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US and China agreed not to escalate trade war after meeting between Trump and Xi. A cease-fire agreement was reached. Even though it's just for 90 days, Asian markets responded positively to the development with all major indices recording solid gains. DOW futures are also pointing to a day of 2% gain for now. In the currency markets, Australian Dollar is the biggest beneficiary and have a strong head start to a busy week. Canadian Dollar and New Zealand Dollar follow as the next strongest. Yen is naturally the weakest one on return of risk appetite. Dollar is the second worst performing, and will need some support from this week's data including NFP, as well as Powell's testimony to reversed weakness.

Technically, AUD/USD finally shows some conviction by gapping up through 0.7314 key resistance. That should seal the case of medium term bullish reversal and next target is 0.7446 fibonacci level. USD/CAD's steep fall today also add credence to the case of rejection of 1.3385 resistance Immediate focus is back on 1.3187 support for confirming near term reversal. Elsewhere, EUR/USD, GBP/USD, USD/CHF, USD/JPY, EUR/GBP, EUR/JPY and GBP/JPY are all staying in familiar range only.

In other markets, Nikkei closed up 1.0% or 223.7 pts at 22574.76. Hong Kong HSI is up 2.46% at the time of writing. China Shanghai SSE is up 2.57%. Singapore Strait Times is up 2.26%. 10 year JGB yield is down -0.0049 at 0.086, below 0.09 handle. WTI crude oil rebound strongly and is now at 53.3. Gold is attempting to recover on Dollar weakness and is pressing 1230.

US-China trade war ceasefire for 90 days, China to work on reforms immediately

US President Donald Trump hailed that he had an "amazing and productive meeting" with Chinese President Xi Jinping, as sideline of G20 summit in Argentina. Both sides agreed to ceasefire on trade war for 90 days and work on structural changes in China. China also agreed to start buying US agriculture products immediately. Trump said there are "unlimited possibilities for both the United States and China."

In a White House statement:

• Trump agreed NOT to raise the tariffs on USD 200B of Chinese progress to 25% on January 1, but leave them at 10%.
• China will purchase a "very substantial" amount of agricultural, energy, industrial, and other product from the US, starting immediately with agriculture.
• Most importantly, negotiations will immediately begin on structural reforms regarding "forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture. "
• The negotiations will be completed within the next 90 days. If an agreement couldn't be made, the above mentioned tariffs will be raised from 10% to 25%.

Just a day after the cease-fire agreement with China. Trump just tweeted that China has agreed to "reduce and remove tariffs on cars" from the US. And the current tariff is 40%.

Japan PMI manufacturing finalized at 52.2, momentum tilting towards a slowdown

Japan PMI manufacturing was finalized at 52.2 in November, revised up from 51.8. Markit noted that new orders rise at joint-weakest rate in just over two years. Also production growth moderates and business confidence drops for sixth month running.

Joe Hayes, Economist at IHS Markit noted that "October's bounce-back was indeed a transitory jump". And, "the underlying picture remains subdued, with momentum tilting towards a slowdown." " Subdued sales performances reflected fragile conditions both domestically and abroad. According to firms, weak demand from China and parts of Europe hampered export growth."

Also from Japan, capital spending rose 4.5% in Q3, much lower than expectation of 8.6%.

China Caixin PMI manufacturing rose to 50.2, domestic demand improved, overseas demand subdued

China Caixin PMI rose 0.1 to 50.2 in November, slightly above expectation of 50.1. Markit noted in the release that production is unchanged for the second month running. There is further in crease in total new work, but export trends remains subdued. Meanwhile, input cost inflation softens to seven-month low.

Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group noted in the release that "Overall, domestic demand across the manufacturing sector improved in November, while overseas demand was still subdued. Production slowed, confidence was relatively stable, capital turnover was improved, and upward pressure on industrial product prices eased. China's economy was weak, but did not show significant signs of deterioration."

AUD shrugs weak manufacturing, building and profits data

The Australian Industry Group Performance of Manufacturing Index dropped sharply by -7 to 51.3 in November. That's the lowest level since October 2017. It's still the twenty-six months of uninterrupted recovery and expansion, longest streak since 2005. Also from Australia, building approvals dropped -1.5% mom in October, below expectation of -1.4% mom. Company operating profits rose 1.9% qoq, below expectation of 2.9% qoq. From New Zealand terms of trade index dropped -0.3% qoq, below 0.1% qoq expectation.

But overall, AUD/USD couldn't care less about the weak data. It surges sharply today on news of US-China trade war ceasefire. AUD/USD should now be in medium term rebound to 0.7446 fibonacci level.

