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Daily Pivots: (S1) 1.3426; (P) 1.3466; (R1) 1.3518; More...

Intraday bias in USD/CAD remains on the upside at this point. Rise from 1.2781 is part of the up trend from 1.2061 and would target 1.3685 fibonacci level next. On the downside, below 1.3415 minor support will turn intraday bias neutral first and bring consolidations. But retreat should be contained well above 1.3164 support to bring rise resumption.

In the bigger picture, up trend from 1.2061 (2017 low) is still in progress and should target to 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685. However, such rise is not clearly impulsive yet. And it could be the second leg of the long term corrective pattern that started at 1.4689. Hence, even in case of further rally, we'd be cautious on loss of momentum and topping above 1.3685. Nevertheless, in any case, outlook will stay bullish as long as channel support (now at 1.2972) holds.

Daily Pivots: (S1) 0.7064; (P) 0.7132; (R1) 0.7177; More...

AUD/USD's fall from 0.7393 resumed after brief consolidations and reaches as low as 0.7086 so far. Intraday bias is back on the downside for 0.7020 low. Decisive break there will resume larger decline from 0.8135 for 0.6826 key support. On the upside, break of 0.7203 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, a medium term bottom is in place at 0.7020 ahead of 0.6826 key support (2016 low). Stronger rebound could still be seen to correct the whole fall from 0.8135 high. But we'd expect strong resistance from 0.7500 support turned resistance to limit upside. Medium term fall from 0.8135 should resume later and extend to take on 0.6826 low at a later stage, after the correction from 0.7020 completes.

Daily Pivots: (S1) 1.1344; (P) 1.1393; (R1) 1.1424; More.....

Intraday bias in EUR/USD remains neutral at this point. While the rebound from 1.1270 was strong, it's still limited below 1.1443 resistance. And near term outlook will remain mildly bearish with downside breakout slightly favored. On the downside, break of 1.1270 will argue that larger fall is resumption should target 1.1251 low next. Decisive break there will confirm this bearish case. EUR/USD should drop through 1.1186 fibonacci level to 61.8% projection of 1.2555 to 1.1300 from 1.1814 at 1.1038 next. However, firm break of 1.1443 resistance will indicate near term reversal and bring stronger rise back to 1.1814 resistance.

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) 1.2586; (P) 1.2633; (R1) 1.2657; More...

GBP/USD is staying in consolidation from 1.2476 and intraday bias remains neutral for the moment. Another rise could still be seen but upside should be limited by 1.2811 resistance to bring fall 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) 0.9916; (P) 0.9936; (R1) 0.9966; More...

Intraday bias in USD/CHF is turned neutral with the current recovery. Outlook is unchanged that the correction from 1.0128 might still extend. But in case of another fall downside should be contained by 0.9848 support to bring near term reversal. On the upside, above 0.9989 will turn bias back to the upside. Break of 1.0008 will target a test on 1.0128 high.

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, break of 0.9848 support will dampen this bullish view and turn focus back to 0.9541 key support instead.

The GBP/USD break above the 1.27 resistance (red line) could indicate a push towards the Fibonaccilevels of wave Y vs W. A break of the support trend line (blue) is possible but the main question is whether price will bounce or break the Fibs of wave X vs W around 1.2425-1.25. could be in wave 4-5.

The GBP/USD seems to be building an ABC (green) correction within a wave X (blue) of a larger WXY (blue) correction.

Daily Pivots: (S1) 112.16; (P) 112.41; (R1) 112.73; More..

USD/JPY drops to as low as 112.00 so far today and the break of 112.23 support indicates resumption of fall from 114.20. It's likely now in the third leg of the corrective pattern from 114.54. Intraday bias is now on the downside for 111.37 support and below. But still, downside should be contained by 38.2% retracement of 104.62 to 114.54 at 110.75 to bring rebound. Larger rise from 104.62 is expected to resume later. On the upside, above 112.66 minor resistance will turn intraday bias neutral first.

In the bigger picture, corrective fall from 118.65 (2016 high) should have completed with three waves down to 104.62. Decisive break of 114.73 resistance will likely resume whole rally from 98.97 (2016 low) to 100% projection of 98.97 to 118.65 from 104.62 at 124.30, which is reasonably close to 125.85 (2015 high). This will stay as the preferred case as long as 109.76 support holds. However, decisive break of 109.76 will dampen this bullish view and turns outlook mixed again.

US stocks tumbled overnight, extending recent decline, as FOMC raised interest rate and the overall announce was less dovish than expected. Risk aversion also spread to Asian session. Commodity currencies are generally pressured as a result. New Zealand Dollar additionally weighed down by poor GDP while Aussie is soft on mixed job data. While Dollar rebounded, it remains soft against European majors and Yen. Euro continues to be supported by Italy-EU budget deal. But Yen is even stronger on risk aversion.

