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Daily Pivots: (S1) 1.1411; (P) 1.1438; (R1) 1.1482; More.....

EUR/USD dipped to 1.1358, breached 1.1363 minor support, but quickly recovered. Intraday bias stays neutral first. Overall outlook remains bearish with 1.1499 resistance intact. On the downside, break of 1.1358 should bring retest of 1.1215 low first. Break will resume medium term down trend. However, on the upside, firm break of 1.1499 will indicate near term reversal and turn outlook bullish for 1.1814 resistance again.

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 January this year, all the cryptocurrencies tracked by CoinMarketCap had a market valuation of more than $800 billion. At the time, this valuation was larger than that of companies like Apple, Microsoft, and Amazon.

In the months that followed, the crypto market valuation started to decline with regulatory issues being a major concern and countries like South Korea and Japan cracking down on ICOs and digital assets. Today, the total valuation of cryptocurrencies is just $146 billion. The market value of Bitcoin has dropped from a peak of $305 billion to the current $78 billion.

The main reason for the current drop is the loss of confidence among investors which started with the forking of Bitcoin Cash a week ago. Traders felt uncomfortable owning currencies whose value could be diluted with just a tweak in software.

What’s more, CoinMarketCap lists more than 2000 currencies, many of which are scams. While currencies like Bitcoin are currently being used online, their acceptance rate has been below par. Therefore, the price of crypto will likely continue moving lower as confidence continues to fall.

The ETH/USD pair reached a multi-monthly low of 119.14. This was the lowest level since last year. The market value of ETH has declined to $13 billion. On the four-hour chart below, the pair is now trading at 129.45. The RSI has risen slightly from 8 to the current 29. The double EMAs show that the pair could continue to decline further. If it does, it will likely test the important psychologically level of 100.

Daily Pivots: (S1) 1.5692; (P) 1.5733; (R1) 1.5795; More....

Intraday bias in EUR/AUD remains mildly on the upside at this point. Rebound from 1.5519 short term bottom is in progress for 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. On the downside, below 1.5643 minor support will bring retest of 1.5519 low.

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.

The euro currency has moved sharply lower against the greenback, following a strong move higher in the US dollar index on Tuesday. The intraday sentiment surrounding the EURUSD pair is bearish while price trades below the 1.1390 level. The MACD indicator is turning lower on the four-hour time frame, with a sustained move below the 1.1370 support level likely to trigger the next round of technical selling.

The EURUSD pair is only bearish while trading below the 1.1390 level, key support is now found at the 1.1330 and 1.1300 levels.

If the EURUSD pair trades above the 1.1390 level, key intraday resistance is found at the 1.1418 and 1.1470 levels.

The British pound is once again under technical selling pressure against the US dollar following a key range breakout to the downside. GBPUSD sellers need to hold price below the 1.2790 level in order to build bearish momentum for a test of the former weekly low. Buyers need to break the 1.2882 level for further bullish advancement toward the 1.2988 resistance level.

The GBPUSD pair is only bearish while trading below the 1.2790 level, key technical support is now found at the 1.2732 and 1.2695 levels.

If the GBPUSD pair trades above the 1.2790 level, key intraday resistance is found at the 1.2835 and 1.2882 levels.

The decline in US stocks accelerated yesterday with the Dow, S&P, and NASDAQ shedding 550, 50, and 115 points respectively. Over the past five days, the three have lost 3.25%, 2.95%, and 4% respectively. This decline has spread around the world with Asian and European stocks dropping as well. These declines are mostly associated with investors’ fear of a slowing economy and the impacts of the ongoing trade conflict between the US and China. In the third quarter earnings releases, a good number of US companies like Apple, Nvidia, and Facebook lowered their guidance. This was also attributed to a strong dollar. Next week, the US President will meet with his Chinese counterpart providing a ray of hope that a trade deal or compromise will be made.

Yesterday, the price of crude oil dropped to the lowest levels since last year. Brent and WTI dropped to lows of $61.95 and $52.69. The decline was because Russia rejected calls by Saudi Arabia to reduce supplies. In the Asian session, the price rose slightly after the American Petroleum Institute (API) released its weekly inventory numbers. The numbers showed a sudden drawdown in crude oil. The inventories declined to 1.54 million barrels. This was significantly lower than last week’s boost of 8.45 million barrels. Today, the EIA will release its numbers, with traders expecting inventories to show 2.94 million barrels.

The US Department of Commerce released the housing numbers yesterday. The housing starts for October rose by 1.5%, which was lower than the consensus estimate of 1.6%. The numbers rose to 1.228 million, which was higher than the estimate of 1.225 million. The building permits for October rose to 1.263 million, which was higher than the estimated 1.260 million. Today, the National Association of Realtors will release the existing home sales numbers for October. Investors expect the numbers to show sales of 5.25 million, which will be higher than September’s increase of 5.115 million. Other important economic numbers will be the durable goods orders and jobless claims.

