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Daily Pivots: (S1) 127.64; (P) 128.29; (R1) 128.74; More....

Intraday bias in EUR/JPY remains neutral at this point. Overall, as long as 130.14 resistance holds, deeper decline is in favor in the cross. Below 127.49 will target 126.63 support first. Break there will resume whole fall from 133.12 and target 124.08/89 support zone. On the upside, however, break of 130.14 will resume the rebound from 126.63 towards 133.12 resistance.

In the bigger picture, as long as 124.08 key resistance turn supported holds, larger up trend from 109.03 (2016 low) is still in progress. Firm break of 137.49 structural resistance will target 141.04/149.76 resistance zone next. However, decisive break of 124.08 will argue that such rise from 109.03 has completed and turn outlook bearish. In that case, deeper fall would be seen to 61.8% retracement of 109.03 to 137.49 at 119.90.

Two months ago, U.S. equity investors cheered a new all-time high on the S&P 500. Stocks advancing to new record numbers started looking as a normal theme given the strength in the U.S. economy, low unemployment, robust earnings, and of course Trump’s fiscal reforms. Suddenly, the euphoria shifted to uncertainty. Equity markets began to plunge, volatility spiked, major indices entered correction territory, and Oil erased one-third of its value. Some investors arelinking the market’s behavior to the 2008 financial crisis and are questioning whether a new global recession is coming.

Predicting a recession is very challenging as we can never know what the trigger will be. A 10% slide from a peak doesn’t necessarily mean we’re getting close to one. We have seen similar corrections in early 2018, 2016 and mid-2015 and no recession followed. However, there is clear evidence that the global economy is slowing down, leading investors to rotate to defensive sectors, and this is well needed to bring stock valuations to realistic levels.

On Thursday investors will get to know whether the Federal Reserve is concerned about falling asset prices when they release the minutes of November’s meeting. If the minutes doesn’t show the Fed is concerned yet, markets could further gauge the Fed’s level of concern on plummeting asset prices as many voting members of the FOMC are due to speak this week including Fed Chair Jay Powell. At this stage I don’t think monetary policymakers are too worried given unemployment is near a 50-year low, and inflation close to target levels. However, chances of slowing the pace of tightening policy areincreasing and this is reflected in the CME’s FedWatch Tool where investors are anticipating a 76% chance of a rate hike in December, and only one more to follow in 2019 as opposed to three hikes projected by the Federal Reserve.

While the Fed is of great importance to restoring confidence, enhanced relations between the U.S. and China may have a bigger impact on sentiment. The meeting between Presidents Donald Trump and Xi Jinping at the upcoming G-20 summit which begins on November 30 will provide guidance on where markets may be headed next. If the two sides agree to calming tensions and finding a framework to de-escalate the on-going trade tensions, we’re likely to see a relief rally in equity markets. However, there’s a high chance of things going in the wrong direction, so expect volatility to remain high over the next few days.

Sterling traders didn’t get excited by the Brexit divorce deal getting signed over the weekend. They know very well that the real struggle is just about to begin. GBPUSD remained near its 2018 lows today, reflecting market skepticism that the deal won’t get passed through the British House of Commons. There’s a lot of bad news that iscurrently priced in Sterling, but more to come if the deal isvoted down by parliament, so expect risk to remain skewed to the downside.

General Trend:

• Lower oil prices support Asian airlines
• Shanghai Composite opened higher by less than 0.1%, declined 2.5% on Friday; Property index outperforms
• Tencent gains over 2%; China speculated to soon issue policies related to e-commerce imports (Local press)
• S&P: China is on track to register the first annual decline in automotive sales since at least 2000
• Nissan and Mitsubishi Motors outperform, Mitsubishi to hold board meeting later today
• Japanese equities upside capped by declines in the financial sector
• South Korea’s Kopsi supported by chipmakers
• Declines in the Resources and Energy sectors weigh on Australian share market financials outperform
• New Zealand glass firm Metro Performance declined over 29%, cut outlook and suspended dividend
• WTI and Brent Crude rise in Asian trading, oil prices dropped over 6% on Friday
• China Dalian Iron Ore declines over 6% (lowest in 5-months) amid drop in steel prices
• Natural Gas Futures drop over 4%, rolled to the Jan 2019 contract
• Japan Manufacturing PMI hits 2-year low as new orders decline; in line with Euro Zone PMI data
• New Zealand Q3 retail sales comes in flat after an expected increase (weakest reading since 2013), kiwi dollar falls 0.25%
• Kiwi later erases decline, tracks gains in Chinese equities and oil prices
• Korean Won (KRW) gains over 0.2%; Bank of Korea (BoK) expected to hike rates at Friday’s meeting
• Russia seizes Ukraine ships near annexed Crimea after firing on them. Ukraine President Poroshenko: Has asked Parliament to meet Monday to discuss martial law Monday after Russia attacked Navy ships on the Black Sea
• Looking Ahead: G20 meeting to be held in Argentina from Nov 30th to Dec 1st.

