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Rates: Fed chair Powell strikes note of caution
US stock markets couldn't hold on to opening gains, sliding throughout the session and pulling US yields lower as well. Fed chair Powell said he is very positive about the US economy, but for the first time stroke a note of caution on growth abroad and the housing market. US eco data will probably confirm his bullish view on the current state of the economy today.

Currencies: dollar eases of recent top
There were plenty of topics with potential to move global USD trading yesterday. In the end, the dollar lost slightly ground off this week's peak. However, the global picture on the US currency hasn't changed. Sterling hardly profited as UK PM May convinced her Cabinet on a Brexit deal. GBP traders are already counting down to the vote in Parliament

The Sunrise Headlines

• US stock markets couldn't hold on to opening gains and closed yesterday's session with marginal losses. Asian stock markets opened in green with the exception of Japan. China outperforms on trade talk progress with the US.
• UK PM May won approval of her ministers for the brexit draft deal. However, many ministers are in discontent proving that it will be fiercely contested in Parliament. A special EU-brexit summit will be held Nov 25.
• Bill Pascrell, a key US Democrat, threatened that the USMCA (the new trade agreement with Canada and Mexico, or Nafta 2.0) needs some changes if the Trump administration wants to secure the support from Democrats .
• Fed chairman Powell repeated the very strong state of the US economy but added that the Fed sees potential headwinds including slowing growth abroad. He also warned for a slowing housing industry and high corporate debt levels.
• Australia printed a solid market report. Net employment gained 32.8k in October, primarily driven by full time jobs (+42.3k). The unemployment rate remained unchanged at 5.0%, but the participation rate rose to 65.6%.
• EU's trade commissioner Malmström said she is working on a list of US goods that would face retaliatory measures if the US proceeded with import tariffs on EU cars. The move comes after renewed tariff threats of US President Trump.
• Today's US eco calendar heats up with US & UK retail sales, Philly Fed business outlook, empire manufacturing survey and weekly jobless claims. ECB Coeuré, Praet, de Guindos and multiple Fed governors speak.

Currencies: Dollar Eases Of Recent Top

Dollar eases of recent top

There were multiple topics with potential to move global FX/USD trading yesterday, including EMU and US data, Brexit, Italy, the oil price, global equity volatility and, last but not least a speech of Fed chairman Powell. The dollar slightly outperformed early in the session, but lost momentum later. US CPI and wage data were a bit softer than expected. UK PM May surpassing a first hurdle in the Brexit process also could be considered a tentative euro positive. That said, there was again no unequivocal directional trend in the dollar, with several ‘erratic' intraday swings. EUR/USD finished the day at 1.1310. USD/JPY closed at 113.63. In a speech overnight, Fed Chairman Powell was pleased with the current state of the US economy, but admitted that there are risks to (global) growth. For now, there is little reason to change expectations on the Fed rate hike path. The reaction of the USD is limited. Asian equities initially traded soft but currently mostly show modest gains. The Aussie dollar is propelled by yet another strong labour report. AUD/USD is changing hands in the 0.7275 area. A tentative easing of global market tensions is maybe a slightly negative for the dollar. EUR/USD trades in the 1.1135 area. USD/JPY also fails to profit and trades near 113.50. Later today, several ECB and Fed governors will speak. The US eco calendar is well filled with the Empire manufacturing survey, the Philly Fed business outlook, retail sales and the jobless claims. US data are expected constructive/solid and we have no reason to expect really negative surprises. Oil and global market sentiment remain wildcards. For now, the impact of both factors on the dollar is ambiguous. The usual inverse correlation between the dollar and oil isn't that strong on a daily basis. Yesterday, we had a neutral bias on the dollar (EUR/USD), expecting more erratic trading in the 1.11/1.15 trading band. We maintain that view. In somewhat longer perspective we see more downside risks in EUR/USD due to ongoing eco divergence and potential event risk.

Yesterday, PM May defended the text of an EU-UK Brexit deal at Cabinet meeting. The UK PM at least surpassed this hurdle. The market reaction was modest as investors realize that the ultimate battle will be fought in Parliament, probably early December. The outcome remains highly uncertain. Today, UK Oct retail sales are expected modest (0.2% M/M) despite a poor September reading. We stay neutral on EUR/GBP. After the recent rally, market positioning probably became more neutral (less sterling short). So, further GBP-gains might be modest

EUR/USD returns back above 1.13 but global picture on USD hasn't changed

Chinese and Hong Kong stocks surge today on reports that China has sent written responses to the US regarding the concessions it's willing to made. That could pave the way for some sort of agreement during Xi-Trump meeting at the G20 summit on November 30. The act is generally seen as constructive for the trade negotiations.

