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Key Highlights

• The Euro failed to break the 1.1470 resistance and declined against the US Dollar.
• There is a major bearish trend line in place with resistance at 1.1450 on the 4-hours chart of EUR/USD.
• The US Manufacturing PMI for Oct 2018 (Preliminary) declined from 55.7 to 55.4.
• Today, the German IFO Business Climate Index for Nov 2018 will be released, which is forecasted to decline from 102.8 to 102.3.

EURUSD Technical Analysis

The Euro recovered recently above the 1.1400 level against the US Dollar. However, the EUR/USD pair failed to break the 1.1470 resistance and declined below 1.1400.

Looking at the 4-hours chart, the pair started a downside move from the 1.1472 swing high and traded below the 1.1400 and 1.1380 support levels. There was a break below the 1.1350 support as well along with the 100 simple moving average (red, 4-hours).

During the decline, there was a break below a connecting bullish trend line with support at 1.1400. Moreover, there was a break below the 50% Fib retracement level of the last wave from the 1.1215 low to 1.1472 high.

The next immediate support is at 1.1300, below which the pair could trade towards the 76.4% Fib retracement level of the last wave from the 1.1215 low to 1.1472 high.

However, the main support is near the 1.1250 level where buyers are likely to emerge. On the upside, the broken support near 1.1380 and the 100 SMA are likely to act as hurdles for buyers. Therefore, a convincing break above 1.1380 and 1.1400 is needed for buyers to take control.

Fundamentally, the US Manufacturing PMI for Oct 2018 (Preliminary) was released by the Markit Economics. The market was looking for no change from the last reading of 55.7.

However, the result was negative as there was a decline in the US Manufacturing PMI from 55.7 to 55.4. Moreover, the US Services Purchasing Managers Index (PMI) also posted a decline from the last reading of 54.8 to 54.4.

Therefore, there could be a short term recovery in EUR/USD and GBP/USD, but upsides are likely to remain capped in the near term.

Economic Releases to Watch Today

• German IFO Business Climate Index for Nov 2018 – Forecast 102.3, versus 102.8 previous.
• German IFO Current Assessment Index Nov 2018 – Forecast 105.3, versus 105.9 previous.
• Dallas Fed Manufacturing Business Index for Nov 2018 – Forecast 25.0, versus 29.4 previous.

Stocks

This week will be a test of our hypothesis that most Equity indices could bounce from Supports. Within this, the Shanghai and the Nifty-Sensex combined look bearish in the near term.

For now, although the Dow (24285.95, -178.74) has closed low, the mentioned Support at 24250-200 has held. Even 24000 could produce the expected bounce towards 25500+. At the same time, we have to be prepared for bearishness on a break below 24000. Some dovishness from the Fed, on the back of the plunge in Crude, could be the positive trigger the market is waiting for.

The mentioned Support at 11000 on the DAX (11192.69, +54.20) is holding so far. we have to now see if a proper bounce that breaks above 11350 materializes or not.

There is a bit of similarity in the charts of the Dow and the Nikkei (21740, +0.44%). Contrary to expectation, it did not dip to Support at 21200 on Friday and in fact trades a little higher today. A rise past 21800, if seen, could be bullish in fact.

The Shanghai (2582, +0.11%) saw a sharp fall on Friday as the Resistance at 2700 is holding well. It might be a loss leader in the near term and maybe we have to be prepared for a fall towards 2550 or even 2400.

The Nifty (10526.75, -73.30, -0.69%) and Sensex (34981.02, -218.78, -0.62%) had fallen on Thursday, in line with near-term bearishness. Today's action, after the large decline in Crude on Friday, will be important. Failure to rally could accentuate near-term bearishness.

COMMODITIES

Brent (59.38) and WTI (50.67) have seen sharp plunge on Friday. Brent is trading below 60 and is likely to test 56 in the near term before bouncing back towards 60-62 in the medium term. The 200-MA on the weekly line chart near 56 could provide some support to Brent and push it higher within the next few sessions.

WTI, has support near 47.5 on the daily line chart and could hold in the near term producing a decent bounce.

