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Daily Pivots: (S1) 112.80; (P) 113.03; (R1) 113.41; More..

USD/JPY recovered to 113.24 but was rejected by 4 hour 55 EMA and drops sharply. As it's staying above 112.57 temporary low, intraday bias stays neutral. On the downside, break of 112.57 will target 112.30 first. Break there will extend the fall from 114.20 to 111.37 support and below. On the upside, above 113.24 will turn bias to the upside for 114.03 first. Overall, 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.

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) 1.3273; (P) 1.3336; (R1) 1.3420; More...

Intraday bias in USD/CAD remains on the upside with focus on 1.3385 resistance. Decisive break there will confirm resumption of medium term up trend. Next target is 1.3685 fibonacci level. On the downside, though, break of 1.3160 support will indicate rejection by 1.3385 resistance and turn near term outlook bearish.

In the bigger picture, up trend from 1.2061 (2017 low) is still in progress and decisive break of 1.3385 will pave the way to 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685. In case correction from 1.3382 extend with another falling leg, downside should be contained by 50% retracement of 1.2061 to 1.3385 at 1.2723 to bring rebound.

Daily Pivots: (S1) 0.7234; (P) 0.7295; (R1) 0.7330; More...

AUD/USD's fall from 0.7393 accelerates lower today and focus is now back on 0.7199 support. Firm 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 0.7300 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 would be seen to corrective 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.

Risk aversion intensifies in Asian session again. In particular, Hong Kong stocks lead the decline on news of arrest of Chinese tech giant Huawei's CFO Meng Wanzhou. The arrest is reported to be in relation to Huawei violating US sanctions by shipping US originated products to Iran and some other countries. Canada also confirmed that Meng is facing extradition to the US. The arrest also prompted concerns over Chinese retaliation on US executives.

At the time of writing, Hong Kong HSI is down -2.62% or -702 pts. Nikkei is down -2.13% or -468 pts. China Shanghai SSE is down -1.28%. Singapore Strait Times is down -1.13%. 10 year JGB yield is down another -0.25 at 0.045. We'd like to point out again that 10 year JGB yield hit as high as 0.166 just back in early October. Considering the slump in US and German yields, the strong bond market rebound and stock market decline, it's clear that funds are seeking safety in rather drastic manner.

In the currency markets, Australian Dollar remains the weakest one for today, followed by New Zealand Dollar. Canadian Dollar isn't much better as the third weakest. The Loonie was sold off sharply after BoC expressed its concern on "oil price shock" in the statement overnight. For now, Yen is the strongest one for today, followed by Swiss Franc and then Dollar.

Technically, USD/CAD is likely in medium term up trend resumption. We'll see if it can sustain above 1.3385 key resistance to confirm. CAD/JPY's firm break of 84.61 support already confirm resumption of fall from 89.22. Outlook in Australian Dollar is starting to look bad. AUD/USD is heading back to 0.7199 support and EUR/AUD is eyeing 1.5781 resistance. Break of these levels will argue that recent rebound is Aussie is finished and turn outlook bearish again. Meanwhile, EUR/USD, USD/CHF, GBP/USD and EUR/GBP are trading in familiar range. These pairs are still awaiting breakout.

BoC stands pat but sounds concerned with oil price shock, CAD dives

Canadian Dollar dropped sharply yesterday after BoC kept overnight rate target unchanged at 1.75% as widely expected. But the central bank sounded rather concerned with recent slump in oil prices. Depending on the developments, further weakness in oil price could lead to downward revision in growth projections, slower rate hike next year, or even a pause.

The statement noted that oil prices have "fallen sharply" since the October MPR, "reflecting a combination of geopolitical developments, uncertainty about global growth prospects, and expansion of U.S. shale oil production". And, "benchmarks for western Canadian oil – both heavy and, more recently, light – have been pulled down even further by transportation constraints and a buildup of inventories". "In light of these developments and associated cutbacks in production, activity in Canada's energy sector will likely be materially weaker than expected."

