71 resistance and intraday bias stays neutral first. As as long 112.61 holds, fall from 114.73 could extend lower to 61.8% retracement of 107.31 to 114.73 at 110.14. We're still favoring the case medium term corrective pattern from 118.65 has completed at 107.31 already. Hence, we'll looking for bottoming below 110.14 to bring another rise. On the upside, break of 112.71 will suggest that the fall from 114.73 is completed and turn bias to the upside for retesting this resistance.

In the bigger picture, as long as 107.31 support holds, medium term rise from 98.97 (2016 low) is not completed yet. And another rise is in favor. Break of 114.73 resistance will target a test on 118.65 high first. However, break of 107.31 will dampen this will and extend the medium term fall back to 98.97 low.

Daily Pivots: (S1) 0.7546; (P) 0.7576; (R1) 0.7601; More...

Intraday bias remains neutral as consolidation from 0.7531 is in progress. Near term outlook stays bearish with 0.7729 resistance intact and deeper decline is expected. Break of 0.7531 will resume whole decline from 0.8124 and target next key cluster level at 0.7322/8. However, considering bullish divergence condition in 4 hour MACD, break of 0.7729 will indicate near term reversal and bring stronger rebound 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 0.8049). 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.

Daily Pivots: (S1) 1.2822; (P) 1.2847; (R1) 1.2890; More....

Intraday bias in USD/CAD remains on the upside for 1.2916 resistance. As noted before, corrective pattern from 1.2916 could have completed at 1.2672 already. Break of 1.2916 will resume whole rise from 1.2061 and target 1.3065 medium term fibonacci level. On the downside, below 1.2804 minor support will delay the bullish case and extend the correction from 1.2916 with another fall. But still, we'd expect downside to be contained by 1.2598 resistance turned support and bring rebound.

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.

Sterling and Dollar remain the two strongest currencies for the week. The greenback was supported by better than expected GDP data overnight, as well as Fed Chair Janet Yellen's upbeat comments. Positive sentiments in the US also sent DOW to record high at 23940.68, up 103.97 pts or 0.44%. NASDAQ, though, dropped -1.27% as investors dumped tech for bank stocks. That was in response to Fed Chair nominee Jerome Powell's hints on easing regulations. An important development to note is the rebound in treasury yields. 10 year yield closed up 0.038 at 2.376, keeping the near term bullish trend. The focus will now turn to Senate tax plan vote and PCE inflation data from US today.

Senate to open debate on Republican tax plan

Senate voted to open the debate on Republican tax plan yesterday, moving another step to a final vote possibly today or tomorrow. President Donald Trump said in his usual tone said in a rally in Missouri that it's a "once in a liftetime opportunity" and urged the Congress to deliver. And he added that "this week's vote can be the beginning of the next great chapter for the American worker." It's widely know that the Republicans got slim 52 majority in the Senate. All 48 Democrats and independents are expected to vote no. So, Republicans could only afford to lose two if they want to pass the bill this week. Then, they can move on to the next stage of reconciling the House and Senate versions.

Fed Yellen: Economic expansion is increasingly broad based

Outgoing Fed Chair Janet Yellen sounded upbeat in her last Congressional testimony overnight. She told the Joint Economic Committee that "the economic expansion is increasingly broad based across sectors as well as across much of the global economy." She acknowledged that "we are not seeing undue inflationary pressure in the labor market, so our policy remains accommodative." However, she also emphasized that " it's important to gradually move our policy rate toward what I'll call a neutral level, which would be consistent with sustainably strong labor market conditions." She maintained that Fed would want to remove stimulus "gradually" to avoid "overheating" and cause a "boom-bust" condition.

Fed Williams: Inflation will pickup in 2018

San Francisco Fed President John Williams also said "as long as the data continue to show steady growth and we see the uptick in inflation that we're expecting, my own view is that we should continue to raise interest rates slowly over the coming year." He also sounded unconcerned with the low inflation. He noted that inflation would usually take around 12 months to pick up after growth accelerates. He added that "the next time you see a headline about stubbornly low inflation, you can smile to yourself, knowing that the mystery isn't all that mysterious after all." And, "with the economy doing so well this year and based on the historical pattern, I expect to see a rise in inflation in 2018."

