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GBPUSD (1.2882): The GBPUSD was seen turning a bit volatile on the Brexit headlines. Price action posted a strong reversal near the support area of 1.2808. However, in the medium term, we expect the sideways pattern to be maintained in the currency pair. As the lower support level is yet to be tested, we expect the GBPUSD to be at risk of testing 1.2683 level of support. To the upside, the gains are limited to the 1.3086 level of resistance.

EURUSD (1.1415): The Euro currency maintained its lead against the greenback as the EURUSD posted modest gains. Price action has been trading rather flat below the resistance area of 1.1435 - 1.1460 level. A breakout above this level is required for the Euro to post further gains. The next upside target is sen at 1.174 - 1.1718 level. To the downside, a decline could push the EURUSD toward 1.1315 - 1.1300 level. Establishing support at this level could potentially mark a bottom in place for the EURUSD.

The markets were seen trading subdued on Thursday as the U.S. session was closed due to Thanksgiving holiday. The U.S. Dollar was seen trading slightly weaker. On the economic front, data was mostly quiet.

The ECB released its monetary policy meeting minutes from the October meeting. No major surprises were in store. The central bank reiterated its stance to end its QE program this end of the year.

The Eurozone consumer confidence report showed a decline to 4 from -3 a month ago.

Market sentiment for the GBP was boosted by reports that the U.K. and the European Union have agreed in-principle to a Brexit deal draft.

The economic calendar is somewhat busy today. The German final quarterly GDP report is due which is expected to confirm that the economy fell 0.2% in the third quarter of the year.

This is followed by the flash manufacturing and services PMI covering, France, Germany, and the Eurozone. Overall, manufacturing and services PMI are expected to remain broadly stable.

The NY trading session will see Canada's inflation and retail sales figures coming out. Headline CPI is forecast to rise 0.1% on the month while retails sales are expected to increase 0.1% which could reverse the declines from the month before.

The British pound has moved towards the 1.2900 level against the US dollar after British PM Theresa May moved closer to securing a soft Brexit deal for the United Kingdom. The GBPUSD pair retains an intraday bullish bias while trading above the 1.2880 level. If buyers can break the above the upper trendline, at 1.2940, further upside towards the 1.3100 level would then seem possible.

The GBPUSD pair is intraday bullish while trading above the 1.2880 level, key technical support remains at the 1.2940 and 1.3000 levels.

If the GBPUSD pair trades below the 1.2880 level, a correction towards the 1.2820 and 1.2790 level remains possible.

The euro currency is trading close to the 1.1400 support level against the US dollar, ahead of the release of key November PMI Manufacturing data from the eurozone. The EURUSD pair has had a muted reaction to the news surrounding a potential soft Brexit deal between the UK and the EU. A clear technical break from the wedge pattern on the four-hour time frame will likely prompt the next directional move.

The EURUSD pair is only bearish while trading below the 1.1400 level, key technical support is found at the 1.1355 and 1.1330 levels.

If the EURUSD pair trades above the 1.1465 level, key technical resistance is found at the 1.1500 and 1.1553 levels.

Yesterday, sterling jumped after the UK and the EU agreed on a draft Brexit document. The political declaration between the two parties will be signed on Sunday. Today, the gains were constrained as the deal faced opposition from both political sides in the UK. Among the main critics of the deal was Dominic Raab, who until two weeks ago was the minister in charge of Brexit. In a statement, he said that the proposed deal will fall short of what the UK voted for. Therefore, there are limited chances that the deal will be passed in parliament.

The euro was little changed against key currencies after the European Commission released the consumer confidence numbers for November. The number fell to minus 3.9, which was lower than the minus 3 that traders were expecting. This was the lowest level since March 2017. The number has been on a slow decline as most Europeans start wondering about the health of the economy. Today, traders will focus on the preliminary third-quarter GDP numbers from Germany. They will also focus on the France and Germany PMIs.

The Canadian dollar strengthened against the US overnight. The decline of the pair was large because of the broad weakness of the USD. Traders are also focused on Canada’s inflation numbers, which will be released today. The expectation is that the median CPI will remain unchanged at 2%. The core CPI is expected to rise by an annualized rate of 1.6%, which will be higher than September’s CPI of 1.5%. Retail sales are expected to rise by a monthly rate of 0.1%. This will be higher than the previous decline of minus 0.1%.

EUR/USD

The EUR/USD was little changed overnight. Low volumes of trades are also expected today as most Americans keep off the market. It is now trading at 1.1414, which is slightly higher than the weekly low of 1.1358. The moving averages and the RSI are showing indecision because of the low volume and little movement in the pair. The average true range that indicates volatility has fallen to the lowest level this month on the hourly chart below.

GBP/USD

Yesterday, the GBP/USD moved from a low of 1.2763 to an intraday high of 1.2927 after a draft Brexit declaration leaked to the press. After sharp upward movement, the pair remained unchanged overnight as traders doubted whether parliament will accept the deal. It is now trading at the 1.2878 level. The MACD has moved above the neutral line. At the same time, the 15-day and 30-day EMAs have crossed one another. Today, there is a likelihood that the pair will mostly react to the pronouncements by the UK’s politicians.

USD/CAD

The USD/CAD pair has been moving higher over the past two months. It has moved from a low of 1.2782 to a high of 1.3320. On the four-hour chart, the pair has made an equidistance channel as shown below. It is now trading at the 1.3195 level, which is close to the lower support level. The RSI has fallen from 76 to the current 43. The pair will likely continue moving down to the important support of 1.3160.

Daily Pivots: (S1) 0.9929; (P) 0.9943; (R1) 0.9943; More...

Consolidation from 0.9908 temporary low is in progress and intraday bias stays neutral first. Another fall could be seen with 1.0006 minor support intact. Break of 38.2% retracement of 0.9541 to 1.0128 at 0.9904 will target 0.9848 key support level. On the upside, above 1.0006 minor resistance will indicate that the pull back has completed. Intraday bias will be turned back to the upside for retesting 1.0128 high.

In the bigger picture, the pullback from 1.0067 has completed at 0.9541 already. And rise from 0.9186 is likely resuming. Firm break of 1.0067 will pave the way to retest 1.0342 key resistance. We'd be cautious on strong resistance from there to limit upside to bring another medium term fall to extend long term range trading. However, break of 0.9848 near term support will dampen this view and bring deeper decline back to 0.9541 support and possibly below.

Since forming the high on Oct 3 at $76.9, Oil (CL_F) has dropped more than 30% in just less than 2 months. The move lower is pretty fast and short term Elliott Wave view suggests the decline is unfolding as an impulse Elliott Wave structure. Down from $76.9, Primary wave ((1)) ended at $68.47, Primary wave ((2)) ended at $69.65, Primary wave ((3)) ended at $54.75, and Primary wave ((4)) ended at $57.98. Oil is currently in the final leg Primary wave ((5)) which looks to unfold as an ending diagonal.

An ending diagonal is a special type of 5 waves in which the subdivision is all in 3 waves. Thus, ending diagonal is 3-3-3-3-3 Elliott Wave structure. Usually Ending Diagonal appears as subdivision of wave 5 or wave C. In Oil’s case, down from Primary wave ((4)) at $57.98, Intermediate wave (1) ended at $52.77 and Intermediate wave (2) ended at $55.86. Intermediate wave (1) unfolded in 3 waves as a FLAT A-B-C where Minor wave A ended at $55.08, Minor wave B ended at $57.44, and Minor wave C ended at $52.77.

Near term, while rally fails below $57.98, Oil has scope to extend lower within Primary wave ((5)). Potential target to end the 5 waves down is 50% – 61.8% retracement of the rally from 2/11/2016 low ($26.05) which comes at $45.5 – $51.5. Afterwards, expect Oil to rally at least in 3 waves to correct the 5 waves decline from Oct 3 high ($76.9).

Oil 1 Hour Elliott Wave Chart

Market movers today

In the euro area, today's November PMIs will be keenly watched by markets after last month's downside surprises and yesterday's continued decline in November consumer confidence data. Due to the still negative order-inventory balance, we see scope for another decline in manufacturing PMI to 51.5, but service PMI will probably be even more interesting, to see whether the weaker activity in October was of a temporary or more persistent nature. We expect the former and hence see scope for a small rebound in service PMI to 54. German and French PMIs will also be released.

In the US, Markit PMIs for November are also due. Overall, manufacturing growth seems to be strong but points to a softer expansion, so we expect manufacturing PMI to stabilise around its current level of 55.7.

Selected market news

Market sentiment remains on a weak footing as fears of a trade war and weaker macro momentum prevail. Asian equity markets are mixed this morning, rounding off a third week of losses, with Chinese stocks leading regional declines. US equity futures point to more declines ahead when trading begins again following the Thanksgiving break. Oil prices continued to dip, with Brent falling below USD63/bbl following a report of higher output in Saudi Arabia and an increase in US crude inventories adding to the recent bearish mood.

Yesterday, the UK and EU agreed on a draft political declaration on the future relationship, which is expected to be approved by EU leaders at the summit on Sunday (see Financial Times article (subscription only). We think this is going to be relatively easy despite some concerns among some member states, most notably Spain on Gibraltar. A strong qualified majority (i.e. 20 out of 27 member states representing 65% of the population) is needed to pass the deal. GBP rallied on the news as investors gained confidence that the final negotiation stage is falling into place and sterling kept its gains overnight (see FX section). But the risk of a leadership challenge for Theresa May continues to linger and the real test for the Brexit deal still looms with the vote in the House of Commons (see Brexit Monitor , 16 November 2018).

The ECB minutes from the October meeting proved relatively uneventful, without any new guidance on the growth or inflation outlook, although a remark was made on the maturity of some of the TLTROs falling below one year in 2019. However, ECB Chief Economist Peter Praet said in an interview yesterday that 'it is premature to decide on a new TLTRO now.' We still expect another TLTRO round to be announced in Q1 19 (see ECB Research - TLTRO3: Italy to be main beneficiary , 9 November) .

Officials acknowledged 'uncertainties and fragilities' affecting the economy, but this was not enough to alter the balanced growth risk assessment. The void of new information in the October minutes confirmed that the 13 December meeting will be pivotal, with the ECB formally ending QE as part of its 'dovish tightening', new staff forecasts on growth and inflation released as well as updated guidance on the reinvestment strategy, including the capital key update.

Brexit deal gets EU27 judgement on Sunday

European stocks are expected to open relatively flat on Friday, something that may be a running theme throughout the day despite the US returning from the Thanksgiving bank holiday.

I think we can probably expect lower than normal volumes again on Friday and news flow may even be a little thin as well which won’t help. Thursday was another important day for Brexit talks, with the draft deal now agreed, it’s over to the EU27 on Sunday to sign it off before parliament gets to have its say.

While there could be complications on Sunday, over issues such as Gibraltar, I don’t expect them to get in the way of the deal being approved which leaves Theresa May with the simple job of getting it through parliament. With her deal being widely criticised by MPs across the political spectrum, be they leave voters or remainers, this is not going to be an easy job although the alternative of no deal Brexit may be enough to convince her doubters to side with her and get it over the line.

Italy heading for EDP

The Italian situation is broadly progressing as many expected, with the European Commission rejecting its budget and recommending an excessive deficit procedure which will be discussed by finance ministers in the coming months. While the public bashing of Brussels and condemnation of Rome is unlikely to go away, the actual process will likely go a little quiet now moving attention elsewhere.

That may put more focus on the economy, with the political distractions taking a break, and we’ll get some insight into the health of the region this morning when the November PMIs for the eurozone, German and France are released. Growth in the region has slowed over the course of the year and the figures today are expected to continue that trend, although that isn’t worrying the ECB too much which has been undeterred and remains on course to end QE next month and raise rates later in 2019.

Two weeks seems a long way away as oil dips again

Oil prices are once again coming under pressure, with the usual list of reasons – high supply, Iranian waivers, weaker global demand and growth expectations – behind the decline. With two weeks to go until the OPEC+ meeting, at which an output cut may be announced to address the current supply/demand dynamics and arrest the price declines, I’m not convinced we’ll see too much more downside and feel a short-squeeze may be on the horizon.

Bitcoin 'hodlers' suffering in aftermath of cash hard fork

It feels like we’ve witnessed the return of bitcoin over the last couple of weeks, although not necessarily in the way that enthusiasts were hoping for. The plunge through $6,000 nine days ago has brought the cryptocurrency back to life and we’re once again seeing the kind of moves that got everyone excited this time last year. Unfortunately for the 'hodlers' though, this time the double digit moves are taking place in the other direction and comes on the back of negative news, with the bitcoin cash split and the drama surrounding it being blamed for the latest selling frenzy