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The British pound is maintaining upside pressure on the US dollar on Friday, with short-term buyers still holding price around the 1.2660. The GBPUSD pair is currently trapped within a rising wedge pattern on the lower time frames, with a break of 1.2650 to 1.2720 levels now needed. It is also worth noting that pairs 100-period moving average on the four-hour time frame continues to cap upside advances.

The GBPUSD pair is bullish while trading above the 1.2650 level, key resistance is found at the 1.2680 and 1.2720 levels.

If the GBPUSD pair trades below the 1.2650 level, sellers will likely test the 1.2600 and 1.2528 support levels.

The euro is attempting to recover higher against the US dollar after dropping towards the 1.1410 support level during the European trading session. The EURUSD pair is once again testing around the pivotal 1.1430 level, where the next directional move is likely to occur. A weekly price close for the EURUSD above the 1.1440 level should be considered bullish by traders.

The EURUSD pair remains bullish while trading above the 1.1430 level, key technical resistance is found at the 1.1480 and 1.1500 levels.

If the EURUSD pair trades below the 1.1410 support level, further losses towards the 1.1390 and 1.1360 levels appear possible.

GBPJPY paused selling at a four-month low of 140.55 on Thursday, with the RSI hinting that a rebound could possibly take place in the four-hour chart as the indicator is fluctuating below 30 in oversold territory for the second day. Yet, as long as the MACD holds in negative area and under its red signal line, any upside correction might be short-lived.

A bounce up could see resistance coming between 141.16 and the 23.6% Fibonacci retracement of the downleg from 145.82 to 140.55, at 141.80. Higher, bullish action may continue until the 38.2% Fibonacci of 142.57, while a close above the 50% Fibonacci of 143.17 and therefore above the Ichimoku cloud could trigger more buying.

Alternatively, should the price break the floor around 140.55, turning the outlook even more negative, immediate support could appear around 140.20 before attention shifts to 139.88, the lowest level reached this year. If the latter proves a weak obstacle, then the next stop could be near 138.50.

Overall, GBPJPY is still in a downtrend but upside risks are rising in the short-term.

China the superpower

President Trump's policy both in trade and foreign relations will hyper-drive China into a global superpower. The US-China relationship will remain fundamental to global equilibrium: if it crashes, the global economy would freefall and destroy asset valuations.
China's Belt and Road Initiative, which consists of the Silk Road Economic Belt and the Maritime Silk Road, got a boost as America destabilised historic partnerships. China will further focus on Asia, building a resilient Sino-centric regional economy. China's progress Asia will not slow: it will provide a massive barrier to the US.

China in 2019 aims to improve quality more than quickly grow. This rebalances away from manufacturing and into consumption. Reform is also focused on financial de-risking and slower credit growth. This transition has been tricky, and the world has had to adjust to a slower but more sustainable Chinese growth rate. Even if China's growth is slowing, authorities are using fiscal, monetary and regulatory devices to safeguard stability – such as selectively re-opening credit valves. Investors would like to see further stimuli to spur an acceleration in growth next year. Growing monetary policy divergence with the US is likely to drag on China's currency and equities.

Stocks lower as US shutdown nears

Equities are under pressure Friday, as concerns over Sino-American trade tensions, a US government shutdown (due Friday midnight local time), recent Fed rate hikes and reports of Chinese officials hacking the US are scaring investors. Oil prices are also absorbed in the downward spiral. Both equities and oil prices turn out to be turning in tandem after negative correlation in the last 4 years.

China has announced monetary and significant tax cuts, but still major indices fell. The Chinese mainland CSI 300 dropped 1.24% while Japan's Topix was down 1.91%, lowest in 20 months, and the Nikkei 225 off 1.11%. Hong Kong's Hang Seng rose 0.51% thanks to Tencent Holdings (+4.51%) which benefited from Chinese government approval of further online gaming solutions. South Korea's Kospi was more robust, closing at +0.07%. At opening, European indices are in the red with Euro Stoxx 50 -0.73%, French CAC 40 -0.69% and German DAX -0.55% while the UK FTSE 100 is converging. US shares are set for a third daily drop, as the US government shutdown nears. USD/JPY (-1.30% year-to-date) is declining further, as the yen is gaining strength for the sixth consecutive time against the greenback amid slowing growth concerns. Currently trading at 111.23, USD/JPY is expected to bounce slightly, heading along 111.45 short-term.