Fed's Beige Book economic report noted that "price pressures have strengthened since the last report." Labor market also tightened as "most districts reported employers were having difficulties finding qualified workers across skill levels." Nonetheless, "wage growth was modest or moderate in most districts."

ECB Knot urged full phase out of QE from September onwards

ECB Governing Council member Klaas Knot said that "with deflation risk clearly off the radar, the main rationale for employing the APP (asset purchase program) has therefore ceased to exist." He added that "fear of relapse owing to an allegedly premature discontinuation of net purchases seems rather overdone." Hence, he urged a "full phasing" out of the program "from September onwards". Back in October, ECB extended the asset purchase program to September next year, but halved the purchase size to EUR 30b a month starting January.

SPD Schulz want bold vision in coalition talk with Merkel

German Chancellor Angela Merkel will meet with Social Democratic Party head Martin Schulz and President Frank-Walter Steinmeier today on talk of reforming the grand coalition. Ahead of the meeting, Schulz said that "I can't tell you what the outcome of the talks will be, but I can assure you of one thing: that I will argue in favor of the best solutions for our country and that my party is aware of its political responsibility." And, he emphasized that "you can't just wing it. You need a bold vision". Schulz also called fro a euro-area budget, a Eurozone finance minister and a "European framework for minimum wages".

On the data front

Japan industrial production rose 0.5% mom in October versus expectation of 1.8% mom. Australia private capital expenditure rose 1.0% in Q3, meeting consensus. Australia building approvals rose 0.9% mom in October, above expectation of -1.0% mom. New Zealand building permits dropped -9.6% mom in October. ANZ business confidence dropped sharply to -39.3 in November. China manufacturing PMI rose 0.2 pt to 5.18 in November, non-manufacturing PMI rose 0.5 to 54.8. UK Gfk consumer confidence dropped to -12 in November.

Looking ahead, the calendar is very busy today. Swiss GDP, KOF and retail sales will be featured in European session. Germany will release unemployment. Eurozone will release CPI and unemployment rate. Later in the day, US PCE is the main focus while jobless claims and Chicago PMI will be featured.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2822; (P) 1.2847; (R1) 1.2890; More....

Intraday bias in USD/CAD remains on the upside for 1.2916 resistance. As noted before, corrective pattern from 1.2916 could have completed at 1.2672 already. Break of 1.2916 will resume whole rise from 1.2061 and target 1.3065 medium term fibonacci level. On the downside, below 1.2804 minor support will delay the bullish case and extend the correction from 1.2916 with another fall. But still, we'd expect downside to be contained by 1.2598 resistance turned support and bring rebound.

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.

Economic Indicators Update

We've been watching this GBP/USD channel as price moves up between horizontal support/resistance zones.

Price has found some bullish legs following the last tap that we spoke about on the blog last week, but has now reached previous swing high resistance and stalled.

GBP/USD Daily:

How price behaves around this horizontal resistance level will be key as to whether we reach the upper band of the channel, or whether we just head back down again. Either way, this is the level that traders can manage their risk around.

Now zoom into an intraday chart and take a look at the hourly below.

GBP/USD Hourly:

These are the sorts of short term support turned resistance (and vice versa) that we want to look for. Especially on the short side if the above daily level does in fact hold.

Today's Beige Book indicated that economic activity across all twelve Federal Reserve Districts increased at a modest to moderate pace between October and mid-November. The outlook improved slightly from the previous report that highlighted hurricane-related setbacks.

Retailers reported optimistic views on holiday spending, with pre-holiday consumption reports largely being mixed as consumers held off on purchases in many cases in anticipation of Black Friday promotions. Retailers expect holiday spending to bolster revenue in the fourth quarter, with auto dealers also expecting a boost. Some retailers have implemented technology upgrades in order to entice shoppers back into stores, providing a streamlined shopping experience between the digital and brick-and-mortar worlds.

Price pressures intensified relative to the previous report, with moderate increases in non-labor input costs being passed onto selling prices. Building material price increases were magnified by strong demand as hurricane rebuilding efforts progressed. Moreover, input costs increased in the transportation and manufacturing sectors, with the inflation largely passed through to consumers.

