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The US dollar continues to trade below the 113.00 level against the Japanese yen, with the risk-sensitive pair earlier tumbling to a two-week trading low. Buyers need to move price above the 113.15 resistance level to negate short-term bearish pressures. A clear breach of the 112.30 support level exposes the USDJPY pair to further heavy technical selling towards the October trading low.

The USDJPY pair is strongly bearish while trading below the 112.90 level, key support is found at the 112.30 and 111.50 levels.

If the USDJPY pair moves above the 112.90 level, further upside towards the 113.15 and 113.80 levels remains possible.

The British pound earlier fell to a fresh 2018 trading low against the US dollar, hitting 1.2657, following another day of political turmoil for the current UK government. The head and shoulders pattern across the lower time frame is now back focus, with the bearish pattern holding a downside projection greater than five hundred basis points. Buyers need to move price above the 1.2840 level to negate immediate selling pressures on the GBPUSD pair.

The GBPUSD pair is strongly bearish while trading below the 1.2695 level, key technical support is found at the 1.2657 and 1.2550 levels.

If the GBPUSD pair trades above the 1.2770 level, key resistance is found at the 1.2800 and 1.2840 levels.

The price of Bitcoin continued the downward momentum started on Monday reaching an intraday low of $3820. This was lower than where it started the week at $4410. The main problem for the currency is negative sentiment due to the declines which have occurred over the past few weeks.

Yesterday, Japan announced that it will start forcing cryptocurrency exchanges to share data of its users in a bid to curb tax avoidance. This was big news for two reasons. Firstly, Japan is one of the most important cryptocurrency countries in the world. Secondly, forcing exchanges to share data goes against the whole idea of cryptocurrencies because it removes anonymity.

In other news, NASDAQ confirmed that it was planning to list Bitcoin futures in the first quarter of 2019. This was somewhat ignored by traders, however, due to past experience. In 2017, CME and CBOE listed the same futures fueling excitement among crypto users who expected the futures to boost volumes. Ultimately, this didn’t work because most traders took short positions leading to a decline in the price.

The BTC/USD pair is trading at 3822.90, which is below the weekly high of 4410. The pair seems headed towards the previous lows of 3513. This is supported by the double EMA and the RSI, which is currently at 41.

The price of crude oil slipped overnight after data from the American Petroleum Institute (API) showed an increase in inventories. The numbers showed that in the past week, inventories increased by 5.34 million barrels, which was higher than last week’s increase of 3.45 million barrels. These figures came a day before the official government data from EIA which is expected to show a drawdown of 940K barrels. It also came a day before OPEC ministers are expected to meet in Vienna for their annual meeting.

The Australian dollar fell after the third quarter GDP numbers missed the consensus estimates. The numbers from the Australia Bureau of Statistics showed that the economy expanded by 2.8% in the quarter. This was lower than the estimated 3.3%. On a quarterly basis, the economy expanded by 0.3%, which was lower than the estimated 0.6% and the slowest expansion in three years. The GDP numbers dampened the market after a hawkish statement from the Reserve Bank of Australia yesterday.

The British pound declined to the lowest level since 2017 after Theresa May’s government was dealt a blow on Brexit yesterday. At Westminster, MPs voted in support of a proposal that parliament should be free to determine what happens next if they reject the proposed deal by the government. With most MPs being against leaving without a deal, there’s a chance that there could be another referendum. Members will vote on May’s plan on Tuesday next week. Many expect her to lose the vote and possibly her job. Yesterday, the Advocate General of the European Court of Justice said in a legal opinion that the country was free to revoke its planned withdrawal from the EU.

In the United States, the markets closed lower yesterday as traders started to worry about the truce between the US and China. Traders are concerned that the truce will not work because of the hardline positions from the two sides. The Dow and S&P 500 indices shed 800 and 90 points respectively. This weakness spread in Asia where the Hang Seng and China A50 declined by 247 and 55 points respectively. In Europe, futures point to modest gains at the open, with the DAX and FTSE gaining by 28 and 15 points respectively. Today, American markets will remain closed as the country mourns the death of George H.W. Bush.

EUR/USD

The EUR/USD slipped in overnight trading after yesterday’s rally. The pair declined to a low of 1.1327, which is along the lower line of the symmetrical triangle pattern. With this fall, the pair’s triangle pattern is closer to reaching the apex, which is an indication that a rally in either direction could happen. The current price of 1.1325 is below the 15-day and 30-day EMA. There is a possibility that the narrow range will be broken tomorrow after ADP releases the jobs numbers.