The statement also concluded by maintaining tightening bias to move interest rate towards neutral. However, the pace will depend on a number of facts. Added in this statement, "the persistence of the oil price shock, the evolution of business investment, and the Bank's assessment of the economy's capacity will also factor importantly into our decisions about the future stance of monetary policy."

Sterling could have 6% swing depending of Brexit vote outcome

Sterling is one of the weakest currency this week, just next to risk aversion pressured commodity currencies. But downside in the Pound is so far limited, except versus Yen. It's believed that odds are stacking against UK Prime Minister Theresa May winning the parliamentary vote on Brexit deal on December 11. Her performance in the first two days of the five-day parliamentary debate hasn't been satisfactory so far.

According to a Reuters poll, economists forecast that Sterling would appreciate 3.5% if the deal is approved next week. On the other hand, rejection could trigger selloff by -2.75%. But we'd like to emphasize the eventual development if rather unimaginable. May's defeat in the Brexit vote might not lead to no-deal Brexit, but no Brexit at all. After all, the UK has a trump card of withdrawing the Brexit request unilaterally.

Anyway, for now the Pound's movement could be relatively limited as traders would refuse to commit to any position before the vote.

BoJ Kuroda: Risks tilted toward the downside

BoJ Governor Haruhiko Kuroda warned today that "risks to Japan's economy are tilted toward the downside" And BoJ policymakers "need to pay particular attention to protectionist moves such as Sino-U.S. trade friction."

Kuroda also warned that "raising interest rates now to create policy space for future economic downturns may risk delaying achievement of our inflation target."

Also, it's premature to reveal the exit strategy for the ultra loose monetary policy. Kuroda said "we need to debate an exit strategy and explain it to markets but only when inflation approaches our target."

On the data front

Australia trade surplus came in smaller than expected at AUD 2.32B in October. Retail sales rose 0.3% mom in October, matched expectations. Germany factory orders will be featured in European session. Later in the day, Canada will release trade balance and Ivey PMI.

US economic calendar will also come back to life. Trade balance, jobless claims, non-farm productivity, ISM services and factory orders will be featured.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7234; (P) 0.7295; (R1) 0.7330; More...

AUD/USD's fall from 0.7393 accelerates lower today and focus is now back on 0.7199 support. Firm 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 0.7300 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 would be seen to corrective 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.

Economic Indicators Update

Sterling is one of the weakest currency this week, just next to risk aversion pressured commodity currencies. But downside in the Pound is so far limited, except versus Yen. It's believed that odds are stacking against UK Prime Minister Theresa May winning the parliamentary vote on Brexit deal on December 11. Her performance in the first two days of the five-day parliamentary debate hasn't been satisfactory so far.

According to a Reuters poll, economists forecast that Sterling would appreciate 3.5% if the deal is approved next week. On the other hand, rejection could trigger selloff by -2.75%. But we'd like to emphasize the eventual development if rather unimaginable. May's defeat in the Brexit vote might not lead to no-deal Brexit, but no Brexit at all. After all, the UK has a trump card of withdrawing the Brexit request unilaterally.

Anyway, for now the Pound's movement could be relatively limited as traders would refuse to commit to any position before the vote.

BoJ Governor Haruhiko Kuroda warned today that "risks to Japan's economy are tilted toward the downside" And BoJ policymakers "need to pay particular attention to protectionist moves such as Sino-U.S. trade friction."

Kuroda also warned that "raising interest rates now to create policy space for future economic downturns may risk delaying achievement of our inflation target."

Also, it's premature to reveal the exit strategy for the ultra loose monetary policy. Kuroda said "we need to debate an exit strategy and explain it to markets but only when inflation approaches our target."

Asian markets are staying in selloff mode on global slow down concerns. Additionally, Hong Kong stocks lead decline on news of arrest of Chinese tech giant Huawei's CFO Meng Wanzhou. The arrest is reported to be in relation to Huawei violating US sanctions by shipping US originated products to Iran and some other countries. Canada also confirmed that Meng is facing extradition to the US. The arrest also prompted concerns over Chinese retaliation on US executives.

