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For the 24 hours to 23:00 GMT, the USD declined 0.27% against the CAD and closed at 1.3351.

In the Asian session, at GMT0400, the pair is trading at 1.3358, with the USD trading 0.05% higher against the CAD from yesterday’s close.

The pair is expected to find support at 1.3325, and a fall through could take it to the next support level of 1.3291. The pair is expected to find its first resistance at 1.3390, and a rise through could take it to the next resistance level of 1.3421.

Trading trend in the Loonie today is expected to be determined by Canada’s new housing price index for October, scheduled to release later in the day.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the AUD rose 0.12% against the USD and closed at 0.7218.

LME Copper prices declined 0.2% or $12.0/MT to $6151.0/MT. Aluminium prices declined 1.1% or $21.5/MT to $1928.0/MT.

In the Asian session, at GMT0400, the pair is trading at 0.7228, with the AUD trading 0.14% higher against the USD from yesterday's close.

Overnight data indicated that Australia's consumer inflation expectations climbed to a level of 4.0% in December. In the prior month, consumer inflation expectations had recorded a reading of 3.6%.

The pair is expected to find support at 0.7207, and a fall through could take it to the next support level of 0.7185. The pair is expected to find its first resistance at 0.7244, and a rise through could take it to the next resistance level of 0.7259.

Looking forward, investors would closely monitor Australia's CBA manufacturing and services PMI's for December, scheduled to release overnight.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, Gold rose 0.15% against the USD and closed at USD1250.50 per ounce, amid weakness in the U dollar.

In the Asian session, at GMT0400, the pair is trading at 1249.50, with gold trading 0.08% lower against the USD from yesterday’s close.

The pair is expected to find support at 1246.87, and a fall through could take it to the next support level of 1244.23. The pair is expected to find its first resistance at 1252.37, and a rise through could take it to the next resistance level of 1255.23.

The yellow metal is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, Silver rose 1.23% against the USD and closed at USD14.84 per ounce, tracking gains in gold prices.

In the Asian session, at GMT0400, the pair is trading at 14.85, with silver trading 0.07% higher against the USD from yesterday’s close.

The pair is expected to find support at 14.69, and a fall through could take it to the next support level of 14.53. The pair is expected to find its first resistance at 14.95, and a rise through could take it to the next resistance level of 15.06.

The white metal is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, Crude Oil declined 1.33% against the USD and closed at USD51.36 per barrel, after the Energy Information Administration (EIA) report indicated that US crude oil stockpiles dropped less-than-expected by 1.2 million barrels to 442.0 million in the week ended 07 December.

In the Asian session, at GMT0400, the pair is trading at 51.39, with oil trading 0.06% higher against the USD from yesterday’s close.

The pair is expected to find support at 50.59, and a fall through could take it to the next support level of 49.80. The pair is expected to find its first resistance at 52.53, and a rise through could take it to the next resistance level of 53.68.

Crude oil is trading below its 20 Hr and 50 Hr moving averages.

In the local markets

USDCNY fixed at 6.8769 today, -295 pips from last fixing and -124 pips from the previous closing at 6.8893 on 16:30 Beijing time. In line with estimates

Local currency markets will likely follow the Yuan today so not looking for much excitement across Asia EM FX

Local equity markets are trading well catching an updraft via US equity futures as in the absence of any inflammatory rhetoric from the US administration, the perception that trade tensions are easing continues to steer the ship. But investors are also breathing a sigh of relief that UK worst-case scenarios didn’t unfold overnight.

Asia traders are pivoting to China’s Central Economic Work Conference which is one of the most important political and economic events on the calendar (Dec 19-21)

A more favourable repricing of China risk is underway heading into the event given the theme of the meeting is “Stabilizing the currency, easing credits, and loosening fiscal policies,” according to various media sources. Indeed, music to regional investor’s ears after all that equity market investor doesn’t enjoy buying stocks when interest rates are falling m fiscal constraints are easing all within the backdrop of a stable currency.

New year projected GDP is expected to be announced in line with market expectations at 6.5 % while the government will likely announce more creative policies to support SME as local banks have been reluctant lenders in that space.

And all of this will be within the context of China de-escalating trade tensions with the US around discussion of Made in China 2025 initiative.

G-10 has been quiet and predictably so ahead of the ECB.