The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.13731
Open: 1.14451
% chg. over the last day: +0.69
Day's range: 1.14416 – 1.14729
52 wk range: 1.1214 – 1.2557

The EUR/USD is showing a positive trend. The quotes grew by 80 points and set the new monthly maximums. The USD is under pressure due to weak economic reports and political stress in the White House. Donald Trump refused to sign a bill regarding the temporary financing of the government. The Philadelphia PMI in December lowered to 9.4 instead of 15.6. You should open positions from the key levels of 1.14400-1.14800.

The Economic News Feed for 21.12.2018:

Primary Orders on the Durable Goods (US) - 15:30 (GMT+2:00);

GDP Report (US) – 15:30 (GMT+2:00);

Inficators signal the power of the buyers, the price fixed above 50 MA and 200 MA.

The MACD histogram is in the positive zone and keeps rising which points toward the growth of the EUR/USD.

The Stochastic Oscillator is in the neutral zone, the %K line is above the %D line, which also gives a signal to buy EUR/USD.

Trading recommendations

Support levels: 1.14400, 1.14000, 1.13700
Resistance levels: 1.14800, 1.15000

If the price fixes above 1.14800 expect further growth of the EUR/USD toward 1.15000-1.15300.

Alternatively the quotes can descend toward 1.14000.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.26079
Open: 1.26532
% chg. over the last day: +0.47
Day's range: 1.26398 – 1.26976
52 wk range: 1.2477 – 1.4378

The GBP/USD keeps trading in a long flat. The technical picture is ambiguous. The Bank of England, as expected, kept the monetary policy at the same levels. The GBP is supported by the positive retail sales report in the UK. The investors are looking forward to more data regarding Brexit. The key trading range is 1.26350-1.26800, positions should be opened from these levels.

At 11:30 (GMT+2:00) the UK will publish a GDP report.

Indicators do not provide precise signals, 50 MA started to cross 200 MA.

The MACD histogram is close to 0.

The Stochastic Oscillator is in the neutral zone, the %K line is rossing the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 1.26350, 1.26000, 1.25400
Resistance levels: 1.26800, 1.27550, 1.28000

If the price fixes above 1.26800, consider buying GBP/USD. The movement will tend toward 1.27400-1.27750.

Alternatively the quotes can descend toward the round 1.26000.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.34842
Open: 1.35028
% chg. over the last day: +0.10
Day's range: 1.34928 – 1.35266
52 wk range:1.2248 – 1.3496

The USD/CAD keeps showing a bullish mood. The CAD is trading in a flat. Positions should be opened from the key interest levels of 1.34900 and 1.35300. Investors are waiting for the economic reports from Canada. Also, keep an eye on the oil quotes dynamics.

The Economic News Feed for 21.12.2018:

Basis Index for Retail Sales (CAD) – 15:30 (GMT+2:00);

GDP Report (CAD) – 15:30 (GMT+2:00);

The price fixed above 50 MA and 200 MA which points toward the power of the buyers.

The MACD is in the positive zone and keeps rising which points toward the growth of USD/CAD.

The Stochastic Oscillator is in the neutral zone, the %K line is higher than the %D line, which gives a signal to buy USD/CAD.

Trading recommendations

Support levels: 1.34900, 1.34500, 1.34150
Resistance levels: 1.35300, 1.35500

If the price fixes above 1.35300 expect further growth toward 1.35600-1.35800.

Alternatively the price can fix below 1.34900 and you should expect a drop-off toward 1.34600-1.34400.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 112.406
Open: 111.203
% chg. over the last day: -1.16
Day's range: 111.048 – 111.459
52 wk range: 104.56 – 114.56

USD/JPY remains in an aggressive sell-off. During the trading yesterday, the yen grew by more than 1% against the USD. The quotes reached 111.000 and can descend further. The local resistance is 111.450. You should keep an eye on the US economic reports and the government bond dynamics.