Big week for USD, AUD and CAD

Looking ahead, Fed chair Jerome Powell's testimony will be a major focus of the week. Powell will have a chance to be scrutinized and clarify his views on how close interesting rate is to neutral, being "just below". Many Fed officials are also busy speaking this week, paving the way for another hike on December 19, two weeks away. And of course, US data like ISM indices and non-farm payrolls will be closely watched.

It's a big week for Australia. Aussie got a head start with the help from US-China trade war cease fire. But challenges lie ahead. RBA is expected to keep interest rate unchanged at 1.50% and maintain a neutral stance. Australia will also release GDP, retail sales, and trade balance.

It's also a big week for Canadian Dollar. BoC is widely expected to keep interest rate unchanged at 1.75%. Canada will release trade balance, Ivey PMI and employment data. But OPEC meeting could be more moving for the Loonie.

Besides, there are numerous important data to be featured including UK PMIs, Swiss CPI, etc. Here are some highlights for the week:

• Monday: China Caixin PMI manufacturing; Eurozone PMI manufacturing final. UK PMI manufacturing; US ISM manufacturing , construction spending
• Tuesday: Japan monetary base; RBA rate decision, Australia current account; Swiss CPI; UK construction PMI; Eurozone PPI; Canada labor productivity
• Wednesday: Australia GDP; China Caixin PMI services; Eurozone PMI services final; UK PMI services; Eurozone retail sales; US ADP employment; non-farm productivity; ISM services, Fed's Beige Book; BoC rate decision
• Thursday: Australia retail sales, trade balance; Germany factory orders; Canada trade balance, Ivey PMI; US trade balance, factory orders, jobless claims
• Friday: Japan average cash earnings, leading indicators; Germany industrial production; Swiss foreign currency reserves; Eurozone employment, GDP revision; Canada employment; US non-farm payroll, U of Michigan consumer sentiment

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7289; (P) 0.7308; (R1) 0.7332; More...

AUD/USD surges to as high as 0.7380 so far today. The strong break of 0.7314 resistance finally confirmed medium term reversal. Intraday bias is on the up side for further rally to 38.2% retracement of 0.8135 to 0.7020 at 0.7446 and above. On the downside, break of 0.7284 minor support will turn intraday bias neutral first. But near term outlook will stay bullish as long as 0.7199 support holds.

In the bigger picture, AUD/USD's decline from 0.8135 should have completed at 0.7020 already, ahead of 0.6826 key support (2016 low). Stronger rebound should be seen. But still, we'd expect strong resistance from 0.7500 support turned resistance to limit upside. Medium term fall from 0.8135 should extend to take on 0.6826 low at a later stage.

Economic Indicators Update

The EUR/USD is again testing the key 1.13 support zone and a bullish reversal could confirm the current wave pattern. Price could then test theFibonacciretracement levels of wave Y vs W and even move up as high as 1.17-1.18.

The EUR/USD is expected to expand the bullish correction within wave B (purple) unless price breaks below the support zone (blue).

The EUR/USD is building a bearish ABC pattern within a larger wave B (red) of a larger bullish ABC zigzag pattern. This waveoutlook is valid as long as price bounces at the 61.8% or 78.6% Fibonacci levels of wave B vs A otherwise a different wave pattern could be valid and a larger downtrend could take place.

Market movers today

We have a number of important events ahead of us this week, but first, markets will heave a sigh of relief after the 90-day ceasefire was agreed between Trump and Xi (for more coverage, see our flash comment: US-China trade - Ceasefire paves the way for the real deal in 2019 , 2 December 2018).

Today, US ISM manufacturing data is being released. We think Markit PMI is a better indicator for manufacturing as ISM manufacturing has been too high compared to reality over the past couple of years. We continue to believe ISM should move lower but it has been stubbornly high for longer than expected.

Later this week, the labour market report on Friday will be even more closely monitored than normal after the latest soft indications from the Fed.

In Scandi, we are due to get PMI from both Sweden and Norway today, see page two for details on the Swedish PMI.

Selected market news

Markets in Asia were buoyed by the trade agreement between the US and China at this weekend's G20 meeting. Stocks in Asia saw healthy gains, notably Chinese equities, and both the Chinese yuan and Australian dollar strengthened.

The agreement between the US and China provided a 90-day truce allowing for negotiations on a permanent trade deal. The truce prevented a further increase in tariffs or new tariffs imposed from the US side. However, the US threatened that if no agreement is reached after this period, the 10% tariff rate on USD200bn worth of Chinese goods will be raised to 25%.

