Sample Category Title

Asian stocks fell on Tuesday following a major speech by Chinese President Xi Jinping, tracking losses on Wall Street as traders braced for an interest rate hike by Federal Reserve. Japan's Nikkei 225 index NIK, -1.82% was 1.6% lower and the Kospi SEU, -0.43% in South Korea dropped 0.4%. Hong Kong's Hang Seng HSI, -1.05% slipped 0.9%. The Shanghai Composite index SHCOMP, -0.82% dropped 1%, as did Australia's S&P ASX 200 XJO, -1.22% . Shares were lower in Taiwan Y9999, -0.70% and Southeast Asia.

Investors had been anxiously awaiting a speech by Xi to commemorate the 40th anniversary of China‘s economic reforms. Some analysts were hoping Xi would announce new commitments to a free-market economy. Xi said economic reforms will continue, where needed. “We will resolutely reform what should and can be reformed, and make no change where there should and cannot be any reform,” he said.

He added that China has reached a point where it must move forward. “We will reinforce the development of the state economy while guiding the development of the non-state economy,” Xi said. “Opening brings progress while closure leads to backwardness.”

The Federal Open Market Committee begins a two-day meeting on Tuesday. It is expected to raise its short-term interest rate by a modest quarter-point, to a range of 2.25% to 2.5% a day later. Investors fear more monetary tightening would weigh on U.S. growth, and eventually, the global economy, that is already expected to slow in 2019 because of trade tensions. President Donald Trump tweeted that it was “incredible” the Fed was considering another rate hike, with “a very strong dollar and virtually no inflation.” The central bank forecasts three more rate hikes in 2019.

The GBP/USD exactly behaved as I analysed it yesterday, but at this point the cable make higher lows and higher highs suggesting a possible bounce.

1..2640-50 is the zone where the pair could bounce. A rejection from the zonal confluence has formed an inverted head and shoulders pattern that might reach higher targets if the price gets an additional bullish momentum. An hourly close above 1.2660 should spike the pair up to 1.2700 followed with 1.2730. A drop below 1.2610 will make bears stronger again, so this scenario will be negated then.

The Australian dollar regained traction on Tuesday and bounced from daily cloud which repeatedly contained attacks in past sessions. Fresh strengths emerges from concerns about dovish Fed on Wednesday, as well as minutes of RBA's last policy meeting. The minutes were generally unchanged but kept hints for potential near future action. Although reversal pattern is forming on daily chart, risk of fresh weakness remains high, with current upticks so far seen as positioning. Strong bearish momentum and negative setup of daily studies supports scenario. Recovery attempts face strong headwinds from falling 10SMA (0.7207) and while the latter caps, risk of retesting cracked pivot at 0.7163 (Fibo 61.8% of 0.7020/0.7393) and stronger bearish acceleration on break, is expected to remain in play. Break above 10 SMA and nearby 100SMA (0.7220) would provide relief, but stronger upside action and close above pivotal barrier at 0.7246 (converged 20/30SMA/13 Dec recovery high) is needed to neutralize bearish threats and signal stronger recovery.

Res: 0.7207, 0.7220, 0.7246, 0.7272
Sup: 0.7173, 0.7163, 0.7108, 0.7074

Notes/Observations

• German IFO survey continues string of weak European data

Asia:

• RBA Dec Minutes: Reiterated that Board agreed that the next likely move in interest rates was higher but saw no strong case for any near-term adjustment
• Japan cuts outlook for GDP and CPI for both current and next year. Cuts FY18/19 CPI from 1.1% to 1.0% and FY19/20 CPI from 1.5% to 1.1%. Cuts FY18/19 GDP from 1.5% to 0.9% and FY19/20 GDP from 1.5% to 1.3%
• Japan Vice Finance Minister for International Affairs Asakawa (top currency official) stated that gone were the days when currency movement was mostly driven by current account balance. In today's world currency was mostly driven by capital flows
• China Govt advisers said to have suggested that 2019 GDP target should be lowered to 6.0-6.5% due to increasing headwinds
• China President Xi address at the 40th anniversary of Deng Xiaoping's reform of China's economy pledged toi make reform more systematic. Stated that the country had avg annual GDP of 9.5% over the last 40 years. Would to uphold one-China policy and deepen cross strait ties

Europe:

• Italy govt reportedly plans to cut 2019 growth outlook from 1.5% to 1.0% as part of budget forecast. no deal had yet been reached yet between Italy govt and EU on the 2019 budget
• PM May: Parliamentary debate on the deal would resume Jan. 7th, with a vote held the following week. Cabinet to hold discussion on 'no deal' planning preparations on Dec 18th; if this deal was voted down there would be no other deal
• Opposition Labour Party Leader Corbyn to put forward no-confidence motion against PM May (Note: opposition planned to call no confidence vote against PM if she did not announce a date for the Parliament meaningful vote on her Brexit deal (Note: A 'no confidence' vote in PM May would be a political reprimand but would not trigger an election (differs from calling a confidence vote against the govt). PM's office said they wouldn't allow time for the no confidence vote , adding ministers would not along with silly games
• UK govt said to have received some legal advice regarding an extension of Article 50 which it argues effectively rules out a 2nd referendum. The advice was that Britain would be legally obliged to take part in Euro Parliament elections in May 2019 if its extended Article 50 . Was a high risk of a successful legal challenge if the UK refuses to take part in elections as this breaches people's rights as citizens

Americas:

• Congress said to be considering stopgap spending bill that went deeper into 2019
• Oct TIC data again showed China and Japan reducing holdings of US treasuries
• Bank of Canada (BOC) Gov Poloz stated that interest rates needed to be more neutral with economy near capacity; not expecting recession in 2019 as the economic fundamentals were quite solid

Macro

• (DE) Germany: The IFO fell by much more than expected once again to 101.0 from 102.0 in the prior month. The expectations reading dropped to 97.3 from 98.7 - the fourth consecutive decline, pointing to further weakness in the German economy. The December reading left the average for Q4 at just 102.0 - down from 103.2 in Q3, which points to a renewed growth deceleration over the medium term.
• (CH) Switzerland: The Swiss government cut it's GDP growth forecast for next year to just 1.5%, from 2.0% expected back in Q3. The inflation projection for 2019 has been cut back to 0.5% from 0.8%, with CPI seen at 0.7% in 2020. At the same time the State Secretariat for Economic Affairs noted "negative risks clearly predominate for the global economy", citing global trade protectionism , Brexit risks, the high level of international debt, but also uncertainty about the relationship between Switzerland and the EU in connection with the negotiations on the framework agreement. At the same time "in view of simmering imbalances, the risk of a major correction in the Swiss real estate sector also remains". Plenty of negative risks, which were also highlighted by the SNB last week and which will keep the Swiss central bank on hold and stuck with a negative interest rates for the foreseeable future.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.22% at 342.50, FTSE -0.42% at 6,744.75, DAX +0.48% at 10,824.05, CAC-40 -0.18% 4,791.00, IBEX-35 -0.31% at 8,785.55, FTSE MIB +0.32% at 18,752.50, SMI -0.11% at 8,588.60, S&P 500 Futures +0.35%]
• Market Focal Points/Key Themes: European Indices trade mostly lower across the board following on from weakness in the US and Asia overnight. Bund futures trade just off the highs as yields continue to fall. On the corporate front Petrofac trades higher following a trading update, with MQ Holding trading lower after a decline in Revenues and profits. Shire shares fall on the back of a Moddy's downgrade on Takeda, while National Grid is another notable faller following the announcement of Ofgem proposal to cut network capital costs. In the US overnight Oracle shares gained after earnings. Looking ahead notable earners include Darden. Factset, Navistar and Worthington Industries.

Equities

• Consumer discretionary: Asos [ASC.UK] +0.5% (analyst action), Superdry Plc [SDRY.UK] +4.5% (co-founder comments)
• Energy: Petrofac [PFC.UK] +4% (trading update), Royal Dutch Shell [RDSA.NL] -2.5% (said to be in talks for acquisition)
• Financials: Hoist Finance [HOFI.SE] -20% (mulls alternatives in response to newly set risk weights)
• Healthcare: Shire Plc [SHP.UK] -4% (potentially acquiring company's rating cut), Galapagos [GLPG.BE] -4.5% (trial initiation)
• Industrials: BASF [BAS.DE] +0.5% (CEO comments), BAE Systems [BA.UK] +0.5% (contract awarded)
• Unilities: Voltalia [VLTSA.FR] +4% (affirms medium-term targets; starts share buyback program)
• Materials: K+S AG [SDF.DE] +2% (positive profit alert)

