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The Brexit uncertainty sparked a flight to safety on Friday. Safe haven currencies, the yen, and the Swiss franc were bid higher. Dovish comments from Fed officials, Clarida, and Harker who expressed some doubt about the December rate hike kept the U.S. Dollar's rally in check.

Gold prices also advanced strongly on the day as investors' risk appetite waned on renewed concerns that the UK and the EU could part with no Brexit deal in hand.

The uncertainty of a no-confidence vote alongside the possibility of a second referendum also drove risk appetite lower. On the economic front, The ECB President spoke earlier in the day. He cautioned that inflation could dip in the coming months. However, the final inflation figures for October showed that headline CPI rose 2.2% annually while core inflation rose 1.1%.

Canada's manufacturing sales was seen rising 0.2%, beating estimates of a 0.1% increase.

A slow start to the week, this Monday will see the release of the Eurozone's current account data. This is later followed by the Eurogroup meetings. Brexit will remain in the headlines amid lack of any further economic reports on the day.

Following last week's resignations from the cabinet on the EU and the UK Brexit draft deal, the Eurogroup meeting starts today. We can expect further headlines on Brexit to dominate the newswires

The greenback remains under pressure against the Japanese yen currency on Monday as US dollar weakness, and risk-off trading sentiment push the pair lower. Heavy technical selling is expected if price falls below the important 112.54 support level. Only a sustained move above the 113.00 resistance level will negate intraday selling pressures on the USDJPY pair.

The USDJPY pair is intraday bearish while trading below the 113.00 level, key technical support is now found at the 112.954 and 111.92 levels.

If the USDJPY pair trades above the 113.00 level, buyers may test the 113.70 and 114.54 resistance levels.

The euro has started the new trading week above the 1.1400 level against the greenback, amidst broad-based weakness in the US dollar index. If buyers can maintain the price above the 1.1360 level, further bullish advancement towards the 1.1450 level is expected. Sellers will likely target the technically important 1.1300 support level if the 1.1360 level is clearly breached.

The EURUSD pair is intraday bullish while trading above the 1.1360 level, key resistance is now found at the 1.1450 and 1.1500 levels.

If the EURUSD pair trades below the 1.1360 level, key intraday support is found at the 1.1330 and 1.1300 levels.

The price of crude oil jumped by more than 1% today as traders expected Saudi Arabia to continue with its campaign of supply reduction. Last week, Saudi’s oil minister said that his country will reduce supplies by more than 500K barrels in December. After the comment, OPEC released its monthly report that predicted an oversupply and weaker demand in the coming year. Even with today’s upward movement – which was likely driven by the news that Saudi Crown Prince, Mohammed bin Salman, ordered the killing of journalist Khashoggi – prices remained at significant lows. CIA’s conclusion that Mr. Khashoggi was murdered is likely to put more pressure on the Trump administration to sanction the country.

The Japanese yen strengthened against the USD in the Asian session even after the country released weak economic numbers. In October, the country’s exports rose by 8.2%, which was lower than the 9.0% that traders were expecting. This growth was better than September’s slump of minus 1.3%. At the same time, the country’s imports increased by 19.9%, which was better than the consensus estimate of 14.5%. The trade deficit was at ¥449 billion, which was worse than the ¥70 billion traders were expecting. Japan is largely an industrial country that derives most of its income from exports.

The New Zealand dollar declined against the USD in the Asian session today. Data from New Zealand showed that the producer price index (PPI) input rose by 1.4%, which was higher than the 0.8% that traders were expecting. It was also higher than the second quarter’s 1% increase. The PPI input measures the change in the price of goods and raw materials purchased by manufacturers. The PPI output rose by 1.5% in the second quarter, which was higher than the 0.9% that traders were expecting.

EUR/USD

The EUR/USD pair was little moved in the Asian session today. This halted the sharp increase that started on Tuesday last week. The pair is now trading at 1.1400, which is slightly lower than Friday’s close of 1.1420. The current price is along the 15-day EMA. It is also above the 30-day EMA on the hourly chart and along the 61.8% Fibonacci Retracement level. The RSI has fallen slightly from 70 to the current 60. The pair could decline slightly in the short-term. These declines will likely create good entry positions.

