Sample Category Title

Pivot (invalidation): 2732.00

Our preference Short positions below 2732.00 with targets at 2680.00 & 2650.00 in extension.

Alternative scenario Above 2732.00 look for further upside with 2754.00 & 2795.00 as targets.

Comment The RSI advocates for further downside.

Pivot (invalidation): 11340.00

Our preference Short positions below 11340.00 with targets at 11120.00 & 11009.00 in extension.

Alternative scenario Above 11340.00 look for further upside with 11405.00 & 11470.00 as targets.

Comment As Long as 11340.00 is resistance, look for choppy price action with a bearish bias.

Pivot (invalidation): 52.15

Our preference Long positions above 52.15 with targets at 53.25 & 53.80 in extension.

Alternative scenario Below 52.15 look for further downside with 51.60 & 50.75 as targets.

Comment A support base at 52.15 has formed and has allowed for a temporary stabilisation.

Pivot (invalidation): 14.3900

Our preference Long positions above 14.3900 with targets at 14.5400 & 14.6600 in extension.

Alternative scenario Below 14.3900 look for further downside with 14.3200 & 14.2400 as targets.

Comment The RSI lacks downward momentum.

Pivot (invalidation): 1235.00

Our preference Long positions above 1235.00 with targets at 1244.50 & 1248.00 in extension.

Alternative scenario Below 1235.00 look for further downside with 1230.50 & 1227.50 as targets.

Comment The RSI advocates for further advance.

USDJPY seems to be moving within a symmetrical triangle in the daily chart, creating lower highs and higher lows. In the short term, momentum indicators suggest that the bias is neutral to bearish as the RSI hovers marginally below its neutral threshold of 50, while the MACD has already crossed below its red signal line but continues to hold above zero.

A significant step below 112.56 and therefore out of the triangle would increase speculation that further negative corrections might follow up, with sellers probably driving the price down to the 50% Fibonacci of the upleg from 109.76 to 114.54, near 112. Down that mark, the focus would shift to the 111.38 level where the price stopped in late October and May, while a break of that barrier could also open the door for the 110.83 level which attracted a lot of noise recently.

In case the market improves above the 23.6% Fibonacci of 113.40, all eyes will turn to the upper line of the triangle seen around 114.00. A decisive close higher could bring additional gains into the market, though only a leg above the 114.54 top would resume the bullish sentiment. Should the price surpass that peak, activating the long-term upward pattern off 104.62, traders could look for resistance around 115.50.

Looking at the bigger picture, the pair is still in an uptrend. However with the 200-day simple moving average (SMA) rising faster than the 50-day SMA, which seems to be flattening, a sense of caution has started to seep into the market.

Summarizing, USDJPY looks neutral to bearish in the short-term but still bullish in the medium-term.

• Risk appetite crumbles as US arrests Huawei CFO, generating worries of re-escalation in the trade conflict
• Today, all eyes are on OPEC’s meeting (1200 GMT); expectations for a production cut are elevated
• Loonie nosedives to a 1½-year low as BoC shifts to a more cautious stance

Risk appetite falters on fears of “trade war” re-escalation

After a relatively calm Wednesday, risk appetite deteriorated once more during the Asian session on Thursday, following news that the CFO of the Chinese tech colossus Huawei Technologies has been arrested in Canada, to be extradited to the US. Although not clear yet, the charges seem related to a violation of US sanctions against Iran. China’s embassy in Canada demanded her immediate release.

Whether correctly or not, markets interpreted this as a severe risk to the “cease-fire” in the trade war. It underscores that US-China frictions likely run deeper than purely trade matters, and that the gap between the two on burning issues like forced technology transfer and intellectual property may be too large to bridge over 90 days. Stock markets in Asia were a sea of red, while futures tracking the major US indices are also pointing to a lower open today, of around -1.0%. Accordingly, the defensive yen – and to a lesser extent the dollar – are outperforming, while risk-sensitive currencies like the aussie and kiwi are surrendering ground.

OPEC meeting in the spotlight

The main event today will be the OPEC meeting in Vienna (1200 GMT), where expectations for a production cut to stabilize oil prices are riding high. Investors appear relatively confident that an output reduction will indeed be delivered, though there’s a wide range of estimates around the size of any cut. Market chatter continues to suggest a cut of around 1 – 1.5 million barrels per day, with anything near the upper bound of this range likely to help oil prices recover, whereas anything near the lower end – or worse yet below it – will probably hurt crude.

Admittedly, predicting the magnitude of a cut is difficult, as the number required to balance the market may differ from the “politically acceptable” number that can be agreed among players. That said, upside risks to prices appear less pronounced than downside ones. A major cut that exceeds expectations would probably infuriate the White House, hence Saudi leaders may want to avoid that route. On the other hand, the producers may fail to agree entirely, or may agree on the need to cut but not on how much, disappointing markets. Besides crude prices, oil-sensitive currencies including the loonie, Norwegian krone, and Russian ruble will also take their cue from the outcome.

Loonie dives to 1½-year low as BoC strikes a cautious tone

The Bank of Canada (BoC) kept its policy unchanged yesterday, as widely anticipated, and shifted to a more cautious bias amid the collapse in oil prices. Policymakers noted activity in Canada’s energy sector may be “materially weaker than expected”, and that “data suggests less momentum” in Q4. The loonie collapsed to a fresh 1½-year low versus the dollar as investors pared back bets for a rate increase at the January meeting, a prospect now priced in with a mere 26% probability, versus the 68% prior to yesterday’s decision. Now, the most crucial driver for the loonie will be today’s OPEC summit, though some remarks by BoC Governor Poloz at 1350 GMT may also attract attention.