Residential real estate inventories remained tight, leading to consistent growth in prices with the low inventories resulting in multiple-offer scenarios that have magnified affordability concerns. Some contacts reported increased interest in remodeling services, as homeowners hold on to their properties longer due to tight market conditions. At the same time, a scarcity of labor also limited construction activity. These effects will be amplified by rebuilding following hurricanes Harvey and Irma in the coming quarters. Additionally, builders are concerned about passing through the quickly rising input costs, including land, building materials, as well as labor, to consumers, potentially preventing first-time homebuyers from purchasing property. Non-residential construction increased slightly, extending trends reported last month. Industrial and warehouse space is in high demand, while retail space development remains weak amid a continuing shift to online shopping.

Employment growth picked up relative to the prior report, with hiring progressing at a modest to moderate pace, resulting in universally tight labor markets. Employers continue to report difficulty in recruiting and retaining workers of various skill levels, with this issue posing a threat to expansion. Wage increases were modest or moderate, emulating last month's report, with the most substantial increases being reported for professional, technical and production positions where workers are in especially short supply. Increasingly, firms are using sign-on and mid-year bonuses, over-time, and other non-wage efforts in order to retain and attract workers.

Manufacturers remain optimistic and expect a pickup going forward, with business having expanded moderately during the reporting period. The expansion in shipments kept the transportation industry busy, which was reported to have expanded in all Districts with the exception of New York. Additionally, the recent California wildfires prevented some shipments, as reported by the San Francisco Federal Reserve Bank staff.

Key Implications

This Beige Book confirms that economic activity continues to advance in the fourth quarter, with hurricane-related setbacks having quickly faded. Business optimism will continue to support investment over the remainder of the year, with the largest constraint on growth currently related to widespread labor shortages. However, firms are counteracting this by investing more heavily in equipment to support expansion, boding well for productivity. Additionally, producers remain upbeat, and expect global economic strength to support continued expansion going forward. These growth prospects should strengthen further as the GOP tax reform plans come closer to materializing, with a slashing of the corporate tax rate potentially lifting investment previously held back by policy uncertainty.

Labor markets are extremely tight and will continue to bolster household incomes and solidify the consumer as an important driver as growth in the fourth quarter. The residential property market will likely remain undersupplied as rising input costs, related to land and labor shortages, hold back new construction, leading prices of new homes higher and holding back purchases.

The report suggested that businesses are increasingly passing on increases in their own input costs to consumers, with these moves likely to show up in inflation in the near future. These dynamics, alongside strong economic growth, will continue to support the case for a December rate hike, something we see happening with near-certainty at this point.

The overnight focus was on the upswing in global yields which offered the greenback no clear channel as traders found themselves confined to the stationary bike, peddling fast but going nowhere quickly while regurgitating the same narratives in very prosaic detail.

On the Fed front, Yellen's testimony, unlike the markets take away from the recent FOMC minutes, continued to emphasise transitory factors in subdued inflation while suggesting the US economic recovery was "increasingly broad-based". By default, the market views this hawkish, but from my seat, the comments are little more than December rate hike window dressing.

Tax reform bill passed the procedural hurdle in US Senate as expected.But rik positivity should continue to underpin the USD into the final tally.

The Japanese Yen

Don't get overly complacent with USDJPY nearing the 112 level as trading JPY remains as intense a dogfight as ever with competing narratives contributing to the choppy price action.

Downside momentum stalled after investors sidestepped the North Korea escalation.However, it may have provided a false sense of bravado suggesting that all that ills the world are cured. But nothing could be further from the truth as risk aversion is waiting in the wings ready to pounce on the first sign of weakness.

But for today at least, improving prospects for tax reform should carry the day.

Long USDJPY remains one of the more crowded trades as short-term speculators have piled in suggesting this will be the best vehicle to sell on any signs of dollar weakness.

The Euro

The single currency continues to underperform versus the markets lofty expectations entering the week. At the core, the USD has gone tacitly bid across G-10 on as the US yields pop and equity market continue to froth on improving tax reform sentiment. But as mentioned yesterday it's more to do with EURGBP crater dampening sentiment as GPB continues to march to the beat of its own drummer after the Bullish Brexit headlines.

Australian Dollar

AUDUSD rate differential touched below the 0 mark for the first time in ages triggering machine driven sell orders based on Aussies diminishing carry advantage.

