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The USD keeps descending regarding the basket of major currencies. On Friday, the USD index (#DX) updated the local minimums and closed in the negative zone (-0.48%). Some Federal Reserve representatives took a guarded position regarding the aggressive monetary policy going further. Richard Clarida, the Vice Chairman of Federal Reserve, thinks that the interest rates are around the "neutral" level. He is concerned about the slow growth rate of the world ecnomy and reports that the Central Bank needs to consider the future statistics. According to the CME FedWatch Tool, the probability of Federal Reserve increasing the interest rates in December has decreased to 68.9%.

The investors keep evaluating the Brexit conundrum. As a reminder: last week, Dominic Raab, the Secretary of UK regarding the Brexit, resigned. Previously, Jeremy Hunt, the head of the Foreign Office, said that London and Brussels will be able to reach an agreement by the end of November. Aside from that, keep an eye on the trading conflict between the US and China.

The oil quotes keep recovering. The WTI futures are testing the 57.50 USD/barrel mark.

Market Indicators

On Friday the major stock indices were rather ambigous: #SPY (+0,26%), #DIA (+0,33%), #QQQ (-0,35%).

The 10-year US government bonds yield keeps falling. Current value is 3,07-3,08%.

The common European currency is trading in a triangle-like formation against the Japanese Yen. The currency pair re-tested the bottom border of the pattern during last week's session.

A breakout through the upper boundary of the triangle pattern occurred during the first part of Monday's trading session.

Given that a breakout had occurred, the next target for the currency exchange rate will be at the upper boundary of a downtrend line at 129.56.

However, a resistance level formed by the 200-hour simple moving average at 128.95 could hinder the rate from hitting the target today.

The Australian Dollar appreciated about 85 base points against the US Dollar on Friday. The currency pair was driven higher by the 50-hour simple moving average during Friday's session.

The exchange rate was trading below the monthly pivot point at 0.7328 during the morning hours of Monday's session.

If this resistance level holds, the currency exchange rate will aim at a support cluster formed by the combination of the 100– and 200-hour SMAs near 0.7256 within this session.

However, if the rate passes the resistance line, the pair will aim for a re-tests of the upper boundary of a junior ascending channel pattern at 0.7340.

The US Dollar depreciated by about 60 base points against the Canadian Dollar on Friday. The decline began after the currency pair hit a resistance level formed by the weekly PP at 1.3183.

The exchange rate is currently trading in a one-week descending channel and it's most likely to remain moving in the channel pattern within this session.

Furthermore, technical indicators suggest that the decline of the USD/CAD currency exchange rate will continue during the following trading session. The potential target for bearish traders will be near the weekly S1 at 1.3099.

The New Zealand Dollar appreciated about 85 base points against the US Dollar on Friday. The currency pair tested the upper boundary of a medium-term ascending channel at 0.6900.

However, after hitting the upper border of the channel pattern, the exchange rate began to decline. By the middle of the European trading session on Monday, the pair has breached the 50-hour simple moving average at 0.6827.

Everything being equal, it is likely that the NZD/USD currency exchange rate continues its decline within this session. The potential target the price could target will be near the 200-hour SMA at 0.6780 today

EUR/USD has started the week unchanged. In Monday’s European session, the pair is trading at 1.1424, up 0.04% on the day. On the release front, there are no major events on the schedule. The eurozone’s current surplus dropped sharply to EUR 16.9 billion, short of the forecast of EUR 24.2 billion. This marked the smallest surplus since July 2014. On Tuesday, the eurozone releases PPI and the U.S. publishes building permits and housing starts.

Inflation in the eurozone improved in October. Eurozone Final CPI edged up to 2.2% and Final Core CPI improved to 1.1%, both of which matched their estimates. In October 2017, Final CPI gained 1.7%. At the same time, lower oil prices could mean that In December, the ECB will revise downwards its inflation forecasts.

In the U.S., consumer inflation and spending numbers were strong in October. On Thursday, the U.S released retail sales reports. Retail sales rebounded with a strong gain of 0.7% in October, after a decline of -0.1% a month earlier. Core retail sales jumped 0.8%, after a gain of 0.1% in September. There was good news from the inflation front on Wednesday, as U.S consumer inflation numbers beat their estimates for October. The consumer price index posted a gain of 0.3%, its strongest gain since January. Core CPI, which excludes food and energy prices edged higher to 0.2%, marking a 3-month high. Both releases were in line with forecasts. Core CPI was 2.1% higher than a year ago. The solid consumer data means that the Fed remains on track to continue raising interest rates. The Federal Reserve holds its next policy meeting in December, with the odds of a December rate hike at 69%, slightly lower compared to last week.