However, concerns remain as most of China described in the documents were just old wine in a new bottle. They're just recap of what Xi Jinping has announced recently, such case raising the equity caps on foreign investments in some industries. There is so far nothing substantial regarding opening of the markets and removing barriers on trade and investments. Mostly likely too, there wasn't anything regarding the highly criticized dominance of State-Owned Enterprises in the country.

Further more, at this point, Treasury Secretary Steven Mnuchin is the one handling the discussion with China. Even if White House economic advisor Larry Kudlow would be involved, they remain far from the stage of making a trade deal. The work of trade agreements fall into the area of trade representative Robert Lighthizer. And, not until Lighthizer is involved, there would only be ceasefire, but no constructive progress.

Nevertheless, investors in Asia are enjoying the ride no matter what. The China shanghai SSE closed up 1.36% at 2668.17. Hong Kong HSI closed up 1.64% or 421.17 pts at 26075.60.

USDJPY got rejected from the 114 area after touching the 114.20 mark early this week, with the pair reversing part of its recent rebound in the following days. The red Tenkan-sen line, however, is still above the blue Kijun-sen line and has started to point to the upside again, while the RSI looks to be changing direction north as well, both hinting further improvement for the market. Yet the latter is not far below its 70 overbought threshold and the MACD continues to weaken towards its red signal line suggesting that gains might be short-lived.

Should negative momentum continue below 113.30, the 23.6% Fibonacci of the upleg from 109.36 to 114.54, the bears could retest the inside swing high of 112.89 before potentially meeting the 38.2% Fibonacci of 112.55. Moving lower, a decisive close below 111.37 where the 61.8% Fibonacci is placed could trigger additional bearish actions, with the price probably falling until 110.83, a frequently approached area in the past two years.

Alternatively, a bounce up could push efforts to overcome the previous tops at 114.20 and 114.54. If this prove successful, resistance could run towards the 115.50 high reached on March 9, while even higher the door would open for the 116.00 psychological level.

In the medium-term picture, the pair retains a bullish outlook over the past three months, and this should stay intact as long as it holds above 112.00. The 50-day simple moving average keeps gaining strength above the longer-term 200-day MA, signalling that the positive picture is not about to fade anytime soon.

To sum up, USDJPY holds bullish both in the short and the medium-term picture.

The GBP/USD breakout is not likely to succeed as larger support and resistance levels are nearby. A bearish break will face Fibonacci retracement levels, whereas a bullish break will run into resistance.

The GBP/USD seems to be building multiple ABC wavesandis creating lots of choppy price action. Overall, the currency pair remains in a difficult spot and is showing erratic patterns. In the long-term though, it seems that the Cable is building a larger ABCDE contracting triangle pattern (purple).

European Council President Donald Tusk confirmed that the extra EU summit on Brexit will be held on November 25.

He said after meeting with chief negotiator Michel Barnier "If nothing extraordinary happens, we will hold a European Council meeting in order to finalize and formalize the Brexit agreement. It will take place on Sunday, November 25th at 0900 a.m."

Sterling cameback to life on Wednesday after Theresa May won cabinet support for her Brexit deal. GBPUSD rallied more 170 pips on the news, but gave up some of the initial gains to settle around 1.30 towards the end of the trading session.

Getting the draft approved by the cabinet is the first step towards a deal, but Sterling should have traded much higher if market participants believed that one is secured. The parliamentary vote will prove to be much more challenging in the weeks ahead, and the risk of U.K. exiting the E.U. without a deal remains high.

Eurosceptic Tories are against the U.K. being restricted and wants to strike trade agreements with the rest of the world, but under the currentdraft agreement there will be a transition phase that will prevent them from doing so. That’s why markets feel getting the drafted agreementapproved through parliament is a hard task. There’s also a more significant risk if the conservatives demand a vote of no confidence in May. Such a scenario will likely lead to a general election,puttingthe U.K. in a much worse position. Traders should expect Sterling to fluctuate in wide ranges overthe next couple of weeks until we get more clarity on Brexit and Theresa May's fate.