Most of the desk conversations are centring on Brexit. One of the exciting discussion brought by my colleagues this morning is falling on the Reese-Mogg interview post the no-confidence vote, and presumably, the other dissenters would vote for Mays deal if there were no backstop. This is the DUPs viewpoint too. However, if May comes back from her whistle-stop tour with some legally binding guarantee that the backstop would not be permanent, that might also work. Given the likelihood that May’s Brexit deal won’t pass Parliament suggestion next step is a no-confidence vote. Indeed, no one wants an election, and May needs the DUP on board, and they need to then themselves vote for the only Brexit they can guarantee.

Ultimately May and the EU coming up with a viable solution to solve the problem of backstop so that it is not indefinite. I.e. the UK will have a unilateral opt-out provided that technological solutions are in place so that the transition is ceaseless. It doesn’t put a date on end, but still, it gives the UK ultimate control. It meets Boris Johnson’s vision of Brexit, the DUP and some of the other brexiteers like Reese-Mogg.

STOCKS

Aah, the Bulls are putting up a spirited fight and while there is still time before they beat back the Bears, it could be that the Bulls are already attracting Smart Money.

The Dow (24527, +0.64%), DAX (10929, +1.38%), Nikkei (21728), Shanghai (2602, +0.02%), Nifty (10737.60, +188.45, +1.79%) and Sensex (35779, +1.79%) are all in the green, some more than others.

Of these, the DAX (10929) and Shanghai (2602) remain more vulnerable than the others while below 11200 and 2650 respectively, but might be able to avert a decline if they manage to remain above 10700-600 and 2575 respectively. But, they still have to do hard work in order to break higher.

The Nikkei (21728) and Dow (24527) may have established relatively strong Supports at 21000 and 24250 respectively. Of course they also have to work hard and may take time to become properly bullish. At the same time, it might not be correct to sell these two.

That the Nifty (10737.60, +188.45, +1.79%) moved up strongly, digesting two pieces of "bad" news (Urjit Patel's resignation and the BJP's defeat in the state elections), is suggestive of good long-term strength. Immediate Resistance is seen at 10850 and we have to allow for a broad range of 10300-850 for the next couple of weeks. An early break above 10850 is also a possibility, but might be a little less probable.

COMMODITIES

Commodities continue to remain sideways. The current phase is the ranged phase before a sharp movement in the near term.

Watch crucial resistance near 1260 on Gold which when holds could push the Gold (1248.90) price towards 1230. Silver (14.83) also is trading just below resistance near 14.90-15.00 levels. A rejection from resistance levels could push Silver back towards 14.25-14.00 levels in the near term.

Copper (2.7777) is likely to rise towards 2.80/85 in the near term. While above 2.70, view remains bullish.

Brent (60.48) and WTI (51.41) continue to remain steady. EIA mentioned a much smaller draw in inventory than API’s expected 10.18 mb for the week ended 7th Dec’18. Russia has said that it will reduce its production slowly and gradually as per the decision made with the OPEC in the meeting last week. Crude prices are likely to remain stable today also.

FOREX

Overall major currencies are in a ranged and contracting phase where small movements are likely to be seen in the near term. A week of this ranged phase is likely to continue before any sharp movement is seen in the medium to long term.

Dollar Index (97.07) faced some rejection from immediate resistance at 97.50 as seen on the daily candles. The movement is narrowing in the 97.50-96.75 region where the index could trade for the next 3-4 sessions before a sharp break on either side is seen in the longer run.

Euro (1.1370) has moved up a bit. Support near 1.1330 is holding for now. Trade region for the rest of December is likely to be 1.15-1.12. Slow and narrow movement is expected signaling a sharp rise after the Christmas season probably. Before that, the sideways consolidation is likely to continue.

Dollar Yen (113.46) is headed higher towards 114 from where a rejection towards 112.50 is expected in the coming week. Overall broad range of 114-112 is likely to hold for the next 1-2 weeks.

Euro-Yen (129.01) could test 129.50 on the upside before coming off from there back towards 128. Ranged view could be seen in the coming week between 129.50-128.00.

Pound (1.2622) is clearly in a channel downtrend as seen on the daily candles. While below 1.27, there is scope of falling further towards 1.25-1.24 in the near term. Only a sustained break above 1.27, can we negate a fall to 1.24 in the near term.

Aussie (0.7228) could move up towards 0.7260-0.7300 levels in the near term. While above 0.7150, price looks bullish in the near term.

Dollar Rupee (72.02) is likely to open lower today and could well test 71.60 on the downside before again rising back towards 72.00. Some stability is likely to be seen in Dollar Rupee today. NDF trades at 71.84 just now, indicating a fall in Dollar Rupee in the morning hour.