Headlines/Economic Data

Japan

• Nikkei 225 opened flat
• (JP) Japan considering increasing defense spending to 1.3% of GDP by FY23 - Japan press
• (JP) JAPAN NOV PRELIM PMI MANUFACTURING: 51.8 V 52.9 PRIOR (lowest level since Nov 2016); New orders fall to contraction for the first time since Sept 2016
• (JP) On Nov 24th, BoJ, PBoC and BoK held the 10th tripartite governors' meeting: Governors exchanged views on recent economic and financial developments in the 3 countries
• 9983.JP Uniqlo unit's Greater China sales said to have slowed in the face of trade war - HK Press
• 7201.JP Former France Ministers support Ghosn, noting there is a clear attempt to destabilize the tie up with Renault (of which Ghosn is the biggest supporter) - press

Korea

• Kospi opened +0.1%
• (KR) Hyundai Research Institute (HRI): South Korea 4th industrial revolution may be compelled to push forward restructuring if there is a slowdown in growth going forward
• (KR) North Korea not responding to US offer for talks - Korean press
• (KR) Korea Economic Research Institute (KERI): top major export industries are expected to face a tumble in terms of global competitiveness within three years as Chinese rivals steadily catch up with local companies
• (KR) Bank of Korea (BOK) sells KRW900B in 1-yr Monetary Stabilization Bonds (MSBs) at 1.92% v 1.87% prior
• (KR) South Korea sells KRW600B v KRW600B indicated in in 3-yr bonds; yield 1.895% v 1.915% prior

China/Hong Kong

• Hang Seng opened +0.7%, Shanghai Composite +0.1%
• (CN) China State Council issues more than 50 measures to support pilot free trade zones (FTZs) to deepen reform and innovation
• (CN) China PBoC may have conducted repos with certain banks - China Securities Journal
• (CN) According to economists from the Beijing Renmin University China 2019 GDP growth is expected to slow to 6.3% from 6.6% in 2018 - financial press
• (HK) New home sales in Hong Kong said to decline to the lowest level in close to 3 years - Local Press
• BABA Babytree Group (backed by Alibaba) prices Hong Kong IPO at HK$6.80/share and raises HK$217M (bottom of expected pricing range)
• (CN) Former PBOC Adviser calls for flexibility in yuan - China Securities Journal
• (CN) China PBoC Open Market Operation (OMO): Skips open market operation v skipped prior (22nd straight skip)
• (CN) China PBoC sets yuan reference rate: 6.9453 v 6.9306 prior
• (CN) China luxury homes are still changing hands, but at lower prices and for a smaller pool of buyers as China’s capital controls take effect - SCMP
• (CN) More than 60% of public China companies have issued upbeat FY18 guidance - Chinese press
• (HK) Hong Kong SFC planning to increase security of backdoor listings; target the use of nominees to mask ownership
• (CN) China National Grain and Info Center (CNGOIC): Expect soybean imports to fall (1st time in 7-yrs) amid trade war

Australia/New Zealand

• ASX 200 opened -0.2%
• (NZ) New Zealand Q3 Retail Sales ex-inflation q/q: 0.0% v 1.0%e
• (NZ) New Zealand National Party (opposition) Leader Bridges: Would repeal capital gains tax
• (AU) Australia sells A$600M v A$600M indicated in Nov 2028 bonds, avg yield 2.6418% v 2.7698% prior, bid to cover 4.66x v 4.94x prior
• MPG.NZ Reports H1 (NZ$) Net 9.1M v 9Me; EBIT 15.5M v 15Me; Rev 140.5M v 143Me; suspends dividend [-30%]
• (AU) RBA Assist Gov Kent: Slower credit growth is due to tighter supply and weaker demand

Other Asia

• (TW) Taiwan Local Election Results: among the 22 county and city chief posts, the Kuomintang Party won 15 seats, the Democratic Progressive Party 6; remainder went to independent candidate; Taiwan President Tasi Ing-wen resigned as chairwoman of the ruling DPP party amid the election results

