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The US 500 index is trying to recover ground as it opened with a negative gap today. The price is climbing above the rising trend line, continuing the bullish outlook. The RSI is standing below the neutral threshold of 50 and pointing higher, detecting accelerating positive momentum. However, the moving averages completed a “death cross” on the daily chart – the 50-SMA crossed the 200-SMA to the downside.

Further upside pressures could drive the price towards the next resistance of the 61.8% Fibonacci retracement level of the upward movement from the low on February 6 to the high on September 21, around 2687. A break above this level could move the market towards the next resistance area of the 50.0% Fibonacci region of 2735.

On the flipside, a downside retracement and a break of the diagonal line could meet support at the 2600 hurdle, shifting the bullish outlook to a more neutral one. A downside break may open the way for the 2552 zone, the April 2 trough, before the February 6 bottom of 2532 comes into view.

Overall, the long-term picture appears positive at the moment as the price returned back above the uptrend line.

Markets

Global core bonds lost ground today. The equity sell-off of last week continued, pushing Asian and European equities lower this morning. Risk-off sentiment ruled markets, as concerns on a slowing global growth and the ongoing (Huawei) spat between the US and China weighed on risk appetite. Both US Treasuries and German Bunds opened higher, but the move north was short-lived. Risk sentiment ameliorated, amongst others, with better than expected foreign trade data in Germany. German Bunds turned south. In the US, there was no data to steer trading, but equity markets opened lower anyway. Both the US and German yield curve edged higher. US yield changes range from -1.3 bps (30-yr) to +2.0 bps (5-yr). German yield changes vary between -2.1 bps (30-yr) to 3.2 bps (5-yr). Italian BTP’s continued the upward trend of last month and moved higher again as industrial production beat expectations. Industrial production (MoM) grew 0.1% in October, while markets expected a decline of 0.3%. If the meeting between Italian PM Conte and European Commission head Jean-Claude Juncker on Wednesday yields a positive outcome, Italian BTP’s could receive some more tailwind.

The dollar took a weak start in Asia this morning. Friday’s US equity sell-off, interest rate markets pricing even less Fed tightening next year and the political tensions between China and the US all weighed on investors’ sentiment. At least for now, this kind of uncertainty doesn’t help the dollar much. At the start of European dealings, the single currency received some additional support from better than expected German foreign trade data. EUR/USD briefly touched the 1.1440 area, but gains could not be sustained later in the session. In technical trade, the US currency reversed a big part of the losses from the Asian session. There was little economic news to guide euro or USD trading. Growing uncertainty on the UK Brexit vote maybe also prevented further euro gains. Interest rate differentials between the US and Germany were mixed across the curve and no decisive factor for EUR/USD trading. EUR/USD traders currently in the 1.14 area. USD/JPY showed quite a solid intraday rebound as core bond yields bottomed and as sentiment on risk turned less negative. The pair is changing hands in the 113 area.

Talks of the past few days has been whether UK’s Prime Minister May should delay the scheduled Parliamentary vote on the brexit deal. While May initially rejected all kind of rumours, she cracked under the pressure one day before this crucial moment. The move came as it was increasingly obvious the deal would have been voted down by both members of the opposition as MP’s of her own party/government. The risk of a vote of no confidence afterwards isn’t one May is willing to take. Instead, the PM is heading to Brussels on Thursday to seek a better deal on the Irish backstop. Possibly in vain, as the EU Commission already said it won’t re-negotiate the deal. The PM is scheduled to address the House of Commons later today. These latest developments illustrate the difficult road ahead and rattled sterling investors who couldn’t find comfort in the mixed production data either. EUR/GBP is trading above the 0.90-handle (0.9035 at the time of writing) for the first time since early September. Cable slid to the June 2017 low at around 1.2615.

News Headlines

Norway’s headline inflation increased in Nov. with 0.5% (MoM) and 3.5% (YoY), up from resp. -0.2% and 3.1% in Oct. and beating market expectations of resp. 0.1% and 3.1%. The uptick supports the Norges Bank to raise rates in Q1 of next year, after it raised its rates in September for the first time in seven years. The krone couldn’t’ profit.

Urjit Patel has resigned his post as governor of the Reserve Bank of India, following persistent disagreement over the bank’s independence with India PM Narendra Modi’s and his government. Mr Patel was in position since September 2016, when he replaced Raghuram Rajan. The Indian rupee loses ground on the news.