NZD/USD

The NZD/USD pair declined to an intraday low of 0.6845 from Friday’s close of 0.6885. On the 30-minute chart, the pair’s 15-day EMA started a crossover of the 30-day EMA as shown below. The RSI moved from 80, to the current low of 42 while the MACD is currently at the neutral level after falling from a multi-week high. The downward trend is likely to continue in the short term with an upward reversal being possible.

XTI/USD

The price of WTI crude oil rose from Friday’s close of 56 to an intraday high of 57.53. This upward trend halted the sharp decline experienced last week. The RSI has moved from around 30 to the current 47 on the four-hour chart. The current price is a continuation of a consolidation that started on Thursday last week. At this point, the pair could continue the previous decline or start a strong upward trend.

Rates: US yields arrive at key support levels

US yields hit key support across the curve following last week's first warning by several Fed heavyweights about negative risks to the eco outlook, which mainly stem from abroad. We don't expect any breaks lower in this week's holiday-shortened (Thanksgiving) and eco/event thin dealings. Risk sentiment will probably determine intraday gyrations.

Currencies: USD eases as markets question late cycle Fed rate hike path

The US yields and the dollar declined on Friday as Fed members including Fed's Clarida indicated that the Fed is nearing a more neutral policy stance. This week, the eco calendar is thin. For now, we expect the news flow the remain positive enough for the USD to stay above key technical levels. Brexit headlines probably still won't help sterling

The Sunrise Headlines

• US equities were mixed on Friday with technology shares underperforming (Nasdaq -0.15%). Asian stock markets opened this week's session mostly with gains. Australia and Singapore are underperforming.
• Michel Barnier, EU's chief brexit negotiator, proposed to extend the Brexit transition period to 2022. Meanwhile, UK PM May is fighting to keep the Brexit deal (and her premiership) alive, as a leadership vote is looming.
• At the Asia Pacific Economic Co-operation meeting over the weekend, US-Chinese trade tensions heated up, damping hopes of progress. US VP Mike Pence and Chinese president Xi Jinping had discussions on trade and security.
• Japan's exports recovered in October to 8.2% (YoY) from last month's surprise drop by -1.3% (YoY). However, Japanese policy makers remain cautious on the overall economic impact of global trade friction and slowing external demand.
• US President Trump suggested the killing of Khashoggi may never be resolved, despite a CIA report concluding Saudi Arabia's Crown Prince Mohammed bin Salman was responsible. President Trump receives a full report on Tuesday.
• Republicans enlarged their majority in the US Senate as the recount in Florida confirmed GOP's Rick Scott has defeated Democrat Bill Nelson. DeSantis and Kemp, two republicans, won the governor seat in resp. Florida and Georgia.
• Today's economic calendar is uneventful with only economic data of secondary importance in the US, UK and the EMU. Fed's Williams speaks today. The Belgian debt agency taps the bond market a final time this year.

Currencies: USD Eases As Markets Question Late Cycle Fed Rate Hike Path

US yields arrive at key support levels

Core bonds eked out gains last Friday with US Treasuries outperforming flat German Bunds. European and US stock markets ended close to opening levels with US benchmarks outperforming. Comments by Fed vice-chair Clarida and Dallas Fed Kaplan triggered an upleg in the US Note future. They echoed Fed chair Powell recent warning about the possible impact from slowing growth abroad on the US economy. Fiscal stimulus also threatens to turn into a headwind from being a tailwind in recent months. Last week marked the first time that heavyweight Fed-governors stepped out with a more cautionary tone about the future. They added though that the current state of the economy remains magnificent. Fed comments don't question a December rate hike, but the December dot plot might take into account a slower continuation of the tightening cycle ahead. For now, that's not our base scenario. US yields declined by 4.2 bps (30-yr) to 6 bps (5-yr) on a daily basis. From a technically point of view, the US 10-yr yield tests the 3.05%-3.07% area which was previously high level resistance (2003 cycle low/2014 high). German yields added around 0.5 bps across the curve. 10-yr yield spread changes vs Germany ended close to unchanged with Ireland (+5 bps) underperforming.