EUR/USD

The EUR/USD pair declined sharply yesterday after the housing starts numbers. In the Asian session, the pair was little moved. The decline came as the 15-day EMA crossed the 30-day EMA in a bearish manner. The RSI has moved from 29 to the current 36 while the MACD shows that more declines are possible. The pair will likely continue moving lower as traders wait for the important building numbers. If it does, it will likely test the support of 1.1300.

XTI/USD

The XTI/USD moved slightly higher in the Asian session. It still remains near the lowest level since last year. On the four-hour chart, the double EMAs show that the pair could continue moving lower. The RSI has moved slightly up to 34, from the previous low of 29. The momentum indicator too has fallen as shown below. There is a likelihood that the pair will continue the downward momentum as traders wait for the OPEC meeting in Vienna. The meeting will be held on December 6.

USD/JPY

This week, the USD/JPY pair has risen from 112.29 to the current 112.94. Yesterday, the pair crossed the 23.6% Fibonacci Retracement level of 112.77 and is currently heading to the 38.2% Fibonacci level of 113.04. The RSI has moved to 66, from a low of 29. Today, the pair will likely continue moving up to the 113 level. This is confirmed by the double EMAs, the RSI, and the MACD as shown below.

AUDUSD turned negative over the last two consecutive days after its downfall from the two-and-a-half-month high near 0.7340, reached last Friday. The price started the day in bullish territory finding support around the 20-day simple moving average (SMA) around 0.7200. In the short-term, the technical indicators remain in the bullish area with the RSI pointing slightly up, however, the MACD oscillator dipped below the trigger line.

On the upside, the 23.6% Fibonacci retracement level of the strong downward movement from 0.8135 to 0.7020, near 0.7285 could be the next immediate resistance for investors to have in mind. Beyond this region, resistance could then run towards the 0.7340 – 0.7380 zone before the 38.2% Fibonacci of 0.7450 comes under the radar.

Alternatively, should the price head south, it would be interesting to see if the SMAs can stop downside movements. A fall below the 20-day SMA could drive the pair until 0.7160, which hovers near the 40-day SMA. However, if these SMAs fail to hold, the market could drop below the latest low in order to meet the 0.7000 – 0.7040 significant support area, which encapsulates the 33-month low of 0.7020.

Regarding the medium-term picture, the market penetrated the falling trend line to the upside, during the previous couple of weeks and is expected to post a strong bullish correction. However, the bullish phase could fade out if the price falls below 0.7160.

Daily Pivots: (S1) 0.8870; (P) 0.8897; (R1) 0.8920; More...

Intraday bias in EUR/GBP remains neutral at this point. Further rise is expected with 0.8824 support intact. On the upside, decisive break of 0.8939 will extend the rally from 0.8655 to 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 instead.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). Medium term fall from 0.9305 is possibly in progress and could extend through 0.8620. On the upside, break of 0.8939 resistance is needed to indicate medium term reversal. Otherwise, outlook will remain cautiously bearish even in case of rebound.

While Asian markets initially opened lower following the US, major indices turned positive after lunch. The development lifted Australian and New Zealand Dollar slightly. But Canadian Dollar is treated differently as weighed down by resumption of free fall in oil prices. The Loonie is trading as the weakest for today, after Yen and then Dollar. Nevertheless, for the week, Aussie and Loonie remain the worst performing. Swiss Franc is the strongest one, followed by Yen and Dollar. The economic calendar is not too heavy ahead.

Technically, while Dollar recovered overnight, there is no follow through buying to confirm underlying strength yet, except versus Canadian. AUD/USD and AUD/JPY defended near term minor support levels, and thus maintained mild bullishness. EUR/GBP is a pair to watch today as it lost further momentum ahead of 0.8939 resistance. UK May's meeting with EU Juncker, and the EU's report on Italy's budget could trigger some volatility in EUR/GBP.

In other markets, DOW lost -2.21% yesterday to 24465.64. S&P 500 closed down -1.82% and NASDAQ dropped -1.70%. Treasury yields were mixed with five year yield closed up 0.004 at 2.870. But 10 year yield dropped -0.009 to 3.048. In Asia, Nikkei closed down -0.35%. But other major Asian indices turned positive after initial selloff. At the time of writing, Hong Kong HSI is up 0.30%, China Shanghai SSE is up 0.19%, Singapore Strait Times is up 0.55%.