North America

• (US) Mastercard projected Black Friday sales total $23B, +9% y/y; Sees Nov 1st to Dec 24th sales +5% y/y - US press
• (US) ShopperTrak data finds 1.7% decline in shopper visits to US retail stores on Black Friday; 1% decline over Thursday-Friday two day period
• (SA) Saudi Arabia said to be leaning towards lower cut to production; OPEC considering plan to retain current output targets that were first set in 2016 (implies 1M bpd cut) - US financial press
• GM Said to plan the closure of its Oshawa (Canada) operations, may impact 2,200 jobs - US financial press

Europe

• (UK) PM May reiterated next weeks are crucial for country's future, will be one of the most significant votes in Parliament for many year; the best Brexit deal was achieved and in the national interest, there will be no other deal negotiated or second referendum
• (UK) According to Telegraph UK Cabinet ministers and EU diplomats are secretly drawing up a “Plan B” proposal for Brexit based on looming assumption that PM May deal will be blocked by Parliament
• (UK) European Council releases statement endorsing UK PM May Brexit deal (as expected)
• (IT) Italy to work closely with EU this week to find agreement on Italy 2019 budget

Levels as of 12:50ET

• Hang Seng +1.7%; Shanghai Composite 0.0%; Kospi +1.1%; Nikkei225 +0.8%; ASX 200 -0.8%
• Equity Futures: S&P500 +0.5%; Nasdaq100 +0.7%, Dax +0.5%; FTSE100 +0.4%
• EUR 1.1326-1.1421; JPY 112.88-113.29 ; AUD 0.7225-0.7250;NZD 0.6755-0.6794
• Feb Gold +0.2% at $1,231/oz; Jan Crude Oil +1.0% at $50.94/brl; Feb Copper -0.2% at $2.78/lb

Daily Pivots: (S1) 0.8829; (P) 0.8854; (R1) 0.8870; More...

EUR/GBP is staying in range of 0.8824/8939 and intraday bias remains neutral first. Further rally is expected as long as 0.8824 minor support holds. On the upside, firm break of 0.8939 resistance will target 0.9098 resistance next. However, break of 0.8824 will now suggest completion of the rebound from 0.8655. Intraday bias will be turned back to the downside for 0.8655 support instead.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). Sustained break of 0.8939 resistance will confirm that it's in a medium term rising leg for 0.9098 and above. And for now, in case of another fall, downside will likely be contained by 0.8620/55 support zone to bring rebound.

The EUR/USD is expected to build a bullish bounce at one of the Fibonaccilevels. A break above the resistance trend line (orange) would confirm a larger wave Y (pink) correction within wave B (purple) whereas a break below the 100% Fib level makes a downtrend continuation more likely.

The EUR/USD indeed completed a wave B (blue) as expected within a larger bearish ABC zigzag (blue). The bearish breakout below support (dotted blue) confirmed the waveC. Now price seems to be building a 5-wave pattern in wave C (blue).

A strong bullish bounce, which takes price back to the resistance line, could indicate a triangle pattern between the S&R lines (orange/blue) rather than an ABC zigzag pattern.

The USD/JPY is expected to build a larger wave E (purple). The confirmation occurs upon the bearish breakout below the channel. In that case the likely reversal spot is the 61.8% Fibonacciretracement level.

The USD/JPY is building a triangle pattern but it remains to be seen whether price will break the triangle to the downside or upside. The breakout will determine the bearish or bullish character of the triangle pattern.

Daily Pivots: (S1) 1.5628; (P) 1.5694; (R1) 1.5739; More....

Intraday bias in EUR/AUD remains neutral first with focus on 1.5643 minor support. Break there will indicate completion of the corrective rise from 1.5519. Intraday bias will turn back to the downside for retesting 1.5519 low first. On the upside, above 1.5781 would extend the corrective rise to 38.2% retracement of 1.6357 to 1.5519 at 1.5839 and possibly above. But upside should be limited well below 1.5984 support turned resistance to bring fall resumption.

In the bigger picture, current development argues that up trend from 1.3624 (2017 low) is possibly completed at 1.6357, ahead of 1.6587 (2015 high). This is supported by bearish divergence condition in weekly MACD. Deeper decline is now in favor to 1.5271 cluster support (38.2% retracement of 1.3624 to 1.6357 at 1.5313). Break will target 61.8% retracement at 1.4668. On the upside, break of 1.5984 support turned resistance is now needed to revive the prior medium term up trend. Otherwise, further decline will be in favor even in case of strong interim rebound.

Market movers today

Markets will keep a close eye on today's November Ifo figures in Germany, especially after gloomy PMI readings on Friday. Both the current assessment and business expectations are expected to edge down further.

A busy day of ECB speakers as well, with Praet, C uré and Draghi due to speak. We will keep an eye on any rhetorical shifts, especially regarding euro area growth momentum, after the latest downside surprises in the data.

