Sample Category Title

• Rates: Key US yield support levels stand their ground
  Yesterday's full blown risk off session caused classic safe haven flows into German Bunds, but not in US Treasuries. Key US yield support levels played their role and didn't budge. US eco data and the cautious improvement in risk sentiment this morning, suggest that the yields could gain some additional ticks ahead of the US long weekend.
• Currencies: Dollar regained benefit of the doubt as US yields prevent further decline
  Fortunes changed in favour of the USD yesterday. US yields held up well despite an outright risk-off market. This supported the dollar instead of the euro. US data have intraday USD moving potential today. The EU assessment of the Italian budget is a euro wildcard. Yesterday's price action suggests that the EUR/USD 1.15/1.1621 resistance won't be that easy to clear

The Sunrise Headlines

• US equities continue to suffer as all major indices lose more than 1.5%. Dow Jones (-2.21%) underperforms. Asian stock markets opened with steep losses, but trade with an upward intraday bias with China already in positive territory.
• In a report by Trade Representative Robert Lighthizer, the US is repeating its accusation that China continues a campaign of intellectual property and technology theft, just 10 days before Presidents Trump and Xi Jinping meet.
• Theresa May is considering technological solutions to maintain a soft Irish border in an attempt to woo the Eurosceptics of her Conservative party. She is exploring the previously discarded “maximum facilitation” option.
• Oil prices plunged again on Tuesday (-6.5%) with Brent crude now below $64 on demand worries and fears of oversupply. Trump fuelled these concerns yesterday by saying he'd love to see oil prices even lower.
• Italian media reports that Deputy PM Salvini would be open to revise the 2019 budget proposal by lowering spending on citizen's income and on beneficiaries of the lower retirement age. The EC reports on EMU budgets today.
• Bank of Canada governor Wilkins said it is time to review the BOC's monetary policy framework. It will have some key challenges as the central bank is likely to run out of “conventional firepower” in the event of an economic downturn.
• Today's economic calendar contains i.a. US Durable Goods Orders for October and Initial Jobless Claims. The European Commission publishes opinions on the draft budget reviews of EMU countries. Germany taps the bond market

Currencies: Dollar Regained Benefit Of The Doubt As US Yields Prevent Further Decline

USD profits as US yields resist riks-off trade

Global (equity) markets faced an outright risk-off session yesterday. Several (corporate) credit spread indicators also widened further. At the same time, US govt yields held up rather well as key support levels came in play. This resilience supported the USD. At the same time, EMU topics (Italian budget, Spain raising questions on Brexit deal) were potential euro negatives. The trade-weighted dollar rebounded from the low 96 area to close the day at 97.84, reversing a big part of the loss at the end of last week. EUR/USD lost almost one big figure and finished at 1.1370. The yen didn't really profit from the risk-on sentiment. USD/JPY even closed the session with a modest gain at 112.77. Overnight, losses on Asian equities are moderate given the sell-off in the US. However, it's too early to already see this as a sign of a genuine trend reversal on the risk-off trade. Headlines on US China talks ahead of the G20 remain negative. US president Trump again attacked the Fed rate hike policy. EUR/USD regains a few ticks (1.1385 area). USD/JPY is changing hands at around 112.80. USD/CNY is holding a tight range in the 6.94 area. Today, the US calendar contains durable goods orders, claims and existing home sales. The latter might be at least as important as the first one. In Europe, the focus will be on the EU assessment of the Italian budget and its reaction of Italian spreads. Global sentiment of course remains also an important driver. A risk rebound is often a euro rather than a USD positive. However, if US-German spreads would re-widen and given uncertainty on Italy, a sustained euro rebound might not be that evident. We had a neutral bias on EUR/USD of late. The USD lost momentum as investors doubt whether the US economy remains strong enough to support 3 additional Fed rate hikes next year. Even so, we assume it's too early for a sustained market repositioning away from the USD. The news from Europe is mixed at best. We see yesterday's price action as confirming our working hypothesis that EUR/USD 1.15/1.1621 resistance won't give away anytime soon.

Sterling gained a few ticks against the euro yesterday but ceded ground against the dollar. The BoE hearing before the Treasury committee didn't bring concrete news for GBP-traders. Today, PM May goes to Brussels to fine-tune the Brexit deal and address issues on the future relationship. After last week's tensions, the Brexit debate temporarily calmed down. This might be slightly GBP-positive in a daily perspective. We stay cautious on sterling as long as uncertainty on final vote persists.

EUR/USD: topisde test rejected, at least for now

XAUUSD (1220.60): Gold was consolidating near the resistance level of 1223.50 with price action briefly spiking to post a fresh two week high. However, failure to establish support has pushed the price back below the price level of 1223.50. Currently, the 4-hour 20-period EMA is seen holding the declines. However, a break below the EMA could trigger gold prices to extend declines to the temporary support at 1213.50. As long as this support holds, gold prices could attempt a rebound. Failure to hold the declines at 1213.50 could trigger further declines down to 1204.08.

GBPUSD (1.2790): The GBPUSD is trading a bit subdued as price action repeatedly tests the support area of 1.2808 level. A reversal off this level could, however, keep price action range bound. To the downside, the untested support at 1.2683 is expected to be tested at some point. However, with the Stochastics in the oversold level, there is a possibility of a rebound in price action.