Asia:

• BoJ Gov Kuroda: Possible changes in risk appetite and risk profile of banks amid low-interest rate environment is an issue central banks are highly attentive too
• Japan Oct Trade Balance: -¥449.3B v -¥70Be; Adj Trade Balance: -¥302.7B v -¥48.3Be

Europe:

• PM May: Getting rid of me would risk delaying Brexit, not make talks easier; a delay could also see people try to stop it from happening; this is the right deal in the national interest (Note: 42 Tory MPs have submited letters of assurance to not support PM May; 25 have publicly said they have sent no confidence letters and 17 privately; leaves 6 votes shy of triggering a no confidence vote
• Graham Brady: Had not received the 48 MPs' letters needed to trigger a confidence vote that could see Theresa May removed as Tory leader. Suggested some fellow Tories had lied about sending in their letters. "Very likely" the prime minister would survive a vote of no confidence if there was one
• UK PM May Political spokesman: PM May names Stephen Barclay as new Brexit Secretary; Role to be different to that held by former Brexit Minister Raab
• EU Brexit Chief Negotiator Barnier has floated the idea of extending Brexit transition by 2 years to end of 2022 - Delaying Brexit will cost UK £10B. A year-long extension would cost about £10bn on top of the £39BB divorce bill already agreed
• French PM Philippe: Won't Back Down on Gasoline Taxes. Did not impose fuel taxes for the pleasure of annoying the French, but because we want to tax carbon more than labor,"
• SNB board member Maechler reiterated domestic monetary policy was appropriate. Financial markets are fragile with sources of risk including Brexit, Italy and the trade dispute between the United States and China. Reiterated stance that level of the CHF currency (Swiss franc) remained high
• Italy Dep PM De Maio Ready for talks with the EU Commission the country's budget plan for next year. Might agree to some budget plan cuts but wants to keep the reforms in place
• ECB's Villeroy (France): Asset purchases probably to end in Dec; outlook for Euro area inflation is firmer

Americas:

• Fed's Harker (non voter, moderate): not convinced Dec rate hike is prudent; Fed has time to move slowly toward 3% rate - CIA said to have concluded that Saudi Crown Prince Mohammed bin Salman ordered the killing of journalist Khashoggi

Macro

• (UK) United Kingdom: The Prime Minister Theresa May still faces the possibility of a no confidence vote following a raft of senior level resignations from the government over her Brexit plan. The general consensus seem to expect she would survive a vote as the majority of Tory Party MPs do not want the distraction of a leadership contest as such a critical juncture in the discussions. The House of Commons will be voting on the agreement on December 10. Even if the PM stays in her post, it remains highly uncertain that the agreememt will pass a parliamentary vote.
• (EU) EU : The Eurozone current account surplus narrowed m/m to €16.9 B in September, from € 24.3B. This reflected mostly a marked narrowing in the goods surplus. The surplus remains largely due to Germany and data will add to ongoing criticism that the German economy remains unbalanced. The financial account though showed that a marked decline in the foreign portfolio investments in the Eurozone, which was just €98B in the 12 months to September, versus €267B y/y. Not a positive picture for investment in the Eurozone economy at all.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.2% at 358.5, FTSE +0.3% at 7037, DAX +0.1% at 11349, CAC-40 +0.1% at 5031, IBEX-35 +0.2% at 9075, FTSE MIB +0.6% at 18990, SMI -0.2% at 8894, S&P 500 Futures -0.1%]
• Market Focal Points/Key Themes: European indices trade mostly higher across the board, coming off the morning highs following mixed US futures on a quieter day on the Macro front. On the corporate front, shares of Renault trades sharply lower approaching 3 year lows after reports that Chairman of the Renault-Nissan-Mitsubishi alliance Carlos Ghosn has been arrested for alleged financial violations. Elsewhere shares of Diploma, trades higher on Earnings; On the M&A front Lotte 24 rising on a takeover offer from ZEAL Network, Technicolor falls after a review of strategic options, ABB continues to rise after further press reports regarding the potential sale of its Power Grid business. In the US Apple shares to be in focus after further press reports regarding production cuts on weaker Iphone demand. Looking ahead notable earners include JD.com, Leju and Spectrum Brands.

