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US Conference Board consumer confidence dropped to 128.1 in December, down from 136.4 and missed expectation of 133.0.

Lynn Franco, Senior Director of Economic Indicators at The Conference Board noted in the release that

• Consumer Confidence decreased in December, following a moderate decline in November.
• Expectations regarding job prospects and business conditions weakened, but still suggest that the economy will continue expanding at a solid pace in the short-term.
• While consumers are ending 2018 on a strong note, back-to-back declines in Expectations are reflective of an increasing concern that the pace of economic growth will begin moderating in the first half of 2019.

Full release here.

The best post-Christmas rally is over and most of the gains are already gone. Europe returned to the markets and traded mix. What was discerning for the equity rebound was that it did not take to the news that China and US will hold mid-level talks on the week of January 7th. Expectations are for the US to increase their demands and intensify the trade war. Today, the US Senate will convene and vote on a bill to end the partial government shutdown.

The Dow fell over 300 points at the open, lower by 1.3% and giving back almost a third of yesterday’s surge. The dollar also rallied against the commodity currencies, with gains of over 0.5% against the Australian dollar, kiwi and loonie.

With the choppy conditions likely to persist until the new year, many will keep a close eye if the stocks can keep this bottom.

Daily Pivots: (S1) 1.1325; (P) 1.1373; (R1) 1.1404; More.....

Intraday bias in EUR?USD remains neutral for the moment. On the upside, break of 1.1485 resistance will revive the case of near term reversal. Bias will be turned back to the upside for 1.1621 resistance first. Break will target 1.1814 key resistance next. On the downside, break of 1.1270 will, instead, revive the bearish case that down trend from 1.2555 is still in progress. Bias will be turned back to the downside for 1.1186 key fibonacci level.

In the bigger picture, as long as 1.1814 resistance holds, down trend down trend from 1.2555 medium term top is still in progress and should target 61.8% retracement of 1.0339 (2017 low) to 1.2555 at 1.1186 next. Sustained break there will pave the way to retest 1.0339. However, break of 1.1814 will confirm completion of such down trend and turn medium term outlook bullish.

Daily Pivots: (S1) 1.2603; (P) 1.2662; (R1) 1.2692; More....

Intraday bias in GBP/USD remains neutral as consolidation continues. Stronger recovery cannot be ruled out. Upside should be limited by 1.2811 resistance to bring decline resumption. On the downside, break of 1.2476 will extend larger down trend from 1.4376 to 61.8% projection of 1.4376 to 1.2661 from 1.3174 at 1.2114. However, firm break of 1.2811 will be an early signal of trend reversal and turn focus back to 1.3174 resistance.

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 now target a test on 1.1946 first. Decisive break there will confirm our bearish view.

Daily Pivots: (S1) 0.9884; (P) 0.9924; (R1) 0.9996; More...

Intraday bias in USD/CHF remains neutral at this point. Outlook is unchanged that we'd still expect strong support from 0.9848 to contain downside to complete the correction from 1.0128. On the upside, break of 0.9989 resistance will argue that such correction is completed. Intraday bias will be turned back to the upside for retesting 1.0128 high. However, decisive break of 0.9848 support will bring deeper decline to 0.9541 key support instead.

In the bigger picture, current development suggests that the medium term rally from 0.9186 hasn't completed yet. Break of 1.0128 will target 1.0342 key resistance next (2016 high). On the downside, firm break of 0.9848 support will dampen this bullish view and turn focus back to 0.9541 key support instead.

Daily Pivots: (S1) 110.52; (P) 110.97; (R1) 111.82; More..

Intraday bias in USD/JPY remains neutral first. On the downside, break of 110.13 will extend the whole decline from 114.54 and target 109.76 key support level. Break there will carry larger bearish implications. On the upside, break of 111.46, with 109.76 key support defended, will revive near term bullishness. In this case, intraday bias is turned back to the upside for 55 day EMA (now at 112.67) first.

In the bigger picture, price actions from 125.85 (2015 high) are seen as a long term corrective pattern, no change in this view. Apparently, such corrective pattern is not completed yet. Break of 109.76 support will start another medium term down leg to 98.97/104.62 support zone. On the upside, break of 114.73 resistance will likely extend the rise from 98.97 through 118.65 resistance.

