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Daily Pivots: (S1) 0.9903; (P) 0.9945; (R1) 0.9973; More...

Intraday bias in USD/CHF remains neutral with focus on 0.9911 minor support. Break there will confirm completion of the rebound from 0.9862. Deeper decline would be seen back to 0.9862. For now, price actions from 1.0128 are viewed as a corrective move. We'd expect strong support from 0.9848 support to bring 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.

Daily Pivots: (S1) 112.50; (P) 113.01; (R1) 113.35; More..

USD/JPY is still bounded in range of 112.23/113.70 despite this week's sharp fall. Intraday bias stays neutral first. On the upside, above 113.70 will target 114.20 resistance first. Break there will resume the rise from 111.37 and target 114.73 key resistance next. However, break of 112.23 support will extend the corrective pattern from 114.54 with another decline. Overall, price actions 114.54 are seen as a consolidative pattern. In case of deeper fall, 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.

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.

Daily Pivots: (S1) 1.5698; (P) 1.5760; (R1) 1.5819; More....

EUR/AUD is staying in consolidation from 1.5887 and intraday bias remains neutral first. In case of another retreat, downside should be contained by 1.5596 support to bring another rally. On the upside, break of 1.5887 will target 1.5984 support turned resistance first. Break will pave the way to retest 1.6357 high next. However, break of 1.5596 will suggest that the rebound is completed. Intraday bias would then be turned back to the downside for 1.5346 low.

In the bigger picture, no change in the view that 1.6357 is a medium term top. But the strong rebound ahead of 1.5271 cluster support (38.2% retracement of 1.3624 to 1.6357 at 1.5313) suggests price actions from 1.6357 are developing into sideway consolidation, rather than a deep correction. The range of 1.5271/6357 is likely set for the consolidation. And we don't expect a break of the range any time soon. But decisive break of 1.6357 will resume the larger up trend from 1.3624 (2017 low) to 1.6587 (2015 high).

Daily Pivots: (S1) 0.8972; (P) 0.8991; (R1) 0.9014; More...

No change in EUR/GBP's outlook as it's staying in range below 0.9086. Intraday bias remains neutral and as long as 0.8931 resistance turned support holds, further rally is expected in the cross. On the upside, decisive break of 0.9098 resistance will extend the rally from 0.8655 and target 0.9304 key resistance next. However, considering bearish divergence condition in 4 hour MACD, firm break of 0.8931 will indicate near term reversal and target 0.8810 support and below.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). It should be in medium term rising leg for 0.9304. Meanwhile, in case of another fall, down side should be contained by 0.8620/55 support zone to bring rebound.

Daily Pivots: (S1) 1.1248; (P) 1.1270; (R1) 1.1293; More...

EUR/CHF is staying in range above 1.1224 and intraday bias remains neutral first. Considering bullish convergence condition in 4 hour MACD, a short term bottom is likely in pace. On the upside, break of 1.1301 minor resistance will target 1.1356 resistance first. Decisive break there should confirm near term reversal. In that case, further rally should be seen back to 1.1501 resistance. However, on the downside, below 1.1224 will invalidate this bullish case and extend the fall to 1.1173 low instead. But still, we'd expect strong support inside 1.1154/98 key support zone to bring reversal.

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.

Daily Pivots: (S1) 141.91; (P) 142.58; (R1) 142.99; More...

GBP/JPY is staying in consolidation from 141.17 and intraday bias remains neutral for now. Near term outlook remains bearish with 144.02 support turned resistance intact. On the downside, below 141.17 will resume the fall from 149.70 and target 139.29/47 key support zone. However, considering bullish convergence condition in 4 hour MACD, decisive break of 144.02 will suggest near term reversal. Stronger rally should then be seen to 55 day EMA (now at 144.96) and above.

In the bigger picture, as long as 139.29 cluster support (50% retracement of 122.36 to 156.59 at 139.47) holds, up trend from 122.36 (2016 low) could still extend beyond 156.69 high. However, decisive break of 139.29/47 will suggest that such up trend is completed and turn outlook bearish. In that case, next target is 61.8% retracement at 135.43.

The Euro currency managed to rise as the U.S. Dollar was seen trading weaker. Economic data on the day showed that the final inflation for November rose at a slower pace of 1.9%. This was below the flash estimates which showed a 2.0% increase. The final core inflation rate was however unchanged at 1.0%.

The NY trading session saw the Empire State Manufacturing Index data. The index fell to 10.9 in December down from 23.3 the month before. This was also below the estimates of 20.1.

Ahead of the two day Fed meeting that starts today, President Trump once again expressed his displeasure with the Fed's plan to hike rates at the Fed meeting this week. This sent the U.S. Dollar falling on the day. The FOMC will be concluding its two-day conference on the 19th of December.

Looking ahead, the economic calendar today is relatively quiet.

