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XAUUSD (1288.56): Gold prices continued to maintain the bullish momentum although price action was seen briefly retreating off the highs before recovering in today's early Asian trading session. Establishing support at the 1280 handle has pushed gold prices slightly higher from Wednesday's highs. However, with the Stochastics oscillator pointing to a bearish divergence, we anticipate that the support level at 1280 could give way to some downside in price action. A break down below 1280 will potentially push gold prices down to the 1250 handle where support is most likely to be established.

AUDUSD (0.6939): The Australian dollar fell sharply on the day, losing 0.94% overall. Price action fell to a decade low of 0.6759 after closing a bit higher from the lows. The declines came following the break down of the support level near 0.7022. The current recovery could, however, keep the AUDUSD to consolidate just below the resistance level of 0.7022. As long as this level is not breached, the AUDUSD could be attempting to post a bottom. However, we cannot rule out further declines in the near term.

EURUSD (1.1368): The EURUSD currency pair posted strong losses on Wednesday as price action failed to breakout above the 1.1461 level of resistance. The minor trend line was breached invalidating the bullish ascending triangle pattern. The break down from the rising trend line saw the Euro currency testing lows of 1.1305 before recovering. The current rally off the lows near 1.1305 could see the EURUSD retesting the breakout level from the trend line. As long as the gains are capped here, we expect further declines down to 1.1275 level.

Daily Pivots: (S1) 1.1209; (P) 1.1240; (R1) 1.1264; More...

EUR/CHF's decline from 1.1501 resumed and reached as low as 1.1181 so far. Intraday bias remains on the downside for 1.1173 low. For now, we'd still expect strong support from 1.1154/98 support zone to contain downside to bring reversal. But break of 1.1348 resistance is needed to indicate near term bottoming first. Otherwise, outlook will stay bearish in case of recovery.

In the bigger picture, price actions from 1.2004 medium term top is seen as a correction only. Downside should be contained by support zone of 1.1198 (2016 high) and 61.8% retracement of 1.0629 to 1.2004 at 1.1154 to complete it and bring rebound. A break of 1.2 key resistance is still expected in the medium term long term. However, sustained break of the mentioned support zone will mark reversal of the long term trend. In that case, 1.0629 key support will be back into focus.

The U.S. Dollar posted strong gains on Wednesday as price action in the greenback sent most of its peers to close lower on the day. Gold prices tried to inch higher but failed to keep the intraday gains. WTI crude oil prices, on the other hand, managed to close bullish.

Higher yen and gold prices reflected the risk-off sentiment in the market while the Kiwi Dollar, the AUD, GBP, and the Euro posted strong declines on the day.

On the economic front, manufacturing PMI from the Eurozone showed that activity in the sector was unchanged at 51.5 compared to the month before. This was however in line with the median estimates.

In the UK, manufacturing activity rose to 54.2, marking a slight advance from the estimates of 52.5 and up from a revised reading of 53.6 in November. Markit's manufacturing PMI for the U.S. showed a modest decline to 53.8 which was below estimates of 53.9

Looking ahead, the economic data from the Eurozone is relatively quiet. In the UK, the construction PMI data is due to be released today. Forecasts point to a slowdown in the UK's construction activity with the index expected to ease to 52.9. This is weaker compared to 53.4 that was registered the month before.

The NY trading session will see the release of the U.S. ADP private payrolls report for December. Economists forecast that private payrolls rose slightly by 180k in December, up from 179k in November. The weekly unemployment claims follow the ADP report.

The main event for the day will be the Institute of Supply Management's manufacturing PMI report. Manufacturing activity is expected to ease to 58.2 in December, down from 59.3 previously. The ISM prices paid is also likely to ease from 60.7 to 57.9.

Apple struggles to grow while the Japanese Yen becomes a safe haven trade

More importantly, the general sense would give you more workable explanations for this. For instance, the global growth fears have been a major qualm among market participants since last year and the ongoing trade war between the US and China has made the matter only arduous. The feeble Chinese Caixin manufacturing data released yesterday intensified those concerns. Hence, we have seen investors hedging their safe haven bets and the spike in the Japanese is the direct result of this.

