Sample Category Title

Daily Pivots: (S1) 0.7183; (P) 0.7204; (R1) 0.7225; More...

Focus remains on 0.7199 support in AUD/USD. Decisive break there will suggest that the corrective rebound from 0.7020 has completed earlier than expected. Deeper fall should then be seen back to retest 0.7020 low. On the upside, above 0.7259 minor resistance will turn bias back to the upside. In that case, corrective rise from 0.7020 would extend to 38.2% retracement of 0.8135 to 0.7020 at 0.7446 before completion.

In the bigger picture, a medium term bottom is in place at 0.7020 ahead of 0.6826 key support (2016 low). Stronger rebound might 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 and extend to take on 0.6826 low at a later stage, after the correction from 0.7020 completes.

Daily Pivots: (S1) 113.08; (P) 113.28; (R1) 113.58; More..

Intraday bias in USD/JPY is mildly on the upside for 114.03 resistance. Break there should resume the rebound from 111.37 and target 114.54 key resistance next. On the downside, below 113.00 minor support will turn intraday bias neutral first. Further break of 112.23 will extend the consolidation from 114.54 with deeper fall. But after all, 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) 0.9882; (P) 0.9911; (R1) 0.9959; More...

Intraday bias in USD/CHF remains neutral first. On the upside, break of 1.0008 resistance will indicate that the pull back from 1.0128 has completed. Intraday bias would be turned back to the upside for retesting 1.0128 first. On the downside, below 0.9862 will target 0.9848 support first. Sustained break there will confirm near term reversal and target 61.8% retracement of 0.9541 to 1.0128 at 0.9765 and below.

In the bigger picture, rise from 0.9541 could have topped at 1.0128. But as long as 0.9541 support holds, we'd still expect rise from 0.9186 to resume at a later stage. Break of 1.0128 will target 1.0342 key resistance. However, break of 0.9514 will pave the way back to 0.9186 low.

Daily Pivots: (S1) 1.1282; (P) 1.1342; (R1) 1.1377; More.....

Intraday bias in EUR/USD remains neutral as it's bounded in range of 1.1267/1472. 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) 1.2458; (P) 1.2609; (R1) 1.2710; More...

GBP/USD's decline resumed after brief consolidation and reaches as low as 1.2479 so far. Intraday bias remains on the downside. Current fall is part of the down trend from 1.4376. Next target will be 61.8% projection of 1.4376 to 1.2661 from 1.3174 at 1.2114. On the upside, above 1.2638 minor resistance will turn intraday bias neutral and bring consolidation first, before staging another decline.

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.

New Zealand and Australian Dollar are trading as the strongest ones today so far, following rebound in Asian stocks. Nevertheless, both currencies are generally limited below last week's highs, indicating unconvincing upside momentum for now. Indeed, sentiments did turn more positive on US-China trade talks. But there are enough risks for investors to worry about. An imminent one is UK Prime Minister Theresa May's political downward spiral and whether she'd be ousted very soon. For today, Yen is the weakest one, followed by Dollar.

Technically, AUD/USD is still struggling in very tight range around 0.7199 support. It's more likely to head downwards on breakout, then upwards. GBP/USD's decline extends in Asia today but EUR/GBP and GBP/JPY are held in tight range. More time is needed to digest this week's selloff in Pound. A focus for today is whether EUR/USD and EUR/JPY would finally have a downside breakout in recently established range. 1.1267 in EUR/USD and 127.49 in EUR/JPY are the levels to watch.

In other markets, US stocks ended mixed overnight. DOW closed down -0.22% at 24370.24. S&P 500 also dropped -0.04% to 2636.78. But NASDAQ closed up 0.16% at 7031.83. 10-year yield rose up 0.023 at 2.879. But yield curve flattened at the long end with 30 year yield closed flat at 3.129. Also, 3-year yield (2.763) and 5-year yield (2.743) remains inverted. In Asia, Nikkei is trading up 1.96%, Hong Kong HSI up 1.54%, China Shanghai SSE up 0.20%, Singapore Strati Times up 0.88%. 10 year JGB yield is also up 0.0052 at 0.051. Investors seem cautiously optimistic.

Trump: Fed Powell's a great guy, just far too aggressive

In a Reuters interview, Trump toned down his rhetorics against Fed chair Jerome Powell and said he's a "great guy". Though, Trump still disagree to Fed's "foolish" rate hike next week.

Trump said, "Well, I think that would be foolish but what can I say? What can I say? You know, I put a man there. What can I say? If they do that, I'd be disappointed and I think a lot of people would be disappointed." On Powell, Trump said, "I think he's trying to do what he thinks is best. I disagree with him - I think he's a great guy. But, I think he's trying to get it right but I think he's being too aggressive, far too aggressive, actually far too aggressive."

Trump may intervene in Huawei case for trade deal

On trade negotiation with China, Trump said the Chines are "back in the market" buying "tremendous amounts of soybeans". He added there maybe another meeting of "top people on both sides". And, if necessary, Trump is open to another meeting with Xi "who I like a lot and get along with very well".

