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Daily Pivots: (S1) 1.1303; (P) 1.1362; (R1) 1.1397; More.....

EUR/USD recovers mildly today but with 1.1421 minor resistance intact, deeper fall is still expected for 1.1215 support. Break there will resume larger down trend for 1.1186 fibonacci level next. On the upside, above 1.1421 minor resistance will turn intraday bias back to the upside for 1.1499 resistance. Firm break there will indicate near term reversal and turn outlook bullish for 1.1814 key resistance.

In the bigger picture, down trend from 1.2555 medium term top has just resumed and should target 61.8% retracement of 1.0339 (2017 low) to 1.2555 at 1.1186 next. Sustained break there will pave the way to retest 1.0339. On the upside, break of 1.1814 resistance is now needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of strong rebound.

Euro, Sterling, Australian and New Zealand Dollar are so far the stronger ones today. Euro is lifted by news that Italy is finally showing some flexibility to adjust it's 2019 budget deficit target. The development also send European stocks higher and Italian yield lower. Improvement in risk appetite helps lift Aussie and Kiwi slightly. Meanwhile, in such market sentiments, Yen, Dollar and Swiss Franc are naturally the softest ones.

Technically, though, the movements in the forex markets are rally limited. EUR/USD is held well below 1.1421 minor resistance despite today's recovery. And EUR/JPY stays below 129.10 minor resistance too. GBP/USD is kept well below 1.2927 minor resistance. And GBP/JPY is held below 145.90 minor resistance. AUD/USD is staying close to mid-point of range of 0.7164/7325. That is, the impact developments in Italy and Brexit may not last too long.

In other markets, at the time of writing, FTSE is up 0.67%, DAX is up 1.13%, CAC is up 0.58%. German 10 year yield is up 0.0184 at 0.362. Italian 10 year yield is down notably by -0.132 at 3.282. German-Italian spread is now back below the 300 alarming level. Earlier in Asian, Nikkei closed up 0.76%, Hong Kong HSI gained 1.73%, Singapore Strait Times rose 1.34%. But China Shanghai SSE dropped -0.14%. This is a risk to the global markets.

Italy toned down on budget deficit target, open to adjustment

Euro is given a lift on reports that the Italian coalition is considering adjustment on its 2019 budget plan. It started with Il Messaggero newspaper quoting Armando Siri, a Transport Ministry undersecretary saying that "In order to save the budget and avoid an increase in market turbulence … a small fine-tuning (of the deficit target) could be considered."

Then, it's reported that Deputy Prime Minister, leader of Five-Star Movement, Luigi Di Maio also said deficit target reduction is not a problem as long as budget measures remain the same. He said in a radio interview that "what is important is that the budget contains the goals that we have established." He referred to the measures including citizen's income, and increase in retirement age. And, he added "then if the negotiation means that the deficit (target) must come down a bit, for us it's not important." Di Maio emphasized that "citizens are more important than numbers."

The cabinet is expected to meet today in the evening to discuss reduction of the 2.4% deficit target of 2019. And that could open up the door for constructive dialogue with the European Commission to avoid Excessive Deficit Procedure.

German Ifo dropped to 102, points to 0.3% Q4 GDP growth at most

German Ifo business climate dropped to 102.0 in November, down from 102.9 and missed expectation of 102.3. Current assessment gauge dropped to 105.4, down from 106.1 and missed expectation of 105.6. Expectations gauge dropped to 98.7, down from 99.7, missed consensus of 99.3.

Ifo President Clemens Fuest noted in the release that "Together with other indicators, these results point to 0.3 percent economic growth in the fourth quarter at most. The German economy is cooling down."

EU publishes joint proposals with other members on WTO reforms

EU published the proposal of reform of the WTO's Appellate Body today, for presentation on the General Council meeting on December 12. The proposal is a joint effort with other WTO members including Australia, Canada, China, Iceland, India, Korea, Mexico, New Zealand, Norway, Singapore and Switzerland.

EU Trade Commissioner Cecilia Malmström said in the press release that  "the appellate body function of the WTO dispute settlement system is moving towards a cliff's edge. Without this core function of the WTO, the world would lose a system that has ensured stability in global trade for decades. Now, together with a broad coalition of WTO members, we are presenting our most concrete proposals yet for WTO reform. I hope that this will contribute to breaking the current deadlock, and that all WTO members will take responsibility equally, engaging in good faith in the reform process."