Brent-WTI spread (8.50) has bounced a bit from 8.21 and could move up towards 9.0-9.2 before attempting a fall back towards 7.75 or even lower in the medium term. A falling spread would indicate some more weakness for the crude prices.

Gold (1223.80) is holding below the immediate resistance at 1230 and while that holds, there is scope of another fall towards 1210-1205 in the near term. Gold could possibly take some time, say a week or two to be able to break above the 1230 resistance and move higher. It looks bearish for this week while the dip continues.

Silver (14.27) has fallen from 14.5 and could test support near 13.80-14.00 in the next few sessions before again bouncing back towards daily horizontal trend resistance at 15.

Copper (2.76) is also facing rejection near 2.80 and while that holds, a decline to support at 2.65 is likely. Overall the price is stuck in the 2.65-2.85 region and needs to break on either side to decide further direction. Before that the price is likely to remain ranged in the said region for another 1-2 weeks.

FOREX

Dollar Index (97.03) has bounced after testing support near 96 last week. It could now rise towards resistance on daily line chart near 97.5 in the current week.

Euro (1.1330, -0.05%) is trading within important support and resistance levels of 1.12 and 1.15. The 8-MA on the 3-day line chart seems to be holding just now and could push Euro towards 1.130-1.1280 in the near term. Thereafter the rate could move up towards 1.15 gradually.

112.25-112.50 seems to be near term support for Dollar Yen (113.23, +0.24%) just now from where a bounce has taken place. While the pair remains above 113, there is scope of testing 113.50-114.0 on the upside soon. In the longer run, we could see an eventual fall back to 112 as long term resistance at 114 may not easily give up.

Euro-Yen (128.32, +0.18): While below resistance near 128.75, Euro-Yen could fall towards support on daily and 3 day candles near 127.5 in this week.

Pound (1.2800)is likely to test support on daily candles near 1.275 in the next couple of sessions. Broad ranging between 1.30-1.27 might still continue for 1-2 weeks.

Aussie (0.7236) might get some support near the 21 days MA (0.7225) in the next 1-2 sessions. However, looking at weekly candles, preference is for it to move lower in this week towards 0.719.

Sharp fall in Brent Crude on Thursday and Friday last week seems to continue, taking the price to levels below 60. This is crucial and could lead to a sharp gap down opening in Dollar Rupee (70.69) today near 70.40/20 region. The correlation between Dollar Rupee and Brent crude is high currently and stable Crude is needed to prevent further strength for the Rupee in the near term. A break below 70.20 if seen today could take it down further below 70 this week aided by the falling crude.

INTEREST RATES

The sharp decline in Crude last week, has pulled US yields a little lower, but Supports have not been broken yet. For instance, the US 10Yr (3.04-05%), dipped a bit compared to 3.06% on Thursday, but remains above the crucial Support at 3.00% for now. The US 2Yr (2.82%) also remains above the crucial Support at 2.80%. It will be interesting to see if these continue to hold this week, or if they produce a bounce. Perhaps the market might want to wait see the US Q3 GDP (Preliminary) number on Wednesday before taking a call. A hitherto absent dovish comment from the Fed (if it comes at all) could trigger a break of the Supports. Else, we may see Yields move up in the coming days.

The US 10-2Yr Spread (0.22%) also needs to rise past 0.30% to give greater credence to our preferred Curve-steepening.

The German-US 10Yr Spread (-2.70%) has dipped a bit compared to -2.68% on Thursday. Similarly, the German-US 2Yr Spread (-3.40%) also traded 1bp lower on Friday compared to -3.49%. The German 2Yr (-0.576%) has earlier bounced a bit from Support at -0.62%. We need to see if the German 30Yr (0.995%) and 10Yr (0.344%) bounce from Supports at 0.98% and 0.30% respectively or not.

In India, the 10Yr GOI (7.7097%) had already broken below 7.75% on Thursday. It may now well be expected to fall below 7.7% towards 7.65% and 7.60% in the coming days/ weeks.

