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Yesterday USD kept losing positions against the major currencies. The USD index (#DX) is in the red (-0.27%). The financial market participants keep evaluating the "careful" comments by the Federal Reserve representatives regarding the increase of the key interest rate. An additional pressure on the USD is caused by the drop in the yield of the US Treasury bonds. We recommend you keep an eye on the US/China trade conflict as well as Brexit.

The Reserve Bank of Australia foresees a stable growth of the economy in 2018-2019. They indend to keep the current direction of the monetary policy and keep the interest rates at the all-time-low level. The investors are waiting for a series of reports from the US real estate market.

The quotes on oil are consolidating. The WTI futures are testing the 56.80 USD/barrel mark. Keep an eye on the weekly report on the crude oil reserves in the US by API – 23:30 (GMT+2:00).

Market indicators

Yesterday the US stock market was marked by an aggressive sell-off: #SPY (-1,69%), #DIA (-1,65%), #QQQ (-3,25%).

The 10-year US government bonds yield keeps falling. Right now it is 3,05-3,06%.

At 15:30 (GMT+2:00) the US will publish some important real estate market reports.

You should also keep an eye on the statement by the Head of the Bank of England.

The dollar continues to develop a rollback from the multi-month highs, falling to 96.0 on DXY while triggering EURUSD to reach a two-week high, at 1.1450. Nevertheless, dollar’s rollback does not help any other assets, and although the weakening of the dollar usually sets offs growth in the stock and commodity markets, this is not the case this time.

On the U.S stock markets, we see a continuous sell-off of stocks of high-tech companies. Nasdaq Index had lost 3% on Monday, and at the start of trading on Tuesday plummeted to lows seen back in May, subsequent to the decline of stocks of market giant such as Google, Amazon and Apple. Pressures on Apple shares have plummeted the company’s capitalization by 16.5% since the beginning of the month. Meanwhile, Facebook lost 40% from its peak values in the middle of the year and sank to low levels, which we have not seen since February 2017.

Powell’s words in regard to the potential pause in the rate hikes induces a pessimistic sentiment in the market participants about resilience of the economy. Demand for U.S. Treasury bonds was on the rise. The words of Fed’s chairman were perceived as a signal that the Central Bank is not as confident in maintaining such a strong rate of economic growth.

With an exceptionally strong economy, growth stocks had the highest demand, and with the economy growth rate close to the trend levels, the focus of investors shifts back to the company’s performance. Under these circumstances, markets shifted their attention to the long-term average P/E ratios, in which the highest rates were in the IT Sector.

It is logical to fear that the correction of high-tech companies might spread to the entire stock market. It happens most of the time, but one should not rush to conclusions.

Based on what we have seen, it can be said that the end of the easy-money era, initiated in early October, resulted in the realisation of a more realistic view of the markets. This was manifest not only in the shift from growth stocks to value stocks, but it was also very noticeable in the dynamics of Crude Oil (-25% of October’s peak value) as well as in the Cryptocurrency market (-30%). Markets are on the way from irrational exuberance to anxiety. However, we cannot exclude the case that emotional sales may drag indices low on an emotional sell-off, throwing them to the other extreme, fear, in the upcoming weeks.

EUR/USD

Current level - 1.1459

The bias is still positive as the pair is approaching 1.1500 resistance area. The later is able to provoke a reversal, for a corrective dip to 1.1360.

USD/JPY

Current level - 112.48

The downtrend remains intact, heading towards 111.40 low. Crucial on the upside is 113.10.

GBP/USD

Current level - 1.2857

Still struggling below 1.2880 and a violation of that area will signal a rise towards 1.3040 zone.

The Australian dollar dipped further on Tuesday, following Monday's close in red, the first after strong four-day rally, which signaled bulls might be running out of steam.

Today's extension lower was triggered by lower stocks and hawkish tone from Fed's Williams, but being short-lived so far.