Later this week, euro area and US inflation data as well as newsflows around the upcoming meeting between Chinese President Xi Jinping and US president Trump will be a key market theme.

Selected market news

The European Council formally endorsed the Brexit deal at a special summit on Sunday, after Britain and Spain reached an agreement over the future status of Gibraltar. EU leaders were united in saying that it was the best deal on offer and made it clear that it cannot be renegotiated even if the UK parliament rejects it. A European Parliament vote is expected in February of March 2019, but before then the bigger hurdle for PM Theresa May looms in convincing a hostile House of Commons of the merits of her Brexit deal before the vote in December. In a cabinet meeting today, she is expected to discuss the best strategy to avoid a defeat, before touring the country in the coming weeks to enlist support for her agreement among politicians and voters (see also Brexit Monitor , 16 November 2018). Markets will also keep an eye on whether there will be a 'no confidence' vote in May and whether the supporting party, Ulster's DUP, will pull its support for the government.

The cyclical divergence between the US and Europe continues, causing EUR/USD to fall back below 1.14. While November US manufacturing PMI pointed to continued strong growth, euro area PMIs did not bring the rebound in momentum that markets were hoping for. Instead it looks like some the recent euro area growth weakness will persist in Q4, as composite PMI fell to a 4-year low. Manufacturing remains the main area of weakness amid slower global demand, rising political and economic uncertainty, trade war repercussions and persistent sluggish car sales. However, the slowdown is also broadening out to service sector activity, where demand and new business inflows have waned recently. The data is increasingly challenging the ECB's 'balanced' growth assessment and its belief in temporary factors lying behind the recent slowdown, although we do not expect it to derail the QE exit strategy at the 13 December meeting.

After closing 0.7% lower on Friday, S&P 500 futures indicate a rebound this morning, as Asian equity markets nudged higher. Brent oil fell below USD60/bbl for the first time since October 2017, driven in part by a stronger USD, spill-overs from negative sentiment in equity markets as well as questions about the likelihood of an OPEC production cut at the 6 December meeting. It marks the seventh consecutive week of losses for the crude oil price.

May gets backing from EU27 but does she have it at home?

European stock markets look set to get the week off to a more positive start on Monday, a day after leaders of the EU27 gave their backing for the UK Brexit deal.

Jean-Claude Juncker backed Theresa May claiming this is the best deal possible for the UK, who now has the much tougher task of convinced more than half of parliamentarians to vote for it in a couple of weeks. The deal has been heavily criticised at home, with a number of MPs from all parties be they remainers or leavers vowing to vote against it.

Whether they do so in parliament when faced with the alternative of a no deal Brexit is another matter but I think there is a long way to go until we get there and there’s likely to be considerable turbulence in the pound during that time. There are a wide number of scenarios for how this could play out in the coming weeks or months and it’s very difficult to say with any confidence which way it will go. The only thing I remain convinced won’t happen is a cliff-edge no deal Brexit due to the considerable damage it would cause for all involved but as long as it remains an option it will weigh on the currency.

Oil pares Black Friday plunge

Brent and WTI prices are paring gains at the start of the week after another plunge on what is being dubbed “Black Friday” for oil ahead of the OPEC+ meeting next week. It will be interesting to see how traders respond this week and whether the thinner than normal trade around the US Thanksgiving holiday exacerbated what would have otherwise been a more modest decline.

To be selling so heavily after such a long and substantial decline, just ahead of a meeting at which a significant production cut could be announced strikes me as a little odd. The market looks primed for a short squeeze at some point in the not-too distant future. Of course, this could be a case of traders expecting a smaller output cut, or none at all, as Saudi Arabia looks to scratch Trump’s back in return for his backing in the aftermath of the Khashoggi murder, although I remain unconvinced.

Bitcoin losses reach more than 80% from peak last December

Bitcoin was heading south once again over the weekend as the wider cryptocurrency space continues to suffer in the aftermath of the bitcoin cash fork. Bitcoin had been relatively stable prior to this event but a 45% tumble in less than two weeks has been a flash back to this time last year when 10+% daily moves were the norm and suddenly everyone wanted a bit of the action.

The recent soft patch – to put it mildly – has taken the losses since the peak last December to more than 80% and I don’t think we’re done yet. Prices are still up around 300% since the start of last year which still represents incredible gains, but more importantly plenty of room below.

Daily Pivots: (S1) 1.1286; (P) 1.1320; (R1) 1.1343; More...

Outlook in EUR/CHF remains unchanged for the moment. 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.