For now, Nikkei is down -1.84% or -404.35 pts. China Shanghai SSE is down -1.28%. Singapore Strait Times is down -1.25%. Hong Kong HSI is down -2.6% or -703 pts. The HSI's gap down and steep decline today argues that recent recovery from 24540.63 has completed earlier than expected at 27260.43. With strong break of 55 day EMA, deeper fall would be in favor in near term back to retest 24540.63 low. More importantly, the corrective structure of the rebound retains medium term bearishness for new low at a later stage.

In the current currency markets, Australian leads the way down again on risk aversion and smaller than expected trade surplus data. Canadian Dollar also stays pressured after yesterday's dovish BoC statement. Yen is the strongest one, followed by Swiss Franc and then Dollar.

STOCKS

Crucial Supports coming up for test now. As expected, most Indices dipped some more yesterday and may come to test important Supports over the rest of this week. The latest catalyst supporting the charts is news that Canada has arrested a top executive of the Chinese company Huwaei. We would favour a fresh upmove to begin soon enough, but also have to be careful in case our reading goes wrong. Basically, we need to see if the Supports survive the scare about a global slowdown. See Interest Rates below.

The Shanghai (2627, down futher from yesterday's close of 2649.8051, -16.15, -0.61%) may have Support at 2600 itself and might do very well for itself if that holds. But in case it breaks, we have to be careful about chances of a fall towards 2500-2400.

The Nikkei (21538, down a solid bit from yesterday's 21919.33, -116.72) has already dipped to a low of 21491 today. There may be some more room down to 21400 which might be a good Support for the expected upmove to start from, but could be pretty bearish if it breaks.

Likewise, the Nifty (10782.90, -86.60, -0.80%) can test Support at 10700-600 and rise from there. Failure to do that could trigger a decline towards 10400-300.

As expected, the DAX (11,200.60, -135.08, -1.19%) has seen a low of 11177. We might now see a test of 11000, which can produce a strong rise if it holds. Else, there could be large fall towards 10000. Be careful there.

The Dow was closed yesterday on account of the earlier death of George Bush (Sr), but the futures are reported to be trading lower, which is not surprising. We see strong/ important Support near 24250 which we think can hold. Let us see.

COMMODITIES

Chinese refiners are willing to buy US Crude as the 90-days of truce period seem an attractive buy for the US Crude. Although they would remain cautious but are willing to explore the opportunity.

Markets await the OPEC meeting that starts today and it would be important to see if the OPEC and the other countries agree upon mutual production cut. Only if the OPEC maintains a balance in the production, we could see a gradual rise in Crude prices in the medium term else any dispute or break between members could lead to higher production levels thereby keeping Crude prices stable or even push it down further below current levels.

Brent (61.48) is holding well below near term resistance at 64. This is likely to hold just now keeping the movement restricted within 64-58 region in the near term.

On the WTI (52.64), immediate support is seen near 51 and the corresponding resistance is seen at 55.

Gold (1245.40) has risen a bit and is gradually heading towards near term trend resistance at 1260. As mentioned earlier, while price trades above support at 1240, near term view is bullish.

Silver (14.56) is almost stable near current levels. While the price is in an overall broad sideways consolidation, there is some scope of testing 15 on the upside. Downside is likely to be capped near 14.25 just now.

Copper (2.7470) is down from 2.7660 seem yesterday. A fall to 2.70 is on the cards for the near term before a bounce back towards 2.85 is seen.

FOREX

Dollar Index (97.01) is rising as expected and could be headed towards 97.50/75 in the near term. View remains bullish while above 96.50.

Euro (1.1341) is almost stable and has room for sideways consolidation for 1-2 more sessions. Thereafter, a break on either side of the 1.14-1.13 region is possible.

Dollar Yen (112.84) has immediate support near 112.50 and if that holds, a bounce towards 114 is possible in the near term. On the weekly line chart, there is 21-day Ma near 112.20 which could be tested on a break below 112.50 but thereafter a bounce looks more likely.

Eur-Yen (127.94) is trading near immediate support at 127.60 and could soon see a bounce back towards 129-130-132 levels in the near term. View is bullish for the coming week. A bullish Euro-Yen could possibly take Euro up towards 1.14-1.15 again.