Equities

• Consumer discretionary: Lotto24 [LO24.DE] +7.5%, ZEAL Network [TIM.DE] -9% (ZEAL Network announces public takeover offer for Lotto24; ZEAL Network adjusts guidance), Technicolor [TCH.FR] -14% (said to consider strategic options including a potential sale), Mears Group [MER.UK] -6.5%, Mitie Group [MTO.UK] +2.5% (Mears Group to acquire maintenance services business from Mitie Group; announces share placing to raise equivalent amount)
• Materials: Arkema [AKE.FR] -3% (analyst action)
• Financials: Diploma PLC [DPLM.UK] +2.5% (earnings), Danske Bank [DANSKE.DK] -0.5% (reportedly whistle-blower holds talks with U.S. authorities; Danish FSA comments on case), Banca Carige [CRGI.IT] +12% (CEO: not planning further assets sales), ABN AMRO Holding [ABN.NL] +2% (company's managers said to have sent warning letter to SPVY board chairman)
• Healthcare: Novartis [NOVN.CH] +1% (FDA approves Novartis drug Promacta for first-line SAA and grants Breakthrough Therapy designation for additional new indication)
• Industrials: Renault [RNO.FR] -13.5% (reportedly Chairman of Renault-Nissan-Mitsubishi Alliance Ghosn to be arrested for alleged financial trading violations), ABB Ltd [ABBN.CH] +1.5% (reportedly in talks with China state Grid, Mitsubishi and Hitachi to sell its Power Grid Business)
• Telecom: Telecom Italia [TIT.IT] +4.5% (named Luigi Gubitosi new CEO; Italian govt to speed-up Telecom Italia and Open Fiber fixed network decree)

Speakers

• UK Business Min Clark: Longer Brexit transition period could occur at out request
• EU Parliament president Tajani (Italy): Would be a miracle if the current Italian govt last until May
• Italy Gov official Buffagni: Key points of 2019 draft budget would not change
• Italy Dep PM Salvini: Could oppose Euro Zone budget plan. Franco-German Eurozone reform plans 'will never have our backifing if it seemed they damage Italy
• ECB's Nouy (SSM chief): Stress test had not shown the need for recapitalization
• Bank of Portugal Gov: Country should increase its productivity to help sustain economic growth
• Spain Govt said not to rule out a snap election in May (**Reminder: Sanchez came into power after Spain Parliament passed its no-confidence motion against then PM Rajoy (as expected) back on Jun 1st)
• Russia Econ Min Oreshkin stated that saw the risks of 2018 inflation exceeding forecast
• Russia Energy Min Novak: Planning on signing agreement with OPEC on output in Dec; need to make a balanced decision on production Various European Finance Ministers comment ahead of Eurogroup meeting
• Eurogroup chief Centono: Italy was not on the agenda for today's meeting; it was an issue for the EU Commission. Franco-German Euro Zone budget proposal could be a breakthrough
• German Fin Min Scholz stated that banking union decisions to come in Dec. Chance for an agreement on a Euro-zone budget has increased
• Netherlands Fin Min Hoekstra: All were worried about the existing situation in Italy
• Austria Fin Min Loeger stated that was concerned that Italy had not changed its stance on the 2019 budget

Currencies/Fixed Income

• The USD was consolidating its losses after the broad sell-off on Friday following Fed global growth concerns
• GBP currency was steady as PM May held onto power for the time being after reports circulated that 48 letters necessary to put a confidence vote into motion had yet to materialize. GBP EU chief negotiator Michel Barnier offered the UK an extension to the transition period
• EUR/USD was holding above the 1.14 level in quiet trading but Italy could remain a headwind for the pair. EU Commission to publish opinion on Italy 2019 fiscal budget and could take the first step to discipline Italy over its 2019 budget in the excessive deficit procedure.
• Goldman Sachs put out its 2019 macro outlook which expected a broad USD decline to begin in 2019 as the US growth boom moderated its pace of expansion compared to the rest of the world. Euro had room for appreciation, but only on a resolution or containment of the budget standoff in Italy—until then, risks were skewed to the downside. Revised its long-standing bearish view on the Yen due to slower US growth, a more challenging risk asset environment, and possible policy tweaks by the Bank of Japan

Economic Data

• (EU) Euro Zone Sept Current Account (Seasonally Adj): €16.9B v €24.3B prior
• (CH) Swiss Weekly Total Sight Deposits (CHF): 577.3B v 577.2B prior; Domestic Sight Deposits: 474.5B v 475.6B prior
• (PL) Poland Oct Employment M/M: 0.0% v 0.0%e; Y/Y: 3.2% v 3.2%e
• (PL) Poland Oct Average Gross Wages M/M: 3.1% v 2.2%e; Y/Y: 7.6% v 6.7%e
• (GR) Greece Sept Current Account Balance: €0.6B v €1.6B prior
• (IT) Italy Sept Current Account Balance: €3.2B v €5.0B prior
• (EU) Euro Zone Sept Construction Output M/M: +2.0% v -0.6% prior; Y/Y: 4.6% v 2.2% prior