During the Asian trading session, Japan published a weak inflation report.

Indicators point toward the power of the buyers: the price fixed below 50 MA and 200 MA.

The MACD histogram is in the negative zone but above the signal line, which gives a weak signal to sell USD/JPY.

The Stochastic Oscillator is in the neutral zone but above the signal line which points toward a bearish sentiment.

Trading recommendations

Support levels: 111.000, 110.750
Resistance levels: 111.450, 112.000, 112.250

If the price fixes below the round 111.000 expect further descend of the USD/JPY quotes..

Alternatively the currency pair can recover toward 111.700-111.900.

Notes/Observations

• France Q3 Final revised lower; Nov Consumer spending data misses expectations (protests likely cited)
• Italy Dec Confidence data misses expectations
• China Govt said to drop ‘neutral;' from its prudent monetary policy stance following its 3-day works council meeting on the 2019 outlook

Asia:

• Japan Nov National CPI Y/Y: 0.8% v 0.8%e; CPI Ex-Fresh Food (core) Y/Y: 0.9% v 1.0%e; CPI Ex Fresh Food/Energy (core-core) Y/Y: 0.3% v 0.4%e
• Japan Cabinet approved general account budget spending of ~¥101.5T for FY19/20 (record amount, in line with press speculation); Government to sell new bonds worth ~¥32.7T in FY19/20 (9th straight decline, in line with press speculation)

Europe:

• PM May said to be hatching a secret Brexit plan B to avoid Armageddon. options on the table said to include postponing the divorce from the European Union, calling another referendum or even announcing fresh national elections.

Americas:

• US House voted to pass stopgap bill, but opposition expected in the Senate; Senate Majority Leader McConnell (R) said Senate to take up House-passed bill on Friday, Dec 21st (Note: House measure would fund the government through Feb 8th)
• House Speaker Ryan: Trump in meeting said he wouldn't sign the Senate-approved funding bill; Trump wanted to see agreement that protected the border

Macro

• (FR) France: Q3 GDP was unexpectedly revised down to 0.3% q/q from 0.4% q/q reported initially. The annual rate was left unchanged at 1.4% but the weaker quarterly rate read in conjunction with deteriorating confidence and consumer spending numbers suggests a renewed slowdown in growth in the near term.
• (DE) Germany: November import price inflation dropped to 3.1% y/y in November from 4.8% y/y in the prior month in large part due to a significant drop in energy price inflation to 19.3% y/y from 37.2% in October. Excluding energy the rate was unchanged at 1.1% but lower on an annual comparison. Import price pressures are easing and the most recent drop in oil prices will also help keep a lid on any significant inflation upside.
• (US) United States: House Speaker Ryan said the White House won't sign the spending bill as it is presented as they seek an agreement that protects the border. This followed meetings with the President and puts the deal to avoid a government shutdown in jeopardy one day to go before recess.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.8% at 334.0 FTSE -0.4% at 6688, DAX -0.7% at 10541, CAC-40 -1.1% at 4643, IBEX-35 -1.1% at 8503, FTSE MIB -1.2% at 18360, SMI -0.7% at 8352, S&P 500 Futures -0.6%]
• Market Focal Points/Key Themes: European Indices trade lower across the board continuing the downward trend after Asian Indices traded mixed, following more weakness in the US overnight. On the corporate front Danske Bank trades lower after cutting its outlook, with Technicolor another notable decliner after guiding full year EBITDA. Bekaert fall after noting impairments will mean the company misses its forecasts. SLM Solutions has faded earlier sharp losses after cutting their outlook, Interserve trades lower after initial strength after announcing its deleveraging plan. In the M&A space Delivery Hero trades over 10% higher after divesting its German business and providing 2019 and 2020 outlook. Looking ahead notable earners include Karmax