Highlights:

• Year-over-year Housing starts rose to 216k in November. The 6-month trend rate inched up to 210k — the first increase in five months.
• In separately-released data, new building permit issuance increased to 240k. That is well above the recent pace of starts and suggests there could be more new building activity in the pipeline.

Our Take:

The increase was the second in as many months with the 211k average starts over October and November up from the 197k average in the third quarter. That in itself is not all that surprising. New residential permit issuance outpaced starts by a wide margin in the third quarter (permits averaged 226k per month), suggesting that there was more new building activity in the pipeline. Indeed, in a separate release this morning, new building permits in October jumped to 240k at an annualized rate, leaving room potentially for further strong near-term starts. Both single and multi-unit starts posted increases in November with gains concentrated in the Prairies and British Columbia.

Looking beyond near-term swings in the data, we continue to think interest rates will continue to rise gradually going forward — and that will weigh particularly heavily on interest-rate sensitive purchases like houses. Higher rates plus regulatory measures have already slowed the home resale market significantly. We expect those trends will ultimately result in slower home building activity next year as well.

When people are talking about small-time online Forex trading, they almost always talk about scalping. After all, it is one of the most profitable Forex trading strategies — and you can scalp effectively with only 100 USD as your starting capital. However, scalping is also one of the riskiest and most exhausting strategies available, and it is easy to get wrong.

What Is Scalping in Forex

 Scalping is a catch-all name for trading strategies that prioritize a large number of orders that get closed only after a couple of ticks. Scalping takes advantage of minuscule price movements on the tick or minute chart and often nets the trader only minimal profits.

To determine when to open which positions, the scalpers constantly parse the news and try to hop onto the bullish and bearish movements. The amplitude of these movements doesn’t matter — the scalpers jump off them after getting only 5-10 pips of profit.

5 pips equal to 0.5% of profit — not much by any mean. However, that’s just one deal — and scalpers open around a dozen of them each hour. Not all of them are successful, but at the end of a trading day, an experienced scalper often has 5% or more of pure profit. Which equals 100% profit monthly, provided the scalper keeps regular working hours.

However, scalping is highly demanding and certainly isn’t for everyone. For each successful scalper, there are hundreds of those that lost all their money on the strategy.

What Makes Scalping in Forex Difficult

A lot of Forex trading strategies depend on thoughtful analysis and careful planning. For example, Price Action is all about finding patterns in the candlestick charts and making educated guesses to what these patterns mean. Therefore, Price Action traders usually trade on hourly or even daily timeframes, which provides them with ample time for analysis.

Scalping is different from the ground up. The best timeframe for scalping is 1-minute, so very often you have to go with your gut. The time for pattern analysis or risk assessment is a luxury in scalping and often leads to lost profits. And there isn’t much profit in each deal, to begin with.

To be a successful scalper, you need to:

• Be prepared to crunch charts and numbers for 8 hours per day;
• Make decisions fast, almost without thinking;
• Stay calm under high-stress conditions;
• Understand that losses will happen;
• Trust your luck for long periods.

If any point on the list doesn’t describe you — don’t try scalping. Even if you manage to stay successful, you will end up burning out on this job.

Also, it is very important to find an appropriate Forex Broker because not every Broker permits the use of different trading strategies. A good example of proper Forex Broker is JustForex where all the trading strategies are allowed to be used. This reliable broker has good reviews and offers favorable trading conditions.

Daily Pivots: (S1) 112.53; (P) 112.73; (R1) 112.91; More..

USD/JPY is staying in range of 112.23/113.24 and intraday bias remains neutral first. As long as 113.24 minor resistance holds, another fall is mildly in favor. On the downside, break of 112.23 will target 111.37 and possibly below. But still, price actions from 114.54 are seen as a consolidation pattern. Hence, even in case of deep decline, 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. On the upside, above 113.24 minor resistance will turn bias back to the upside for 114.03 resistance.

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) 0.9877; (P) 0.9911; (R1) 0.9932; More...

With 0.9943 minor resistance intact, intraday bias in USD/CHF remains on the downside for 0.9848 support first. Decisive break there will confirm near term reversal and target 61.8% retracement of 0.9541 to 1.0128 at 0.9765 and below. On the upside, above 0.9943 minor resistance will turn intraday bias neutral first. But break of 1.0008 resistance is needed to indicate short term bottoming. Otherwise, near term outlook will now remain bearish in case of recovery.

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) 1.1361; (P) 1.1394; (R1) 1.1429; More.....

Intraday bas in EUR/USD remains neutral at this point, and further fall is expected 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.