UK PM May to address the Parliament on Brexit, call for support

UK Prime Minister Theresa May is expected to make a statement at around 1530 GMT in the parliament on completing the negotiation with the EU on withdrawal agreement and future relationship. May would also call the Commons to back the deal that allows UK to "move on". Or, "this House can choose to reject this deal and go back to square one ... It would open the door to more division and more uncertainty, with all the risks that will entail."

The last step on the UK side is for the parliament to ratify the agreement. This remaining 1% is probably the most challenging task for the whole Brexit deal. The key date to remember now is January 21, 2019. There is a UK legal requirement that the government has to reach an agreement with the EU by then. If the parliament rejects the deal, the Government has until that day to put forward a new plan. The government is likely to use the brinkmanship strategy, threatening to leave the EU with no-deal on March 29, 2019, if the parliament rejects the current agreement.

More in Brexit Update – The Remaining 1%, The Most Challenging

Japan PMI manufacturing dropped to 51.8, underlying trend skewed to the downside

Japan PMI manufacturing dropped to 51.8 in November, down from 52.9 and missed expectation of 53.0. That's also a two-year low. Joe Hayes, Economist at IHS Markit, noted in the release that "October's six-month peak seems to have been just a transitory month-to-month rebound". And, "the underlying trend appears to be skewed to the downside.". "Indeed, the fall in new orders is a worrying development as easing global growth momentum coupled with a weak domestic backdrop could spell further demand woes for Q4."

BoJ Kuroda: It's possible to shrink the balance while keeping markets stable

BoJ Governor Haruhiko Kuroda appeared in the Parliament again today. He clarified that the objective of the quantitative and qualitative easing problem was to lift inflation to 2% target, rather than bankrolling the government debt.

He also pointed out "how to deal with the BOJ's expanded balance sheet would be among key challenges for us when we were to exit from quantitative easing." However, "past experience of other central banks indicate that with a good mix (of redemption and re-investment of bonds), it's possible to shrink our balance sheet at an appropriate pace, while keeping markets stable."

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1303; (P) 1.1362; (R1) 1.1397; More.....

EUR/USD recovers mildly today but with 1.1421 minor resistance intact, deeper fall is still expected for 1.1215 support. Break there will resume larger down trend for 1.1186 fibonacci level next. On the upside, above 1.1421 minor resistance will turn intraday bias back to the upside for 1.1499 resistance. Firm break there will indicate near term reversal and turn outlook bullish for 1.1814 key resistance.

In the bigger picture, down trend from 1.2555 medium term top has just resumed and should target 61.8% retracement of 1.0339 (2017 low) to 1.2555 at 1.1186 next. Sustained break there will pave the way to retest 1.0339. On the upside, break of 1.1814 resistance is now needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of strong rebound.

Economic Indicators Update

Entering into US session, return of risk appetite helps lift Australian and New Zealand Dollar today. Sterling and Euro are also firmer but we're not seeing any follow through buying the these four currencies yet. It takes some more time to confirm their underlying momentum. The Pound is partly supported by EU's formal endorsement of the Brexit withdrawal agreement. Euro and European stocks rise on news that Italy is finally being flexible to adjust its budget plan. The slightly weaker than expected German Ifo reading was ignored. On the other hand, Yen, Dollar and Swiss Franc are the weakest ones.

In European markets, at the time of writing:

• FTSE is up 0.79%
• DAX is up 1.24%
• CAC is up 0.91%
• German 10 year yield is up 0.0152 at 0.359
• Italian 10 year yield drops sharply by -0.1672 to 3.247
• German-Italian spread is now at 288, back below 300 alarming level

Earlier in Asia

• Nikkei rose 0.76% to 21812.00
• Hong Kong HSI rose 1.73% to 26376.18
• Singapore Strait Times rose 1.34% to 3093.38
• However, China Shanghai SSE dropped -0.14% to 2575.81. This is a risk to the global markets

The DAX index has ticked higher in the Monday session. Currently, the DAX is trading at 11,330, up 0.13% on the day. On the release front, there is only one indicator on the schedule. German Ifo Business Climate dipped to 102.3, shy of the estimate of 102.0 points. Later in the day, ECB President Mario Draghi will testify before the European Parliament Economic and Monetary Affairs Committee.

The DAX remains under strong pressure and posted sharp losses for a second straight week. Investor risk appetite has waned, as the ongoing global tariff war between the U.S. and its major trading partners has dampened global growth. The markets are hoping for a breakthrough at the G20 summit in Argentina on Friday, when President Trump meets with Chinese leader Xi Jinping. If there is any progress, traders can expect the DAX to respond with gains.