Equities

• Consumer discretionary: Technicolor [TCH.FR] -13.3% (Defines outlook), Delivery Hero [DHER.DE] +13% (Sells German ops, provides outlook), Just Eat [JE.UK] +4% (Up with Delivery hero)
• Materials: Bekaert [BEKB.BE] -4.5% (Impairment charges)
• Financials: Danske Bank [DANSKE.DK] 3.3% (Cuts outlook)
• Healthcare: Mithra Pharmaceuticals [MITRA.BE] +1.0% (Trial data)
• Industrials: Interserve [IRV.UK] -2.7% (Deleveraging update)
• Technology: SLM Solutions [AM3D.DE] -4% (Cuts outlook)

Speakers

• Italy Fin Min Tria stated that needed a bigger effort to avoid a VAT hike in 2020 and 2021
• China State Council guideline on implementing work Report reiterates its proactive fiscal policy; modifies its prudent monetary policy stance for 2019. Reiterated stance to keep economic operation with reasonable range in 2019; to stabilize aggregate demand and prioritize employment. Reiterated view to keep liquidity reasonably ample and look to increase market confidence. Would continue structural deleveraging to prevent abnormal financial market volatility and resolve financing difficulties for SMEs. To handle local govt debt risks in a reliable way
• Russia said to cut oil output by 228K bpd as part of November OPEC+ deal

Currencies/Fixed Income

• USD remained on soft footing in the aftermath of the Fed dovish rate hike earlier in the week. No safe haven flows into the greenback despite an environment of another round that saw risk assets come under pressure in Asia and EU session.
• EUR/USD continued to have difficulties breaking above the 1.15 level where various technical headwinds persist. Continued concerns on growth front for the region saw the pair give back its initial gains to trade at 1.1430 just ahead of the NY morning.
• GBP currency was poised to end the week on a positive tone for the 1st time in over a month. GBP/USD slightly higher just under the 1.2670 level
• JPY currency continued to benefit from safe-haven flows to probe the lower end of the 111 neighborhood.

Economic Data

• (NL) Netherlands Dec Consumer Confidence Index: 9 v 13 prior
• (NL) Netherlands Oct Consumer Spending Y/Y: 1.7% v 2.1% prior
• (DE) Germany Jan GfK Consumer Confidence: 10.4 v 10.3e
• (DE) Germany Nov Import Price Index M/M: -1.0% v +1.0% prior; Y/Y: 3.1% v 4.8% prior
• (DK) Denmark Q3 Final GDP Q/Q: 0.7% v 0.7% prelim; Y/Y: 2.3% v 2.0% prelim
• (DK) Denmark Dec Consumer Confidence Indicator: 2.9 v 4.3 prior
