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EURUSD (1.1360): The EURUSD currency pair was slightly muted to the outcome of the ECB's decision. Price action, therefore, remains trading flat and near the falling trend line which has managed to hold the gains. In the near term, the EURUSD is expected to retest the lower support at 1.1315 - 1.1300 once again. Failure to break out above the trend line would keep price action trading flat at the current levels. There is a risk that the common currency could break the support which could open the way for further declines to 1.1220.

Daily Pivots: (S1) 0.8944; (P) 0.8981; (R1) 0.9009; More...

EUR/GBP is staying in consolidation from 0.9086 and intraday bias remains neutral first. As long as 0.8931 resistance turned support holds, further rise is expected. On the upside, decisive break of 0.9098 resistance will extend the rise from 0.8655 to 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). Sustained break of 0.8939 resistance will confirm that it's in a medium term rising leg for 0.9098 and above. And for now, in case of another fall, downside will likely be contained by 0.8620/55 support zone to bring rebound.

The Swiss National Bank held its monetary policy meeting on Thursday. The Central Bank kept its LIBOR rate unchanged at -0.75% as widely expected. The Central Bank, however, lowered its inflation outlook.

The ECB was the next central bank to hold its monetary policy meeting. The Central Bank announced that it was ending its QE program but gave a cautious outlook on the economy and inflation prospects. The Euro did not react much to the news.

The NY trading session saw the U.S. import prices falling by 1.6% which was more than the forecast of a decline of 1.0%.

The Tankan manufacturing index was at 19, unchanged from the previous quarter. Economists polled expected manufacturing to fall to 18. The non-manufacturing index rose to 24 from 22 during the last quarter, and the data beat the estimates of a decline to 21.

The European trading session will see the release of the flash manufacturing and services PMI for December. The Eurozone's manufacturing PMI is forecast to rise slightly to 51.9 while services PMI is expected to remain steady at 53.4, unchanged from the previous month.

The NY trading session will see the retail sales numbers out of the U.S. Core retail sales are forecast to rise 0.2% in November. This follows a sharp 0.7% increase the month before. Headline retail sales are expected to grow 0.1% on the month, slower than the 0.8% increase seen the month before.

Later in the evening, the flash services and manufacturing PMI for the U.S. will be released by Markit.

USDCAD is losing momentum after the aggressive upside run towards the 18-month high of 1.3443 on December 6. The price is developing well above its moving averages which are positively sloped, a sign that the uptrend could continue and remains in an ascending movement in the short- and long-term timeframes. Momentum indicators are also in bullish territory, with the MACD crossing above its red signal line and the RSI fluctuating well above its 50 mark.

An extension to the upside would likely retest the previous peak of 1.3443. Higher than that, positive momentum could speed up towards the 1.3540 resistance level, registered on June 2017, whilst a penetration of this significant barrier could send prices near the 1.3800 handle, the top of April 2017.

A downside reversal could rest around the 20-day simple moving average (SMA) around 1.3290, before heading towards the short-term rising trend line near 1.3250. Below that, the pair could break this line and re-challenge the 1.3160 support level, increasing the chances for a bearish correction mode. Also, the 23.6% Fibonacci retracement level of the upleg from 1.2060 to 1.3443, around 1.3117 could be a strong level for investors to look for.

Summarizing, USDCAD has been trading in an upward tendency since September 2017, creating higher highs and higher lows.

Daily Pivots: (S1) 1.5665; (P) 1.5723; (R1) 1.5772; More....

EUR/AUD is staying in consolidation from 1.5887 and intraday bias remains neutral. In case of another retreat, down side should be contained by 1.5596 support to bring rise resumption. On the upside, above 1.5887 will resume the rise from 1.5346 to 1.5984 resistance first. Decisive break there will pave the way to retest 1.6357 high. Nevertheless, break of 1.5596 will indicate completion of the rebound and turn bias back to the downside for retesting 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) 1.1269; (P) 1.1286; (R1) 1.1306; More...

Intraday bias in EUR/CHF remains on the upside at this point. Rebound from 1.1224 short term bottom should target 1.1356 resistance first. Decisive break there should indicate near term reversal and target 1.1501 key resistance. On the downside, below 1.1224 will dampen 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.

