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Daily Pivots: (S1) 1.1295; (P) 1.1319; (R1) 1.1336; More...

Intraday bias in EUR/CHF remains neutral and outlook is unchanged. The choppy decline from 1.1501 is seen as a corrective move. Hence, we'd expect strong support from 61.8% retracement of 1.1173 to 1.1501 at 1.1298 to contain downside and bring rebound. On the upside, break of 1.1356 minor resistance will turn bias back to the upside for 1.1433 resistance first. However, sustained break of 1.1298 will turn focus back to 1.1173 low.

In the bigger picture, price actions from 1.2004 medium term top is seen as a correction only. Downside should be contained by support zone of 1.1198 (2016 high) and 61.8% retracement of 1.0629 to 1.2004 at 1.1154 to complete it and bring rebound. This cluster level is in proximity to long term channel support (now at 1.1240) too. A break of 1.2 key resistance is still expected in the medium term long term. However, sustained break of the mentioned support zone will mark reversal of the long term trend. In that case, 1.0629 key support will be back into focus.

The euro currency is back under pressure against the US dollar after being firmly rejected from its weekly pivot point on Monday. The bullish inverse head and shoulders pattern on the one-hour time frame remains valid, although buyers need to defend the 1.1300 support level. In the short-term, the 1.1330 level remains the key area to watch when trading the EURUSD pair.

The EURUSD pair is only intraday bullish while trading above the 1.1379 level, key technical resistance is found at the 1.1400 and 1.1470 levels.

If the EURUSD pair trades below the 1.1330 level, key technical support is found at the 1.1300 and 1.1216 levels.

The US dollar continues to press higher against the Japanese yen currency, following a confirmed technical break above the 113.15 level. Going forward, buyers need to break above the 114.19 level to negate the recent bearish double-top created earlier this month. If the USDJPY pair is rejected from current trading levels, a further technical test of the 112.79 support level appears likely.

The USDJPY pair is strongly bullish while trading above the 113.15 level, key resistance is found at the 114.19 and 114.54 levels.

If the USDJPY pair trades below the 113.15 level, key technical support remains at the 112.79 and 112.53 levels.

The price of Bitcoin continued the freefall started more than a week ago. The decline started after the hard fork of Bitcoin Cash on Thursday 15 this month. This forking led to many cryptocurrencies’ investors to lose hope on the industry because of the dilution factor. As a result, the market valuation of Bitcoin has dropped to $64 billion. This is a sharp decline from the YTD valuation high of more than $300 billion. The total market capitalization of cryptocurrencies tracked by Coin Market Cap has dropped by more than $100 billion to $122 billion.

The price of crude oil dropped slightly after yesterday’s relief rally. The drop came after Donald Trump talked to the Wall Street Journal (WSJ) about his upcoming meetings at the G20. In the interview, he said that he was little optimistic about his meeting with China’s Xi. Traders were hopeful that the meeting will provide an opportunity for the two biggest economies to make a truce. Such a truce would help change the current business climate and improve the economic growth in the coming year. Analysts are banking on the weakness of the US stock market to force the US president to make a deal.

After dropping yesterday, the USD/JPY started another upward rally overnight. This was a continuation of a rally that started on November 20, when the pair reached 112.30. Overnight, the Bank of Japan released the corporate services index, which rose by 1.3%. This was higher than the consensus estimate of 1.2% and the previous month’s 1.1%. The index measures the change in the prices of services offered by companies such as consultancies. It is an important measure of inflation. Later today, its movement will likely be caused by the US consumer confidence data.

EUR/USD

After falling yesterday, the EUR/USD pair was little moved overnight. The pair is trading at 1.1335, which is along the 20-day EMA. It is also close to the 50% Fibonacci Retracement level. The RSI has remained at 45, which is a neutral level. This means that the pair could move in either direction today depending on the US, France and Italy consumer confidence numbers.

USD/JPY

The USD/JPY pair resumed the upward trend and reached an intraday high of 113.53. Its price is along the 15-day EMA and above the 30-day EMA. The RSI has eased from yesterday’s high of 80 to the current 15. The pair will likely cross the resistance level of 113.65 and continue the upward trend. If it does, it will likely test the important resistance level of 114.

XTI/USD

The XTI/USD pair eased from yesterday’s rally and resumed the downward trend. This is a strong trend that started on October 3. The pair’s price is below the 30, 50, and 100-day EMAs as shown below. The RSI has moved from below 27 to the current 37, while the Bears power strength has eased a bit. The pair will likely continue the downward trend. If it does, it will likely move below 50. However, the coming OPEC and G20 meetings could reverse the downward trend.