Pound (1.2720) has risen back to trade above 1.27. While support at 1.27 holds, we could see a rise in the currency pair towards 1.29 in the medium term.

Aussie (0.7222) declined sharply yesterday breaking below immediate support at 0.7250. If the fall sustains, we could see a dip to 0.7150 gradually. Only if an immediate bounce back to levels above 0.7250, if seen could negate a fall to 0.7150 and reinforce a near term rally targeting higher levels of 0.73-0.74.

Dollar Rupee (70.47) could see some more of downside towards 70.30/25 today. But we expect a rise from levels above 70, that could take it higher towards 70.60/80.

INTEREST RATES

There has been some more inversion of the US Yield Curve towards the middle portion with the US5Yr (2.78%) now trading 1bp lower than the 2Yr (2.79%). The 10-2Yr Spread (0.11%) is also trading at a crucial Support. We would want to bet on fresh steepening of the Curve with a fall in the 2Yr being the favored move, but will go by wherever the Market decides to go.

In this, perhaps tomorrow's US NFP data might be crucial. The NFP has been averaging 200K for almost 2-3 years now. A number below 100K might spook the market further about a slowdown.

Yesterday, the RBI kept the Repo unchanged but allowed a series of cuts in the SLR. The 10Yr GOI (7.4407%) has dipped just below 7.45%, the 38.2% retracement level of the rise from 6.26% to 8.18%. As it seeems to be falling vertically, further decline towards 7.40% and even 7.22% might be possible. Rallies are likely to be sold into (Bonds will be bought).

Key Highlights

• Crude oil price formed a decent support near $49.50 and $50.00 against the US dollar.
• There was a break above a major bearish trend line with resistance at $51.50 on the 4-hours chart of XTI/USD.
• The Euro Zone Services PMI in Nov 2018 increased from 53.1 to 53.4.
• Today, the US Services PMI for Nov 2018 will be released, which is forecasted to remain at 54.4.

Crude Oil Price Technical Analysis

During the past few days, there were heavy declines in crude oil price from the $60.00 swing high against the US Dollar. The price even broke the $55.00 and $54.00 support levels before buyers emerged near $50.00.

Looking at the 4-hours chart of XTI/USD, the price traded as low as $49.25 and later formed a decent support near the $49.50 and $50.00 support levels. As a result, there was an upward move and the price traded above the $51.00 and $52.00 resistances.

The price even broke a major bearish trend line with resistance at $51.50 to enter a short term bullish zone. Later, buyers pushed the price above the $54.00 level and the 50% Fib retracement level of the last decline from the $57.95 high to $49.25 low.

However, there is a strong resistance near the $54.50-55.00 zone and the 100 (red) simple moving average (4-hours). A convincing break above the $55.00 resistance is needed for a larger recovery in the near future.

On the other hand, an immediate support is near the $51.80 level, below which the price may perhaps retest the $49.50-50.00 support area.

Both major pairs, EUR/USD and GBP/USD seem to be struggling to gain bullish momentum and it seems like the US Dollar may continue to rise in the short term.

Economic Releases to Watch Today

• US Initial Jobless Claims – Forecast 220K, versus 234K previous.
• US ISM Non-Manufacturing Index for Nov 2018 – Forecast 59.2, versus 60.3 previous
• US ADP Employment Change Nov 2018 – Forecast 195K, versus 227K previous.
• US Services PMI for Nov 2018 – Forecast 54.4, versus 54.4 previous.

Retailers reported a 0.3% lift in sales in October, in line with market expectations but better than Westpac's forecast of a 0.1% gain. While sales growth is still not strong its looking a touch better than it did mid year, annual growth having lifted from 2.9% in June to 3.5% in October.

The detail looks to be a little more uneven with a strong rise for clothing (2.6%mth) and a solid 0.6% gain for household goods but mixed results for 'small ticket' discetionary storetypes, 'other retail' up 0.5% but cafes and restaurants down 0.9%. Basic food retail rose 0.2%.

The picture was also more mixed by state with a 0.4% decline in sales in NSW nortable given the more advanced house price correction in Sydney.

Overall though the gain is of some relief given yesterday's disappointing September quarter update on wider consumer spending.