INTEREST RATES

Good show. The 5-2 Spread, which was going at between -1bp and -3bp for the last few days has moved up to 0bp, with the 2yr and 5Yr both quoting at 2.77%, the 5Yr moving up to 2.77% (from 2.75%) while the 2Yr has dipped to 2.77% (from 2.78%).

Let us see if the Curve manages to avoid fresh inversion when the Yields fall again, as they are likely to do after moving up a bit more ahead of the FOMC meeting next week.

ECB meeting today. The German 30Yr (0.86%) and 10yr (0.28%) have been falling, breaking below earlier supports and could be headed lower. The 5Yr (-0.26%) has bounced a bit from Support at -0.30%. The Curve is getting flatter there.

The 10Yr GOI (7.4112%) came back down yesterday. As mentioned yesterday, maybe we can see some stability between 7.40-60% now. That said, the longer term trend points downward towards 7.2% and lower, especially after the November CPI has come in even lower at 2.33% last evening.

Daily Pivots: (S1) 1.1253; (P) 1.1276; (R1) 1.1316; More...

Considering bullish convergence condition in 4 hour MACD, EUR/CHF's rebound and break of 1.1277 minor resistance suggests short term bottoming at 1.1224. Intraday bias is turned back to the upside for 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.

Risk sentiments are rather firm in Asian markets as major indices opened up and are extending gains. UK Prime Minister Theresa May's survival of the leadership challenge is a positive factor. Also, progress and US-China trade talk is another factor. It's reported that China has already purchased more than 1.5m tonnes of US soybeans this week, the first major purchase in six months. And of course there were reports that China is considering to lower auto tariffs from 40% to 15%. The WSJ also reported that China is working on replacing the "Made in China 2025" initiative with something that allows more foreign participations. Focus will now turn to SNB and then ECB rate decision.

In the currency markets, Australian Dollar is so far the strongest one for today, followed by Dollar and then Euro. Yen is trading as the weakest one. Sterling follow as the second weakest as yesterday's rebound fades. For the week, Aussie is the strongest one followed by Dollar. But with the exception of GBP/USD, all Dollar and Aussie pairs are limited below last week's high, suggesting lack of follow through momentum. Sterling remains the worst performing one followed by Yen.

In other markets, DOW closed up 0.64% overnight. S&P 500 rose 0.54% and NASDAQ added 0.95%. 10 year yield rose 0.027 to 2.906. 3-year (2.783) to 5-year (2771) yield remains inverted. In Asia, at the time of writing, Nikkei is up 0.99%, Hong Kong HSI up 1.33%, China Shanghai SSE up 1.60%, Singapore Strait Times up 0.46%. Japan 10 year JGB yield is up 0.0066 to 0.064. USD/CNH dropped sharply yesterday and it's now at 6.870, comparing to this week's high at 6.922.

ECB to revise down growth and inflation forecasts, SNB to stay cautious

ECB is widely expected to keep benchmark interest rate unchanged at 0.00% today. And it should stick with the plan to end the asset purchase program after December. Nevertheless, there are prospects of some dovish shifts. As indicated by recent economic data, growth momentum in the Eurozone, in particular in Germany, has slowed down quite notably. Recent slump in oil prices would also put some downward pressure in the energy led headline inflation in the bloc. ECB is generally expected to revise down 2019 growth and inflation forecasts.

President Mario Draghi's comments on the economy will also be watched. ECB has so far viewed the slowdown in second half as temporary. But policy makers could start to feel more uncertainty about that. In particular, the slowdown in global trade due to protectionism is starting to bite exports growth, most notably in Germany. But for now, we're not expecting ECB to change the forward guidance of keeping interest rates at present level at least through summer of 2019. The forward guidance itself is flexible enough.

SNB is also widely expected to keep the Sight Deposit rate unchanged at -0.75%, with 3-month Libor target range held at -1.25 to -0.25%. Some traders might look for hints of a rate hike in 2019. But it's rather unlikely. EUR/CHF 's uptrend topped at 1.2004 back in April, rejected by the key 1.2 handle. Subsequent events, including Iran sanctions, Italian elections and budget, Turkish Lira crisis, trade war, stock markets rout, etc, sent the cross back to below 1.15. Meanwhile, domestically, Swiss economy also contracted -0.2% in Q3. There is little room for SNB policy makers to move away from negative interest rate.