Yesterday's rally in U.S. equities showed that the mood has shifted followinglast week's selloff. All three major indices rebounded strongly led by beaten-down Tech, Retail and Financial sectors. The Dow Jones Industrial Average closed near its day'shigh posting 354 points ingains, while the S&P 500 and Nasdaq Composite gained 1.55% and 2.06% respectively.

Optimism over a strong holiday sales season and a slight recovery in Oil prices helped to boost the oversold market. However, President Trump's comments to The Wall Street Journal saying that he's still likely to increase tariffs on $200 billion of Chinese goods and slap tariffs on the remaining $267 billion of imports will likely complicate marketsfurther.

The global economy is in a desperate need to end the ongoing trade disputebetween the two largest economies. Already we've been seeing many signs of economic slowdown in Emerging Markets, Europe and even in the U.S. Investors are likely to become more concerned that the G20 summit in Argentina kicking off on Friday won't lead to a truce or a framework agreement between China and the U.S., but given that we're living in a Trump world, there's always a chance for last minute changes. Until then expect markets to remain choppy.

Investors will be focused on Fed talks this week with Fed Vice Chairman Richard Clarida due to speak later today followed by Fed Chair Jerome Powell tomorrow. The overall economic outlook has changed significantly compared to just a couple of months ago. Oil prices declined more than 30% from theirpeak suggesting inflation may slow down; equity markets entered correction territory hitting wealth; and dark clouds are gathering over the U.S. housing market. I think the Fed has now enough reasons to adjust the pace of tightening policy, but investors need confirmation from policymakers.

The 3% recovery in Oil prices yesterday seemed to be short-lived with both major benchmarks declining slightly today. It will be difficult to know where prices will be headed next unless we know the outcome of the G20 summit and OPEC's annual meeting on December 6. Finding a new normal is likely to be a difficult task in the weeks to come.

In the Cryptocurrency world, traders are no longer worried about price movements as much as the fate of these currencies. A fall from almost $20,000 to below $4,000 in Bitcoin's price is a complete crash. Some may say that we had seen a similar correction before when prices dropped from $1,150 in December 2013 to below $300 more than a year later. However, the difference between then and now is the market cap. Back then investors and speculators may have lost nine billion dollars. However, this year's move has wiped out more than $250 billion from its peak.

USD Index is unfolding a bearish turn, down from 97.52 area which we labelled as start of a new, bearish cycle. We can see a completed wave 1 impulse, followed by a temporary consolidation labelled as wave 2. This consolidation can look for resistance and a bearish turn near the Fibonacci ratio of 50.0 or 61.8, from where futher weakness may follow. A drop below the lower channel line will confirm a completed wave 2 correction and further bearish development, below the 96.02 area.

USD Index, 4h

Cycle from Sept 24 high (1.182) in EURUSD remains in progress as an Elliott Wave impulse structure where Primary wave ((1)) ended at 1.1214 and Primary wave ((2)) is proposed complete at 1.147. Pair still needs to break below Primary wave ((1)) at 1.1214 to validate this view. Until then, we still can’t rule out a double correction in Primary wave ((2)) in the form of WXY. Near term, the decline from 1.147 is unfolding in what looks like a leading diagonal Elliott Wave structure.

Down from 1.147, Minor wave 1 ended at 1.1356, Minor wave 2 ended at 1.1434, Minor wave 3 ended at 1.1325, and Minor wave 4 ended at 1.1384. Pair should soon end Minor wave 5 which also completes Intermediate wave (1). Afterwards, it should bounce in Intermediate wave 2 to correct cycle from 11/20 high (1.147) in before the decline resumes. We don’t like buying the pair and expect sellers to appear in 3-7-11 swing as far as pivot at 1.147 high stays intact.

If pair breaks above proposed Primary wave ((2) at 1.147, then it’s doing a double correction and can open further upside towards 1.16 area before the decline resumes. If this happens, we still expect pair to extend lower or at least pullback in 3 waves from 1.16 area as far as pivot at 9/24 high (1.1815) stays intact.

EURUSD 1 Hour Elliott Wave Chart

The GBP/USD wave and chart pattern are showing a potential triangle formation within a wave4 (pink). Price needs to break below the support trend line (green) for a bearish breakout but a bullish break seems most likely at the moment.

The GBP/USD seems to have completed a wave 1 and wave 2 (orange) as long as price stays above the support trend line (blue). The bullish breakout could confirm a wave 3 (orange) pattern within a larger bullish ABC pattern (green) or an immediate wave C. The Fibonaccilevels indicate key support and resistance levels.