WTI crude oil futures (for February delivery) jumped by 9% on Wednesday after extending the steep slippery slope to a 1 ½-year low of 42.53. On Thursday, though, the market resumed its bearish mode, with the technical indicators suggesting that there are still some sellers that could hold the market on the downside in the short-term; the MACD consolidates below its red signal line, while the Tenkan-sen line continues to lose ground below the blue Kijun-sen line.

The 42.53 bottom could be challenged by the bears once again if the market deteriorates. In case it fails to halt downside movements this time, turning the outlook even more negative, attention will shift down to the 39.23-37.74 region where the price found support in previous years. Lower, the next stop could be near the 35 psychological level.

On the upside, nearby resistance is expected to come around 46.50, while a stronger wall could be met at the 50 level, where the 20-day simple moving average (MA) is currently lying. Additional gains may drive the price up to 52.65 before the door opens for the 54.53 barrier.

Looking at the bigger picture, the market is under severe pressure, and with the 50-day MA distancing itself below the 200-day MA, the negative profile is not expected to change anytime soon.

USD/CAD has gained ground in the Thursday session. Currently, the pair is trading at 1.3639, up 0.46% on the day. On the release front, the U.S. unemployment claims rose slightly to 216 thousand, just shy of the estimate of 217 thousand. We’ll also get a look at CB Consumer Confidence, which is forecast to climb to 135.7 points. On Friday, the U.S. publishes Chicago PMI and Pending Home Sales. There are no Canadian releases this week, so U.S. indicators will have a magnified effect on the direction of USD/CAD.

The struggling Canadian dollar has dropped to its lowest level since May 2017. There has been little to cheer about in December, with the currency dropping 2.6 percent this month. In the U.S., the stock markets have been in turmoil, with massive losses on Monday, followed by sharp gains on Thursday. The roller-coaster movement in the markets has raised risk apprehension, making the Canadian currency less attractive, as nervous investors stick with safe-haven assets.

There was a positive development in the U.S- China trade war, following reports on Wednesday that a U.S. delegation would travel to China to hold talks in the first week of January. The ongoing trade dispute between the world’s two largest economies has caused havoc in the equity markets and hurt the Canadian dollars. President Trump has agreed to suspend further tariffs on China while the sides are talking, but has promised more tariffs on March 1 if the sides are unable to reach a deal. A breakthrough might be to tall an order, but the fact that the sides are meeting face-to-face for the first time in months will likely improve the mood of jittery investors.

Daily Pivots: (S1) 1.3555; (P) 1.3586; (R1) 1.3606; More...

USD/CAD's rally continues today and reaches as high as 1.3639 so far. Intraday bias remains on the upside for 1.3685 fibonacci level next. Break there will target 1.3793 key medium term resistance. On the downside, below 1.3566 minor support will turn intraday bias neutral and bring consolidations. But downside should be contained above 1.3322 support to bring another rally.

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 1.2991) holds. Sustained break of 1.3793 will pave the way to retest 1.4689 (2015 high).

While the US markets staged an historic comeback yesterday, sentiments didn't stay long. After Asian markets turned mixed, European markets are now trading broadly lower. DOW's over 1000pts rebound yesterday was impressive. But futures suggest that it's going to give back 300pts or more at open. Swiss Franc and Japanese Yen are currently taking turns to be the strongest ones as markets are back in risk averse mode. Australian, New Zealand and Canadian Dollar are the weakest ones. Dollar and Euro are mixed.

At the time of writing, FTSE is down -1.23%, DAX is down -2.01%, CAC is down -0.36%. German 10 year yield is down -0.011 at 0.238. Italian 10 year yield is down -0.039 at 2.783. Earlier today, Nikkei closed up 3.88% at 200776.62 and reclaimed 20000 handle. Singapore Strait Times rose 1.12%. However, Hong Kong HSI dropped -0.67%. China Shanghai SSE dropped -0.61% to 2483.09, very close to 2449.19 low made back in October. Japan 10 year JGB yield also dropped -0.0039 to 0.023.