Other highlights for today

The highlights on the US economic calendar are the ADP employment report and the ISM non-manufacturing PMI, both for November. The ADP number is projected to be solid, though note that the correlation between the ADP and the NFP print that is due tomorrow has declined substantially, so today’s release may carry less importance in the eyes of investors. Finally, the US trade balance for October is also due.

As for the rest of speakers, BoE Deputy Governor Ramsden (1000 GMT) and Atlanta Fed President Bostic (1715 GMT) will deliver remarks.

Rates: Risk sentiment remains very fragile
We expect strong US eco data and OPEC+ production cuts in 2019, but they'll probably play second fiddle with investors watching stock markets. Overnight risk sentiment is negative even if we think the news flow is meagre. We don't fight current trends, but think the downside could gradually be exhausted with key support lining up.

Currencies: Dollar doesn't find clear directional trend as market doubts persist
Trading in the major USD cross rates remains an era of relative calm as global uncertainty persists. The combination of global uncertainty and at the same time declining interest rate support for the dollar is keeping EUR/USD in a directionless trading pattern. Sterling is still haunted by (conflicting) headlines on Brexit

The Sunrise Headlines

• US stock markets were closed yesterday in honour of former president Bush, while Asian equities opened with heavy losses this morning. China underperforms on news that Canada arrested Huawei CFO Wanzhou Meng.
• French president Macron has cancelled the increase in fuel taxes which was going to be implemented starting from 2019, in an attempt to calm the growing nationwide protest movement. Protesters still want Macron to resign.
• OPEC+, led by Russia and Saudi Arabia, are close to agree on a deal to cut oil production, though the size of the cut is not yet decided on. The move defies US President Trump, who urged to maintain current supply so prices are kept low.
• The Bank of Canada held its benchmark rate steady at 1.75%, a 10-yr high. However, latest disappointing economic data prompted the bank to take a more cautious tone, warning the economy could be heading for a slowdown in Q4.
• UK PM May's cabinet urged to delay next week's Parliament vote on the Brexit deal, as they fear the heavy defeat could topple the government. Opponents fear the ‘backstop' will keep the UK in a EU customs union indefinitely.
• The Federal Reserve's Beige Book confirms the US economy remains strong, though some districts are signalling a cooling growth. Labour markets is further tightening and trade uncertainty remains a big concern for US businesses.
• Today's economic calendar contains the US ADP employment report, jobless claims and non-manufacturing ISM. The EMU's eco calendar is empty. ECB's de Guindos, Fed's Bostic and Fed Quarles speak

Currencies: Dollar Doesn't Find Clear Directional Trend As Market Doubts Persist

USD looking for direction as risk-off persists

Global volatility eased (temporarily) yesterday. US markets were closed in honor of former president Bush. Sentiment stayed risk-off but the pace of the sell-off slowed. EUR/USD bottomed after Tuesday's intraday slide. The news flow from Europe was also mildly euro supportive. The EMU PMI's were slightly better than expected. Headlines suggested that Italy and the EU are making progress to find a compromise on the Italian budget. In the Fed Beige book, most Fed districts see ongoing modest to moderate growth. Labour shortages and price pressures due to higher tariffs are a concern. The trade-weighted dollar finished marginally stronger near the 97 handle. EUR/USD was little changed (1.1344). The yen returned part of Tuesday's risk-off gain. USD/JPY rebounded (113.19 from 112.77). Overnight, global sentiment turned again outright risk-off. The flattening of the US yield curve resumes. Canada arrested the CFO of Huawei and might extradite her to the US. The case suggests that there is little improvement in the US-China trade relationship despite Saturday's meeting between Presidents Trump and XI Jinping. Asian equities are again deep in the red, with losses in China mounting close to 3%. EUR/USD still lacks any directional tendency holding in the mid 1.13 area. The yen strengthens below 113 (112.75 currently). The yuan weakens modestly. The Aussie dollar extends this week's decline after disappointing trade data. Today, The ISM, the ADP labour report, jobless claims and trade balance data might move the dollar intraday. FX traders will also keep an eye at the OPEC meeting. However, global (FX) markets will stay focused on the US yield curve. The context of at the same time global uncertainty and declining US yields (and a flattening yield curve) is ambiguous for EUR/USD. In case of a new risk-off episode, some EUR/USD downside drift might be on the cards, despite a narrowing of the US-EMU interest rate differential (spill-over from EUR/JPY-USD/JPY selling). Still the 1.12/1.15 range looks solid.

Sterling gained temporarily ground yesterday despite a poor UK PMI. The Brexit debate in Parliament continued. Over the previous days chances on no Brexit looked to have grown slightly. However, the outcome of the process remains highly uncertain/binary in nature. EUR/GBP finished little changed near 0.89. Headlines from the Brexit debate in parliament will continue to drive EUR/GBP trading today. For now, we see no trigger for a sustained sterling comeback.

EUR/USD: Risk-off and flattening of the US yield continue to give ambiguous sign for EUR/USD trading

XAUUSD (1240.08): Gold was seen recovering from the modest declines posted on Tuesday, Price action reversed those losses and is looking to retest the resistance level at 1242.25 level. Establishing resistance with a firm retest could pave the way for a downside correction in prices. The lower support at 1227.10 remains the prime target. A reversal around this level could keep gold prices turning flat and trading within the said levels. If gold prices posted further declines, we anticipate the price to test the lower support at 1217.00.

GBPUSD (1.2723): The GBPUSD currency pair is seen now trading within the support area of 1.2747 - 1.2683 region. We expect price action to maintain the range within this level as price fails to breakout from the upside. Given that price has been consolidating, a break down from the current support area could potentially trigger further losses to the downside. A close below 1.2683 could trigger the descending triangle pattern. This puts the minimum downside target to 1.2500.