In order to reach this agreement, China agreed to buy a not yet specified but very significant amount of US goods within agriculture, energy and industry products plus the two sides will begin to immediately negotiate 'structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusion and cyber theft, services and agriculture'. According to a tweet from President Trump over the weekend, the Chinese side had also agreed to 'reduce and remove' tariffs on American cars from 40% currently. In our view, the deal is good news for financial markets and the global economy. It paves the way for a real deal in 2019 that removes all tariffs imposed and leads to more opening of the Chinese market (for more details, see our flash comment: US-China trade - Ceasefire paves the way for the real deal in 2019 , 2 December 2018).

The G20 meeting also provided relief for the oil price, as Russia and Saudi Arabia agreed to extend into 2019 their deal to manage the oil market, known as OPEC+, although Moscow and Riyadh have yet to confirm any fresh output cuts. The announcement opens the door for a deal at the OPEC meeting on Thursday, 6 December. The oil price is up 6% this morning on the news with Brent trading slightly above USD62 per barrel.

General Trend:

• Equity Futures rise following US/China trade 'truce': Nasdaq Futures +1.8%, S&P500 +1.4%, Nikkei 225 Futures +1.1%; WTI Crude +2.8%, Copper +2.1%
• Equity markets in China and Hong Kong rise over 2%; Technology names and automakers gain
• Trump said China has agreed to remove tariffs on car imports
• Macau gaming shares rise after monthly casino revenues data
• Trade sensitive Marine Transportation and Iron/Steel companies gain in Japan
• Australian equities supported by the Resources and Energy Sectors
• Graincorp [GNC.AU] rises over 26%, received takeover bid
• Bluescope Steel [BSL.AU] supported by stock buyback
• Commodity currencies rise following 'truce' between the US and China regarding trade: AUD/USD +0.8%, NZD/USD +0.5%
• Chinese Yuan and other Asian currencies gain on trade truce
• Various Chinese companies plan to sell USD bonds
• Japan Q3 Capex misses ests
• Australia home prices decline for 14th straight month (Corelogic)
• US President Trump: China has agreed to remove tariffs on Car imports - tweet
• Looking Ahead: RBA expected to hold policy meeting on Tuesday; 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) JAPAN Q3 CAPITAL SPENDING (CAPEX) EX SOFTWARE: 2.5% V 10.7%E; CAPITAL SPENDING Y/Y: 4.5% V 8.5%E; Company profits: 2.2% v 14.0%e; Company Sales: 6.0% v 5.1% prior
• (JP) Japan Nov Final PMI Manufacturing: 52.2 v 51.8 prelim (slowest pace since Aug 2017)
• (JP) US President Trump acknowledges Japan PM Abe work to reduce trade imbalance, but needs to be more progress - Nikkei

Korea

• Kospi opened +1.5%
• (KR) South Korea President Moon and President Trump agreed to revive the momentum on negotiations for the denuclearization of North Korea - Korean press
• (KR) South Korea President Moon starts state visit to New Zealand - Korean press
• (KR) South Korea banks non-performing loans ratio (NPL) falls below 1% for the first time in 10-yrs - Korean press
• (KR) South Korea Nov PMI Manufacturing: 48.6 v 51.0 prior
• (KR) South Korea sells KRW600B v KRW600B indicated in 5-yr bonds; avg yield 1.98%

China/Hong Kong

• Hang Seng opened +2.6%, Shanghai Composite +2.3%
• (CN) SENIOR CHINA DIPLOMAT: PRESIDENT XI AND PRESIDENT TRUMP AGREED THAT US WILL NOT IMPLEMENT 25% TARIFF ON JAN 1ST, 2019; TO BE RETAINED AT 10% LEVEL FOR 90 DAYS; China agrees to purchase more from the US to work on imbalance, will work to reach an agreement on trade in the next 90-days; China agrees to purchase US agricultural products immediately; If the two countries are unable to reach agreement over the next 90 days, the 10% tariff will rise to 25%
• (HK) Macau Nov Gaming Rev (MOP): 25.0B v 27.3B prior; Y/Y: 8.5% v 2.6% prior
• (CN) China General Administration of Customs (GAC) says Jan to mid-Nov total imports and exports (total trade volume) surpassed the entire trade volume for 2017; said the volume was nearly 15% higher than same period in 2017 - Xinhua
• (CN) China Financial Futures Exchange (CFFEX) eases restrictions on domestic stock index futures trading in a sound and orderly way in a bid to facilitate market functions – Xinhua
• (CN) China PBoC sets yuan reference rate: 6.9431 v 6.9357 prior
• (CN) China PBoC Open Market Operation (OMO): Skips open market operation v skipped prior (27th straight skip)
• (CN) CHINA NOV CAIXIN PMI MANUFACTURING: 50.2 V 50.1E
• (CN) SCMP Op Ed: Look out for another PBOC move to support the economy as growth momentum fades; the next move will be the 5th time in 13-months