Market movers today

After yesterday's recovery in global risk sentiment, where financial markets chose to ignore weak Ifo numbers in Germany and manufacturing data in US, the strength of the rebound will be keenly observed on a day with few economic releases.

In the UK, the key focus is on indications of political support from both sides of the political spectrum for the Brexit deal ahead of the vote in the House of Commons in December.

In the US, markets will focus on four Fed speakers later today and any signals for the rate path in 2019, where the neutral rate lies and whether it should be attained.

Another key market focus is the tension between Ukraine and Russia after renewed fighting between the two countries on Sunday in the Black Sea region. Yesterday, the EU and western governments urged both sides to step back from further provocation, demanding the release of Ukrainian Ships and sailors detained by Russia.

In Scandinavia, we will get Swedish household lending data as well as Danish portfolio investment figures (see next page).

Selected market news

Donald Trump struck a pessimistic tone just days before meeting China's Xi Jinping, saying he still plans to increase the tariffs rate of USD200bn of Chinese goods to 25% next year and that if negotiations fail, he intends to slap tariffs on remaining Chinese imports. Along with oil, US stock futures fell, while Asian stocks paint a mixed picture this morning.

After the EU approved the Brexit deal, focus in the UK turns to the House of Commons' arithmetic. At the time of writing, 95 Conservative MPs have said they will vote against the deal and not many Labour MPs showed up to a government briefing on it. Right now, things are clearly not moving in the right direction for Theresa May, questioning our base case with the deal passing the House of Commons, although we still think it will be closer than some might think. Based on the discussions among political analysts in the UK, it seems like Theresa May is increasingly aware of the probability of losing the vote, but that she thinks it might pass the second time. If she loses by a big margin, she probably needs to resign. The vote in the House of Commons will take place on Tuesday 11 December with five days of debate starting on 4 December. Theresa May will start a tour across the country campaigning for the deal. The hope is that more public support will help. While Theresa May's approval rating has improved lately, the public remains divided on what to think of the deal. In another blow, Donald Trump yesterday also warned that May's Brexit deal could curb the UK's ability to strike a trade agreement with the US.

German November Ifo figures edged down further in line with the weaker PMI and ZEW signals. So far, soft indicators do not point to much of a growth acceleration in Germany in Q4 (currently 0.3% q/q at most). Interestingly, ECB speakers largely refrained from commenting on the growth outlook in their speeches yesterday.

General Trend:

• Asian large-cap tech shares track Monday’s gains in the US; Softbank gains over 3%
• Limited impact seen on Apple’s suppliers from Trump’s comments, upcoming G20 meeting remains in focus
• Shanghai Composite rises less than 1% in early trading, Property index gains
• Japan megabanks rise, S&P500 Financials index rose on Monday
• Australia’s banking index rises amid regulatory delay
• Energy prices decline in Asian trading, oil prices closed higher on Monday
• Japan’s Line Corp gains over 15%, speculated to enter into partnership with Tencent
• Genting Malaysia declines over 14%, filed legal proceedings against Fox and Disney
• China Iron Ore prices add to Monday’s losses
• New Zealand Oct trade deficit wider than expected, imports at a record high

Headlines/Economic Data

Japan

• Nikkei 225 opened +0.7%
• RNO.FR Top executives from Nissan, Renault and Mitsubishi to meet as soon as Thursday - Japan press
• (JP) Japan PM Abe said to cancel trip to Europe - Japanese press
• (JP) JAPAN OCT PPI SERVICES Y/Y: 1.3% V 1.2%E
• 3938.JP Reportedly Line partners with Tencent on mobile payments in Japan – Nikkei [+17%]
• (JP) Moody's: Japan corporate earnings growth to slow down in 2019
• (JP) Japan MoF sells ¥399.3B v ¥400B indicated in 0.80% (prior 0.8%) 40-yr JGBs, highest accepted yield 0.9400% v 1.0250% prior, bid to cover: 3.85x v 3.24x prior
• (JP) Oil Refining companies in Japan expected to seek continued waiver from US sanctions on Iran oil imports after 180-day exemption ends - financial press
• (JP) Japan PM Abe: Next initial budget to have measures to address sales tax, include tax cuts for car owners and rebates on some cashless purchases; to account for ¥2.0T of general budget (after the close yesterday)

Korea

• Kospi opened +0.4%
• (KR) South Korea Nov Consumer Confidence: 96.0 v 99.5 prior (21-month low)
• (KR) China military airplane entered South Korea's air defense identification zone (KADIZ) without notice three times on Monday, less than a month after the last such reported intrusion - Korean press
• (KR) South Korea sells KRW801B v KRW800B indicated in 30-yr bonds; avg yield 2.005% v 2.11% prior; bid to cover 2.72x v 2.79x prior