Speakers

• ECB's Rehn (Finland): Reinvestments, low rates to support inflation goal. Called for periodic review of ECB's monetary policy framework
• EU's Moscovici stated that the EU shouldn't be a punitive institution. France won't be sanctioned with an excessive deficit procedure (EDP) as the country was working to lower its budget deficit. Working very hard to ensure Italy did not face sanctions over deficit goal breach
• Italy Dep PM Di Maio: have done all we could on 2019 budget, made all the budget concessions possible. Italy's new budget deficit target did not fit completely with EU parameters but was a sign of dialogue. He added there would be no agreement if EU asked us to betray Italians
• Bank of Portugal Dec Economic Bulletin cut its 2018 GDP growth forecast from 2.3% to 2.1% and cut 2019 GDP growth forecast from 1.9% to 1.8%
• Bank of Finland updated its economic forecasts which cut 2018 GDP growth from 2.9% to 2.7% and cut 2019 GDP from 2.2% to 1.9%
• Norway Central Bank (Norges) Gov Olsen reiterated forward guidance of gradually raising the Deposit Rate in the coming years with the next potential rate hike seen in March 2019
• Germany Finance Ministry commented on 2019 issuance which planned to sell €156B in bonds and €43B in bills
• German IFO Economists commented that uncertainty had increased with Brexit at the top of the agenda. It saw the domestic economy cooling but avoiding a recession. Export level at its lowest since Nov 2016
• Brazil Central Bank (BCB) Dec COPOM Minutes reiterated that reforms were essential to maintain low inflation. Risk of lower-than-expected CPI had grown but risks for higher CPI still remained relevant
• Japan FY19/20 initial budget seen at ¥101.5T (1st time over the ¥100T level) with general spending seen at ¥62.0T, +5.2% y/y and JGB bond issuance at ¥32.7T
• Bank of Korea (BOK) Nov Minutes: Necessary to focus on resolving fiscal imbalances
• Russia Energy Min Novak to discuss OPEC+ deal with Russian oil companies on Wed, Dec 19th. Plan was to achieve approx 228K bpd in production cuts within one quarter. Cuts to be voluntary and proportional for Russian oil companies. Russia forecasted 2019 oil production between 555-556M tons; forecasts could be lowered by 3-4M tons as there were a lot of uncertainties

Currencies/Fixed Income

• The USD was softer in the session and probing 1-week lows against major pairs ahead of the FOMC policy meeting on Wednesday. US bond yields were lower as safe-haven flows and caution view on the Fed remain prevalent.
• USD/JPY was lower by 0.3% to probe the mid-112.50 area aided by safe-haven flows.. The BOJ meets later this week for its final monetary-policy meeting for 2018 and likely to reiterate its forward guidance stance on "being on hold for an extended period"
• GBP/USD was higher by 0.2% after UK PM May stated she would continue dialogue with EU on the Brexit before a vote in parliament next month.
• EUR/USD higher by 0.25% despite weaker-than-expected survey of Germany business sentiment

Economic Data

• (ZA) South Africa Oct Leading Indicator: 105.7 v 105.0e
• (ES) Spain Q3 Labour Costs Y/Y: 1.9% v 0.7% prior
• (HK) Hong Kong Nov Unemployment Rate: 2.8% v 2.8%e (matches lowest level since Jan 1998)
• (DE) Germany Dec IFO Business Climate: 101.0 v 101.7e; Current Assessment: 104.7 v 105.0; Expectations Survey: 97.3 v 98.3e
• (PL) Poland Nov Employment M/M: 0.1% v 0.1%e; Y/Y: 3.0% v 3.0%e
• (PL) Poland Nov Average Gross Wages M/M: 0.9% v 0.4%e; Y/Y: 7.7% v 7.2%e
• (BR) Brazil Dec IGP-M Inflation (2nd Preview): -1.2% v -1.1%e