AUD/USD

After weeks of sharp gains, the AUD/USD pair slipped today after the GDP numbers from Australia. The pair declined from a high of 0.7395 to an intraday low of 0.7288. The decline wiped out the gains made this week. The RSI declined from a high of 70, to the current 47 and is likely to continue the declines. The pair’s price is along the 42-day EMA and below the 21-day EMA. At the same time, the Average True Range is at the highest level since September this year, which is a sign of increased volatility. The pair will likely continue the declines before resuming the upward trend.

GBP/USD

The GBP/USD pair declined to the lowest level since 2017 in overnight trading. The pair reached an intraday low of 1.2655. On the daily chart, the pair’s RSI is currently at 39 while the pair is below the 100-day and 50-day EMA as shown below. The current price is an important support level, which could imply a double bottom. Today, traders will focus on Brexit and the UK PMI numbers.

EUR/USD

Current level - 1.1334

Possible test of the support level at 1.1320 with new target 1.1260. In the opposite direction, the first resistance level is at 1.1420.

USD/JPY

Current level - 112.97

After breaking 113.20 and testing  112.60, a range trading is possible for the pair, before making another attempt at the support level 112.60.

GBP/USD

Current level - 1.2705

The political tensions around the Brexit deal weigh on the pound. After breaking below 1.2730, the next target is 1.2660. If a correction movement starts, the first resistance level is at 1.2850.

Market movers today

In the euro area, service PMI readings in Italy and Spain for November are due as well as retail sales for the eurozone. These numbers will provide interesting clues about the strength of the eurozone economy. Activity remains in hibernation.

In the UK, all eyes are on the debate in the House of Commons and the troubles of the Theresa May government in pushing through the Brexit deal.

I n Poland, the central bank rate decision is due, where we expect no change but watch out for the press conference later in the afternoon.

US markets are closed on Wednesday, as it has been declared a national day of mourning following the death of former President George H.W. Bush. That also means that Powell's address to the US Congress Joint Economic Committee is postponed.

Selected market news

US stocks fell more than 3% on Tuesday as investor optimism over a trade resolution began to fade. The sour market sentiment was fuelled by Trump tweeting warnings that he would revert to tariffs if the two sides could not resolve their differences. The US 10-year bond yield fell to its lowest point since mid-September. A string of comments from the Chinese authorities, however, lifted market sentiment in the early morning Asian trading session. The comments indicated that the trade meeting at the G20 meeting was 'very successful', that China will implement specific items agreed upon as soon as possible and that the US and China will proactively push forward negotiations within the 90-day time frame. The Chinese currency strengthened the most since 2005 after the weekend's trade discussion, but weakened somewhat overnight. See China Market Monitor - Biggest two-day drop in USD/CNY since 2005 , 4 December 2018.

The first day of the five-day long Brexit debate was quite eventful. Early yesterday, the European Court of Justice ruled that the UK can unilaterally revoke the Article 50 notification (which started the Brexit clock), as long as it has parliamentary backing (given the notification itself required approval in the House of Commons). In the House of Commons, PM Theresa May lost three votes. Without going into too many details, the most important one gives the House of Commons more power over what happens in case May's deal fails on Tuesday, which seems very likely at this point. While May's defeats show party discipline in the Conservative Party is low, it may actually turn out to be positive for Theresa May. There is no majority for a 'no deal' Brexit in the House of Commons and any changes to the Brexit deal will likely be in a softer direction. This makes Theresa May's case for 'my deal or risk softer/no Brexit' more credible, which may eventually convince some of the hardliners to vote in favour of her deal in a second attempt. Moderate Conservatives have warned the hardliners about this for a long time.

The USD/JPY could now be moving up higher as part of a wave E (purple) of a waveB (pink), which is part of a larger bearish ABC zigzag pattern (pink). Any of the Fibonacci retracement levels could be bouncing spots for a reversal but a break above the 100% Fibonacci level invalidates the bearish structure.

The USD/JPY has completed a bearish ABC (green) within wave D (purple) and is now expecting a bullish ABC zigzag pattern within wave E (purple). The Fibonacciretracement levels are key resistance.