Technically, USD/CAD's rally extends today and seems to be picking up upside momentum again. It's on track to 1.3685 fibonacci level next. AUD/USD is staying in tight range but could resume recent decline soon. EUR/JPY and GBP/JPY are staying in consolidation but that should be relatively brief before decline resumption. The bigger question is the time for EUR/USD, GBP/USD and USD/CHF to finally have a breakout from range.

Released from the US, initial jobless claims dropped -1k to 216k in the week ending December 22, slightly below expectation of 220k. Four-week moving average on initial claims dropped -4.75k to 218k. Continuing claims dropped -4k to 1.701M in the week ending December 15. Four-week moving average dropped -1k to 1.676M. House price index rose 0.3% mom in October.

ECB uncertain if US-China trade truce would lead to significant de-escalation of trade tensions

In the Monthly Bulletin released today, ECB warned that "signs of moderating momentum are emerging" in the global economy. And "activity is expected to decelerate in 2019 and remain steady thereafter." And that "reflects the projected cyclical slowdown across advanced economies and in China."

The central bank also noted that "The intensification of trade tensions between the United States and China should weigh on activity in both countries. While the global impact is still judged to be relatively limited, heightened uncertainty about future trade relations may adversely affect confidence and investment."

ECB added that "While the temporary truce between the United States and China sent a positive signal, there remains considerable uncertainty as to whether the talks will lead to a significant de-escalation of US-China trade tensions."

For Eurozone economy, ECB noted the slowdown in 2018 has been "driven largely by external factors, in particular the weakness in external demand." And, "much like the strengthening of growth in 2017, the slowdown in 2018 has been driven by net exports. Trade dynamics have been normalising as global growth has fallen back towards potential levels.

Nevertheless, ECB also said "All in all, the recent slowdown in growth has not, thus far, called into question the fundamentals of the current economic expansion."

China accelerating laws on IP protection, face-to-face meeting with US in Jan

China is accelerating legislation to protect intellectual property rights of foreign investments. Draft laws has been submitted to the Standing Committee of the National People's Congress for first review. Strong wordings were used in the draft like "official authorities and their staff shall not use administrative means to force the transfer of technology." The Committee will being a session on Sunday and then hold "public" consultations until February 24.

China's Ministry of Commerce spokesman Gao Feng said today that there are plans for face-to-face meeting with the US over trade in January. In the mean time, "intensive" phone calls are on-going despite the Christmas break. Separately, Bloomberg reported that a US delegation will travel to Beijing in the week of January 7. Deputy U.S. Trade Representative Jeffrey Gerrish will lead the Trump administration's team, including Treasury Undersecretary for International Affairs David Malpass.

Trump considering executive order to ban US purchase of China's Huawei and ZTE products

Reuters reported, citing three unnamed sources, that Trump is considering to sign an executive order as early as in January to indirectly limit US companies purchases of equipment from China's tech giants Huawei and ZTE. The executive order could invoke the so called International Emergency Economic Powers Act that gives the president authority to regulate companies on national securities ground. It's believed that, though, Huawei or ZTE wouldn't be directly named.

China's Foreign Ministry spokesperson Hua Chunying declined to comment on the order. But she said "it's best to let facts speak for themselves when it comes to security problems." She added, "some countries have, without any evidence, and making use of national security, tacitly assumed crimes to politicize, and even obstruct and restrict, normal technology exchange activities." And, "this in reality is undoubtedly shutting oneself off, rather than being the door to openness, progress and fairness."

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.3555; (P) 1.3586; (R1) 1.3606; More...

USD/CAD's rally continues today and reaches as high as 1.3639 so far. Intraday bias remains on the upside for 1.3685 fibonacci level next. Break there will target 1.3793 key medium term resistance. On the downside, below 1.3566 minor support will turn intraday bias neutral and bring consolidations. But downside should be contained above 1.3322 support to bring another rally.

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 1.2991) holds. Sustained break of 1.3793 will pave the way to retest 1.4689 (2015 high).

Economic Indicators Update