Fixed Income Issuance

• (SK) Slovakia Debt Agency (Ardal) sold total €150.5M in 2028 and 2029 Bonds

Looking Ahead

• (SA) Saudi Arabia Sept Crude Oil Exports: JODI
• 05:25 (BR) Brazil Central Bank Weekly Economists Survey
• 05:30 (SE) Sweden Central bank (Riksbank) Jochnick
• 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 6-month Bills
• 05:30 (BE) Belgium Debt Agency (BDA) to sell €3.0-3.4B in 2024, 2028, 2034 and 2057 OLO Bonds
• 06:00 (RO) Romania to sell Bonds
• 06:00 (IL) Israel to sell Bonds
• 06:10 (UK) PM May at event
• 06:30 (CL) Chile Q3 GDP Q/Q: 0.4%e v 0.7% prior; Y/Y: 2.9%e v 5.3% prior
• 06:30 (CL) Chile Q3 Current Account Balance: -$3.2Be v -$1.9B prior
• 06:45 (US) Daily Libor Fixing
• 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming auctions (bills on Tues)
• 08:10 (UK) Baltic Dry Bulk Index
• 08:50 (FR) France Debt Agency (AFT) to sell combined €3.9-5.1B in 3-month, 6-month and 12-month BTF Bills
• 09:00 (NO) Norway Central Bank (Norges) Bank Dep Gov Nicolaisen in Oslo
• 09:30 (EU) ECB announces Covered-Bond Purchases
• 10:00 (US) Nov NAHB Housing Market Index: 67e v 68 prior
• 10:45 (US) Fed's Willaims (moderate, voter) - 16:00 (US) Weekly crop report

USDCAD turned down in five waves from 1.3262 which means that pair is in new intraday bearish trend which is likely going to see lower prices after A-B-C bounce to 1.3200 resistance from where market may drop even to 1.3055 swing support from Nov 07. At the same time, we also see Crude oil in recovery mode within wave 4) that can be headed to 59.42 resistance by the end of the week.

USDCAD, 1h

Crude oil, 1h

Asia suffers from trade war

The Asia-Pacific Economic Cooperation summit closed with no joint communiqué for the first time in its 29 years of existent. Discussions during the summit between US Vice President Mike Pence and Chinese President Xi Jinping were limited: it’s hoped that Xi’s end-of-the-month meeting with President Donald Trump will be more fruitful. Asian shares managed to close in positive territory. Tokyo’s Topix index rose by +0.51%, supported by financial and industrial stocks, while Hong Kong Hang Seng increased by 0.72% due to rising demand for tech and financial stocks. China mainland CSI 300 also gained +1.13%, making it the largest winner in China.

We expect trade to remain in focus as the Xi-Trump meeting nears. Tariffs of 25% on USD 250 billion of Chinese imports to the US might arrive, if no clear progress is made. Further levies on USD 267 billion of Chinese goods could even come into play. The fixing for USD/CNY at 6.9245 remains largely below the current rate of 6.9430.

European Commission versus Italy

Eurozone equities remain in green, despite continued conflict over Italy’s budget. The BTP-Bund 10-year spread has remained at 3.05-3.15% since last Wednesday, suggesting that investors’ fear over Italian fiscal policy risk is stabilizing. The European Commission will be taking its final decision on Italy’s budget on 21 November. That might prompt a drastic change, if the Commission decides to impose sanctions (0.20% of GDP deposit, plus a freeze on billions of Euros in EU funds). EUR/USD is currently trading at 1.1420 and is expecting to bounce slightly along to 1.1445 short-term.

The euro currency has continued to trade higher against the US dollar during the European trading session, with price reaching 1.1428. The intraday upside target for EURUSD buyers remains the 1.1450 level, while medium-term bulls are likely to aim for the 1.1500 resistance level. A strong rejection from current trading levels may provoke a technical test of the 1.1330 support level.

The EURUSD pair is intraday bullish while trading above the 1.1390 level, key resistance is found at the 1.1450 and 1.1500 levels.

If the EURUSD pair trades below the 1.1390 level, key intraday support is found at the 1.1360 and 1.1330 levels.