Trump went further and said that he could intervene in the Huawei case if it's good for the trade deal. He said "If I think it's good for the country, if I think it's good for what will be certainly the largest trade deal ever made – which is a very important thing – what's good for national security – I would certainly intervene if I thought it was necessary."

Separately, Huawei's top executive Meng Wanzhou, arrested by Canada on December 1 on US request, was granted bail by a Canadian court yesterday.

UK PM May's EU tour ended with nothing, to face leadership challenge ahead

Pressures have been mounting on UK Prime Minister Theresa May after she called off the Brexit parliamentary vote. Her meeting with European leaders appeared to be fruitless. After the meeting with May, European Council president Donald Tusk tweeted that "Clear that EU27 wants to help. The question is how."

Domestically, the campaign to oust May seems to be gathering momentum. BBC cited multiple sources saying that the required 48 letters to 1922 Committee chair Graham Brady for leadership challenge have been reached. And, the vote on May's leadership could happen at the first opportunity, that is, as soon as tonight in the UK.

Former UK PM Major: Revoke Brexit notice now, the clock must be stopped

Former UK Prime Minister John Major urged the current government to revoke Brexit notice to the EU now. He said, "We need to revoke article 50 with immediate effect. The clock, for the moment, must be stopped."

He added, "It's clear we now need the most precious commodity of all: time. Time for serious and profound reflection by both parliament and people. There will be a way through the present morass, there always is."

Also, he said Brexit will weaken UK's position in the world. He argued that "We are a more valued ally for America because of our influence in Europe and we are more valued by Europe because of our close relationship with America." And, "Britain, shorn of both these long-standing allies, will be seen by the world as a mid-sized, middle-ranking power that is no longer super-powered by her alliances."

Australia Westpac consumer sentiment rose 0.1%, RBA to hold through 2020

Australia Westpac consumer sentiment rose 0.1% to 104.4 in December, up from 104.3.

Westpac Chief Economist Bill Evans noted in the release that the disappointment of just 0.3% Q3 GDP growth is "likely to prompt the RBA to lower its growth forecasts for 2018 and 2019." Also, "the atmospherics of a central bank forecasting strongly above trend growth is likely to change to one talking more about near trend growth."

And markets pricing have largely moved towards Westpac's rate forecast. That is RBA will keep OCR unchanged at 1.50% "over the course of both 2019 and 2020".

NAB delays RBA hike expectations, falling house price has bigger impact

NAB becomes another bank to delay RBA rate hike expectations. It now expects the first hike to happen in second half of 2020. It noted that "ages pressure remains weak and hence inflationary pressure has remained low." And, core inflation would continue to "track below RBA's target band" through all of 2019.

And, there would be a "moderation in growth back to potential of around 2.3 to 2.5%". And, "falling house prices suggest a bigger impact on housing construction than previously incorporated and additional concerns about the consumer, though low rates and unemployment are important offsets."

Elsewhere

Japan domestic CGPI rose 2.3% yoy in November, below expectation of 2.4% yoy. Machine orders rose 7.6% mom in October, below expectation of 10.2% mom. Eurozone will release industrial production in European session. Later in the day, US CPI will be the major focus.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.2458; (P) 1.2609; (R1) 1.2710; More...

GBP/USD's decline resumed after brief consolidation and reaches as low as 1.2479 so far. Intraday bias remains on the downside. Current fall is part of the down trend from 1.4376. Next target will be 61.8% projection of 1.4376 to 1.2661 from 1.3174 at 1.2114. On the upside, above 1.2638 minor resistance will turn intraday bias neutral and bring consolidation first, before staging another decline.

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.

Economic Indicators Update

NAB becomes another bank to delay RBA rate hike expectations. It now expects the first hike to happen in second half of 2020. It noted that "ages pressure remains weak and hence inflationary pressure has remained low." And, core inflation would continue to "track below RBA's target band" through all of 2019.

And, there would be a "moderation in growth back to potential of around 2.3 to 2.5%". And, "falling house prices suggest a bigger impact on housing construction than previously incorporated and additional concerns about the consumer, though low rates and unemployment are important offsets."

NAB's commentary here.

Australia Westpac consumer sentiment rose 0.1% to 104.4 in December, up from 104.3.

Westpac Chief Economist Bill Evans noted in the release that the disappointment of just 0.3% Q3 GDP growth is "likely to prompt the RBA to lower its growth forecasts for 2018 and 2019." Also, "the atmospherics of a central bank forecasting strongly above trend growth is likely to change to one talking more about near trend growth."

And markets pricing have largely moved towards Westpac's rate forecast. That is RBA will keep OCR unchanged at 1.50% "over the course of both 2019 and 2020".

Full release here.

Pressures have been mounting on UK Prime Minister Theresa May after she called off the Brexit parliamentary vote. Her meeting with European leaders appeared to be fruitless. European Council president Donald Tusk tweeted that "Clear that EU27 wants to help. The question is how."

https://twitter.com/eucopresident/status/1072550065380708357

Domestically, the campaign to oust May seems to be gathering momentum. BBC cited multiple sources saying that the required 48 letters to 1922 Committee chair Graham Brady for leadership challenge have been reached. And, the vote on May's leadership could happen at the first opportunity, that is, as soon as tonight in the UK.