General Trend:

• Asian chip and technology companies trade broadly weaker, Hynix drops over 5%
• Australian banks trade broadly lower, RBNZ commented on capital rules
• Japan Display rises over 38%, confirmed alliance talks
• JGB Futures rise to highest level since late 2016 as equities drop
• Japan Q4 Tankan Survey mixed, large company outlooks decline
• Commodity currencies track declines in equities amid China data, RBNZ commented on capital rules
• The auto and electronic sectors weighed on China’s Nov Industrial Production data (Stats Agency)
• China Stats Agency official commented on 2019 growth
• China PBoC conducts second MLF operation in Dec, skipped OMO for the 36th straight session
• China is expected to hold its Economic Work Conference Dec 19-21
• US Fed FOMC expected to hold policy meeting Dec 18-19

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.4%
• (AU) Australia Dec Preliminary PMI Manufacturing: 53.7 v 54.6 prior
• (AU) Australia AOFM: There will be no further issuance or bond buybacks in 2018
• (NZ) Reserve Bank of New Zealand (RBNZ): Consulting on a proposal to raise the amount of capital that banks must hold: Generally bank capital level increase will be between 20 and 60%
• (NZ) New Zealand Nov Manufacturing PMI: 53.5 v 53.7 prior
• (NZ) New Zealand sells NZ$250M v NZ$250M indicated in 3.00% April 2029 bonds: avg yield 2.4828%, bid to cover 1.79x

China/Hong Kong

• Shanghai Composite opened -0.3%, Hang Seng -1.2%
• (CN) CHINA NOV INDUSTRIAL PRODUCTION Y/Y: 5.4% V 5.9%E (matches slowest growth rate since early 2016)
• (CN) CHINA NOV RETAIL SALES Y/Y: 8.1% V 8.8%E (slowest growth since 2003)
• (CN) CHINA NOV FIXED ASSETS INVESTMENT (EX-RURAL) YTD Y/Y: 5.9% V 5.8%E
• (CN) China Nov Surveyed Jobless Rate: 4.8% v 4.9% prior
• (CN) China National Bureau of Statistics (NBS) Official: Nov industrial production was impacted by the auto and electronics sectors; China 2019 economic growth target should reflect goal of doubling GDP by 2020 from 2010
• (CN) China Politburo: Will keep economic operation within 'reasonable' range in 2019; to continue campaign against pollution, poverty
• (CN) China PBoC Gov Yi Gang: Domestic economic growth has neared its potential; downward pressure is increasing
• (CN) CHINA PBOC CONDUCTS CNY286B IN 1-YEAR MEDIUM-TERM LENDING FACILITY (MLF) V CNY187.5B PRIOR AT 3.30% V 3.30% PRIOR
• (CN) China PBoC Open Market Operation (OMO): Skips operation for 36th straight session
• (CN) China PBoC sets yuan reference rate: 6.8750 v 6.8769 prior
• (US) Commerce Sec Ross: we are having frequent conversations with China

Japan

• Nikkei 225 opened -0.8%
• (JP) Nikkei 225 Dec Futures and Options said to settle at ~21,619
• (JP) BoJ announcement related to daily bond buying operation: Trims offer to buy 5-10 yr JGBs to ¥430B v ¥450B prior
• (JP) JAPAN Q4 TANKAN LARGE MANUFACTURING INDEX: 19 V 18E; OUTLOOK: 15 V 17E (weakens for first time in 3 quarters); LARGE ALL INDUSTRY CAPEX: 14.3% V 12.8%E
• (JP) JAPAN DEC PRELIM PMI MANUFACTURING: 52.4 V 52.2 PRIOR

Korea

• Kospi opened flat
• (KR) South Korea President Moon approval rating 45% v 49% prior (record low) - Gallup Poll

North America

• US equity markets ended mixed: Dow +0.3%, S&P500 flat, Nasdaq -0.4%, Russell 2000 -1.6%
• Apple [AAPL]: China Unit: To publish iPhone software update early next week to resolve any possible concerns about compliance with court order
• (SA) Saudi Arabia reportedly to target the US with a sharp reduction in oil exports; Saudi total exports to drop to around 7M bpd in Jan - press