Daily slow stochastic is reversing from overbought zone and could generate negative signal, but conflicted by fresh rise of bullish momentum and daily MA's in full bullish setup.

Key near-term supports lay at 0.7256/53 (10 & 100SMA's) which created bull-cross and 0.7247 (daily cloud top), with break here needed to weaken near-term structure and signal deeper pullback towards 0.7215 (Fibo 38.2% 0.7020/0.7335).

Conversely, overall bullish bias is expected to remain intact while 10/100SMA's hold, for fresh extension of recovery phase from 0.7020 towards next target at 0.7381 (21 Aug high).

Res: 0.7300, 0.7325, 0.7335, 0.7381
Sup: 0.7268, 0.7256, 0.7247, 0.7215

The pair continues to trend lower, extending steep fall into third straight day and looking for test of daily cloud base (112.16) after fresh bearish extension on Tuesday broke below 112.45 pivot (Fibo 61.8% of 111.37/114.20) and generated bullish signal.

Last Friday's long bearish daily candle (the biggest one-day fall in Nov) continues to weigh, along with daily MA's in bearish setup and strengthening bearish momentum.

Close below broken Fibo support at 112.45 is needed to confirm bearish stance, while sustained break below cloud base (112.16) and 112.04 (Fibo 76.4% / 100SMA) would generate stronger bearish signal.

Corrective upticks are expected to hold below daily cloud top (112.89) and keep bears in play.

Res: 112.45; 112.70; 112.89; 113.06
Sup: 112.16; 112.04; 111.77; 111.62

The Euro wakes up in early European trading on Tuesday and ticks higher after the action in Asia was quiet and moved within tight range.

The pair remains in green for the sixth straight day and looks for extension of bull-leg from 1.1215 double-bottom (12/13 Nov) towards targets at 1.1499 (07 Nov spike high) and 1.1515 (Fibo 50% of 1.1815/1.1215 descend/55SMA).

Bulls remain in play despite rather hawkish comments from Fed's Williams on Tuesday who signaled that the Fed may stay on track for rate hike in Dec, as dollar showed mild reaction on comments, staying at the back foot.

Earlier comments from Fed's vice chair Clarida, who expressed concerns about global growth slowdown which could also impact US economy and pre-US holiday position adjustment, keep the greenback under pressure that could provide further support to the single currency.

Monday's close above 1.1444 pivot (Fibo 38.2% of 1.1815/1.1215) was bullish signal, with strong bullish momentum on daily chart and multiple MA's bull-crosses (5/10 and 5/20) underpinning.

Also, next week's twist of thinning daily cloud is expected to be magnetic.

Broken Fibo barrier at 1.1444 holds today's action for now, with broken 30SMA (1.1421) expected to contain deeper dips and keep bulls intact.

Res: 1.1499, 1.1515, 1.1558, 1.1586
Sup: 1.1444, 1.1421, 1.1393, 1.1371

The Euro wakes up in early European trading on Tuesday and ticks higher after the action in Asia was quiet and moved within tight range.

The pair remains in green for the sixth straight day and looks for extension of bull-leg from 1.1215 double-bottom (12/13 Nov) towards targets at 1.1499 (07 Nov spike high) and 1.1515 (Fibo 50% of 1.1815/1.1215 descend/55SMA).

Bulls remain in play despite rather hawkish comments from Fed's Williams on Tuesday who signaled that the Fed may stay on track for rate hike in Dec, as dollar showed mild reaction on comments, staying at the back foot.

Earlier comments from Fed's vice chair Clarida, who expressed concerns about global growth slowdown which could also impact US economy and pre-US holiday position adjustment, keep the greenback under pressure that could provide further support to the single currency.

Monday's close above 1.1444 pivot (Fibo 38.2% of 1.1815/1.1215) was bullish signal, with strong bullish momentum on daily chart and multiple MA's bull-crosses (5/10 and 5/20) underpinning.