STOCKS

The Bulls cannot be written off yet, but the situation is fifty-fiftyish. A strong bounce or a strong decline, both seem equi-probable. We continue to prefer the Bull side, but also think it might be best to stand back and watch for another couple of days.

Decent volatility in the Dow (24370.24, -53.02, -0.22%) yesterday, opened higher, closed lower, but managed to remain above the 24250 Support. Absolutely in the middle of a "could go anywhere" situation on the Weekly Candles, with a preference for the upside.

The Nikkei (21516) is trading just above 21500 today, helped by weakness in the Yen (113.50). If the Nikkei sustains today's rally and closes above 21600, it will help the Bulls.

Bulls are putting up a fight in the Shanghai (2605) as well. Of course, a break above 2650 is still needed to score a telling point. This could take a few more days. A break below 2570, on the other hand, may trigger bearishness.

Surprisingly, even the DAX (10780.51, +158.44, +1.49%) is also trying to claw back up (a bit like Wile E Coyote flailing to get back onto the cliff edge after running off it in the TV cartoon) and has managed to rise and close above the crucial 10700. Bullishness, however, will need a rise past 11200. which seems a tall order yet. In effect, therefore, the DAX might still be a loss-leader.

Contrary to our expectation of fall towards 10200 in the wake of the BJP's losses, the Nifty (10549.15, +60.70, +0.58%) actually closed with a small gain, after seeing a low of 10333.85. We can look for a broad indecisive range of 10200-800 for the rest of the month now. The longer term could still be bullish from January while the Support at 10200 holds.

COMMODITIES

No major movement seen in the commodity sector as prices remain stable.

Brent (60.79) and WTI (52.20) are almost stable. Both are likely to remain ranged in the 58-64 and 50-55 region for some more time. No major movement is expected this week. Recovery in global equities is positive for oil just now. Russia plans to cut its oil output by 50000-60000 bpd in January as part of the OPEC deal to cut by 220000 bpd.

Brent-WTI spread (8.12) is stable but has scope of falling towards 7 in the medium term. A fall in the spread could pull crude prices down in the near term.

Gold (1250.80) looks bullish towards 1265 while above 1240.

Copper (2.7745) almost tested 2.70 before bouncing back towards current levels. This rise is likely to continue taking the price higher towards 2.80/85 again. This sideways range is a pause period probably before a sharp rise is seen in the longer run.

FOREX

Overall global currencies are stable just now. Most of them are stuck within narrow ranges that is likely to hold for a few more sessions before a sharp break is seen.

Dollar Index (97.37) is stuck in the 98-96 region and could remain so for the next 1-2 sessions. 98 is an important resistance and while that holds, the index could eventually fall in the medium term breaking below 96.

Euro (1.1332) has dipped and is testing near term support at current levels. A bounce from here if not seen today could open up chances of falling further towards 1.13-1.12 in the next 1-2 weeks.

Dollar Yen (113.44) is also stuck in the narrow 114-112 region and could be ranged for few more sessions before a break on either side is seen. Resistance near 114.0-114.50 looks strong tilting our preference of a break on the downside in the medium term.

Pound (1.2505) is falling sharply and could test 78.6% retracement of the rise from 1.19 (Oct’16) to 1.44 (Apr’18) near 1.2460. A bounce could then follow from 1.2460 in the medium term. Near term looks bearish.

Aussie (0.7215) has support near 0.71 which is likely to hold in the longer run. Note that 0.70/0.71 is a long term support and the Aussie could be nearing a medium term bottom soon.

Dollar Rupee (71.86) came off from yesterday's high of 72.4625. Overall we may see a re-test of 72.25/75 again before fresh selling comes in. Broad range of 73.25-71.50 is seen for the next couple of weeks. The pair trades at 72.32 on the NDF indicating a possible gap up opening on the onshore market today.

INTEREST RATES

Sharp pick-up on the US 2Yr Yield (2.78%) yesterday from 2.71% earlier, as also across the Curve (5Yr up from 2.70% to 2.75%, 10Yr up from 2.86% to 2.89%), but the Curve got a little more inverted with the 5-2 Spread moving down from -1bp to -3bp and the 10-2 Spread moving down from +15bp to +11bp.

The pick up in Yields could be position adjustment and a corrective rally ahead of the FOMC next week, but the overall trend suggests some more downside in Yields over the rest of the month. We have to also see if the hoped for (still to be confirmed) rally in Equities can lead to some Curve Steepening.

ECB meeting tomorrow.

Shaktikanta Das is the new RBI Governor. Let us see how the market reacts to this. Yesterday, the 10Yr GOI (7.5278%) had risen to 7.7122% soon after the Open as reaction to the Urjit Patel but came back down again. Maybe some stability might come into this as well.