Technically, AUD/USD is on track to retest 0.7020 low. EUR/AUD, after breaking 1.5984 support turned resistance, is also on track to retest 1.6357 high. USD/CAD is also in progress to 1.3685 fibonacci level. Yen will be a focus today as USD/JPY might finally sustain below 112.23 support with some conviction. Similarly, EUR/JPY could finally break through 127.61 support decisively. GBP/JPY might also have a tat on 141.17 support. EUR/USD, GBP/USD and USD/CHF, EUR/GBP are staying in range, awaiting breakout.

In other markets, DOW closed down -1.49% at 23323.66, S&P 500 dropped -1.54% while NASDAQ dropped -2.17%. US treasury yields tumbled sharply, especially at the long end. 10-year yield dropped -0.047 to 2.778. 30-year yield dropped -0.064 to 3.015, and it's now risking 3% handle. More importantly, yield curve flattened further and it's now inverted from 1-year (2.648) to 5-year (2.622).

In Asia, Nikkei is currently down -3.15%, Hong Kong HSI is down -1.51%, China Shanghai SSE is down -1.27%, Singapore Strait Times is down -0.55%. Japan 10 year JGB yield is down -0.0107 at 0.024.

Fed hikes to 2.25-2.50%, delivered dovish economic projections

Fed raised federal funds rate by 25bps to 2.25-2.50% as widely expected. The decision was made by unanimous vote. The latest economic projections were rather dovish. 2019 growth and inflation forecast was revised down. Fed also projected few rate hikes ahead. Yet, investors, possibly Trump too, are unhappy with the insufficient dovishness. The key is that Fed maintained "some further gradual increases" in federal funds rate will be consistent with sustaining the expansion and keeping inflation near target. Fed Chair Jerome Powell, while admitting that global growth is "softening", also said "policy does not need to be accommodative" as the US economy continues to perform well.

First and most important on longer run federal funds rate, seen as Fed's view on neutral. Median projection was revised to 2.8%, down from 3.0%. Central tendency was revised to 2.5-3.0%, somewhat down from 2.8-3.0%. Range was unchanged at 2.5-3.5%. For 2019, median was revised to 2.9%, down from 3.1%. Central tendency was revised to 2.6-3.1%, down from 2.9-3.4%. Overall, the revision argues that Fed might have one or at most two more rate hikes in 2019, rather than three as implied in September projections.

On growth, 2019 median growth projection was revised to 2.3%, down from 2.5%. 2020 median growth projection was unchanged at 2.0%. On unemployment, 2019 median unemployment rate projection was unchanged at 3.5%. 2020 median unemployment rate projection was revised to 3.6%, up from 3.5%. On core inflation. 2019 median core PCE projection was revised to 2.0%, down from 2.1%. 2020 median core PCE projection was revised to 2.0%, down from 2.1%.

Suggested readings on FOMC:

• FOMC Review – Fed Not As Dovish As Expected
• FOMC to Continue With Hikes, but Mindful of Risks
• Where The Fed May Be Wrong
• The Fed Hikes Rates, But Acknowledges Risks
• Fed Delivers Dovish Hike But Tightening Isn't Done Yet
• Fed Raises Rates, and Expects "Some" Further Gradual Hikes Will be Required
• FOMC Review Fed To Markets: 'Just A Couple Of More Hikes'
• Fed Recap: 'Some' What Dovish Hike Not Enough For Stocks

BoJ stands pat as widely expected, with 7-2 vote

BoJ left monetary policy unchanged today as widely expected. Short term policy rate is held negative at -0.1%. The central bank will continue with asset purchase at around JPY 80T a year to keep 10 year JGB yield at around 0%. The decision was again made by 7-2 vote. Y. Harada against said allowing long-term yields to move to some extent was too ambiguous. G. Kataoka continued to push for strengthen easing.

On economic outlook, BoJ said the economy is "likely to continue its moderate expansion". Domestic demand is likely to follow an uptrend, "with a virtuous cycle from income to spending being maintained in both the corporate and household sectors". CPI is "likely to increase gradually toward 2 percent, mainly on the back of the output gap remaining positive and medium- to long-term inflation expectations rising".

BoJ also maintained the risks include US macroeconomic policies, protectionist moves, emerging markets, Brexit and geopolitical risks.

Australia employment grew 37k, but full time jobs dropped -6.4k

Australian employment market grew 37.0k, seasonally adjusted, in November, much better than expectation of 20.0k. However, the growth was mainly driven by part-time jobs, which rose 43.4k. Full-time employment has indeed dropped -6.4k. Unemployment rate also rose 0.1% to 5.1%, above expectation of 5.0%. Participation rate rose 0.2% to 65.7%.