The USD/JPY pair has touched a critical level of 1074.87 against the dollar, a level not seen since March 2018. Of course, a number of technical indicators on a daily time frame are flashing red signs and sending out a clear signal that investors should be mindful of the current move as it is overextended. However, given the momentum of the current move and the price where we are trading? I think it is likely that we may continue to see the extension of the current after some consolidation.

Most of the sectors and stocks can’t escape from the current trade war misery which Donald Trump has started with China. Although, President Trump thinks that this is nothing but a short-term pain which many will simply forget, but the reality is that the collateral damage is becoming sizeable. Apple, the tech giant, lowered its revenue outlook for Q1 due to the sluggish demand from China. The company is facing intense competition from Chinese brands which are taking the market share and there are also some supply constraints. Not many are interested in upgrading their iPhones and the CEO has alarmed investors that he is in shock that the growth isn’t strong emerging markets.

The after hour market rout deepened on the back of this event and the Dow Jones futures are off by nearly 350 points during the early of trading. This provides solid evidence of how a slowing economic growth and a trade war makes the best death cocktail for the sentiment. Obviously, the timing of this news has chipped away any political leverage which Trump thought he had and the in the coming days. Clearly, trade wars are not easy to win however, the current intensity of the market selloff and weak economic growth may just push the president to the corner.

Rates: Core bonds start year on strong footing
A dismal Chinese manufacturing PMI set the tone for risk-off trading in Asia/Europe yesterday with Bunds and US Treasuries surging. Liquidity remained rather low. Both contracts extended gains overnight despite heavily overbought conditions as Apple guidance hit stocks. US data will be watched today with especially the US manufacturing ISM grabbing attention.

Currencies: FX flash-crash in Asia this morning. Yen jumps sharply
The yen is the star performer at the start of 2019. EUR/JPY, USD/JPY and EUR/USD declined in a classic risk-off repositioning yesterday. Overnight, the yen jumped again sharply higher in the wake of the Apple warning. FX traders will closely monitor the eco data for clues on US growth going forward. The USD looks vulnerable despite yesterday’s EUR/USD decline

The Sunrise Headlines

• WS ended modestly higher yesterday (+0-0.5%) after a volatile trading session. Oil shares led the gains. Most Asian indices opened with losses, as Apple cut its quarterly sales outlook. Japanese bourses are closed today.
• Apple has lowered its revenue outlook for the first time in almost 20 years. The company has cut revenue expectations for Q4 from $89bn/$93bn to $84bn. CEO Tim Cooke points at weakness in China’s economy and supply constraints.
• US President Trump failed to reach an agreement with congressional Democrats on border security funding yesterday, leaving the government in a partial shutdown. Leaders are said to meet again on Friday.
• The People’s Bank of China announced it will ease the calculation rules for some banks’ reserve ratios, to further boost the impact of a previous easing measure to support loans to small- and micro-sized enterprises.
• UK PM May starts a round of talks with EU leaders today, as she still seeks answers to sell her Brexit deal back in Westminster. Starting on Monday, she’ll discuss the deal with MP’s, to eventually take a vote on it the week after.
• Oil data showed that OPEC countries have started to cut oil output earlier than announced. December output fell by the most in almost two years, led by Saudi Arabia. Oil prices gained modest ground on the news.
• Today’s US economic calendar contains employment data (ADP Employment Change, Initial Jobless Claims) and the ISM Manufacturing gauge for December. The calendar in the EMU remains empty, apart from Spanish bond supply