However, most of the Aussie pressure is coming from GBPAUD cross as the market continues to add to longs.

The Chinese Yuan Pre Fix

The markets are awaiting Chinese PMI

Energy Prices

The market continues to trade the OPEC headlines, but the only one that counts Russia signalled it was leaning towards a nine-month extension. As usual, this whole OPEC fiasco is a complex event. Even if a nine-month extension is agreed to in principle, the entire debate is open for review in April anyway. Moving on ………

Korean Won

There will be of massive interest in the Bank of Korea( BoK) rate decision as the BoK is now viewed as the proxy for regional monetary policy.

The Malaysian Ringgit

The Market continues to express its bullish Asia FX views through the Ringgit which rallied again yesterday pushing through a 52-week high

The unexpected arrival of interest normalisation is taking hold of sentiment. And with Malaysia investors already riding the wave of a robust global demand, the higher interest rate scenario as adding to the Ringgit's appeal. Since the market has still not fully priced in a January rate hike nor the real prospects of a follow-up interest rate hike in Q2 or Q3, the rally could extend well into year-end as traders set sights on the critical 4.00 level.

MYR may be less susceptible to adverse shifts in the global growth narrative as the Ringgit remains under-owned by investors But the near-term risks are a collapse in Oil prices post OPEC meeting or a deterioration in risk sentiment from China Bond and Equity markets souring into year-end potentially destabilising regional markets.

From the macro perspective, the export sector continues to flourish, and by that alone, and despite the Ringgit trading at a 52 week high, the MYR remains undervalued relative to some of its high flying regional peers

Speaking of which; the market continues to view the KRW as a broader proxy for local FX risk as well as rates normalisation. With the BoK set to raise interest rates as the domestic economy continues to soar, expect the MYR to ride any buoyant Won sentiment. And with the Ringgit posied to do some serious catch up to regional peer currency valuations, the MYR should remain one of the go-to trades for Asia FX investors heading into year-end.

A Brave New Bubble

But with all the commotion on Bitcoin, it offered some distraction to a listless trading day on forex desks. However, with the new wave of so-called "Crypto Strategist" hitting the airwaves overly long on theory and conjecture but lacking any structural blueprint or trading narrative, it might be time for some reflection, in case the masses forget to come up for air before it's too late.

These are extraordinary times in the market. The primary drivers of bitcoin momentum in my view 1) The CME's acceptance that seems to have lit a fire under wall street. Cryptocurrencies will gain more credibility as CME Group Inc. starts selling bitcoin futures and other mainstream institutions get involved 2) Intense media coverage supporting the current rally which leads to 3) Investors pervasive apprehension that they're missing the party or the underlying fear of losing out of a quick profit.

It's not just your average retail Joe champing at the bit, high net worth investors are starting to view Bitcoin as an asset class in the same light as investing in other higher-risk debt and are gradually accepting it as a legitimate asset class.

Bitcoin will continue to broaden its legitimacy and credibility as more of the more significant well known Primary Market Makers enter the field.Provided Bitcoin has a favourable lift off on the CME later this year Bitcoin could surge higher from credibility perspective alone.

Of course, Government agencies will likely clamp down on excessive margin given the hyper-volatility as the potential loss to non-sophisticated investors is enormous. After all, risk management continues to run weak in the retail space.

The Canadian dollar depreciated on Wednesday after conflicting comments out of Vienna ahead of the meeting between Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members no Thursday. The production cut deal which has stabilized prices for more than a year is set to expire in March of 2018, but there is a case for extending the timeline by 9 months. Crude has already priced in an announcement tomorrow, but there is still room for disappointment as Russia could get cold feet and ask for a shorter commitment.

The US economy expanded by 3.3 percent in the third quarter as per the second estimate released today. The gap between the pace of growth in Q3 and the slowdown of the Canadian economy favours the greenback. On Friday the monthly Canadian GDP will be released with the market expecting an improvement over the 0.1 percent contraction last month.

Canadian Prime Minister Justin Trudeau will visit China on December 3 with the intention to build a plan B on trade in case NAFTA ends up disappearing. While not exactly a perfect replacement a deal with China could diversify Canada's reliance on its neighbour to the south, but given the long negotiation periods for this type of deals it could be a decade before it is signed.