Most Asian stock markets record gains this morning despite disrupting headlines from the APEC-Summit (Asian Pacific Economic Cooperation). Leaders failed to agree on a closing statement because of a trade-related stand-off between China and the US which pours cold water on hopes of a truce in the sidelines of the upcoming G20-meeting (Nov 30). The US Note future has small downward bias at the start of this holiday-shortened week with US Thanksgiving (Thursday) and Black Friday. We expect a neutral opening for the Bund.

Today's eco calendar is razor thin with only US NAHB housing index and a speech by NY Fed Williams. Williams will probably align with Powell and Clarida's warnings last week. We don't expect them to add to strength in US Treasuries. US yields hit key support across the curve (5y: 2.8%; 10y: 3.05%/3.07%; 30y: 3.3%) which we expect to hold. Risk sentiment could determine intraday gyrations on other markets today, but we expect an uneventful trading day. The Belgian debt agency aims to raise €2.9-3.4bn in its final auction of the year, by tapping OLO 82 (0.5% Oct2024), OLO 85 (0.8% Jun2028), OLO 73 (3% Jun2034) and OLO 83 (2.25% Jun2057).

German 10-yr yield holing in the lower part of the 0.3%-0.6% range

EURUSD had a bearish start on Monday, with the price developing near the crucial psychological level of 1.1400, after creating four consecutive green days in the previous week. The pair has also significantly increased its distance above its 20-day simple moving average (SMA) for the first time over the last two months, while the technical indicators seem to be neutral to bullish. The RSI indicator is moving sideways near the threshold of 50 and the MACD oscillator is strengthening its positive momentum above its trigger line and below its zero line.

Further upside recovery could retest the 40-SMA, which stands near the 1.1450 level before attention turns to the 1.1500 critical handle, taken from recent highs. Moving higher, the area of the 23.6% Fibonacci retracement level of the downleg from 1.2550 to 1.1215, near 1.1530 should be in focus, while a significant rally above this region could last until the 1.1620 resistance, taken from the high on October 16.

Should the price move lower again, the 17-month low of 1.1215 could be a key level to challenge. Below that, investors could have in mind the next support, which stands 100 pips below the previous one at 1.1115.

Regarding to the long-term picture, the bearish outlook came back into play after the violation of the 1.1300 trough on Friday. In case of a retest of the 1.1800 handle, the pair would be able to resume the neutral mode and create chances for a bullish correction.

The EUR/JPY is building a bearish ABC zigzag (blue) pattern and a bearish breakout could confirm the last wave 5 (green) in that structure. A new low could indicate the end of wave C (blue) of wave 4 (pink) and start a potential uptrend at the Fibonacci retracement levels.

The EUR/JPY could be completing an expanded WXY (purple) correction in wave 4 (pink) via an ABC (blue).

Daily Pivots: (S1) 0.7275; (P) 0.7307; (R1) 0.7363; More...

Intraday bias in AUD/USD remains on the upside with focus on 0.7314 resistance. Sustained break there 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) 1.3121; (P) 1.3155; (R1) 1.3182; More...

Intraday bias in USD/CAD remains neutral at this point. And further rise is expected as long as 1.3056 support holds. On the upside, break of 1.3264 will resume the rise from 1.2781 and target 1.3385 key resistance next. On the downside, however, break of break of 1.3056 will indicate near term reversal and turn outlook bearish.

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) 1.1351; (P) 1.1387; (R1) 1.1452; More.....

No change in EUR/USD's outlook. While recovery from 1.1215 might extend, it's seen as a corrective move. Hence, upside should be limited by 1.1499 resistance. On the downside, below 1.1321 minor support will turn bias to the downside for 1.1215 and then 1.1186. However, 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.