EURUSD retains bear pressure as it eyes more weakness towards the 1.1270 zone. Support lies at the 1.1250 where a violation will aim at the 1.1200 level. A break below here will aim at the 1.1150 level. Further down, support lies at the 1.1100. On the upside, resistance resides at 1.1350 level with a break through there opening the door for further upside towards the 1.1400 level. Further up, resistance comes in at the 1.1450 level where a violation will expose the 1.1500 level. All in all, EURUSD continues to face downside pressure medium term.

EURGBP emains vulnerable below key resistance rat 0.8932. This leaves risk of more decline on the cards. On the downside, support stands at the 0.8800 level where a violation will turn focus to the 0.8750 level. A break below here will aim at the 0.8700 level This leaves upside risk towards the 0.8950 level. A violation if seen will turn risk towards the 0.9000 level. Further up, resistance comes in at 0.9050 level followed by the 0.9100 level. All in all, EURGBP remains biased to the downside on correction.

Wall Street slides again

Wall Street slid further in holiday-shortened trading on Friday amid more signs of a global economic slowdown. UK shares dropped ahead of the weekend Brexit summit while oil prices slid further toward $50 per barrel.

US30USD Daily Chart

The US30 index fell for a second straight day during the US Thanksgiving period. First indications are that US futures may be attempting a bounce this morning

While the index fell, it still failed to move below the October low of 24,066. Daily momentum indicators may be starting to shift from a bearish standpoint

No first tier US data today. The Dallas Fed manufacturing index is expected to slip to 25.0 from 29.4 in November.

DE30EUR Monthly Chart

The Germany30 index closed higher on Friday despite disappointing European PMI data. French, German and Euro-zone Markit manufacturing PMIs all came in below forecast, but managed to hold above the 50 mark

The index continues to pivot around the 55-month moving average at 11,219 after hitting a monthly low of 9.512 earlier this month

More economic disappointment is possible today as the German IFO expectations index is seen slipping to 99.2 in November from 99.8. This would be the third month of declines.

WTICOUSD Weekly Chart

WTI slid to its lowest level in eleven months on Friday amid reports of higher production from Saudi Arabia this month

Friday’s fall meant that prices have fallen for seven straight weeks, with a total slump of 35% from October’s peak. Fibonacci support level at $49.39, 78.6% retracement of the June 2017 to October 2018 rally

Saudi Oil Minister said Saudi will respond to market demand for oil and will not flood oil market with supply. November output was 10.7M bpd.

A crude warning

Black Friday turned into a fire sale for oil prices, while EU manufacturing continues to flounder with export-orientated figures declining to a 30-month low, compounding the weak run of EU economic data but it was the enormous drop in oil prices that triggered calamitous price action across forex, commodity and bond markets

Exacerbating Friday's price action, however, was holiday thinned liquidity conditions and traders running very low-risk thresholds.

Trading desks return full staffed today; however, market conditions will be anything but ordinary. Besides headline risk remaining elevated around EU-Brexit talks and the G-20 summit, from a flow perspective, it's going to be a very tricky week as traders are beginning to fold their cards knowing markets have that remarkable tendency to swing one way into year end. But with month-end approaching and when combined with year-end flows starting to factor, markets could get both messy and noisy in quick order this week.

With every road leading to the Xi-Trump meeting at the G-20 this weekend, possibly the best and last opportunity for the two leaders to share middle ground. The big question is are we going to see Trump the “deal maker “or Trump the ” trade warrior” who wants China to ” feel more pain”. Keeping in mind that betting against the later has been a poor bet for traders this year.

Oil markets

The oil spill accelerated Friday, and the eye-watering tumult is unmissable as bearish sentiment erupted like an uncontainable oil gusher again. Indeed, one of the biggest and quickest wildcats runs in some time. But everything that's been identified bearish remains intact. Pointing to one smoking gun is impossible. Instead, its a toxic combination of factors, highlighted by oversupply concerns, OPEC uncertainty, a very shaky risk environment on the back of the slowing global growth narrative, the precipitous swing on Fund positioning (based on CFTC report) and financial risk aversion flows.

And while oil market might come up for air at some point (admittedly I said the same at $ 62-63 Brent), the reality is we've had a progressive week-on-week substantial reduction in long crude oil futures positions, and gross longs are at the lowest in three years (Reuters).

While analysts are calling on OPEC production cuts, the fact is, all options are on the table, from no production cuts at all to 500-k b/d cut by Saudi Arabia, or a joint 1.4-m b/d cut by OPEC+ to bolster prices. But frankly, traders think Saudi won't cut due to political pressure from the US administration around the Kashoggi affair. So, given the high level of OPEC uncertainty, long liquidation in futures continues while fast money speculators are hedging for a greater downside tail risk from no production cuts which is adding up to a massively bearish skew.

At the root of the oil market woes, there is too much supply and too little demand, but much of the near term price recovery will be driven by what happens in G-20 in Buenos Aires and at the OPEC summit in Viena a week later

An intense focus will fall on G-20 as Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin, are expected to have sit chat down with President Trump who will unquestionably argue for lower oil prices. With these three oil powerhouses at the table, don't discount a rebalancing agreement to be in place before December 6 -7 OPEC meeting. When it comes to oil prices the new world order increasing revolves around Washington, Moscow, Riyadh, and Beijing

Brexit

As expected the European Council released a statement endorsing UK PM May Brexit deal, but according to London media UK Cabinet ministers and EU diplomats are privately drawing up “Plan B” Brexit proposal on the looming assumption that PM May's deal will be rejected by parliament. Not a ringing endorsement for the success of the deal when both parties are still engaged in discussion without the main protagonist involved.

Gold Markets

The stronger dollar dented sentiment into the weekend but with both the US and China suggesting the G-20 could find a silver lining at the G-20 summit, as Trump the deal maker over Trump, the trade warrior, has made some a believer taking the shine off gold. As for this week, USD dollar movements will ultimately provide Gold's near-term direction, early in the week. Last week the USD was supported by global growth concerns

STIRT and FX markets

The horrible EU PMI data dimmed hopes for the ECB who were wishing for a rebound this quarter ahead of their much-anticipated December stimulus unwind meeting. While last week's ECB minutes referenced downside risks, as widely expected ECB stick with the planned December halt to bond purchases, while markets have one interest hike priced in by September 2020

Last week's RBA minutes were in line and suggested next move will more likely be a hike than a cut, but as usual, the RBA was in no rush to adjust policy anytime soon. So, the market is only pricing in 1 hike by June 2020.

To be sure G-10 eyes are honing in on Fed Powell, and Clarida who will be speaking this week, followed shortly after by the November FOMC Meeting Minutes. These speeches will be significant for dollar sentiment into year-end after their most recent appearances triggered the great debate on the 2019 US interest rate glide path. Currency markets will be susceptible to both events. We can be sure they will emphasise data dependence while the rate trajectory will remain gradual as the Fed's increase interest rates to a neutral policy setting. So the bar remains high for any near terms shift in policy however like a growing consensus of market participants, in 2019 the Feds see a moderation in US economic activity as US fiscal policy inputs fade.

G-10

The USD benefited from risk aversion flow into US bonds on Friday as investors look for shelter ahead of G-20 amidst slowing global growth and sagging equity markets although further gains could be tempered by Powell and Clarida holding a cautious tone on the US economy at their speeches this week

The dismal EU PMI prints predictably exacerbated the Euro losses

Hampering the Canadian Dollar is the fact sagging oil prices offset any positive from CPI inflation running higher than Bank of Canada target. Besides the massive discount on WCS oil notwithstanding, plummeting oil prices should continue to weigh on the Lonnie

The Japanese Yen was the direct beneficiary of moderate risk aversion flow and lower oil prices

The Australian Dollar remains heavy, but its one of the critical binary trades to Buenos Accord' surprise. Domestically the landslide state election loss is a troubling sign for Australia minority government.

Asia traders will be looking to see if a strong Yuan is part of the trade war compromise as the USDCNH should be the critical currency markets driver post-G-20. If China does not offer the RMB as a necessary trade concession, given the US administrations long held currency manipulator view, the Aussie Dollar upside could be limited given increased China proxy flows on the back of the deterioration in Chinas current account amidst Pboc policy divergence with the Federal Reserve. All of which will continue to weigh negatively for the Yuan, so unless there is a commitment by the Pboc to pursue a stable/ strong currency policy aggressively, markets could fade knee-jerk ASEAN favourable currency reactions

Asia Currency

Despite looming G-20 risk we might have relatively calm seas to navigate this week as the Pboc will hold the Yuan in very tight ranges ahead of G-20. But ultimately the G-20 is expected to provide the guiding light for local currency markets but during the interim expect the broader USD dollar movement to dictate the pace of play in ASEAN currency markets

A surprise Buenos Accord?

If Trump and Xi surprise the markets with a Buenos Accord, global equity markets will bounce considerably higher so local currencies like the KRW would be the direct beneficiary of regional equity inflow. We would see commodity and oil prices immediately rebound, and the fiscally hindered Malaysian Ringgit would benefit from improved inflows. While the IDR and INR carry positions would likely underperform the rest of the bloc but would still benefit from improved regional sentiment.

Crypto

It's never worth catching a falling knife before the bottom is in. After falling from $20,000 to $4000 in under a year, it suggests the market remains a bottomless pit. There is nothing normal nor positive about this type of price movement so beware of false profits selling soothsayer storylines and never get anchored to a price. Just because BTC is trading below $ 5000, $4000 or $3000 for that matter, doesn't mean Bitcoin is undervalued even more so when BTC offers up no intrinsic store of value. Just because a rabbit might cost $150 to dig it out of a hole, doesn't mean the rabbit is worth $150.00

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EU27 leaders swiftly approve the Brexit deal after just taking less than an hour in the special EU summit in Brussels today. They endorsed both the Brexit withdrawal agreement, and the political declaration on future EU-UK relations. The European Council's full statement here.

European Council President Donald Tusk said in the press conference that "Ahead of us is the difficult process of ratification as well as further negotiations. But regardless of how it will all end, one thing is certain: we will remain friends until the end of days, and one day longer."

European Commission President Jean-Claude Juncker said, "Sad day, no cause for celebrations. I salute unity of EU27 during the negotiations. We stood by Spain on Gibraltar, they have our solidarity. I'm proud of the work of our negotiating team. This is the only deal possible."

And, "This is the best deal possible. I invite those who have to ratify it in the U.K. House of Commons, to do so. This is the best deal for Britain. This is the best deal for Europe. It is the only deal possible."

Post meeting press conference.

https://www.facebook.com/eucouncil/videos/196098541321420/

Full set of information of the special EU summit.

First, a review of last week’s events:

EUR/USD. If you look at the chart of the pair, it is clear that by the evening of Friday, November 23, it returned to the values of Friday morning, November 16. That is, the result of the week is close to zero, and the victory for the most accurate forecast can be awarded to trend indicators and oscillators on D1, which had taken a neutral position.

As for the experts, a third of them had predicted the continuation of the pair’s correction up to the level of 1.1450-1.1550 (actual maximum of the week is 1.1470), with the subsequent return of the dollar to growth. This actually did happen, as a result, the pair ended the week at 1.1330;

GBP/USD. The result of last week for this pair is similar to the result of EUR/USD, that is, close to zero. On Thursday, when it became known that the European Commission had approved the political declaration on Brexit, it seemed that the pound had a chance to reverse the negative situation. It soared 150 points to the height of 1.2925. But the joy of the British currency holders was short-lived, and the pair met the end of the five-day period in the 1.2810 zone;

USD/JPY. Regarding the future of this pair, the opinions of experts had been divided almost equally: 45% had voted for the pair to fall, 45% had voted for its growth, and 10% had taken a neutral position. And they all turned out to be right: the pair was falling in the first half of the week, then it was growing, and it showed a zero result by the end of the session, returning to Pivot Point in the 112.90 zone. As for the support/resistance levels, graphical analysis was most accurate here: it marked the upper limit of the channel at 113.10 on H4 (the pair rose to 113.14), and a fall to 112.65 on D1 (the weekly minimum was fixed at 112.30);

As for cryptocurrencies, there were two versions of the forecast, a neutral one and ... a very bad one. Naturally, the second one came true. Panic moods from the hard forks (division) of BCH (Bitcoin Cash) to two new coins continued to put pressure on the market. As a result, the bitcoin flew further down, reaching the values of September last year in the $4,210-4,250 zone, and pulled other cryptocurrencies with it: the TOP-5 index lost more than 500 points, or about 25% during the week.

As for the forecast for the coming week, summarizing the opinions of a number of analysts, as well as forecasts made on the basis of a variety of methods of technical and graphical analysis, we can say the following:

EUR/USD. The most important event that can seriously affect the quotes of both the euro, and the British pound, will be the extraordinary Summit of European leaders on Brexit, which will be held on November 25-26. In case its results are positive, the pair may return to November highs of 1.1470 and 1.1500. However, less than half of the experts agree with this scenario, 40%.

As for the remaining 60%, they continue to insist the dollar will strengthen. On Wednesday, November 28, the market is expecting data on the US GDP for the 3rd quarter, and if they turn out to be better than in the 2nd quarter, this will give the American currency a strong support. You should also pay attention to the minutes of the US Federal Reserve meeting on Thursday, November 29, although no special surprises are expected from it.

The targets for the bears are 1.1300 and the 2018 low of 1.1215, in the case of a breakdown of which the path to support 1.1120 is opened.

If we talk about indicators, about 15% of the oscillators on H4 indicate that the pair is oversold, which may portend a short-term correction;    

GBP/USD. Almost 100% of the indicators are painted red. But future trends are not determined by them at all. The decisions of the EU Brexit Summit are, of course, very important for the pound. But it faces an even more serious test: the deal on the terms for the British exit from the European Union has yet to be approved by the British Parliament.

And there are many chances that the parliamentarians will vote against the deal. In this case, a second vote will be required, which may be scheduled for February, and up to this point investors will be wary of the pound.

In the meantime, expert opinions are equally divided: half of them are for the growth of the pair, half are for its fall. The nearest support levels are 1.2720 1.2695, 1.2660, the resistance levels are 1.2885, 1.2925 and 1.3025;

USD/JPY. The Japanese currency often goes counter-trend to its European counterparts: when the euro and the pound fall against the dollar, the yen rises. It is this perspective that is drawn by analysts for the next week. 55% of them, supported by 90% of oscillators and 70% of trend indicators, vote for the fall of the pair first to support 112.60, and then 30 points lower. It is possible that the pair will be able to successfully test the level of 112.00.

The alternative scenario is supported by 45% of experts, graphical analysis on D1 and 10% of oscillators, signaling the pair is oversold. The targets of the bulls are zones 113.15-113.40 and 114.20-114.55.

Cryptocurrencies. Most likely, the negative trend in the market will continue, and the bitcoin will try to break through the level of $4,000. The next target is 1,000 points lower. Another vulnerability was found in smart contracts based on ethereum, and the ETH/USD pair may fall to the most important psychological level of $100. The target for the litecoin (LTC/USD) is to consolidate below $30, and for the ripple (XRP/USD) - below $0.40.

As for the good news for crypto bulls, there is divergence between the quotes of Bitcoin and the readings of many oscillators, which indicates a possible upward correction. However, according to most experts, this correction will be short-term.

EUR/USD rebounded to 1.1472 last week but failed to take out 1.1499 resistance and reversed. Initial bias remains on the upside this week for 1.1215 low fist. 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 neutral again. But near term outlook will remain bearish as long as 1.1499 resistance holds.

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.

In the long term picture, the rejection from 38.2% retracement of 1.6039 to 1.0339 at 1.2516 argues that long term down trend from 1.6039 (2008 high) might not be over yet. EUR/USD is also held below decade long trend line resistance. Firm break of 61.8% retracement of 1.0339 to 1.2555 at 1.1186 should at least bring a retest on 1.0339 low.