After a weak third quarter in the eurozone, there are concerns that the downturn could continue in the fourth quarter. German indicators ended the week on a sour note, as GDP and PMI reports pointed downwards on Friday. Final GDP declined 0.2% in the third quarter, in line with expectations. This marked the first decline since 2014 and was identical to Preliminary GDP, which was released last week. Manufacturing PMI fell to 51.6, pointing to a stagnant manufacturing sector. This marked a fourth straight drop in manufacturing activity. Services PMI dropped lower, with a reading of 53.3 points. Both indicators missed their forecasts. There was more disappointing news on Monday, as German Ifo Business Climate fell to 102.0 in November, its third straight drop. The weak numbers are raising concerns as to whether the German expansion is over.

EU published the proposal of reform of the WTO's Appellate Body today, for presentation on the General Council meeting on December 12. The proposal is a joint effort with other WTO members including Australia, Canada, China, Iceland, India, Korea, Mexico, New Zealand, Norway, Singapore and Switzerland.

EU Trade Commissioner Cecilia Malmström said in the press release that  "the appellate body function of the WTO dispute settlement system is moving towards a cliff's edge. Without this core function of the WTO, the world would lose a system that has ensured stability in global trade for decades. Now, together with a broad coalition of WTO members, we are presenting our most concrete proposals yet for WTO reform. I hope that this will contribute to breaking the current deadlock, and that all WTO members will take responsibility equally, engaging in good faith in the reform process."

Full press release and the proposal.

BTCUSD plummeted to a new 16-month trough of 3814 earlier today, continuing the strong sell-off sentiment of the previous couple of weeks. The RSI and the MACD have both weakened, with the former remaining in the oversold zone and the latter easing below its red signal line. Downside risks persist as both indicators continue to fluctuate in bearish territory.

If the market manages to pick up speed to post more losses, support could be found around the 3500 region, taken from the low in September 2017. A significant leg below this area could send prices towards the 3000 handle, registered in September 2017 as well.

On the flip side, if the pair bounces up and surpasses the 4000 barrier, resistance could be met at the mid-level of Bollinger band near 4260. The next immediate hurdle is coming from the 4610 resistance level, identified by the minor top on November 21.

In the short-term, the aggressive bearish phase remains in play especially when bitcoin continues to set multi month lows day by day.

The New Zealand Dollar depreciated about 63 base points of its values against the US Dollar on Friday. The currency pair was pressured south by the 50,-100-, and 200-hour SMAs during the previous session.

However, Monday's trading session begins with a strong bullish momentum, and by the middle of the day, the exchange rate has gained about 59 base points of its values.

Everything being equal, it is likely that the NZD/USD currency exchange rate continues its upward movement.

The potential target the price will be at the upper boundary of a downtrend line at 0.6827.

The US Dollar edged higher by about 72 base points against the Canadian Dollar on Friday. The currency pair tested the upper boundary of a triangle pattern at 1.3260 during the end of the previous trading session.

The exchange rate was trading near the bottom border of the triangle-like formation pattern at 1.3188 during the morning hours of Monday's session and could be set for a breakout.

If this breakout occurs, the USD/CAD currency exchange rate will aim at a support level formed by the weekly S1 at 1.3152 today.

Furthermore, technical indicators suggest that the breakout might not be immediate.

The Australian Dollar is trading in a triangle pattern against the US Dollar. The exchange rate bounced off its bottom border at 0.7200 during the end of Friday's trading session.

A breakout occurred through the upper boundary of the triangle pattern during the first part of Monday's session.

Given that the currency pair has breached the pattern, it is likely that bullish traders could push the exchange rate towards a resistance level formed by the weekly R1 at 0.7308 within this session.

However, a resistance line set by the 61.80% Fibonacci retracement level at 0.7287 might prevent the price from hitting target today.

Downside risks prevailed in the market on Friday, thus sending the common European currency to plunged by about 109 base points against the Japanese Yen.

However, Monday's trading session begins with a strong bullish momentum, and by the middle of the day, the exchange rate has gained about 98 base points of its values.

Currently, the pair is trading near a resistance cluster formed by the weekly and the monthly PPs at 128.89.

If this cluster holds, the EUR/JPY currency exchange rate will make a brief retracement down towards a support level set by the weekly PP at 128.36 with this session.