Sample Category Title

Daily Pivots: (S1) 1.1280; (P) 1.1321; (R1) 1.1371; More.....

EUR/USD's consolidation from 1.1215 is still in progress and intraday bias remains neutral. In case of stronger recovery, upside should be limited below 1.1499 resistance to bring fall resumption. On the downside, break of 1.1214 will target 1.1186 fibonacci level first. Break will target 61.8% projection of 1.2555 to 1.1300 from 1.1814 at 1.1038 next.

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 recovery.

Daily Pivots: (S1) 1.2656; (P) 1.2843; (R1) 1.2963; More...

Intraday bias in GBP/USD remains on the downside for 1.2692 support. first. Break will target 1.2661 low next. Decisive break there will resume larger down trend from 1.4376. On the upside, break of 1.2894 minor resistance will probably bring another rebound. But upside should be limited by 1.3316 fibonacci level. Overall, price actions from 1.2661 are viewed as a consolidation pattern. Down trend from 1.4376 should resume after completion of the consolidation.

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.

Sterling recovers mildly today but remains the weakest one on political turmoil in the UK. There is no clear sign of a come back in the Pound and it remains vulnerable for more selloff, even before weekly close. The markets are rather quiet in Asian overall. Australia, New Zealand and US Dollar are trading as the weakest ones, without much follow through momentum. Yen and Canadian Dollar are the strongest ones. For the week, Sterling is the worst performer, followed by Swiss Franc and then Dollar. New Zealand and Australian Dollar are the strongest.

Technically, selloff in the Pound halted ahead of near term support levels. But theses levels, 1.2692 in GBP/USD, 142.76 in GBP/JPY and 0.8939 in EUR/GBP could be taken out easily on another round of selling. Dollar is engaging in corrective pull back and downside is so far limited. But both USD/JPY and USD/CAD are now risking deeper fall. In particular, 112.94 in USD/JPY is a key near term level to defend.

In other markets, DOW rebounded overnight and closed up 0.83% at 25289.27. S&P 500 rose 1.06% and NASDAQ added 1.72%. 30 year yield closed up 0.014 at 3.368. But 10 year yield closed down slightly by -0.002 at 3.118. In Asia, Nikkei is currently down -0.08%. Hong Kong HSI is up 0.28%. China Shanghai SSE is up 0.88%. Singapore Strait Times is up 0.97%. Gold's recovery continues and is now back above 1215. WTI crude oil is hovering round 57, consolidating in tight range above 58.84 temporary low.

UK PM May insisted her Brexit plan's the right one, ready to see through leadership challenge

Sterling recovers mildly today but remains the weakest one for the week on political turmoil in the UK. Four ministers, including Brexit Minister Dominic Raab resigned in protest to Prime Minister Theresa May's draft Brexit agreement. But May insisted in a press briefing that "I believe with every fibre of my being that the course I have set out is the right one for our country and all our people." She added that "I am going to do my job of getting the best deal for Britain and I'm going to do my job of getting a deal that is in the national interest."

ERG leader Jacob Rees-Mogg has formally requested a no-confidence vote on May. And for now, at least 14 Conservative MPs had openly said they had joined in the call. Four-eight letters are needed to trigger a leadership challenge. May's response regarding the challenge was "Am I going to see this through? Yes."

Even if May can survive the leadership contest, it remains very doubtful if she can get enough votes through the parliament. Conservative Brexit-supporting MP Mark Francois, put it this way. "It is ... mathematically impossible to get this deal through the House of Commons. The stark reality is that it was dead on arrival."

US still planning to raise tariffs on Chinese goods on Jan despite planned Trump-Xi meeting

US Commerce Secretary Wilbur Ross said in an interview that all the exchanges with China right now are just "preparatory". And the "big-event" is the meeting between Trump and Xi at the G-20 in Argentina on Nov 30/Dec 1. He added both leaders will certainly not get into "intimate details". And, it's going to be "big picture". If things go well, the meeting will "set the framework for going forward".

However, Ross also noted that the US is still planning, on Jan 1, to raise tariffs on USD 200B in Chinese imports from 10% to 25%. And "We certainly won't have a full formal deal by January. Impossible."