The USD/CAD gained 0.37 percent on Wednesday. The currency pair is trading at 1.286 due to strong economic indicators in the US against zero releases on the Canadian front. The US followed yesterday's strong consumer confidence numbers with a preliminary GDP improvement of 0.3% in the third quarter. The US economy is now expected to have gained 3.3 percent in Q3. The figure came in right at the forecast, but it did help the USD regain some of the lost momentum from last week.

Politics will remain a thorn in the dollar's side as the tax reform bills are facing rising opposition from crowdsourced efforts. The Trump's Administration decision to once again try to do too much with the bill could end up being its undoing.

The loonie was impacted by lower oil prices as the correlation between the commodity and the currency has increased after it had decoupled earlier in the year. The news out of Vienna tomorrow will decide the path of the black stuff as OPEC members and non-members are expected to prolong the production cut agreement that has stabilized prices. For the Canadian currency the focus will be on Friday's release of jobs and gross domestic product (GDP) data released at 8:30 am EST.

The price of oil fell in the last 24 hours. West Texas Intermediate is trading at $57.27 after conflicting headlines about the Organization of the Petroleum Exporting Countries (OPEC) meeting in Vienna forced the price of crude under the $57 price level despite the release of US crude weekly inventories showing a larger than expected drawdown.

The market is already pricing in a 9 month extension that will push the production cut agreement between OPEC and non-OPEC until the end of 2018. Russia has been rumoured to be more eager to push for a 3 to 6 month extension, which is why the technical committee that met earlier this week is offering a compromise. A 9-month extension with the possibility of a review at the 6 month mark. When the OPEC announces the extension anything lower than 9 months could cause a drop in prices.

US crude stocks were lower by 3.4 million barrels, but it was the unexpected gasoline and distillate inventories that had a negative impact in the price of oil just as the OPEC meeting is set to wrap up on Thursday.

US production has increased and with the Keystone pipeline restarted operations, but still at reduced capacity. Disruptions in North America due to weather and forest fires has kept production lower than otherwise expected with the OPEC doing the heavy lifting on price stability. The market will be watching for developments in Vienna as the floor of energy pricing has been put in place by the OPEC production cut, and once it reaches its end crude prices will be vulnerable if global demand for energy has not recovered at the same rate as production.

Market events to watch this week:

Thursday, November 30

• 8:30am USD Unemployment Claims

Friday, December 1

• 4:30am GBP Manufacturing PMI
• 8:30am CAD Employment Change
• 8:30am CAD GDP m/m
• 10:00am USD ISM Manufacturing PMI

*All times EDT

The British pound has posted considerable gains in the Wednesday session. In North American trade, GBP/USD is trading at 1.3443, up 0.77% on the day. On the release front, British Net Lending to Individuals dropped to GBP 4.8 billion, above the forecast of GBP 4.3 billion. Bank of England Governor Mark Carney spoke at an event in London. In the US, Preliminary GDP for the third quarter came in at 3.3%, matching the forecast. Pending Home Sales jumped to 3.5%, crushing the estimate of 1.1%. As well, Fed Chair Janet Yellen testifies before a congressional committee. On Thursday, the US releases Personal Spending and unemployment claims.

British Prime Minister Theresa May has blinked first, going a long way to meeting the European demands on Britain's bill for leaving the European Union. The Europeans had demanded EUR 60 billion, while the UK had countered with EUR 20 billion. However, the UK has upped its offer significantly, and the final amount could be as high as EUR 50-60 billion. The British government is anxious to start talks on a trade deal with the EU, and this offer should placate Brussels and pave the way for trade talks to begin in December. Another thorny issue is the border between Northern Ireland and Ireland. Britain has ruled out having the north remain in a customs union with the EU after Brexit, but Ireland is insisting that there not be a hard border.

There was positive news from the banking sector on Tuesday, as all seven major UK banks passed the BoE's stress tests. This is a reliable indication that the banking sector is in decent shape, despite nagging concerns about the toll that Brexit could take the British economy. Still, investors were quick to seize on negative comments from BoE Governor Mark Carney, who warned that in the case of a "disorderly" Brexit, the financial sector would face "some quite material economic costs". Carney's warning briefly sent the pound lower, but it managed to recover.