Currencies: FX Flash-Crash In Asia This Morning. Yen Jumps Sharply

FX flash-crash. Yen jumps sharply

Global sentiment didn’t improve at the start of 2019. Poor Chinese (and EMU) PMI’s reinforced investor worries on the global economy. The US dollar lost interest rate support of late as markets priced out further Fed rate hikes. It looked that more EUR/USD gains were possible yesterday morning. The pair came close to 1.15, but a poor start of European equities and a sharp decline of German yields blocked the euro upside. USD/JPY, EUR/JPY and EUR/USD declined in lockstep, with EUR/JPY taking the lead in a classic risk-off move. Sentiment improved temporarily in US dealings, but a (China related) profit warning from Apple after US close, recharged the risk-off trade. EUR/JPY closed at 123.55 (open at 125.87). EUR/USD (close 1.1344) lost more than a big figure. USD/JPY closed at 108.88. In thin markets early in Asian trade (Japanese markets still closed), the post-Apple repositioning triggered a violent run to the yen. EUR/JPY and USD/JPY were temporarily in free-fall. The likes of the Aussie dollar were also hit very hard. The move eased later in Asian trading, but yen gains remain impressive (USD/JPY trades currently below 107, EUR/JPY is trading in the mid 121 area). Contrary to yesterday’s losses, EUR/USD reacted rather calmly in Asia (currently 1.1360 area). FX traders will closely monitor European markets (Asian equities are holding up relatively well, but US equity futures show heavy losses). The jury is still out, but this price action suggests a repositioning out of US assets/equities as the impact from the trade war is also weighing on (parts of) the US economy. In this context, markets will eagerly look out for the first 2019 US data with the ADP labour report and the manufacturing ISM. Especially the latter might be important as investors try to make up their mind on the health of the US economy. A weak ISM will probably weigh on USD/JPY. The reaction in Asia suggests that US equities and maybe the dollar, are vulnerable, despite yesterday’s EUR/USD decline. EUR/USD is holding in the established 1.12/1.15 trading range. Even in case of a further risk-off repositioning, the 1.1265/70 area might provide first important support.

EUR/GBP hovered mostly in the low 0.90 area yesterday. The UK manufacturing PMI unexpectedly improved, but didn’t help sterling as the rebound was mostly driven by stock-building ahead of Brexit. This morning, the temporary sell-off of risky currencies also hit sterling. EUR/GBP trades currently in the mid 0.90 area. Today’s UK construction PMI is probably of second tier importance. The combination of global market stress and uncertainty on brexit remains sterling negative.

EUR/JPY: yen jumps as uncertainty on global growth intensifies

Daily Pivots: (S1) 0.6960; (P) 0.7007; (R1) 0.7033; More...

AUD/USD dived to as low as 0.6722 as down trend resumed. 0.6826 (2016 low) was also breached. The long term down trend is tentatively seen as resuming. Further decline is in favor to 100% projection of 0.8135 to 0.7020 from 0.7393 at 0.6278 next. On the upside, break of 0.7071 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish.

In the bigger picture, medium term fall from 0.8135 is still in progress. Such decline is seen as part of the long term down trend from 1.1079 (2011 high). Sustained break of 0.6826 (2016 low) will pave the way to next key level tat 0.6008 (2008 low). In any case, break of 0.7393 resistance is needed to indicate medium term bottoming. Otherwise, outlook will remain bearish even in case of strong rebound.

Daily Pivots: (S1) 1.3547; (P) 1.3605; (R1) 1.3642; More...

With 1.3566 minor support intact, further rise is still expected in USD/CAD. Decisive break of 1.3685 fibonacci level will target 1.3793 key medium term resistance next. On the downside, break of 1.3566 will indicate short term topping and bring deeper pull back to 55 day EMA (now at 1.3329).

In the bigger picture, up trend from 1.2061 (2017 low) is still in progress and should target 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685. At this point, the structure is not clearly impulsive yet. Hence, we'd be cautious on topping between 1.3685/3793. But in any case, medium term outlook will stay bullish as long as channel support (now at 1.2993) holds. Sustained break of 1.3793 will pave the way to retest 1.4689 (2015 high).

Daily Pivots: (S1) 1.2536; (P) 1.2655; (R1) 1.2729; More....

GBP/USD's down trend resumed by breaking 1.2476 and reaches as low as 1.2391 so far. Intraday bias is back on the downside. Current fall from 1.4376 should target 61.8% projection of 1.4376 to 1.2661 from 1.3174 at 1.2114 next. On the upside, break of 1.2814 resistance is needed to indicate trend reversal. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, whole medium term rebound from 1.1946 (2016 low) should have completed at 1.4376 already, after rejection from 55 month EMA. The structure and momentum of the fall from 1.4376 argues that it's resuming long term down trend from 2.1161 (2007 high). And this will now remain the preferred case as long as 1.3174 structural resistance holds. GBP/USD should target a test on 1.1946 first. Decisive break there will confirm our bearish view.