Some suggested readings on ECB and SNB

• ECB Preview: Dovish Surprise Possible, But Draghi Likely To Leave His Options Open
• Will Europe's Slowdown Restrain the ECB?
• ECB to End QE But Support Still Needed
• ECB: A Matter Of Less Accommodation, Not Tightening
• ECB Preview: A New Chapter Of Dovish Tightening
• ECB Preview – Focus on Reinvestment Plan, New Round of TLTRO
• SNB Meeting: No Hawkish Bits Yet

Sterling rebound lost steam after UK PM May survived leadership challenge

Sterling softens mildly in Asia after UK Prime Minister Theresa May survived the leadership challenge. 200 Conservative MPs voted in support for May in the no-confidence vote. 117 voted against her. That's way more than enough to secure her place as Prime Minister. But it's still alarming than more than a third of the MPs of her party wanted her out. May herself also admitted that "a significant number of colleagues did cast a vote against me and I've listened to what they said". But she added it's time to "get on with the job of delivering Brexit for the British people".

May will go to Brussels for the two day EU summit today. But she's only given 10 mins to tell EU leaders what she needs to get the Brexit agreement through parliament. EU's stance is very clear that the agreement itself is not renegotiable. But they're open to offer "assurances" regarding the Irish border backstop, and others. The results of the summit could continue to trigger volatility in the pound.

Canada warns US not to politicize extradition, China urges Canada to distance from US hegemonism

Canadian Foreign Minister Chrystia Freeland warned the US (not China) not to politicize the arrest and extradition of Huawei top executive Meng Wanzhou. Trump said on Tuesday that he could intervene in the case if it's good for trade negotiation with China. When asked about Trump's comments, Freeland said "our extradition partners should not seek to politicize the extradition process or use it for ends other than the pursuit of justice and following the rule of law".

Separately, Chinese state-owned hawkish media Global Times urged Canada to "distance itself from US hegemonism and fulfill its obligations to help maintain international order and protect human rights". And the media also warned that "Washington is mistaken if it thinks it can take Meng hostage and ransom her for concessions in the upcoming trade talks."

On the data front

Australian consumer inflation expectation rose to 4.0% in December. UK RICS house price balance dropped to -11 in November. Germany will release CPI final while Swiss will release PPI in European session. US will release import price index and jobless claims later in the day. But main focuses will be on SNB, ECB and May's Brussel trip.

EUR/CHF Daily Outlook

Daily Pivots: (S1) 1.1253; (P) 1.1276; (R1) 1.1316; More...

Considering bullish convergence condition in 4 hour MACD, EUR/CHF's rebound and break of 1.1277 minor resistance suggests short term bottoming at 1.1224. Intraday bias is turned back to the upside for 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.

Economic Indicators Update

ECB is widely expected to keep benchmark interest rate unchanged at 0.00% today. And it should stick with the plan to end the asset purchase program after December. Nevertheless, there are prospects of some dovish shifts. As indicated by recent economic data, growth momentum in the Eurozone, in particular in Germany, has slowed down quite notably. Recent slump in oil prices would also put some downward pressure in the energy led headline inflation in the bloc. ECB is generally expected to revise down 2019 growth and inflation forecasts.

President Mario Draghi's comments on the economy will also be watched. ECB has so far viewed the slowdown in second half as temporary. But policy makers could start to feel more uncertainty about that. In particular, the slowdown in global trade due to protectionism is starting to bite exports growth, most notably in Germany. But for now, we're not expecting ECB to change the forward guidance of keeping interest rates at present level at least through summer of 2019. The forward guidance itself is flexible enough.

SNB is also widely expected to keep the Sight Deposit rate unchanged at -0.75%, with 3-month Libor target range held at -1.25 to -0.25%. Some traders might look for hints of a rate hike in 2019. But it's rather unlikely. EUR/CHF 's uptrend topped at 1.2004 back in April, rejected by the key 1.2 handle. Subsequent events, including Iran sanctions, Italian elections and budget, Turkish Lira crisis, trade war, stock markets rout, etc, sent the cross back to below 1.15. Meanwhile, domestically, Swiss economy also contracted -0.2% in Q3. There is little room for SNB policy makers to move away from negative interest rate.

Some suggested readings on ECB and SNB

• ECB Preview: Dovish Surprise Possible, But Draghi Likely To Leave His Options Open
• Will Europe's Slowdown Restrain the ECB?
• ECB to End QE But Support Still Needed
• ECB: A Matter Of Less Accommodation, Not Tightening
• ECB Preview: A New Chapter Of Dovish Tightening
• ECB Preview – Focus on Reinvestment Plan, New Round of TLTRO
• SNB Meeting: No Hawkish Bits Yet