Also, next week's twist of thinning daily cloud is expected to be magnetic.

Broken Fibo barrier at 1.1444 holds today's action for now, with broken 30SMA (1.1421) expected to contain deeper dips and keep bulls intact.

Res: 1.1499, 1.1515, 1.1558, 1.1586
Sup: 1.1444, 1.1421, 1.1393, 1.1371

Here are the latest developments in global markets:

FOREX:The dollar index is marginally lower on Tuesday (-0.08%), extending the losses it posted in the previous session as US bond yields declined and a disappointing NAHB index fueled speculation the US economy may have peaked. The Swiss franc was the best performer, attracting inflows amid risk aversion in markets, while the euro followed closely in its tracks. The pound was little changed amid no fresh Brexit news, though investors may turn their attention to a testimony by BoE policymakers today.

STOCKS: Wall Street closed firmly in the red, with the weakness being led by the technology sector and specifically by FAANG stocks (see below). Accordingly, the tech-heavy Nasdaq Composite (-3.03%) was the worst performer, while the S&P 500 (-1.66%) and Dow Jones (-1.56%) also felt the heat of the tech rout, given the heavy weighting firms like Apple (-3.96%) have in these indices. Asian markets were also a sea of red on Tuesday, with indices in Hong Kong and China leading the drop. Europe didn't escape unscathed either, with futures tracking all the major benchmarks pointing to a lower open today.

COMMODITIES: Oil ticked higher on Monday on the back of speculation for OPEC supply cuts, and amid news the EU is set to sanction some Iranian nationals. However, the recovery proved short-lived and crude retreated again, weighed by the risk averse market environment. WTI is currently trading at $56.90 a barrel, and Brent at $66.31 per barrel. In precious metals, gold continues to take advantage of the pullback in the dollar, moving further above its 100-day moving average to currently trade at $1,225 per ounce – looking set to challenge the downtrend line drawn from the peaks of May soon.

Major movers: Dollar drops alongside Treasury yields as risk appetite sours

The dollar underperformed most of its peers on Monday, falling in tandem with US bond yields, which were hammered somewhat lower as investors increased their exposure to defensive assets amid a sharp selloff in US equity markets. A disappointing National Association of Home Builders (NAHB) index likely exacerbated the greenback's troubles, via amplifying the latest narrative that the Fed is set to pause its hiking cycle next year. Recall that housing data are considered a forward-looking gauge of broader economic activity and hence, the loss of momentum recently is an ominous sign for future growth prospects. Against this backdrop, figures on building permits and housing starts today may attract special attention.

The Swiss franc and the euro were the main beneficiaries of the pullback in the dollar, outshining even the defensive Japanese yen despite the broader weakness in risk sentiment. In the UK, the pound continued to trade in a choppy manner, gaining against the dollar but losing versus the euro, in the absence of any major Brexit updates. Attention may (briefly) turn away from UK politics today, as several BoE policymakers including Governor Carney and Chief Economist Haldane will testify before Parliament. Market pricing derived from the UK overnight index swaps suggests investors no longer expect a rate hike by the BoE in 2019 amid heightened Brexit uncertainties, and if Carney & Co. appear comfortable with that, the pound could come under renewed selling interest.

In equity markets, reports Apple is cutting its orders for iPhone components re-awakened the tech bears, with FAANG stocks (Facebook, Amazon, Apple, Netflix, and Alphabet's Google) posting severe losses. While the trigger may have been hints of weaker demand for Apple products, the rout was likely aggravated by money managers liquidating prior long-equity positions to protect their year-to-date profitability, as the end of the year is now in sight. The implication is that equity investors should be especially careful heading into year-end; any further weakness could “feed on itself” much easier than usual, as several funds attempt to protect their profitability by locking in profits in the face of a declining market, thereby exacerbating the sell-off.