Australia/New Zealand

• ASX 200 opened +0.4%
• (NZ) New Zealand Q3 Terms of Trade q/q: -0.3% v 0.0%e
• (AU) Australia Nov Corelogic House Price m/m: -0.9% v -0.6% prior (14th consecutive monthly decline)
• (AU) AUSTRALIA OCT BUILDING APPROVALS M/M: -1.5% V -1.5%E; Y/Y: -13.4% V -14.0%E
• (AU) AUSTRALIA Q3 COMPANY OPERATING PROFIT Q/Q: 1.9% V 2.8%E; INVENTORIES SA Q/Q: 0.0% V 0.4%E
• GNC.AU Receives non-binding A$10.42/shr cash offer from Long Term Asset Partners Pty (+26%)
• (AU) Australia Nov Commodity Index: 122.1 v 123.7 prior; Y/Y: 14.9% v 14.9% prior

Other Asia

• TSM Said to provide certain product price incentives - Local Press

North America

• QCOM China President Xi has indicated he is "open to approving" the prior unapproved deal between Qualcomm and NXP, should it again be presented to him
• QCOM Considers prospect of NXP deal closed, deadline is past deal terminated - email statement
• TRCO Reportedly Nexstar has reached deal to acquire Tribune Media for $46.50/shr in cash – press
• (SA) Saudi Oil Min Khalid Al Falih: OPEC+ agreement has stabilized the oil market, providing benefit to consumers, producers, and the global economy
• (CA) Alberta (Canada): Mandates 325K bpd cut in oil output to ease supply glut and deal with low crude prices (~9% of total output), effective from Jan 2019; relates to oil-sands and conventional oil

Europe

• DBK.DE CEO Sewing: Not at risk of a takeover, despite ongoing speculation about a possible tie-up with UBS or Commerzban - press
• (ES) Spain region of Andalusia holds elections: Far right Vox party wins 12 of 109 seats; Socialists winning party but will need to form coalition
• (EU) EU Finance Ministers expected to agree to give bailout fund new responsibilities but delay decision on EU budget and deposit guarantee - financial press

Levels as of 12:50ET

• Hang Seng +2.5%; Shanghai Composite +2.7%; Kospi +1.7%; Nikkei225 +1.0%; ASX 200 +1.8%
• Equity Futures: S&P500 +1.7%; Nasdaq100 +2.1%, Dax +1.1%; FTSE100 +0.8%
• EUR 1.1328-1.1357; JPY 113.44-113.82 ; AUD 0.7349-0.7381;NZD 0.6889-0.6919
• Feb Gold +0.4% at $1,231/oz; Jan Crude Oil +5.2% at $53.60/brl; Feb Copper +1.8% at $2.84/lb

For the 24 hours to 23:00 GMT, the EUR declined 0.69% against the USD and closed at 1.1310 on Friday.

On the data front, the Euro-zone's flash consumer price inflation (CPI) slowed to a 3-month low level of 2.0% in November, in line with market expectations. In the prior month, the CPI had advanced 2.2%. Moreover, the region's unemployment rate remained unchanged at a rate of 8.1% in October, defying market expectations to ease slightly to 8.0%.

Separately, in Germany, retail sales rebounded at its fastest pace since May 2017 by 5.0% on a yearly basis in October, driven by robust labour market and earnings growth and surpassing market expectations for a gain of 1.4%. In the preceding month, retail sales had recorded a fall of 2.6%.

In the US, data showed that the US Chicago Fed purchasing managers index rose to a level of 66.4 in November, following a level of 58.4 in the previous month. Market participants had envisaged for the index to climb to a level of 58.5.

In major news, the US President, Donald Trump and his Chinese counterpart, Xi Jinping agreed to pause additional tariffs for the next 90 days and reset resolution talks.

In the Asian session, at GMT0400, the pair is trading at 1.1353, with the EUR trading 0.38% higher against the USD from Friday's close.

The pair is expected to find support at 1.1306, and a fall through could take it to the next support level of 1.1259. The pair is expected to find its first resistance at 1.1400, and a rise through could take it to the next resistance level of 1.1447.