Separately, it's reported that the document China sent to the US this week included 142 items regarding US requests on trade. The items are divided into three categories: issues for further negotiation, issues China is already working on, and issues that are non-negotiable. It's believed that some items on the non-negotiable lists were unacceptable to Trump, while the US is skeptical on others due to China's history of failing promises.

Fed Kashkari sees no need for more rate hikes, Bostic wants to keep going to neutral

Minneapolis Fed President Neel Kashkari reiterated yesterday that he didn't see the need to continue raising interest rates. And, he saw no signs of overheating while low wage growth suggests the labor market are more slack. He also pointed to slowdown in other major economies, in the context that Japan and Germany GDP contracted in Q3. He questioned "right now, the U.S. economy seems to be the strongest engine of the major economies around the world -- is that going to last, especially if the Fed keeps raising rates? It's hard to know."

On the other hand, Atlanta Fed President Raphael Bostic maintained his support to keep raising interest rates to neutral, even though they "not too far". He said "I don't think we are too far from a neutral policy, and neutral is where we want to be". And, "We may not be there quite yet, but I am inclined to think that a tentative approach as we proceed would be appropriate."

BusinessNZ PMI improved, not large but important to broader economic narrative

New Zealand BusinessNZ Performance of Manufacturing Index rose 1.6 to 53.3 in October, indicating faster expansion rate. That's also the highest level since May. BusinessNZ noted "the October result was a welcome change from where the survey has sat for the previous four months." And, while "the improvement in the PMI is not large, but we see it as important to the broader economic narrative".

Looking at the details, the key sub-indicators of production (52.8) and new orders (56.7) both improved with their highest results since May and April respectively.  Also, after dipping into contraction during various times in 2018, employment (52.4) improved for a second consecutive month.  The proportion of positive comments (58.3%) also increased, with demand for products from offshore customers noted throughout.

Looking ahead

Eurozone October CPI final is the main feature in European session. US will release industrial production later in the day. Canada will release international securities transactions and manufacturing sales.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.2656; (P) 1.2843; (R1) 1.2963; More...

Intraday bias in GBP/USD remains on the downside for 1.2692 support. first. Break will target 1.2661 low next. Decisive break there will resume larger down trend from 1.4376. On the upside, break of 1.2894 minor resistance will probably bring another rebound. But upside should be limited by 1.3316 fibonacci level. Overall, price actions from 1.2661 are viewed as a consolidation pattern. Down trend from 1.4376 should resume after completion of the consolidation.

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.

Economic Indicators Update

The precious metal group does not get any break in the past 7 years. The move lower has been relentless and rally has been short lived. Silver in particular has corrected 70% from the 2011 high at $50 and still has not shown any sign of serious recovery. Our short term Elliott Wave view suggests that Silver is doing a 5 waves impulsive Elliott Wave move from April 19, 2018 high where Intermediate wave (1) ended at $16.06, Intermediate wave (2) ended at $17.31, Intermediate wave (3) ended at $13.94, and Intermediate wave (4) ended at $14.91.

Intermediate wave (5) is currently in progress as an impulse where Minor wave 1 of (5) ended at $13.87. Internal of Minor wave 1 also unfolded as an impulse of lesser degree where Minute wave ((i)) ended at $14.46 and Minute wave ((ii)) ended at $14.72. Minute wave ((iii)) ended at $13.91, Minute wave ((iv)) ended at $14.05 as triangle, and Minute wave ((v)) of 1 ended at $13.87. Minor wave 2 rally is currently in progress as a zigzag Elliott Wave structure where Minute wave ((a)) of 2 ended at $14.25 and Minute wave ((b)) of 2 ended at $14.08. Minute wave ((c)) of 2 has a target of $14.46 – $14.69 and as far as pivot at 11/2 high ($14.91) stays intact, expect Silver to extend lower. We don’t like buying Silver.

Silver 1 Hour Elliott Wave Chart

New Zealand BusinessNZ Performance of Manufacturing Index rose 1.6 to 53.3 in October, indicating faster expansion rate. That's also the highest level since May. BusinessNZ noted "the October result was a welcome change from where the survey has sat for the previous four months." And, while "the improvement in the PMI is not large, but we see it as important to the broader economic narrative".

Looking at the details, the key sub-indicators of production (52.8) and new orders (56.7) both improved with their highest results since May and April respectively.  Also, after dipping into contraction during various times in 2018, employment (52.4) improved for a second consecutive month.  The proportion of positive comments (58.3%) also increased, with demand for products from offshore customers noted throughout.