General Trend:

• Equities markets across the region open lower tracking New York markets Monday. Financials and Semis weigh on markets in Asia
• Trade sensitive Marine Transportation and Iron/Steel sectors weigh on markets in Japan
• Equity Futures rise after declines seen on Tuesday’s session
• Aussie dollar declines on weaker Q3 GDP
• Asian bonds gain amid growth concerns, move higher in US Treasury prices
• Nissan fails to nominate a new chairperson
• Japan JGB Futures trade at highest level since Nov 2016, tracks Tuesday's gain in US Treasuries and equity market declines
• Oil prices decline by over 1.5% in Asia
• Looking Ahead: US equity markets to close on Dec 5th in honor of former President George H. W. Bush

Headlines/Economic Data

Japan

• Nikkei 225 opened -1.3%
• (JP) Bank of Japan (BOJ) Deputy Gov Wakatabe: Will maintain 'massive' stimulus to nudge up prices to 2% target
• (JP) Japan govt reportedly to increase spending on public works to ¥3T, a decade-high level in next year's budget – Nikkei
• 8591.JP Orix said to acquire Japan's Cornes AG for ¥40B ($355M) – Nikkei
• (JP) Japan Nov PMI Services: 52.3 v 52.4 prior; Composite: 52.4 v 52.5 prior
• (JP) BOJ announcement related to daily bond buying operation: Raises 10-25 yr purchases to ¥200B from ¥180B
• 4502.JP ~88% of shareholders approve merger with Shire

Korea

• Kospi opened -1.3%
• (KR) South Korea Nov Foreign Exchange Reserves: $403.0B v $402.8B prior
• (KR) Bank of Korea (BOK) sells KRW2.2T in 2-yr Monetary Stabilization Bonds (MSBs) at 1.93%
• 068270.KR Presents positive results for CT-P10, biosimilar rituximab, in advanced follicular lymphoma at the American Society of Hematology Meeting 2018

China/Hong Kong

• Hang Seng opened -1.9%, Shanghai Composite -1.4%
• (CN) Fitch affirms China sovereign rating at A+; Outlook stable
• (CN) China PBoC struggling as the easing it is giving banks is not resulting in impacting the real economy - SCMP
• 1958.HK Reportedly Daimler is in talks with BAIC; said to float plan to boost stake in China Venture - press
• (CN) Analysts warn that 90-days is not enough time bridge the very wide gap between China and the US on trade - SCMP
• (CN) China top developers fall as Nov figures show another month of declines, property market looking at a possible year of recession depending on Dec – SCMP
• (CN) China Commerce Ministry (MOFCOM): Reiterates to push forward trade negotiations with the US in 90-days, confident to execute trade talk results; To implement specific items agreed upon meeting 'ASAP'
• (HK) Hong Kong Nov PMI: 47.1 v 48.6 prior (close to 2.5-yr low)
• (CN) China National Development and Reform Commission (NDRC): Govt agencies sign MOC for joint efforts to strengthen punishment for intellectual property (IP) infringements – Xinhua
• (CN) Analysts note that China's pledge to buy more American agricultural products could turn a bumper Brazil harvest of soybeans into a global glut – SCMP
• (CN) China PBoC Open Market Operation (OMO): Skips open market operation v skipped prior (29th straight skip)
• (CN) China PBoC sets yuan reference rate: 6.8476 v 6.8939 prior (strongest fix since late Sept )
• (CN) CHINA NOV CAIXIN PMI SERVICES: 53.8 V 50.7E (5-month high); COMPOSITE: 51.9 V 50.5 PRIOR
• (US) We are either going to have a REAL DEAL with China, or no deal at all - at which point we will be charging major Tariffs against Chinese product being shipped into the United States. Ultimately, I believe, we will be making a deal - either now or into the future...China does not want Tariffs! - tweet

Australia/New Zealand

• ASX 200 opened -0.9%
• (AU) AUSTRALIA Q3 GDP Q/Q: 0.3% V 0.6%E (lowest rate since early 2017); Y/Y: 2.8% V 3.3%E; GDP Final Consumption: 0.3% v 0.7% prior; GDP Deflator q/q: 0.9% v 0.1% prior; GDP Capital Expenditure q/q: 0.1% v 0.0% prior
• (NZ) NEW ZEALAND Q3 VOLUME OF ALL BUILDINGS Q/Q: 0.7% V 2.3%E
• TME.NZ Confirms alternative preliminary nonbinding indicative proposal for NZ$6.45/shr received from Hellman & Friedman
• (AU) Australia Nov Final PMI Services: 53.7 v 52.6 prior; Composite: 53.9 v 52.9 prior
• YAL.AU Hong Kong HK$1.18B IPO priced at HK$23.48/shr; retail portion 0.19x covered
• TPM.AU FY19 results are tracking well ahead of guidance – AGM
• (AU) Australia sells A$1.0B v A$1.0B indicated in 2029 bonds; avg yield 2.5399% v 2.6596% prior, bid to cover 2.51x v 2.56x prior
• (AU) AMP Capital Chief Economist said the Reserve Bank of Australia (RBA) might be confronted with having to cut rates in H2 2019 (prior Q2 2019)