New Zealand GDP grew only 0.3%, sharp contraction in construction and manufacturing

New Zealand Dollar drops sharply today after big miss in GDP data. GDP grew 0.3% qoq in Q3, sharp slow down from Q2's 1.0% qoq and missed expectation of 0.6% qoq. Deep contraction is seen in both construction and manufacturing. Construction fell -0.8%, driven by a decrease in heavy and civil construction. Manufacturing dropped -0.8% "with 6 of 9 manufacturing industries declining." Services growth also eased to 0.5%, slowest rate of growth in six years. Also from New Zealand, trade deficit shrank to NZD -861M in November.

Looking ahead

UK will take center stage today with retail sales and BoE rate decisions featured. BoE is widely expected to keep Bank rate unchanged at 0.75%. The asset purchase target will also be held at GBP 435B. BOE sounded hawkish in November. Yet, given the changes in economic and political developments since the November meeting, it might have to tilt its stance on the rate hike path. While the upcoming meeting is an interim one, with no release of inflation report, the members might still convene a more cautious message in its policy statement. More in BOE Probably Turns More Cautious amid Brexit Uncertainty.

Later in the day, Canada will release wholesale sales. US will release Philly Fed survey, jobless claims and leading indicators.

USD/JPY Daily Outlook

Daily Pivots: (S1) 112.16; (P) 112.41; (R1) 112.73; More..

USD/JPY drops to as low as 112.00 so far today and the break of 112.23 support indicates resumption of fall from 114.20. It's likely now in the third leg of the corrective pattern from 114.54. Intraday bias is now on the downside for 111.37 support and below. But still, downside should be contained by 38.2% retracement of 104.62 to 114.54 at 110.75 to bring rebound. Larger rise from 104.62 is expected to resume later. On the upside, above 112.66 minor resistance will turn intraday bias neutral first.

In the bigger picture, corrective fall from 118.65 (2016 high) should have completed with three waves down to 104.62. Decisive break of 114.73 resistance will likely resume whole rally from 98.97 (2016 low) to 100% projection of 98.97 to 118.65 from 104.62 at 124.30, which is reasonably close to 125.85 (2015 high). This will stay as the preferred case as long as 109.76 support holds. However, decisive break of 109.76 will dampen this bullish view and turns outlook mixed again.

Economic Indicators Update

The December FOMC meeting outcome is expected, yet unexpected. As widely anticipated, it raised the policy rate, by +25 bps, to 2.25-2.5%. The IOER rate was raised by +20bps. The members trimmed the rate hike forecasts to two, form three, for September. They remained upbeat about economic outlook, but turned more cautious for the developments ahead. Yet, the members were not as dovish as expected. As Chair Jerome Powell noted, the members have "seen some developments that signal some softening". These “developments have not fundamentally altered the outlook”. The change in forward guidance was subtle, while the downward revisions on the economic projections were modest.

There were a few changes in the accompanying statement. Acknowledging the strength in the employment market, the members noted that the unemployment rate has “remained low”. In September, they indicated that the unemployment rates “has declined”. The change in language merely reflects the situation that the unemployment rate has steadied at 3.7%, the lowest level in over 40 years, since September.

On the forward guidance, the FOMC retained the view that “further gradual increases” in the Fed funds would be required to achieve the dual mandates. While the word “some” was added before “further gradual increases” at the December reference, the Committee did not elaborate on the meaning of “some”. The members judged that “risks to the economic outlook are roughly balanced”, adding the pledge that they would “continue to monitor global economic and financial developments and assess their implications for the economic outlook”.

The closely-watched median dot plot signals two more rate hike (each by 25 bps) in 2019, down from three as projected in September. Meanwhile, the longer run neutral rate projection was lowered by 25 bps to 2.75%. On the staff economic projections, GDP growth was revised slightly lower for 2018 and 2019, and stayed unchanged for 2020 and 2021. The long-run growth was revised higher slightly. Inflation was revised slightly lower for 2018 and 2019, and stayed unchanged for 2020 and 2021. Core inflation was revised slightly lower throughout the projection horizon.

BoJ left monetary policy unchanged today as widely expected. Short term policy rate is held negative at -0.1%. The central bank will continue with asset purchase at around JPY 80T a year to keep 10 year JGB yield at around 0%. The decision was again made by 7-2 vote. Y. Harada against said allowing long-term yields to move to some extent was too ambiguous. G. Kataoka continued to push for strengthen easing.

On economic outlook, BoJ said the economy is "likely to continue its moderate expansion". Domestic demand is likely to follow an uptrend, "with a virtuous cycle from income to spending being maintained in both the corporate and household sectors". CPI is "likely to increase gradually toward 2 percent, mainly on the back of the output gap remaining positive and medium- to long-term inflation expectations rising".

BoJ also maintained the risks include US macroeconomic policies, protectionist moves, emerging markets, Brexit and geopolitical risks.

Full release here.