• (DK) Denmark Nov Retail Sales M/M: +1.2% v -0.5% prior; Y/Y: 3.4% v 2.4% prior
• (FI) Finland Nov Unemployment Rate: 6.2% v 6.3% prior
• (FI) Finland Nov PPI M/M: -0.3% v +0.3% prior; Y/Y: 4.7% v 5.8% prior
• (FI) Finland Nov Preliminary Retail Sales Volume Y/Y: 1.2% v 1.0% prior
• (TR) Turkey Dec Consumer Confidence Index: 58.2 v 59.6 prior
• (MY) Malaysia mid-Dec Foreign Reserves: $101.4B v $102.0B prior
• (FR) France Q3 Final GDP Q/Q: 0.3% v 0.4%e; Y/Y: 1.4% v 1.4%e
• (FR) France Dec Business Confidence: 102 v 102e; Manufacturing Confidence: 104 v 103e; Production Outlook Indicator: -10 v +2e; Own-Company Production Outlook: 11 v 14 prior
• (FR) France Nov Consumer Spending M/M: -0.3% v 0.0%e; Y/Y: -2.0% v -1.6%e
• (FR) France Nov PPI M/M: 0.4% v 0.4% prior; Y/Y: 2.6% v 3.9% prior
• (CH) Swiss Nov M3 Money Supply Y/Y: 2.8% v 2.6% prior
• (AT) Austria Oct Industrial Production M/M: 1.2% v 0.8% prior; Y/Y: 5.0% v 3.5% prior
• (HU) Hungary Oct Final Trade Balance: €0.3B v €0.3B prelim
• (RU) Russia Narrow Money Supply w/e Dec 14th (RUB): 10.38T v 10.22T prior
• (SE) Sweden Nov Retail Sales M/M: 0.8% v 0.6%e; Y/Y: 1.1% v 0.4%e
• (SE) Sweden Nov PPI M/M: 0.0% v -0.3% prior; Y/Y: 7.9% v 9.5% prior
• (SE) Sweden Oct Non-Manual Workers' Wages Y/Y: 2.7% v 2.6% prior
• (HK) Hong Kong Q3 Current Account Balance: $45.8B v $15.6B prior; Overall balance of payments (BOP): -$41.7B v -$48.5B prior
• (ZA) South Africa Nov Budget Balance (ZAR): -16.9B v -32.7B prior
• (IT) Italy Dec Consumer Confidence Index: 113.1 v 114.0e; Manufacturing Confidence: 103.6 v 103.8; Economic Sentiment: 99.8 v 101.1 prior
• (NO) Norway Dec Unemployment Rate: 2.3% v 2.3%e
• (PL) Poland Nov Unemployment Rate: 5.7% v 5.8%e
• (PL) Poland Nov Retail Sales M/M: -2.7% v -2.9%e; Y/Y: 8.2% v 7.9%e; Real Retail Sales Y/Y: 6.9% v 6.5%e
• (UK) Q3 Final GDP Q/Q: 0.6% v 0.6%e; Y/Y: 1.5% v 1.5%e
• (UK) Q3 Current Account Balance: -£26.5B v -£22.0Be
• (UK) Q3 Final Total Business Investment Q/Q: -1.1% v -1.2% prelim; Y/Y: -1.8% v -1.9% prelim
• (UK) Nov Public Finances (PSNCR): +£4.4B v -£3.5B prior; Public Sector Net Borrowing: £6.3B v £7.0Be; Central Government NCR: +8.4£B v -£3.2B prior; PSNB ex Banking Groups: £7.2B v £7.7Be
• (SL) Sri Lanka Nov National CPI (NCPI) Y/Y: 1.0% v 0.1% prior
• (BR) Brazil Dec FGV Consumer Confidence: 93.8 v 93.2 prior
• (BR) Brazil Dec FGV Construction Costs M/M: 0.1% v 0.1%e
• (BE) Belgium Dec CPI M/M: -0.2% v 0.2% prior; Y/Y: 2.3% v 2.8% prior