The Canadian dollar has ticked higher in the Monday session. Early in North American trade, USD/CAD is trading at 1.3335, up 0.10% on the day. On the release front, Canadian construction numbers were mixed. Housing starts climbed to 216 thousand, marking a 5-month high. Building permits declined 0.2%, its weakest reading since June. In the U.S., the sole event is JOLTS Job Openings. The indicator is expected to improve to 7.22 million, after the previous release of 7.01 million. The U.S will release a host of inflation indicators this week, starting with the Producer Prices Index on Tuesday.

The spotlight was on job numbers on Friday, with key indicators on both sides of the border. Canada’s economy added a stunning 94.1 thousand jobs, crushing the estimate of 10.5 thousand. The unemployment rate dropped from 5.8% to 5.6%. The strong performance boosted the Canadian dollar on Friday, after losing ground for three straight days.

It was a completely different story in the United States. Nonfarm employment change was weaker than expected, plunging from 250 thousand to 155 thousand. This was well off the forecast of 198 thousand. Wage growth remained stuck at 0.2%, missing the estimate of 0.3%. There was better news from the unemployment rate, which remained at a sizzling 3.7%. The data points to slowing growth in the U.S, which could lead to a change in monetary policy. The Federal Reserve minutes from the November meeting indicated that policymakers discussed changing their stance of gradual increases rate increases. The markets are currently looking at one rate hike next year – just a few months ago, analysts were predicting up to rate hikes in 2019.

Daily Pivots: (S1) 1.2693; (P) 1.2749; (R1) 1.2787; More...

GBP/USD drops to as low as 1.2611 so far today. Break of 1.2661 support indicates resumption of down trend from 1.4376. Intraday bias is now on the downside for deeper decline. Next target is 61.8% projection of 1.4376 to 1.2661 from 1.3174 at 1.2114. On the upside, break of 1.2811 resistance is needed to indicate short term bottoming. Otherwise, near term outlook will remain bearish even in case of recovery.

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.

Pound is at the center of focus today as it finally shows some commitment on the downside. The trigger of the selloff is report that UK Prime Minister Theresa May is going to call off tomorrow's Brexit parliamentary vote. Weak economic data of course also add to the pressure of the Pound. At this point, Sterling is overwhelmingly the weakest one for today, followed by Yen, and then Canadian. New Zealand Dollar is the strongest one so far. Euro shrugs off poor investor confidence data and follows as second strongest, thanks to rally to EUR/GBP.

Technically, GBP/USD's break of 1.2661 key support now indicates medium term down trend resumption. EUR/GBP is heading to 0.9098 and break will put focus on 0.9305 high. GBP/JPY also breaks 142.76 support and is now on track to 139.88 key support. The forex markets are rather steady elsewhere though. Dollar trades a touch weaker against Euro and Swiss Franc but there is no follow through selling. The greenback is also bounded in familiar range against Aussie and Canadian.

In other markets, FTSE is now trading up 0.49%, thanks to lower Pound. DAX is down -0.39% and CAC is down -0.30%. German 10 year yield is up 0.0076 at 0.258. Meanwhile, Italian 10 year yield is down -0.031 at 3.100. German-Italian spread continues to narrow. WTI crude oil is trading at around 51.7 as consolidation continues. Gold is consolidating at around 1245. Earlier in Asia, all major indices closed lower, but except Nikkei, losses were limited. Nikkei closed down -2.12%, Hong Kong HSI down -1.19%, China Shanghai SSE down -0.82%, Singapore Strait Times dropped -1.24%. Japan 10 year JGB yield dropped for another day, by -0.023 to 0.04, pretty strong rally in bonds.

May to call off tomorrow's Brexit vote, to make a statement at 1530GMT.

It's reported that May has abruptly called off tomorrow's parliamentary vote on her Brexit deal. There is no confirmation yet but the news is widely reported and not denied. May is set to make a statement later at 1530GMT.

Scotland's First Minister Nicola Sturgeon criticized that "this is a watershed moment and an act of pathetic cowardice by a Tory government which has run out of road and is now collapsing into utter chaos". She added that "the Prime Minister's deal should come before the (UK parliament) immediately so that it can be voted down and we can replace Tory chaos with a solution that will protect jobs, living standards and Scotland's place in Europe."

Northern Irish DUP deputy leader Nigel Dodds said "If anyone needs any further lesson or demonstration on how not to negotiate, look at the shambles today of the government in the House of Commons having to pull a vote on something that they said was the only way forward."