EURUSD (1.1374): The EURUSD formed a bearish engulfing on the daily chart, and this coincides with the reversal off the resistance area on the 4-hour chart. The declines could potentially push the EURUSD down to 1.1315 - 1.1300 level of support. Establishing support at this level would mark a retest of the breakout level. Therefore, we could expect to see a rebound in price. This could also potentially mark an inverse head and shoulders pattern with the neckline resistance seen at 1.1435 - 1.1460 level.

Daily Pivots: (S1) 0.7184; (P) 0.7243; (R1) 0.7273; More...

Intraday bias in AUD/USD remains neutral at this point. On the upside, sustained break of 0.7314 will indicate medium term reversal. Further rally should be seen to 38.2% retracement of 0.8135 to 0.7020 at 0.7446 next. Nevertheless, failure to sustain above 0.7314, and break of 0.7164 support will retain bearishness and turn bias back to the downside for retesting 0.7020 low.

In the bigger picture, AUD/USD's decline from 0.8135 could have completed at 0.7020 already, ahead of 0.6826 key support (2016 low). Break of 0.7314 will confirm and bring strong rebound. But for now, we'd expect strong resistance from 0.7500 support turned resistance to limit upside. Medium term fall from 0.8135 should extend to take on 0.6826 low at a later stage.

Daily Pivots: (S1) 1.3203; (P) 1.3261; (R1) 1.3367; More...

Intraday bias in USD/CAD remains on the upside at this point. Current rise from 1.2781 is in progress for 1.3385 resistance. Decisive break there will resume larger up trend from 1.2061 to 1.3685 fibonacci level next. On the downside, break of 1.3141 support is needed to indicate short term topping. Otherwise, outlook will remain bullish in case of retreat.

In the bigger picture, current development revives the case that corrective fall from 1.3385 has completed at 1.2781 already. And whole up trend from 1.2061 (2016 low) is ready to resume. Break of 1.3385 will target 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685. This will now be the favored case as long as 1.2781 support holds.

Daily Pivots: (S1) 112.39; (P) 112.61; (R1) 112.97; More..

USD/JPY formed a temporary low at 112.30 and recovered. Intraday bias is turned neutral first. Another fall is expected as long as 113.09 minor resistance holds. On the downside, below 112.30 will resume the fall from 114.20 to 111.37 support. Such decline is seen as the third leg of the consolidation pattern from 114.54. Downside should be contained by 38.2% retracement of 104.62 to 114.54 at 110.75 to bring rebound. On the upside, above 113.30 minor resistance will turn bias back to the upside for 114.54/73 key resistance zone.

In the bigger picture, corrective fall from 118.65 (2016 high) should have completed with three waves down to 104.62. Decisive break of 114.73 resistance will likely resume whole rally from 98.97 (2016 low) to 100% projection of 98.97 to 118.65 from 104.62 at 124.30, which is reasonably close to 125.85 (2015 high). This will stay as the preferred case as long as 109.76 support holds. However, decisive break of 109.76 will dampen this bullish view and turns outlook mixed again.

The markets were seen trading relatively subdued heading into the Thanksgiving holiday in the U.S. Data showed that building permits rose 1.26 million on the month matching estimates while housing starts also rose 1.23 million, matching estimates.

There was some volatility for the pound sterling. Spain announced that it would vote no against the Brexit draft citing the outstanding issue over Gibraltar. The sterling's reaction was, however, a bit muted.

Data from the Eurozone is quiet with not many releases in store. The NY trading session will see the U.S. durable goods orders report coming out. Core durable goods orders are forecast to rise 0.4% on the month. However, headline durable goods orders are expected to fall 2.2% on the month.

Later in the day, the U.S. existing home sales report is due. Forecasts point to 5.20 million increase marking a slight gain from the month before.

Daily Pivots: (S1) 0.9920; (P) 0.9939; (R1) 0.9970; More...

USD/CHF recovered ahead of 38.2% retracement of 0.9541 to 1.0128 at 0.9904 and intraday bias is turned neutral first. Deeper decline could still be seen and below 0.9908 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.

Daily Pivots: (S1) 1.2802; (P) 1.2843; (R1) 1.2891; More...

Intraday bias in GBP/USD remains neutral and outlook is unchanged. Price actions from 1.2661 are viewed as a consolidation pattern. Break of 1.2692 will bring retest of 1.2661 first. Firm break there will resume the larger down trend from 1.4376. On the upside, sustained break of 4 hour 55 EMA (now at 1.2885) could extend the consolidation with another rise. But even in case of strong rally, upside should be limited by 1.3316 fibonacci level to bring down trend resumption eventually.

In the bigger picture, whole medium term rebound from 1.1946 (2016 low) should have completed at 1.4376 already, after rejection from 55 month EMA. The structure and momentum of the fall from 1.4376 argues that it's resuming long term down trend. And this will be the preferred case as long as 38.2% retracement of 1.4376 to 1.2661 at 1.3316 holds. However, firm break of 1.3316 would bring stronger rebound to 61.8% retracement at 1.3721. And, the eventual depth of the fall from 1.4376, and the chance of hitting 1.1946 low, will depend on the strength of the interim corrective rebound from 1.2661.