Full release here.

Minneapolis Fed President Neel Kashkari reiterated yesterday that he didn't see the need to continue raising interest rates. And, he saw no signs of overheating while low wage growth suggests the labor market are more slack. He also pointed to slowdown in other major economies, in the context that Japan and Germany GDP contracted in Q3. He questioned "right now, the U.S. economy seems to be the strongest engine of the major economies around the world -- is that going to last, especially if the Fed keeps raising rates? It's hard to know."

On the other hand, Atlanta Fed President Raphael Bostic maintained his support to keep raising interest rates to neutral, even though they "not too far". He said "I don't think we are too far from a neutral policy, and neutral is where we want to be". And, "We may not be there quite yet, but I am inclined to think that a tentative approach as we proceed would be appropriate."

US Commerce Secretary Wilbur Ross said in an interview that all the exchanges with China right now are just "preparatory". And the "big-event" is the meeting between Trump and Xi at the G-20 in Argentina on Nov 30/Dec 1. He added both leaders will certainly not get into "intimate details". And, it's going to be "big picture". If things go well, the meeting will "set the framework for going forward".

However, Ross also noted that the US is still planning, on Jan 1, to raise tariffs on USD 200B in Chinese imports from 10% to 25%. And "We certainly won't have a full formal deal by January. Impossible."

Separately, it's reported that the document China sent to the US this week included 142 items regarding US requests on trade. The items are divided into three categories: issues for further negotiation, issues China is already working on, and issues that are non-negotiable. It's believed that some items on the non-negotiable lists were unacceptable to Trump, while the US is skeptical on others due to China's history of failing promises.

The report from the US Energy Information Administration (EIA) shows that total crude oil and petroleum products stocks dropped -1.41 mmb to 1252.02 mmb in the week ended November 9. Crude oil inventory jumped +10.27 mmb (consensus: +3.18 mmb) to 442 mmb. Inventories increased in 4 out of of 5 PADDs. Meanwhile, Cushing stock added +1.17 mmb to 35.46 mmb. Utilization rate climbed higher, by +0.1% to 90.1% and crude production gained +0.86M bpd to 11.7M bpd for the week.

Concerning refined oil product inventories, gasoline inventory dipped -0.62 mmb to 226.61 mmb as demand gained +1.02% to 9.19M bpd. The market had anticipated a -1.48 decrease in stockpile. Production gained +3.52% to 10.06M bpd while imports plunged -57.19%% to 0.25M bpd during the week. Distillate inventory declined -3.59 mmb to 119.27 mmb as demand soared +7.3% to 4.63M bpd. The market had anticipated a -1.74 mmb drop in inventory. Production added +0.6% to 4.99M bpd while imports surged +83.74% to 0.31M bpd during the week.

Released after market close on Wednesday, the industry- sponsored API estimated that crude oil inventory jumped another significant amount of +8.8 mmb during the week. For refined oil products, gasoline stockpile gained +0.19 mmb while distillate was down -3.2 mmb.

Sterling recovers mildly today but remains the weakest one for the week on political turmoil in the UK. Four ministers, including Brexit Minister Dominic Raab resigned in protest to Prime Minister Theresa May's draft Brexit agreement. But May insisted in a press briefing that "I believe with every fibre of my being that the course I have set out is the right one for our country and all our people." She added that "I am going to do my job of getting the best deal for Britain and I'm going to do my job of getting a deal that is in the national interest."

ERG leader Jacob Rees-Mogg has formally requested a no-confidence vote on May. And for now, at least 14 Conservative MPs had openly said they had joined in the call. Four-eight letters are needed to trigger a leadership challenge. May's response regarding the challenge was "Am I going to see this through? Yes."

Even if May can survive the leadership contest, it remains very doubtful if she can get enough votes through the parliament. Conservative Brexit-supporting MP Mark Francois, put it this way. "It is ... mathematically impossible to get this deal through the House of Commons. The stark reality is that it was dead on arrival."

Stocks

Dow (25289.27, +0.83%) has bounced back well from levels near 24750. Trading in the middle of the broad 25750-24250 region, there is scope for moving on either side just now. On the longer term charts, the long sideways trade is still intact and a break on either side of the 27000-24500 region is important to decide upon the medium term trend.