Opposition Labor Party leader Jeremy Corbyn said "The government has decided Theresa May's Brexit deal is so disastrous that it has taken the desperate step of delaying its own vote at the eleventh hour". And, "We don't have a functioning government ... Labour's alternative plan for a jobs first deal must take centre stage in any future talks with Brussels."

ECJ said UK free to revoke Brexit unilaterally

As widely expected, the European Court of Justice finally ruled today that "the United Kingdom is free to revoke unilaterally the notification of its intention to withdraw from the EU." And, "Such a revocation, decided in accordance with its own national constitutional requirements, would have the effect that the United Kingdom remains in the EU under terms that are unchanged as regards its status as a Member State.

Separately, European Commission Jean-Claude Juncker talked with May over night weekend. His spokeswoman reiterated the position that "we have an agreement on the table" and "we will not renegotiate", regarding Brexit deal. And, She added that European Union is ready for "all scenarios" of Brexit.

UK GDP rose 0.1% mom, industrial and manufacturing production contracted

Some volatility is seen in Sterling in early part of European session. It firstly declined against Euro, then was limited mildly by ECJ's ruling on Brexit revocation. But overall movements are limited and not even a batch of weak economic data was economy to kick the Pound out of range.

UK GDP rose 0.1% mom in October, matched expectations. For the rolling three months Aug to Oct, growth to 0.4%, down from 0.6% from Jul to Sep. The slow down was even more noticeable, comparing to 0.7% recorded in both May to Jul and Jun to Aug periods. Services was the biggest contributor to growth in the Aug to Oct period, up 0.23%. Production rose merely 0.05% while construction rose 0.08%.

Also from UK, industrial production dropped -0.6% mom, -0.8% yoy in October versus expectation of 0.1% mom, -0.2% yoy. Manufacturing production dropped -0.9% mom, -1.0% yoy versus expectation of 0.0% mom, 0.0% yoy. Trade deficit widened to GBP -11.9B versus expectation of GBP -10.5B. Construction output dropped -0.2% mom versus expectation of -0.4% mom.

Eurozone Sentix investor confidence dropped to -0.3, downside similar to pre-crisis year 2007

Eurozone Sentix Investor Confidence dropped sharply to -0.3 in December, down from 8.8 and missed expectation of 8.4. It's also the fourth decline in a row, and lowest reading since December 2014. Expectation index also dropped to -18.8, lowest since August 2012. Sentix noted that "the dynamics of the downturn are similar to those of the pre-crisis year 2007."

Also, "sheer downward momentum that the economy is currently offering is impressive. The economy is "slimming down at a considerable pace, with pressures coming from "all corners" including "trade disputes, the Italian crisis, unrest in France and Belgium or Brexit." Besides, "the momentum of the current downturn is in many respects similar to that of 2007, and banks, especially in Europe, appear to be in a similarly precarious position".

Also released in European session, German trade surplus narrowed slightly to EUR 17.3B in October. Swiss unemployment rate dropped 0.1% to 2.4% in November.

OECD: RBA policy rates should start to rise soon

In a report released over the weekend, OECD said Australia's "long span of positive output growth continues". And, "continued robust output growth of around 3% is projected in the near future". On RBA, OECD said that "in the absence of negative shocks, policy rates should start to rise soon". It warned that "monetary conditions remain very accommodative, with the risk of imbalances accumulating further if the low-interest rate environment persists." And, "in the absence of a downturn, a gradual tightening should start as inflation edges up and wage growth gains momentum."

However, OECD also warned that the housing market is "a source of vulnerability". So far, "data point to a soft landing without substantial consequence for the overall economy." But "risk of a hard landing remains." And it urged authorities to "prepare contingency plans for a severe collapse in the housing market. These should include the possibility of a crisis situation in one or more financial institutions.

Released earlier in Asia Pacific, New Zealand manufacturing activity rose 2.0% qoq in Q3. Japan GDP was finalized at -0.6% qoq in Q3, revised down from -0.5% qoq. Current account surplus narrowed to JPY 1.33T. Australia home loans rose 2.2% mom in October, versus expectation of -0.5% mom.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2693; (P) 1.2749; (R1) 1.2787; More...

GBP/USD drops to as low as 1.2611 so far today. Break of 1.2661 support indicates resumption of down trend from 1.4376. Intraday bias is now on the downside for deeper decline. Next target is 61.8% projection of 1.4376 to 1.2661 from 1.3174 at 1.2114. On the upside, break of 1.2811 resistance is needed to indicate short term bottoming. Otherwise, near term outlook will remain bearish even in case of recovery.

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