The German Ifo business climate index is forecast to show a decline to 101.8 on the index. This marks a decline from 102.0 that was registered previously. Canada's manufacturing sales report kicks off the NY trading session with forecasts pointing to a 0.3% increase on the month.

The U.S. housing data is on the cards next. Building permits are forecast to rise modestly to 1.26 million in November, slightly up from October's fall to 1.26 million. Housing starts are expected to remain steady at 1.23 million for November.

December 2018 has so far been one of the ugliest Decembers in U.S. stock market history. The S&P 500 declined 7.8% in 10 trading days and experienced the worst two-day selloff since October. Cheaper valuations, the U.S.-China trade truce, and dovish Fed commentary were not enough to put an end to falling stock markets. Santa Clause seems to have lost his way this year, defying hopes that stocks will rally towards the year's end. Instead, institutional investors appear to be pulling out, taking whatever profits they have accumulated throughout this year.

Today the FOMC will kick off its highly anticipated two-day meeting. Given the steep decline in equities and the economic slowdown in Asia and Europe, many investors hope that the Fed will shelve the December rate hike. However, the U.S. economy grew an annualized 3.5% in the third quarter, unemployment is currently at a 50-year low, and inflation is near target. Given these factors, monetary policymakers won't be able to justify a pause in the normalization cycle. In my opinion, avoiding a rate hike in December will send a negative signal to markets, confirming the views that a recession is about to hit the global economy.

Instead, the more probable scenario on Wednesday would beto deliver a dovish rate hike. This means the Fed will raise rates by 25 basis points and indicate that going forward, the policy will be data-dependent. Expect the phrase ‘further gradual increase' to be dropped from the statement especially following Fed Chairman Jerome Powell's remarks that the central bank's benchmark interest rate is ‘just below' neutral. This will allow the central bank to pause the hiking cycle next year without causing shocks to expectations.

The Fed's dot plot is another interesting chart to observe on Wednesday. In September's meeting, Fed participants projected three rate hikes in 2019. Expect these dots to shift downwards to two hikes instead. Meanwhile, the longer-term interest rates may be dragged downwards to indicate that we're getting closer to neutral rates.

Chairman Powell is likely to be faced with many questions about the threat of economic slowdown especially given the recent inversion of the yield curve. Investors will scrutinize every word he says, but I think at this stage there's little he can do to provide equity bulls their much-needed confidence.

The DAX 30 seems to be completing a bearish ABC (blue) zigzag pattern which could aim for the Fibonacciretracement levels of wave C vs A.

The DAX 30 seems to be building a large bearish WXY (pink) correction. A downtrend could occur if price manages to break below the 38.2% Fibonacci retracement level of wave 4 vs 3just below 10,000 at 9,750.

Market movers today

Today, it is time for the German Ifo business confidence. We expect to see a small decline again on the back of a continued difficult external environment, with China slowing further into year-end. See also Germany - Not out of steam, but past the peak , 11 December 2018 for more on our expectations on the German economy.

US housing starts will give more flavour on the state of how much US housing is slowing down. A range of housing indicators (permits, house prices, home sales, NAHB survey) have all weakened over the past six months.

In China, President Xi Jinping is scheduled to give a speech in Beijing to mark the 40-year anniversary of the reform and opening policy, started by Deng Xiaoping in December 1978.

Otherwise, markets will be looking ahead to the Fed meeting tomorrow for signals of monetary policy in 2019.

Selected market news

It is beginning to look like investors have been naughty this year as Santa Claus continues to be ever delayed. Risk tumbled in the US after European bourses closed. The S&P 500 fell over 2% to its lowest level year to date. Asian exchanges followed suit. US 10-year treasuries held steady around 2.86%. The dollar held against other currencies. This morning, S&P 500 stock futures are trading unchanged.

Yesterday, Trump warned the Fed about raising rates. He said that it is 'incredible that with a very strong dollar and virtually no inflation', the Fed is even considering raising rates given that at the same time 'the outside world is blowing up' and 'Paris is burning'. Markets continue to expect the Fed to raise interest rates as it convenes tomorrow despite Trump's guidance over the 'madness' of raising rates amidst global carnage. We concur.

Never a dull day in Brexit land. Yesterday, PM Theresa May indicated that the vote on her Brexit deal will take place in the week beginning 14 January. May also said that negotiations with the EU continue despite the EU having said that no further negotiations are planned and that the EU27 will not reopen the Withdrawal Agreement. It seems as if EU leaders will not change position until at least the UK politicians find out what they want. This makes good sense as it is not a given that the deal would survive in the House of Commons even with further concessions given the big divisions in British politics.

Also yesterday, UK Labour leader Jeremy Corbyn said he wanted to proceed with a 'no confidence' vote in May. The vote would not be on her government, which could lead to snap elections. Instead, a vote solely on May would have limited legal implications besides the potential embarrassment for Theresa May.