European Commission to publish report on Italy's budget today

The European Commission will publish its views on the draft budget plan of all 19 Eurozone states today, at around 1100GMT. And without a doubt, Italy's DBP will be included. It's generally expected that the Commission will, at the same time, publish a report regarding Italy's breach of EU rules. That will be the first step in the so called Excess Deficit Procedure, which could eventually lead to fines for Italy up to 0.2% of its GDP.

Reactions in the bond markets will be closely watched today. For now, German 10 year yield stands at 0.354. Italian 10 year yield stands at 3.618. That is, German-Italian spread is now at 326. It's generally agreed that 300 is an alarming level while 400 is definitely unsustainable. Many of the smaller, regional Italian banks will have capitalization problems at 400.

UK May to meet EU Juncker with strongest position for a while

UK Prime Minister Theresa May will meet European Council Jean-Claude Juncker in Brussels today, to work on the political declaration covering future relationship after Brexit. May appears to be in the strongest position for a while. The campaign to oust May, led by ERG chair Jacob Rees-Mogg, ended in humiliating failure. Only 26 MPS had publicly said that they had submitted the letter demanding no-confidence vote, well short of the threshold of 48.

According to European Commission spokesman Margaritis Schinas. The aim of the meeting between May and Juncker is for preparation for Sunday, Nov 25, EU summit, for approving the Brexit withdrawal agreement. The so-called political declaration on future relationship will also be covered.

Fed Kashkari: Preemptively rate hike might cause the end of economic expansion

Minneapolis Fed President Neel Kashkari, a known dove, sounded cautious in on interest rates on his comments again. He said in a radio interview yesterday that "one of my concerns is that if we preemptively raise interest rates, and it's not in fact necessary, we might be the cause of ending the expansion".

He reiterated that Fed should "pause and see how the economy continues to evolve." Also, he said "I'm not seeing signs that the U.S. economy is overheating, so I don't think we need to preemptively raise interest rates."

USTR: China has not fundamentally altered its unfair practices

The US Trade Representative released an update on Section 301 IP investigation on China yesterday. Less than two weeks ahead of the Trump-Xi meeting as sideline of G20 summit in Argentina, USTR is piling more pressure on China for reforms. In short, the report complained that "China has not fundamentally altered its unfair, unreasonable, and market-distorting practices that were the subject of the March 2018 report on our Section 301 investigation."

The report also noted that "despite repeated U.S. engagement efforts and international admonishments of its trade technology transfer policies, China did not respond constructively and failed to take any substantive actions to address U.S. concerns." And, China, "made clear – both in public statements and in government-to-government communications – that it would not change its policies in response to the initial Section 301 action." The report also said "China largely denied there were problems with respect to its policies involving technology transfer and intellectual property".

WTI crude oil hit 52.7, more downside ahead

Crude oil prices have declined for 6 consecutive weeks. A confluence of factor has triggered the sharp selloff: concerns that the slowdown of Chinese economic growth would accelerate, reports that Russia would not join OPEC to cut output further, Trump called for Saudi Arabia to raise output, news of possible concession on Iranian sanctions. All these factors can be summarized in a demand/ supply relation. More in Oil Update – Oversupply Likely Continues to Weigh on Oil Prices Next Year

On the data front

Australia Westpac leading index rose 0.1% mom in October. Japan all industry activity index dropped -0.9% mom. UK publica sector net borrowing will be the main feature in European session.

Later in the day, US durable goods will take center stage. jobless claims, leading index, existing home sales will also be released. Canada will release wholesale sales.

EUR/GBP Daily Outlook

Daily Pivots: (S1) 0.8870; (P) 0.8897; (R1) 0.8920; More...

Intraday bias in EUR/GBP remains neutral at this point. Further rise is expected with 0.8824 support intact. On the upside, decisive break of 0.8939 will extend the rally from 0.8655 to 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 instead.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). Medium term fall from 0.9305 is possibly in progress and could extend through 0.8620. On the upside, break of 0.8939 resistance is needed to indicate medium term reversal. Otherwise, outlook will remain cautiously bearish even in case of rebound.