Dax (11353.67, -0.52%) has not been able to break above 11600 and is trading lower. While 11600 holds, we may expect a fall towards 11100-11000 levels in the coming sessions. View remains bearish while below 11600.

The Nikkei (21690.91, -0.52%) is likely to face some rejection near 22000 which could push the index towards 21400 or lower in the near term. We could see some sideways range trade for a couple of sessions before a fall towards 21400 starts.

Shanghai (2666.99, -0.044%) also has important resistance at 2700, which has to break to initiate a fresh upmove. Else if 2700 holds, we could see another dip towards 2600-2500 in the coming week.

The Nifty (10616.70, +0.38%) needs to break above 10650 to head higher towards 10800-10900 in the coming week. A small dip from there could be possible thereafter. In the longer run, there is scope of rising towards 10000-11000. Watch price action near 10800-10900, on a break above 10650; else a dip from current levels back towards 10500 or lower is possible.

35500 is the level to watch in Sensex (35260.54, +0.34). A break on the upside could open up chances of a rise towards 36000. Else a dip from 35500 could push the index back towards 34500.

COMMODITIES

Support near 65 is holding for Brent (66.95) as the prices are slowly moving higher. A test of 68-69 is possible while above 65 from where another fall is possible back towards 65 or lower in the medium term.

WTI (56.99) has also moved up slightly. It could move up towards 58.0-58.50 in the near term.

Brent-Nymex WTI spread (9.97) is stuck in the narrow range of 9.21-10.35 but is trading just below resistance levels on the 3-day chart which indicates that the spread could soon come off towards 9.0 and lower in the medium term.

Gold (1215.70) is rising as expected and while the support at 1200 holds, Gold could continue to move up towards 1230. Near term looks bullish.

Copper (2.7535) is also headed towards immediate resistance at 2.80 as seen on the daily candles. A rejection from there could again push the price back to 2.65. Immediate range of trade could be seen in the 2.80-2.65 region unless a break on either side is seen. Above 2.80, another resistance is visible at 2.85, indicating a sharp upmove above 2.85 is unlikely in the medium term.

FOREX

Watch out for whether Aussie and Pound close above their 21 weeks MAs today. USDINR might just rise from 71.80 today.

Dollar Index (96.96): While below 97.5, it should be bearish towards 96.5-96.0 in the near term ie by next week. A break below 96 (if it happens) would be a bearish indicator for the medium term.

Euro (1.1337) : Chances of bullishness towards resistance near 1.138-1.140 remain intact (watch the 21 days MA @ 1.138). From there, Euro could again come off next week.

USD/JPY (113.39): As per expectation, a test of crucial support near 113 should happen by next week - a break below 113 would be an important bearish indicator, possibly establishing 114.2-114.3 as a medium term top.

Aussie (0.7271) again tested resistance near 0.73 yesterday and then dipped from there. As we have been saying in our previous briefings as well, the crucial thing to see right now is whether it closes today above the 21 weeks MA (0.7252) or not - a close above that would be bullish, leading to a rise to 0.735 next week.

Pound (1.2788): Turmoil around the Brexit plan has led to a drastic fall in Pound. It could move even lower by next week towards support near 1.27. Alternatively, if it rises in today's session to close above the 21 weeks MA @ 1.299, the preference for next week would then be bullish.

EUR/JPY (128.48) might just continue to range between 129.5-127.25 in the next week - with a test of 129.5 possibly happening first followed by a dip towards 127.5.

Dollar Rupee (71.985) could test 71.80 today before bouncing back from there to levels above 72 again.

INTEREST RATES

US 10 Year yield (3.11%) : Support in the 3.10%-3.05% zone could be tested soon. The US 30 year yield (3.36%) could also have Support near 3.30%. We are expecting these supports to hold on first testing and then produce a bounce that lasts up to the FOMC meeting in December, possibly along with a bounce in Brent towards 70 in the near term.

German 10 year yield (0.36%) could fall more towards support near 0.30% in the near term, before rising from there again.

The German-US 10 Year yield spread (-2.75%) consequently might also fall a little more towards support near -2.78% to -2.80% in the near term. However in the weeks ahead, a rise towards medium term resistance near -2.65% to -2.60% is also looking possible. A break above this resistance level might just establish the recent low near -2.80% as a possible bottom.