Looking forward, traders would keep an eye on the Markit manufacturing PMI for November, set to release across the euro bloc. Later in the day, the US Markit manufacturing PMI and the ISM manufacturing PMI, both for November, along with construction spending data for October, will be on investors radar.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the GBP declined 0.31% against the USD and closed at 1.2744 on Friday.

In economic news, UK's seasonally adjusted house price index advanced 0.3% on a monthly basis in November, beating market consensus for a rise of 0.1%. In the previous month, the index had registered a flat reading.

In the Asian session, at GMT0400, the pair is trading at 1.2776, with the GBP trading 0.25% higher against the USD from Friday's close.

The pair is expected to find support at 1.2737, and a fall through could take it to the next support level of 1.2697. The pair is expected to find its first resistance at 1.2813, and a rise through could take it to the next resistance level of 1.2849.

Trading trend in the Sterling today is expected to be determined by UK's Markit manufacturing PMI for November, scheduled to release in a few hours.

The currency pair is trading above its 20 Hr moving average and showing convergence with its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD rose 0.14% against the JPY and closed at 113.60 on Friday.

In the Asian session, at GMT0400, the pair is trading at 113.52, with the USD trading 0.07% lower against the JPY from Friday's close.

Data indicated that Japan's final manufacturing PMI fell to a level of 52.2 in November, amid slowdown in economic growth and marking its lowest level since August 2017. In the preceding month, the PMI had recorded a level of 52.9, while preliminary figures had indicated a fall to a level of 51.8.

The pair is expected to find support at 113.31, and a fall through could take it to the next support level of 113.09. The pair is expected to find its first resistance at 113.78, and a rise through could take it to the next resistance level of 114.03.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD rose 0.36% against the CHF and closed at 0.9998 on Friday.

Data indicated that Switzerland’s KOF economic barometer eased to a level of 99.1 in November, compared to market expectations for a fall to a level of 99.5. The KOF economic barometer had recorded a revised reading of 100.2 in the prior month.

In the Asian session, at GMT0400, the pair is trading at 0.9978, with the USD trading 0.20% lower against the CHF from Friday’s close.

The pair is expected to find support at 0.9951, and a fall through could take it to the next support level of 0.9925. The pair is expected to find its first resistance at 1.0004, and a rise through could take it to the next resistance level of 1.0031.

Going ahead, investors would closely monitor Switzerland’s retail sales for October and manufacturing PMI for November, scheduled to release in a while.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD rose 0.08% against the CAD and closed at 1.3292 on Friday.

On the macro front, data revealed that Canada's annualised gross domestic product (GDP) advanced 2.0% on a quarterly basis in 3Q 2018, meeting market expectations. In the prior quarter, the GDP had recoded a gain of 2.9%.

In the Asian session, at GMT0400, the pair is trading at 1.3213, with the USD trading 0.59% lower against the CAD from Friday's close.

The pair is expected to find support at 1.3173, and a fall through could take it to the next support level of 1.3133. The pair is expected to find its first resistance at 1.3293, and a rise through could take it to the next resistance level of 1.3373.

Moving ahead, traders would await Canada's RBC manufacturing PMI for November and MLI leading indicator for October, set to release later in the day.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the AUD declined 0.21% against the USD and closed at 0.7302 on Friday.

LME Copper prices declined 0.7% or $44.0/MT to $6238.0/MT. Aluminium prices rose 0.1% or $2.0/MT to $1935.0/MT.

In the Asian session, at GMT0400, the pair is trading at 0.7369, with the AUD trading 0.92% higher against the USD from Friday's close.

Overnight data showed that Australia's AIG performance of manufacturing index fell to a level of 51.3 in November, following a reading of 58.3 in the previous month. Moreover, the nation's seasonally adjusted building approvals plunged 13.4% on a yearly basis in October, compared to a revised drop of 12.8% in the previous month. Market participants had expected building approvals to drop 14.0%. On the contrary, the CBA manufacturing PMI rose to a level of 54.6 in November, compared to a reading of 54.5 in the previous month.

Elsewhere in China, Australia's largest trading partner, the Caixin/Markit manufacturing PMI index unexpectedly rose to a level of 50.2 in November, compared to market consensus for a steady reading. The PMI index had registered a level of 50.1 in the previous month.

The pair is expected to find support at 0.7309, and a fall through could take it to the next support level of 0.7250. The pair is expected to find its first resistance at 0.7404, and a rise through could take it to the next resistance level of 0.7440.

Going forward, traders would keep an eye on the Reserve Bank of Australia's interest rate decision slated to release overnight.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.