Day ahead: US housing starts due; Carney appears before Parliament; Brexit, EU-Italy budget standoff, Sino-US trade dispute at play

Bank of England Governor Carney's parliamentary appearance will be attracting interest on Tuesday. Elsewhere, some housing data out of the US are on the agenda, while beyond releases, the themes of Brexit, the EU-Italy budget standoff and the Sino-US trade dispute remain at play, with any headlines having the potential to drive positioning in the markets.

Numbers on factory orders are due out of the Confederation of British Industry (CBI) at 1100 GMT, though these look secondary compared to any news on Brexit which have the capacity to lead to wild swings in sterling pairs.

Also pound-related and before the CBI figures, BoE Governor Carney, Deputy Governor Cunliffe, Chief Economist Haldane and external MPC member Saunders will be appearing before parliament to answer questions about the Bank's November Inflation Report at 1000 GMT. They're also likely to be on the receiving end of questions as regards the Bank's plans in the event of a no-deal Brexit, with any comments on this front probably proving sterling-sensitive.

At 1330 GMT, October data on US housing starts and building permits will be made public. These don't tend to be market-moving for FX markets though they're attracting more interest as of late given that the rising rate environment is acting as a drag on the real estate market. Moreover, Monday's figures that showed US homebuilders' sentiment posting its sharpest monthly decline in more than four-and-a-half years, is giving an additional element of importance to the numbers.

Also at 1330 GMT, the Philly Fed will be issuing its November non-manufacturing business outlook survey.

In relation to the EU-Italy disagreement over the latter's spending plans, the European Commission will release its report on all eurozone draft budgets tomorrow; Italy will likely be identified as violating the relevant rules.

The kiwi dollar may get some short-term direction from today's bi-weekly milk auction, given that dairy products are New Zealand's largest goods export earner. Thus, higher prices are seen as positive for the local dollar. Some calendars mark the release at 1200 GMT, though it is tentative in nature, hence the relevant numbers may well be made public at some other point in time.

The Bank of Canada's Wilkins will be giving a speech at 1800 GMT.

In energy markets, weekly API data on US crude stocks are due at 2130 GMT.

In equity markets, it will be interesting to see whether the tech selloff, which according to some is coming on the back of worries over the Sino-US trade spat, has more room to run.

Technical Analysis: GBPUSD negative short-term bias still at play

GBPUSD has recovered somewhat after coming close to its lowest since mid-August of 1.2693 last week. The MACD being below its trigger line suggests that the short-term bias is still negative. However, the stochastics may be giving an early sign for gains in the very short term, as the %K line has just moved above the slow %D one.

Upbeat remarks by Carney or positive Brexit news are likely to boost the pair. Resistance to gains may take place around a previous low at 1.2921. Further above, the area around the current level of the 100-day moving average line at 1.3005 would be eyed; the 50-day MA has roughly converged with the 100-day one, while not far above lie a top (1.3042) and a bottom (1.3048) from previous months. Steeper gains would eye the region around the 1.31 handle which was relatively congested in the past.

Losses on the back of a dovish Carney or additional Brexit complications could meet support around 1.2784, this being a previous bottom. Further below, the zone around 1.2693, the pair's lowest since mid-August, would come within scope; notice that 1.2661, a more than one-year nadir lies not far below.

Pivot (invalidation): 5.3460

Our preference Short positions below 5.3460 with targets at 5.3000 & 5.2690 in extension.

Alternative scenario Above 5.3460 look for further upside with 5.3670 & 5.3930 as targets.

Comment As Long as the resistance at 5.3460 is not surpassed, the risk of the break below 5.3000 remains high. The pair is trading within a bearish channel drawn from November 16.

Pivot (invalidation): 0.7305

Our preference Short positions below 0.7305 with targets at 0.7275 & 0.7250 in extension.

Alternative scenario Above 0.7305 look for further upside with 0.7325 & 0.7340 as targets.

Comment The RSI calls for a drop.