Cryptocurrencies had our attention again yesterday after Bitcoin slumped more than $500 in less than an hour. After spending almost two and a half months in the range of $6,000 - $6,800 some traders thought that finallyBitcoin’s price action had steadied. This perception changed on Wednesday and reminded us that cryptocurrencies are still an extremely volatile asset class. It wasn’t only Bitcoin that crashed by more than 10% yesterday to trade at itslowest level since October 2017, there was a sea of red across the crypto space. The crypto market lost $30 billion in 24 hours, from a market cap of $210 billion to almost $180 billion.

Some have blamed the initial fall onuncertainty around a hard fork in Bitcoin cash. However, the selloff accelerated after Bitcoin breached the key technical level of $6,000. The plunge in prices will be an important test for digital assets. If prices bounce back in the next couple of days it may signal that Bitcoin and other major cryptocurrencies are finding a price floor, after which investors begin accumulating more digital assets. Failing to do so will lead to a shakeup in investors’ confidence and probable further steep selloffs. It will be interesting to see how things develop from here.

Daily Pivots: (S1) 146.46; (P) 147.45; (R1) 148.57; More...

Intraday bias in GBP/JPY remains neutral as range trading continues. On the downside, break of 145.99 should confirm completion of rebound from 142.76. And in that case, deeper fall should be seen back to 142.76 and possibly below. On the upside, decisive break of 149.70 will resume whole rise from 139.88 and target 153.84/156.59 resistance zone.

In the bigger picture, as long as 139.29 cluster support (50% retracement of 122.36 to 156.59 at 139.47) holds, up trend from 122.36 (2016 low) would still extend beyond 156.69 high. However, decisive break of 139.29/47 will suggest that such up trend is completed and turn outlook bearish. In that case, next target is 61.8% retracement at 135.43.

Daily Pivots: (S1) 128.02; (P) 128.62; (R1) 129.12; More....

Outlook in EUR/JPY remains unchanged for the moment. Another decline is expected to 126.63 support. Break there will resume whole fall from 133.12 and target 124.61/89 support zone. On the upside, break of 130.14 resistance is now needed to confirm rise resumption. Otherwise, near term outlook will stay cautiously bearish in case of recovery.

In the bigger picture, as long as 124.08 key resistance turn supported holds, larger up trend from 109.03 (2016 low) is still in progress. Firm break of 137.49 structural resistance will target 141.04/149.76 resistance zone next. However, decisive break of 124.08 will argue that such rise from 109.03 has completed and turn outlook bearish. In that case, deeper fall would be seen to 61.8% retracement of 109.03 to 137.49 at 119.90.

Daily Pivots: (S1) 0.7195; (P) 0.7225; (R1) 0.7262; More...

AUD/USD rebounds strongly today but stays below 0.7302 temporary top. Intraday bias remains neutral first. On the upside, decisive break of 0.7314 will indicate medium term reversal. Further rally should be seen to 38.2% retracement of 0.8135 to 0.7020 at 0.7446 next. However, break of 0.7164 will suggest that rebound from 0.7020 has completed and maintain medium term bearishness. Intraday bias would be turned back to the downside for retesting 0.7020 low.

In the bigger picture, as long as 0.7314 resistance holds, fall from 0.8135 is tentatively treated as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 will target 0.6008 key support next (2008 low). However, firm break of 0.7314 will suggest that whole decline from 0.8135 has completed. And, the corrective pattern from 0.6826 (2016 low) is extending with another rising leg towards 0.8135 before completion.

General Trend:

• Asian equity markets trade mixed
• Financials and tech firms decline in Japan, similar to Wednesday’s US trading session
• Softbank declines over 3%, tracks weakness in US tech sector
• Equity markets in China outperform amid renewed speculation of H2 RRR cut
• Shanghai Property index rises after Oct home price data
• Chinese automakers trade mixed, official plays down tax cut for auto purchases
• Tencent gains over 3% post earnings
• Toshiba’s shares supported by stock buyback
• Asian corporate earnings slowdown on today’s session
• Fed’s Powell comments on housing market, Treasury Futures gain
• Aussie gains on better than expected labor market data, 3-year yields rise
• NZ PM Ardern: US/China trade war may be hurting business confidence in New Zealand
• China’s largest bank ICBC said to cancel USD bond sale

Headlines/Economic Data

Japan

• Nikkei 225 opened -0.8%
• (JP) Japan Investors Weekly Net Buying of Foreign Bonds: +¥1.62T v -¥167.3B prior; