Sample Category Title

Notes/Observations

• Focus on EU Commission opinion on 2019 draft budget plans
• Italy seemed open to compromise on budget but League official down plays such speculation
• South Africa inflation at a 1-year high and remained above the SARB's mid-point of the target range for the 4th straight month ahead of tomorrow's rate decision

Asia:

• China PBoC said to be less likely to lower money market rate due to foreign exchange concerns
• Moody's: Expect China 2019 GDP to slow to 6% v 6.6% expectation in 2018

Europe:

• EU Parliament and Council reportedly aim to loosen rules on bad bank loans

Brexit:

• PM May said to be examining a last-minute plan to scrap the Irish backstop in a bid to win over mutinous Conservative Brexiteers and bring the DUP back onside. PM told her cabinet that she was exploring "technological" solutions to maintain a soft border in Ireland in place of her backstop plan as she looked to appease her Brexiteers ahead of a critical vote in the Commons on her deal next month
• Cabinet Brexiteers told PM May she must secure additions to her Brexit deal. Gang of five (Andrea Leadsom, Michael Gove, Penny Mordaunt, Chris Grayling, and Liam Fox) want PM to flesh out how UK could leave backstop, threaten to withhold £19B of payments
• Ireland Foreign Min Coveney: Brexit text would not be reopened; withdrawal agreement was not a draft text, it was 'the text'. Future relationship with UK to take at least 2 or 3 years to negotiate

Americas:

• Fed's Kashkari (non-voter, dove): Fed should pause hikes to see how economy evolves
• US Trade Rep Lighthizer released report on China IP and tech transfers which summarized that China hasn't modified its unfair trade practices
• BoC's Wilkins: Might see review process for inflation target renewals after 2021. Inflation targeting had worked well but the decade after the 2008 crises shows it was not perfect, it is time thoroughly review alternatives

Energy:

• Weekly API Oil Inventories: Crude: -1.5M v +8.8M prior

Macro

• (IT) Italy: Italian yields continue to be driven by budget speculation. BTPs and MIB rallied on reports that Salvini may be open to budget concessions only to reverse quickly from highs as the League denied the reports. With anti-EU sentiment still rising there is increasing risk that next year's European elections will turn into an effective referendum on the EU. (UK) United Kingdom: October net government borrowing increased to £8.8 B (ex-lending to public sector banks). It was the biggest October level of borrowing since 2015, though government borrowing in the year-to-date was £11.2B less than at the same point in the previous financial year, and in fact the lowest borrowing at this point in the year since 2005. The improvement reflected robust tax receipts as well as the impact of ongoing austerity measures.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.5% at 352.7, FTSE +0.7% at 6996, DAX +0.6% at 11128, CAC-40 +0.5% at 4947, IBEX-35 +0.7% at 8931, FTSE MIB +0.6% at 18623, SMI 0% at 8769, S&P 500 Futures +0.5%]
• Market Focal Points/Key Themes: European Indices trade higher across the board following a mixed Asian session and positive US futures. Focus is on Italy with the FTSE MIB outperforming ahead of the EU Commission's opinion on the 2019 draft budget plans. On the corporate front Generali trades higher following the presentation of mid term targets; Unicredit also higher after reports the company could look to be split up. On the earnings front, Kingfisher trades lower after earnings, with Babcock Intl and TalkTalk among other notable decliners after earnings; U-Blox drops over 10% after cutting its outlook. To the upside Johnson Matthey is a notable riser after lifting its profit outlook; Adidas also rises on CEO comments. Indivior continues to plummet after sharp falls yesterday dropping another 13% today following a court ruling to allowing Dr Reddy to sell generic opioid treatment. Looking ahead notable earners include Deere & Co and Daktronics.

Equities

• Consumer discretionary: Airbus [AIR.FR] +0.5% (appoints new CFO from Infineon; COO), Kingfisher [KGF.UK] -2% (earnings; to exit some markets; share buyback program), Adidas [ADS.DE] +1% (CEO comments on next year sales)
• Materials: Johnson Matthey [JMAT.UK] +7% (earnings; adjusts guidance)
• Financials: Generali [G.IT] +2% (capital markets day), Unicredit [UCG.IT] +2% (reportedly studying plan of splitting in two separate units; Giorgetti calls to ban shortselling of banks' stocks), Deutsche Bank [DBK.DE] +1.5% (reports that internal review estimates bank handled $150B of potentially suspicious flows tied to Danske Bank ), Amundi [AMUN.FR] +2% (share buyback program), Banco BPM [BAMI.IT] +6% (merger speculation)
• Healthcare: Indivior [INDV.UK] -10% (mentions concerns about its guidance in FCD response), Novartis [NOVN.CH] -0.5% (FDA issues warning about severe worsening of MS after patients stop Gilenya treatment)
• Industrials: ThyssenKrupp [TKA.DE] +1% (earnings; initial FY19 outlook; comments on business separation), Renault [RNO.FR] +2% (appoints new interim Chairman; Arrest of Ghosn, Kelly reportedly has been prolongated for 10 days; Ghosn was planning a merger between Renault and Nissan before his arrest), Babcock International Group [BAB.UK] -9% (earnings)
• Technology: Infineon [IFX.DE] +3% (Airbus appoints new CFO from Infineon; COO), U-Blox [UBXN.CH] -10% (profit warning), Sage Group [SGE.UK] -3% (earnings)
• Telecom: TalkTalk [TALK.UK] -6.5% (earnings; launches new company FibreNation to accelerate its full fibre plans), Iliad [ILD.FR] +4.5% (Orange CEO comments on industry consolidation)

Speakers

• Italy Dep PM Salvini said to be potentially open to budget revisions. Willing to lower the amounts to be spent on the citizen's income and for beneficiaries of the lower retirement age
• Italy League party refute speculation that Salvini was seeking budget changes and revisions to reforms
• German Chancellor Merkel: Must have Brexit exit agreement signed at the upcoming Leader Summit (**Note: schedule for Sun, Nov 25th). Must resolve Spain's reservations on draft accord and accept UK decision to leave EU
• Sweden Central Bank (Riksbank) Financial Stability Report: Household indebtedness was the biggest risk to country. Problems on housing market could spread
• Italy Stats Agency (ISTAT) updated its forecasts which cut 2018 real GDP from 1.4% to 1.1% and set 2019 GDP growth at 1.3%
• Russia Central Bank Gov Nabiullina stated that must be ready for sanction pressure to increase and could consider a rate cut in late 2019. Currency controls would have a negative impact on economy
• Philippines Central Bank Dep Gov Guinigundo: Markets expect monetary tightening to end
• Saudi Arabia Nov oil production said to hit record levels as customers prepare for Iranian sanctions. Production between 10.8-10.0M bpd with some days above 11M bpd

Currencies/Fixed Income

• USD remained on soft footing on position adjustments. The greenback still had technical factors behind its recent strength as the Fed was expected to raise rates in December. However, given a spat of weaker US data there was growing expectations that the Fed would take its foot off the accelerator to some extent in 2019
• Italy seemed open to compromise on budget as Dep PM Salvini potentially open to budget revisions. EUR/USD was higher by 0.2% to reapproach the 1.14 area. Previously Salvini had been adamant that fundamentals of budget would not change. BTP's saw the biggest drop in a month as the 10-year yield fell over 10bps. League official later refuted such speculation on any changes to its planned reforms. Nonetheless price action was follwoing the headline roulette on Italian budgetary stance.
• GBP/USD was initially holding above the 1.28 level as a leadership challenge threat seemed to wane for the time being with the Dec Parliament vote on Brexit text vote now being eyed as a referendum to her leadership. Cable gains dissipated as the NY morning approached

Economic Data

• (NO) Norway Sept AKU Unemployment Rate: 4.0% v 4.0%e
• (ZA) South Africa Oct CPI M/M: 0.5% v 0.6%e; Y/Y: 5.1% v 5.2%e (highest annual pace since Oct 2017)
• (ZA) South Africa Oct CPI Core M/M: 0.1% v 0.2%; Y/Y: 4.2% v 4.3%e
• (CH) Swiss Oct M3 Money Supply Y/Y: 2.5% v 2.3% prior
• (UK) Oct Public Finances (PSNCR): -£3.3B v +£18.3B prior; Net Borrowing: £8.0B v £5.6Be; Central Government NCR: -£3.2B v +£14.7B prior; PSNB ex Banking Groups: £8.8B v £6.1Be
• (SL) Sri Lanka Oct National CPI (NCPI) Y/Y: 0.1% v 0.9% prior

Fixed Income Issuance

• (ID) Indonesia sold total IDR15T vs. IDR10T indicated in 3-month and 9-month Bills, 5-year, 15-year, 20-year bonds
• (PH) Philippines sold PHP15B vs. PHP15B indicated in 5-year Bond; Avg Yield: 7.003% v 7.342% prior; bid-to-cover 3.4x
• (DK) Denmark sold total DKK2.42B in 2020 and 2027 DGB Bonds

Looking Ahead

• (SE) Sweden announces details for Nov 28th auction
• 05:30 (DE) Germany to sell €5.0B in 0.0% Oct 2023 BOBL
• 05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.25-1.50B in 6-month and 12-month bills
• 06:00 (IT) EU Commission opinion on 2019 draft budget plans
• 06:00 (CZ) Czech Republic to sell 2029 and 2033 bonds
• 06:45 (US) Daily Libor Fixing - 07:00 (RU) Russia to sell combined RUB20B in OFZ bonds
• 07:00 (US) MBA Mortgage Applications w/e Nov 16th: No est v -3.2% prior
• 07:00 (UK) Weekly PM question time in House of Commons
• 08:10 (UK) Baltic Dry Bulk Index
• 08:30 (US) Oct Preliminary Durable Goods Orders: -2.6%e v +0.7% prior; Durables Ex-Transportation: 0.4%e v 0.0% prior; Capital Goods Orders (Non-defense/ex-aircraft): +0.2%e v -0.1% prior; Capital Goods Shipments (Non-defense/ex-aircraft): +0.3%e v -0.1% prior
• 08:30 (US) Initial Jobless Claims: 215Ke v 216K prior; Continuing Claims: 1.65Me v 1.676M prior
• 08:30 (CA) Canada Sept Wholesale Trade Sales M/M: +0.3%e v -0.1% prior
• 09:00 (IT) Italy Fin Min Tria in parliament
• 09:30 (BR) Brazil weekly Currency Flow data
• 10:00 (US) Nov Final University of Michigan Confidence: 98.3e v 98.3 prelim
• 10:00 (US) Oct Existing Home Sales: 5.20Me v 5.15M prior
• 10:00 (US) Oct Leading Index: 0.1%e v 0.5% prior
• 10:00 (MX) Mexico weekly International Reserves data
• 10:00 (UK) BOE Gov Carney
• 10:30 (US) Weekly DOE Crude Oil Inventories
• 11:00 (US) Treasury announcement for upcoming 2-year FRN for Nov 28th
• 12:00 (US) Weekly EIA Natural Gas Inventories
• 12:00 (CA) Canada to sell 2-year notes
• 12:10 (UK) PM May to meet EU's Juncker in Brussels
• 13:00 (US) Weekly Baker Hughes rig count data
• 13:00 (US) Treasury to sell 10-year TIPS
• (CO) Colombia Oct Retail Confidence: No est v 28.6 prior; Industrial Confidence: No est v 3.8 prior
• (NG) Nigeria Oct CPI Y/Y: 11.4%e v 11.3% prior
• (PE) Peru Q3 GDP Y/Y: 2.2% v 5.4% prior

EURJPY is pushing aggressively higher, paring Tuesday’s losses above the 20- and 40- simple moving averages in the 4-hour chart. Moreover, the price has been trading within the 23.6% Fibonacci retracement level and the 38.2% Fibonacci mark of the downleg from 133.10 to 126.60, between 128.15 and 129.10 over the last week.

Technically, the MACD oscillator is moving higher in the negative zone, below its trigger line, and the RSI indicator is pointing up, surpassing the neutral threshold of 50.

If prices are able to continue to move higher and overcome the 38.2% Fibonacci of 129.10 and the 129.05 resistance, the next obstacle for traders to watch is the 50.0% Fibonacci of 129.86. Even higher, the price could meet the 130.15 hurdle, before being able to hit the 130.50 hurdle, taken from the high on October 12.

On the other side, if the market manages to turn to the downside again below the 23.6% Fibonacci and the 128.00 handle, this could open the way towards the 127.50, taken from the latest lows. Moving lower, the market could decline further until the 127.50 barrier and then towards the 127.25 support.

Concluding, the market is expected to hold neutral in both the short-term and medium-term.

NASDAQ is the only index which is green for the year. Theresa May is in Brussels trying to avoid the har border and hammer out a deal with the EU. Risk-off assets are in demand.

US and European futures are trading higher as investors shake off the negativity. Investors are concerned about the plummeting oil prices and the technology sector.

The WTI oil price has tumbled to sub $53 level and this is negative for the energy companies. Apple is down nearly 24% from it’s recent October peak and this has pushed the NASDAQ index lower. Both the S&P500 and Dow have are back in the negative territory in terms of their yearly gain. In other words, it was pretty much a bloodbath on Wall Street and this is denting the confidence. Investors are concerned about the global sell-off and the risk of assets are in high demand. The volatility index closed at 22.48 yesterday or up by 2.38 points. The level of 25 is of critical importance because if it moves above this point, it means more rout for the equity markets.

Similarly, the precious metal is also holding on to it’s gains and it is trading above the important critical level of 1200. The price of gold is consolidating between $1,211 and $1,230. Any spike in volatility would mean that the gold price is likely to break out of this zone to the upside. Of course, the weakness in the dollar index is also helping the yellow metal to stay in the positive zone. Remember, the dollar index itself also acts as a safe haven asset but, under those circumstances it usually has a positive correlation with the gold price.

We do not expect much action from the markets today because of the shortened trading week over in the US- Thanksgiving holiday on Thursday followed by Black Friday.

Moving back to the macro elements, the US has once again pointed finger towards China and the blame game is on. It is about intellectual property theft, as we don’t already have enough trouble. According to the new 53 pages long report, just ahead of president Trump and President Xi’s meeting, the report has a number of critical claims against China such as practices related to intellectual property, innovation and a few other things which resonate this agenda.

In the currency markets, Donald Trump has taken a step to cool down the Fed’s hawkish strategy. Although not sure how effective this could be because the Fed is independent at least for now. The Fed is on a firm path to increase the interest rate next month but the president has called for an interest rate cut. Not sure if the Fed is going to lay any attention to this but one thing is for certain; the Fed and the president aren’t on the same page.

Back in the eurozone, the Italian and German 10-year yield spread is only 1 bp away from hitting the five-year high, currently, it is trading at 326.62 bps. What this means is that the Italian are going to be in more trouble if they do not sort out their mess. The EU will imply the financial penalties on Rome for not respecting the fiscal rules. The EU is going to release their opinion about the budget plan for the euro-area nations and this particular report may push the Italian banking further out of luck.

As for the Brexit and Theresa May, she is still trying to find a solution to avoid the hard border in the Northern line and a technological solution is something which she is exploring. The prime minister is going to find a resolution for both; the UK and the EU in Brussels today so that they can work together and agree on future trade relations. The sterling is back below the 1.30 mark against the dollar and the question is if we are going to continue to move towards the 1.25 mark.

The USD strengthened against a number of its counterparts yesterday, as its safe haven qualities gathered support. Yesterday’s stock market rout, turned investors towards the greenback, as risk aversion rose on escalating worries about global growth and further tensions in the US-Sino relationships. It should be mentioned that the US administration yesterday, said that China has to alter its unfair practices, mounting further pressure according to media. Please note that the expected rate hike by the Fed in December, may currently be providing a positive short term bias for the USD as well. The strengthening of the USD was more obvious against the CAD, as the commodity currency weakened, probably due to falling oil prices, as Canada is a major oil producer. Volatility could continue for the USD, just before the Thanksgiving holiday.

USD/CAD rallied yesterday, breaking consecutively the 1.3215 (S2) and the 1.3290 (S1) resistance levels (now turned to support). We could see the pair stabilising today, as it seems to have taken a breather during the Asian session, however the direction still remains uncertain. The main risk factors to watch out for could include today’s financial releases, oil prices and investor’s sentiment towards the USD as described above. Please note, that the pair’s RSI in the 4 hour chart has surpassed the reading of 70, implying a rather overcrowded long position. Should the pair find fresh buying orders along its path we could see it breaking the 1.3350 (R1) resistance line and aim for the 1.3425 (R2) resistance level. On the other hand, should the pair come under the selling interest of the market, we could see it breaking the 1.3290 (S1) support line and aim for the 1.3215 (S2) support level.

EUR weakens as the Italian effect takes place once again

The EUR traded with a bearish bias against the USD, as wider confidence in the common currency retreated yesterday. Worries grew among investors about the EUR, as the Italian bank shares hit a two year low and the spread between German and Italian bond yields widened, according to analysts. We see the case for the single currency to remain under pressure as the possibility of further tensions between Rome and Brussels continues and Eurozone’s preliminary PMI’s for November are to be released on Friday. We could see volatility continuing to dominate EUR pairs however with a bearish bias this time.

EUR/USD dropped yesterday breaking the upward trendline incepted since the 15th of November and the 1.1430 (R2) as well as the 1.1385 (R1) support lines (now turned to resistance). As the pair broke the prementioned upward trendline, we lift our bullish bias and the pair’s stabilization during the Asian session today, could enable the pair to open a new leg. Should the bulls dictate the pair’s direction, we could see the pair breaking the 1.1385 (R1) resistance line and aim for the 1.1430 (R2) resistance hurdle. Should the bears continue to reign over the pair, we could see it breaking the 1.1345 (S1) support line and aim for the 1.1305 (S2) support barrier.

In today’s other economic highlights:

During the American session today we get from Canada the Wholesale sales growth rate for September, the US Durable goods orders growth rates for October, the number of existing US home sales for October, the final release of the Michigan Consumer Sentiment indicator for November and the EIA Crude Oil inventories figure. Please be advised that the API crude oil inventories figure showed an unexpected drawdown which provided some support for oil prices, however should you be interested in more fundamentals and technical analysis for oil please refer to our weekly oil outlook due out later today .

USD/CAD H4

Support: 1.3290 (S1), 1.3215 (S2), 1.3145 (S3)

Resistance: 1.3350 (R1), 1.3425 (R2), 1.3525 (R3)

EUR/USD H4

Support: 1.1345 (S1), 1.1305 (S2), 1.1260 (S3)

Resistance: 1.1385 (R1), 1.1430 (R2), 1.1490 (R3)

The pair extends recovery into the second day after strong fall last Fri/Mon stalled on approach to daily cloud base (112.16) and greenback was fueled by safe-haven buying on strong fall of stocks.

Recovery attacks daily cloud top (112.94) with break here to generate bullish signal for extension towards next pivots at 113.03 (Fibo 38.2% of 114.20/112.30) and 113.25 (Fibo 50% / daily Tenkan-sen).

Break and close above the latter is needed to confirm reversal and signal further recovery.

Momentum emerged into positive territory on daily chart and slow stochastic reversing from oversold territory, support scenario.

On the other side, failure to break above cloud and repeated close under cloud top, would keep the downside vulnerable.

Res: 113.03, 113.25, 113.48, 113.63
Sup: 112.79, 112.64, 112.30, 112.16

OECD said in a report released today that global growth has already peaked and it's now set for a "soft landing". And, the global economy is navigating "rough seas" with "downside risks abound". It also noted that "policy makers will have to steer their economies carefully towards sustainable, albeit slower, GDP growth." The organization also pointed out that "global trade and investment have been slowing on the back of increases in bilateral tariffs while many emerging market economies are experiencing capital outflows and a weakening of their currencies". OECD also warned that " accumulation of risks could create the conditions for a harder-than-expected landing". And the risks include firstly, further trade tensions, secondly, tightening financial conditions and thirdly, a sharp slowdown in China.

For 2019, global growth forecasts was revised down to 3.5% and stay there in 2020. US growth was left unchanged at 2.7% in 2019 and then slow to 2.1% in 2020. Eurozone growth was revised down to 1.8% in 2019 then slow further to 1.6% in 2020. Japan growth would accelerate to 1.0% in 2019, an upward revision, but slow to 0.7% in 2020. China's growth is projected t slow to 6.3% in 2019, downwardly revised, and then further to 6.0% in 2020.

OECD Secretary-General Angel Gurría warned that  "trade conflicts and political uncertainty are adding to the difficulties governments face in ensuring that economic growth remains strong, sustainable and inclusive." And, "we urge policy-makers to help restore confidence in the international rules-based trading system and to implement reforms that boost growth and raise living standards – particularly for the most vulnerable."

According to OECD, trade tensions have already shaved between 0.1-0.2% from global GDP this year. If US raise tariffs on all Chinese goods to 25%, world economy growth could fall to just 3.0% in 2020, no more 3.5%. And, growth in the US could drop by -0.8% and by -0.6% in China.

Full press release here.

The British Pound has been depreciating against the Japanese Yen since the beginning of November after the currency pair reversed from the upper boundary of a dominant descending channel pattern at 149.50 on November 8.

The GBP/JPY exchange rate was trading near the lower boundary of a three-month ascending channel at 144.42 during the morning hours of Wednesday's trading session and could be set for a breakout.

If this breakout occurs, the currency exchange rate will target August swing low at 140.00 during the following trading session.

The pair is currently trading in a down flag pattern, which suggests that a decline in sight.

The New Zealand Dollar has been appreciating against the Japanese Yen since October after the currency pair made a U-turn from a support level formed by the monthly S1 at 72.11.

The exchange rate was trading near the lower boundary of an ascending channel pattern at 76.67 during the first part of Wednesday's trading session and could be set for a breakout.

Everything being equal, it is likely that the NZD/JPY currency exchange rate will make a brief pullback towards a support cluster formed by the weekly S3 and the monthly R1 at 75.29 during the following trading sessions.

The Euro regained traction and bonces through 1.14 barrier in early Wednesday, after 0.72 fall on Tuesday which left big bearish daily candle, also generated bearish signals on formation of bearish outside day and close below 1.1474 pivot (Fibo 38.2% of 1.1215/1.1472 upleg).

Temporary base is forming at 1.1360 zone (Tue/Wed lows) where 20SMA/ top of thick 4-hr cloud contained downside attempts, with fresh recovery pressuring falling 30SMA (1.1414) close above which would neutralize downside risk.

On the other side, daily indicators continue to point lower as momentum is to break into negative territory and form bear-cross with its 7-d MA and slow stochastic is heading south after reversing from overbought territory.

Bullish scenario on break above 30 SMA requires confirmation on sustained break above cracked key Fibo barrier at 1.1444 (38.2% of 1.1815/1.1215) which would unmask next pivotal barriers at 1.1499 (07 Nov spike high) and 1.1515 (50% of 1.1815/1.1215 descend).

Conversely, stronger bearish signal could be expected on repeated close below 1.1374 Fibo support and sustained break below 20SMA (1.1366).

Concerns about global growth slowdown which fuel safe-haven currencies could keep the Euro under pressure, while pre-holiday profit-taking on dollar longs could boost the single currency.

Res: 1.1414, 1.1444, 1.1472, 1.1499
Sup: 1.1360, 1.1348, 1.1313, 1.1276

Cable consolidates around 1.28 handle in early Wednesday's trading after Tuesday's 0.5% fall on strong fall in stocks which boosted dollar on fears about global slowdown. Near-term focus is shifted lower on weakening momentum and MA's in bearish configuration (10/20SMA bear-cross was formed today) on daily chart, while studies on lower timeframes are negative. Risk of retesting key supports at 1.2722 (15 Nov), 1.2695 (30 Oct) and 1.2661 (15 Aug) remains high, violation of which would generate strong bearish signal. Alternatively, break above 1.2895 pivot (Fibo 38.2% of 1.3174/1.2722, reinforced by falling 10SMA), below which the action in past three days repeatedly stalled, would sideline downside risk. Today's key event is UK PM May and EU Juncker meeting, where two sides will discuss draft Brexit agreement and try to fine-tune the details of post-Brexit time and disagreements over some parts of the text. Markets will remain in sit and wait mode to get fresh signals as Brexit theme was the top event and key driver of the British pound recently.

Res: 1.2818, 1.2883, 1.2895, 1.2948
Sup: 1.2774, 1.2760, 1.2722, 1.2695