Economic Indicators Update

General Trend:

• Energy shares drop following declines in oil prices on Tuesday’s session
• Japanese megabanks trade lower
• Asian tech shares rise, pare some of the recent losses
• Mitsubishi Electric declines over 5%, said to have shipped certain rubber products without inspection (Japanese Press)
• Nissan and Mitsubishi Motors rise after Tuesday’s declines; Situation related to the Nissan Chairman still fluid
• US Trade Rep Lighthizer releases report on China IP and tech transfers which says China hasn't modified its unfair trade practices - USTR report
• Renewed press speculation that the China PBoC will continue to not follow rate hikes by the US Fed
• Crude Oil rises over 1.9% after declines on Tuesday

Headlines/Economic Data

Japan

• Nikkei 225 opened -1.4%
• Mitsubishi Electric, 6503.JP Said to have shipped certain rubber products without inspection - Japanese Press; Late denies press report: no quality issues with unit's rubber products
• Honda, 7267.JP To recall ~107K Odyssey units in the US in relation to door latch - US financial press
• 8233.JP Planning to issue ¥60B in convertible bonds overseas [-15%]
• Nissan, 7201.JP Said to consider revising alliance with Renault, including stake - Local Media

Korea

• Kospi opened -1.2%
• (KR) South Korea and US held working group on North Korea in Washington DC, discussed UN Security Council resolutions
• (KR) South Korea holding public hearing today on trade deal with UK, in a move to cushion risks posed to Korean firms doing business in the UK after Brexit - Korean press
• (KR) South Korea Nov 1-20 Exports Y/Y: +5.7% v 26.0% prior; Imports Y/Y: 12.8% v 31.4% prior
• (KR) South Korea sells KRW1.8T in 2-yr Monetary Stabilization Bonds (MSBs) at 1.945%

China/Hong Kong

• Hang Seng opened -1.3%, Shanghai Composite -1.0%
• (CN) US Trade Rep Lighthizer releases report on China IP and tech transfers which says China hasn't modified its unfair practices
• 173.HK Expects the Hong Kong property market to become active again after March of 2019 - Local Press
• (CN) According to some analysts, the impact of the US/China trade tensions and higher costs of doing business have led to some concerns among investors regarding a 'flash crash' - HK Press
• (CN) China PBoC said to be less likely to lower money market rate due to foreign exchange concerns - China Securities Journal
• (CN) China PBoC Open Market Operation (OMO): v skipped prior (19th straight skip)
• (CN) China PBoC sets yuan reference rate: 6.9449 v 6.9280 prior
• (CN) Moody's: Expect China 2019 GDP to slow to 6% v 6.6% expectation in 2018
• (CN) Hebei (largest steel making province in China) issues second level pollution alert from Nov 22 - Local Media
• (HK) Official: No plan to ease property curbs at this time - press

Australia/New Zealand

• ASX 200 opened -1.2%
• APA.AU Australia Treasurer Frydenberg officially rejects CK's bid for APA; deal terminated
• WOW.AU Guides FY19 priorities mostly consistent with FY18; Customer and brand metrics to remain stable; Starting to build momentum into festive season - AGM
• (AU) Australia ACCC launches inquiry into supply of electricity in the National Electricity Market
• (AU) Australia sells A$1.0B v A$1.0B indicated in May 2030 bonds, avg yield 2.7486% v 2.729% prior, bid to cover 3.31x v 4.04x prior
• (NZ) Reserve Bank of New Zealand (RBNZ) Analytical Note: Expects labor force participation to remain broadly flat
• (AU) RBA Gov Lowe: Workers do not feel happy or confident about future prospects despite unemployment level
• (NZ) New Zealand Oct Credit Card Spending m/m: -0.1% v +0.8% prior; y/y: 6.3% v 7.8% prior

Other Asia

• (PH) China and Philippines sign deals relating to oil and gas exploration; signed a total of 29 deals on state visit - SCMP

North America

• (US) Pres Trump has submitted written responses to some of Special Counsel Mueller's questions, according to Trump attorney Rudy Giuliani - press
• (US) Outgoing Senator Corker (R-TN) demands President Trump make determination on the Saudi Crown Prince; Congress will consider law to push the President on Saudi Arabia
• TME Thought to be considering moving Tencent Music Entertainment Group IPO to early 2019 - US financial press

Europe

• (UK) PM May suggests that Brexiters' customs plan could be solution to Ireland boarder issue - press
• (ES) China President Xi Jinping is expected to visit Madrid (Spain) next week, infrastructure investment is expected to be a topic - HK Press
• (IT) Italy Fin Min Tria reiterates concerned about bond spread - Italy Press

Levels as of 12:50ET

• Hang Seng -0.2%; Shanghai Composite +0.3%; Kospi -0.3%; Nikkei225 -0.2%; ASX 200 -0.5%
• Equity Futures: S&P500 +0.4%; Nasdaq100 +0.5%, Dax +0.5%; FTSE100 +0.7%
• EUR 1.1364-1.1379; JPY 112.65-112.94 ; AUD 0.7203-0.7236;NZD 0.6782-0.6807
• Dec Gold +0.1% at $1,222/oz; Jan Crude Oil +1.6% at $54.27/brl; Dec Copper +0.5% at $2.77/lb