Other Asia

• (PH) PHILIPPINES NOV CPI Y/Y: 6.0% V 6.3%E (slowest pace since July)
• (PH) Philippines Central Bank (BSP) Gov Espenilla: Monetary policy to stay vigilant; Nov inflation confirms inflation is heading back to the 2-4% target range

North America

• (US) Weekly API Oil Inventories: Crude: +5.4M v +3.5M prior(build in all categories)
• F CEO Hackett says to make interim announcement related to workforce this week - US financial press
• (US) Special Counsel Mueller recommends no jail time for former national security advisor Michael Flynn, he provided "substantial assistance" with Russia and Trump campaign

Europe

• (UK) UK PM May Government defeated 321-299 in Vote on Parliament Brexit Power
• (UK) UK Parliament find Government in contempt over Brexit legal advice; UK Gov defeated in contempt motion 311-293; Orders Gov to publish full advice immediately; UK Parliament leader Andrea Leadsom says govt will publish its full Brexit legal advice tomorrow
• (UK) UK does not need to pass legislation through Parliament to revoke Article 50 - Sky News
• (IT) Dep PM Salvini tweets (translated): "Where it is written that I have to remove €4B from the pockets of Italians because a European commissioner told me to do so?"
• (US) White House spokesperson: Trump told German automakers he'd like to see more cars being made in the US; has no immediate plans to impose tariffs on their cars

Levels as of 12:50ET

• Hang Seng -1.8%; Shanghai Composite -0.8%; Kospi -0.8%; Nikkei225 -0.7%; ASX 200 -0.7%
• Equity Futures: S&P500 +0.3%; Nasdaq100 +0.4%, Dax +0.2%; FTSE100 +0.3%
• EUR 1.1318-1.1418; JPY 112.65-113.09 ; AUD 0.7282-0.7356;NZD 0.6909-0.6945
• Feb Gold -0.5% at $1,240/oz; Jan Crude Oil -1.5% at $52.44/brl; Feb Copper +0.2% at $2.76/lb

Short term Elliott Wave view in USDJPY suggests that cycle from 11/12 peak (114.21) remains in progress as a double three Elliott Wave structure. Down from 114.21, Minute wave ((w)) ended at 112.27 and Minute wave ((x)) bounce ended at 114.03. Internal of Minute wave ((x)) unfolded as a zigzag Elliott Wave structure where Minutte wave (a) ended at 113.23, Minutte wave (b) ended at 112.63, and Minutte wave (c) of ((x)) ended at 114.03.

Minute wave ((y)) lower is currently in progress and the internal is unfolding as a double three Elliott Wave structure in lesser degree. Down from 114.03, Minutte wave (w) ended at 112.54 as a zigzag Elliott Wave structure, and Minutte wave (x) bounce is correcting cycle from 11/29 high before the decline resumes. We expect sellers to appear after Minutte wave (x) bounce is complete in 3, 7, or 11 swing as far as pivot at 114.03 high stays intact.

USDJPY 1 Hour Elliott Wave Chart

Here an update to the EUR/JPY position trading strategy as last mentioned in the week report here. In short, we've entered short at 127.80. Stop is placed at 129.30, slightly above 129.29 resistance.

Overall developments affirm our bearish view. The price actions from 127.49 as well as from 126.63 are corrective looking, suggesting fall from 133.12 is not over. EUR/JPY is also capped comfortably by 55 day EMA. Daily MACD is so far held in negative region. These are all bearish indications.

We'd expect a test on 126.63 after taking out 127.49 minor support. Break will resume the fall from 133.12 for a another take on 124.08 key support. We'd cautiously look at the reaction from there. But we're leaning towards resumption of the down trend from 137.49 to 61.8% retracement of 109.03 to 137.49 at 119.90. So we'll keep the target at 120.00 first.