Fixed Income Issuance

• (IN) India sold total INR120B vs. INR120B indicated in 2020, 2027, 2032, 2035 and 2045 bonds
• (DK) Denmark sold total DKK300M in to sell 3-month and 6-month
• (CH) Switzerland sold CHF107.5M in 3-month Bills; Avg Yield: -0.979% v -1.018% prior

Looking Ahead

• (CO) Colombia Nov Retail Confidence: No est v 26.8 prior; Industrial Confidence: No est v 1.3 prior - OPEC to publish detailed production targets
• 06:00 (BR) Brazil mid-Dec IBGE Inflation IPCA-15 M/M: -0.1%e v 0.2% prior; Y/Y: 3.9%e v 4.4% prior
• 06:00 (ES) ECB's De Guindos (Spain) in Madrid
• 06:00 (UK) DMO to sell €B in 1-month, 3-month and 6-month bills (£1.5B, £1.5B and £1.5B respectively)
• 06:30 (CL) Chile Central Bank Traders Survey
• 06:30 (IN) India Weekly Forex Reserves w/e Dec 14th: No est v $393.7B prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (IN) India announces upcoming bill issuance (held on Wed)
• 07:30 (BR) Brazil Nov Current Account Balance: -$1.7Be v $0.3B prior; Foreign Direct Investment (FDI): $11.0Be v $10.4B prior
• 07:30 (BR) Brazil Nov Tax Collections (BRL): 119.2Be v 131.9B prior
• 08:10 (UK) Baltic Dry Bulk Index
• 08:30 (US) Q3 Final GDP Annualized (3rd reading) Q/Q: 3.5%e v 3.5% prelim; Personal Consumption: 3.6%e v 3.6% prelim
• 08:30 (US) Q3 Final GDP Price Index: 1.7%e v 1.7% prelim; Core PCE Q/Q: 1.5%e v 1.5% prior
• 08:30 (US) Nov Preliminary Durable Goods Orders: +1.6%e v -4.3% prior; Durables Ex-Transportation: 0.3%e v 0.2% prior; Capital Goods Orders (Non-defense/ex-aircraft): 0.2%e v 0.0% prior; Capital Goods Shipments (Non-defense/ex-aircraft): 0.2%e v 0.3% prior
• 08:30 (CA) Canada Oct Retail Sales M/M: 0.5%e v 0.2% prior; Retail Sales (Ex-auto) M/M: 0.2%e v 0.1% prior
• 08:30 (CA) Canada Oct GDP M/M: +0.2%e v -0.1% prior; Y/Y: 2.2%e v 2.1% prior
• 09:00 (MX) Mexico Oct IGAE Economic Activity Index (Monthly GDP) Y/Y: 2.2%e v 2.1% prior
• 10:00 (US) Nov Personal Income: 0.3%e v 0.5% prior; Personal Spending: 0.3%e v 0.6% prior; Real Personal Spending (PCE): 0.3%e v 0.4% prior
• 10:00 (US) Nov PCE Deflator M/M: 0.0%e v 0.2% prior; Y/Y: 1.8%e v 2.0% prior
• 10:00 (US) Nov PCE Core M/M: 0.2%e v 0.1% prior; Y/Y: 1.9%e v 1.8% prior
• 10:00 (US) Dec Final University of Michigan Confidence: 97.5e v 97.5 prelim
• 10:00 (CA) Bank of Canada Q4 Senior Loan Officer Survey: No est v -10.9 prior; Business Outlook Future Sales: No est v 15.0 prior; Overall Business Outlook Survey: No est v 2.8 prior
• 10:00 (EU) Euro Zone Dec Advance Consumer Confidence: -4.3e v -3.9 prior
• 11:00 (US) Dec Kansas City Fed Manufacturing Activity: 13e v 15 prior
• 13:00 (US) Weekly Baker Hughes Rig count data
• 14:00 (CO) Colombia Oct Economic Activity Index (Monthly GDP) Y/Y: 3.1%e v 2.3% prior
• 15:00 (CO) Colombia Central Bank Interest Rate Decision: expected to leave Overnight Lending Rate unchanged at 4.25%

The EUR/USD currency exchange rate has revealed an ascending channel pattern. The pattern represents the rate's surge following the bounce off from the lower trend line of a dominant descending pattern.

In the near future the rate is expected to continue its surge in this pattern higher until it meets a strong resistance levels, which might stop the surge and break the pattern.

Meanwhile, note that Dukascopy Analytics are taking the next week off. Use the pattern for guidance and note that the markets will be closed during the holiday days.

On Friday, the GBP/USD traded still below the 1.2700 level, which continued to provide resistance.

However, the rate had retreated down to the lower trend line of a medium scale ascending pattern, which has been guiding the pair through the last couple of months.

Due to that reason it is expected that throughout the next week the rate will continue its surge, as it is highly unlikely that fundamental Brexit events will take place during the Christian holiday week.

Meanwhile, note that Dukascopy Analytics will be off during the next week. No technical or fundamental analysis articles will be created by the team.

The USD/JPY continued its decline until the rate almost reached the 111.80 level. That point suddenly forced a retracement of the currency exchange rate. By using this point new descending patterns were drawn.

In general, the rate is expected to resume its decline after trading sideways during the start of the next week. Use these patterns for guidance in the upcoming week.

Dukascopy Analytics will be off during the next week. Meanwhile, the market volatility will be low, as most of the financial field is also on vacation.

For almost a month Dukascopy Analytics stated that on the larger scale the yellow metal is heading to the 1,260.00 level. The move has occurred and fully ended on Friday.

The bullion has surged above the resistance levels at 1,260.00 and even broken resistance levels at that level. The surge was stopped by the upper trend line of a medium term pattern.

In regards to the near term future, it is expected that the bullion will consolidate its gains. Meanwhile, Dukascopy Analytics are taking the next week off.