Europe

• (EU) Juncker: UK has to say what it wants in the future relationship; wants to start talks on future relations between the UK and EU as immediately after ratification by both parliaments
• (EU) Tusk: UK PM May informed EU about difficulties of ratifying deal; EU stands by Nov Brexit deal, won't renegotiate it
• (UK) EU has reportedly strengthened the wording on Brexit backstop in its summit document; reiterates it doesn't seek to use Brexit backstop, backstop should be temporary; notes 'firm determination' to work speedily on subsequent agreement by Dec 2020 – press
• (EU) ECB sources: Policymakers debated modifying the balance of risk assessment to highlight downside risks - press

Levels as of 01:30ET

• Nikkei 225, -2.1%, ASX 200 -1.1%, Hang Seng -1.7%; Shanghai Composite -0.9%; Kospi -1.2%
• Equity Futures: S&P500 -0.7%; Nasdaq100 -0.9%, Dax -0.6%; FTSE100 -0.4%
• EUR 1.1373-1.1354 ; JPY 113.69-113.42 ; AUD 0.7231-0.7178 ;NZD 0.6867-0.6790
• Feb Gold -0.2% at $1,246/oz; Jan Crude Oil -0.4% at $52.38/brl; Feb Copper -0.6% at $2.751/lb

Markets back in the red despite this week's bounce

We've seen a decent bounce in equity markets in what has been another quite extraordinary week – I'm thinking primarily of the UK, of course – and yet despite this, it's hard to find many people that are actually bullish near-term which makes me think this particular sell-off has not yet run its course.

A look at Asia trade overnight and how European and US futures are shaping up ahead of the final trading day of the week would appear to support this view. This still looks like a very vulnerable market and while US China trade talks may be encouraging, Europe has a number of problems that aren't yet heading towards a successful conclusion and that's going to take its toll.

One eye will naturally remain on the various political stories that have been such an important driver for markets today but there's also a lot of data that could provide a welcome distraction. This primarily comes in the form of PMIs, with manufacturing and services surveys for December being released for the eurozone throughout the early part of the European session.

ECB confirms end of QE and offers less optimistic view

The PMIs come after the ECB confirmed that its QE program will come to an end this month as planned, although reinvestments will continue well beyond the central bank starts raising rates. The central bank didn't change it view on rate hikes, sticking with its commitment to keep them at current levels at least through the end of the summer next year, although their internal view on what this means may have changed as the economy has slowed.

Draghi acknowledged that risks are leaning more to the downside, as the ECB revised lower its growth forecasts, which I think will ultimately delay the first hike until at least this time next year, if not a little longer. The euro area economy faces numerous challenges next year including weaning itself off net QE increases, slower global growth and political flare up, such as what we're seeing in France and Italy, where the government remains at odds with the European Commission over its budget. It's latest compromise – reducing its deficit target to 2.04% from 2.4% is unlikely to be enough to get Brussels on board.

Gold rally held back by continued dollar support

The growing number of dollar bears are being forced to be very patient, with the pound remaining under Brexit pressure and the euro struggling to generate the momentum higher. This is providing near-term pressure for Gold which has a strong inverse relationship with the greenback but has looked bullish itself. Gold is now testing $1,240 from the upside having broken above here last week. If this can hold, it could be a bullish signal with the next levels above being $1,260 and $1,280.

Oil prices bottoming or pause in selling?

The post-production cut impact on oil prices has been modest to say the least but for now at least, the failure to break new lows will come as a relief. We now look stuck in a tight range near the lows, between $50-54 in WTI and $58-63 in Brent. This may in itself be a bottoming setup in itself but there doesn't appear to be too many rushing to get in at these levels which suggest sentiment may be tilted to the downside for a little longer yet.

Daily Pivots: (S1) 1.1328; (P) 1.1361; (R1) 1.1391; More.....

Intraday bias in EUR/USD remains neutral and outlook stays bearish with 1.1472 resistance intact. On the downside, break of 1.1267 will target 1.1215 low first. Firm break there will resume larger down trend from 1.2555 for 1.1186 fibonacci level next. However, considering bullish convergence condition in daily MACD, firm break of 1.1472 will be suggest medium term bottoming and turn outlook bullish for 1.1814 resistance instead.

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) 1.2616; (P) 1.2651; (R1) 1.2694; More...

GBP/USD is staying in consolidation from 1.2476 and intraday bias remains neutral for now. Further recovery cannot be ruled out. 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.