Fixed Income Issuance

• (HU) Hungary sold CNY2.0B in 3-year Panda bonds

Looking Ahead

• (SA) Saudi Arabia Oct Oil Production: No est v 10.502M bpd prior; Exports: No est v 7.43M bpd prior
• JODI - (IQ) Iraq Oct Crude Oil Output Exports: JODI
• (BR) Brazil Dec CNI Consumer Confidence: No est v 113.6 prior
• (BR) Brazil Dec CNI Industrial Confidence: No est v 63.2 prior
• (IT) Italy Senate to discuss the 2019 budget
• 05.30 (UK) Weekly John Lewis LFL sales data
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO) ( - 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
• 06:00 (TR) Turkey to sell Bonds
• 06:45 (US) Daily Libor Fixing
• 07:45 (US) Weekly Chain Store Sales
• 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: expected to leave Base rate unchanged at 0.90%; to leave Overnight Deposit Rate unchanged at -0.15%
• 08:00 (RU) Russia announces weekly OFZ bond auction (held on Wed)
• 08:10 (UK) Baltic Dry Bulk Index
• 08:30 (US) Nov Housing Starts: 1.228Me v 1.228M prior; Building Permits: 1.260Me v 1.265M prior (revised from 1.263M)
• 08:30 (CA) Canada Oct Manufacturing Sales M/M: 0.5%e v 0.2% prior
• 08:55 (US) Weekly Redbook Retail Sales data
• 09:00 (EU) Weekly ECB Forex Reserves
• 09:00 (HU) Hungary Central Bank Gov Matolcsy post rate decision statement
• 09:30 (NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: No est v +2.2% prior
• 10:00 (MX) Mexico weekly International Reserve data
• 10:00 (CO) Colombia Oct Trade Balance: -$1.0Be v -$0.4B prior; Total Imports: $4.7Be v $4.1B prior -
• 14:00 (AR) Argentina Q3 GDP Q/Q: No est v -4.0% prior; Y/Y: -3.5%e v -4.2% prior
• 14:00 (AR) Argentina Q3 Unemployment Rate: No est v 9.6% prior
• 16:30 (US) Weekly API Oil Inventory data

The Decline of the common European currency against the Japanese Yen continued during Monday's trading session. The currency pair fell about 76 base points during the end of yesterday's session.

The depreciation continues during Tuesday's trading session. By the middle of the day, the exchange rate has declined further 45 base points.

As for the near future, it is likely that the Euro will make a brief retracement north towards a resistance cluster formed by the combination of the 200-hour simple moving average and the weekly PP at 12849.

However, the 50-hour SMA at 128.16 could hinder such movement today.

The Australian Dollar traded sideways movement against the US Dollar on Monday. The 50-hour simple moving average was providing resistance for the currency pair at 0.7185 during yesterday's session.

Today's session began with a bullish momentum, and by the middle of the European trading session, a breakout had occurred through the upper boundary of a descending channel pattern at 0.7192.

Given that a breakout had occurred, the AUD/USD currency exchange rate will likely surge within this session and potentially aim at a resistance level formed by a traditional weekly R1 at 0.7233.

The US Dollar has continued to gain strength against the Canadian Dollar in an ascending trendline. The currency pair appreciated about 48 base points during Monday's trading session.

However, after testing a resistance level formed by the monthly pivot point at 1.3419 during the Asian session on Tuesday, the exchange rate made a U-turn south.

In regards to the near future, most likely, the US Dollar will continue to surge towards the 1.3445 area. It is expected that a decline could follow after the currency exchange rate reaches the given target.

The New Zealand Dollar traded below the 50-hour simple moving average at 0.6820 against the US Dollar on Monday.

However, the situation changed during the Asian session on Tuesday, as bullish momentum pushed the currency pair towards a resistance level formed by a traditional weekly pivot point at 0.6881.

After hitting the weekly R1 the exchange rate made a brief retracement down. Everything being equal, it is likely that the Kiwi aim at a support level set by the weekly PP at 0.6829 during the following trading session

The US dollar has extended intraday losses against the Japanese yen currency during the European trading session, with the risk-sensitive pair break below key trendline support. The MACD indicator on the four-hour time frame is also signalling further short-term downside ahead for the USDJPY pair. The USDJPY is also likely to remain under pressure if US equity markets continue to decline.

The USDJPY pair is strongly bearish while trading below the 112.42 level, key support remains at the 112.20 and 111.30 levels.

If the USDJPY pair trades above the 112.42 level, buyers may test towards the 112.55 and 112.90 resistance levels.

The British pound continues to build bullish momentum against the US dollar, with price holding firmly above the 1.2600 support level. Buyers now need to move price above the neckline of the large head and shoulder pattern and surpass the former weekly trading high. If the GBPUSD pair is technically rejection around the 1.2660 resistance level, sellers will likely push price back towards the 1.2600 level.

The GBPUSD pair is bullish while trading above the 1.2600 level, buyers may test towards the 1.2660 and 1.2700 levels.

If the GBPUSD pair is rejected from the 1.2660 level, sellers will likely test the 1.2630 and 1.2600 support levels.