China/Hong Kong

• Hang Seng opened -0.1%, Shanghai Composite +0.4%
• (CN) Pres Trump: expect to move ahead with plan to increase China tariffs to 25% on $200B worth of goods; iPhones made in China could be included in new round of tariffs - press interview
• (CN) As bitcoin prices fall, China bitcoin miners (one of the largest in the world) have started to turn off machines and stop some of their mining – Caixing
• 2007.HK Notes Altissimo project in Hong Kong only sold 18 of the 110 units available by end of day Monday; priced apartments 5% lower than others in the neighborhood
• (CN) China PBoC Open Market Operation (OMO): Skips open market operation v skipped prior (23rd straight skip)
• (CN) China PBoC sets yuan reference rate: 6.9463 v 6.9453 prior
• (CN) China Oct Industrial Profits y/y: 3.6% v 4.1% prior (6th consecutive month of slowing); YTD y/y: 13.6% v 14.7% prior
• (CN) China National Development and Reform Commission (NDRC):will allow foreign banks in China to apply for government approval for a quota increase in their medium to long-term foreign debt for 2019 - Chinese press
• 322.HK Reports Q3 (CNY) Net 1.55B v 1.24B y/y, Rev 18.9B v 19.7B y/y [-17%]
• (CN) S&P Asia Pacific Economist: Expects China GDP growth to remain above 6% in 2019, notes policy space to guide gradual slowdown; sees risks as mostly on the downside

Australia/New Zealand

• ASX 200 opened +0.2%
• (NZ) New Zealand Oct Trade Balance (NZD): -1.3B v -0.9Be; Exports: 4.9B v 4.9Be; Imports: 6.2B v 5.7Be
• LYC.AU Plans to briefly shut down Malaysia production in Dec; as a results NDPR production to be cut by 400t in Q2
• QIP.AU Enters into a merger agreement of equals with Xenith IP Group worth A$1.80/QANTM share [+5%]
• (AU) Australia sells A$150M v A$150M indicated in Nov 2027 Indexed Bonds, avg yield 0.8033% v 0.8078% prior, bid to cover 3.45x v 4.97x prior
• MIL.AU Receives consultant’s Preliminary Report: taking corrective measures; will not meet prior guidance given [-39%]
• (AU) Australia PM Morrison: Will announce budget surplus before election; mid-year economic and fiscal outlook (MYEFO) to be released on Dec 17th; Budget to be released earlier than normal on April 2nd

North America

• UTX Confirms to Separate Into Three Independent Companies; Completes Acquisition of Rockwell Collins; affirms dividend of $0.735 post split; Cuts FY18 $7.10-7.20 v $7.27e (prior $7.20-7.30); Raises Rev $64.5-65.0B v $64.8Be (prior $64.0-64.5B); Affirms organic Rev ~+6%
• (MX) Mexico incoming Fin Min Urzua: To propose Gerardo Esquivel as deputy Central Bank Gov; to meet with rating agencies and investors in Dec to discuss the 2019 economic package
• ADBE Reports Cyber Monday online sales $4.3B, +18% y/y; sees total cyber Monday sales of $7.9B by the end of the day
• LMT (JP) Japan Govt considering buying up to 100 F35 fighter jets from the US in a deal worth ¥1.0T - Nikkei

Europe

• (UK) Brexiteers to back PM May plan if she says when she is quitting - Times
• (UK) PM May spokesperson (responding to Pres Trump): Brexit agreement means the UK can do a US trade deal (reminder President Trump: Brexit deal sounds like a good deal for the EU; Brexit deal as it stands means UK may not be able to trade with the US; We don't like what is happening, hopefully it will get worked out)
• ALO.FR EU may ask Alstom and Siemens for larger concessions and disposals including high speed train tech, before it clears the deal - FT

Levels as of 12:50ET

• Hang Seng -0.1%; Shanghai Composite +0.1%; Kospi +0.8%; Nikkei225 +0.9%; ASX 200 +0.9%
• Equity Futures: S&P500 +0.2%; Nasdaq100 +0.2%, Dax +0.1%; FTSE100 +0.0%
• EUR 1.1326-1.1343; JPY 113.41-113.60; AUD 0.7214-0.7238;NZD 0.6754-0.6816
• Feb Gold -0.1% at $1,228/oz; Jan Crude Oil -0.4% at $51.39/brl; Feb Copper -0.3% at $2.76/lb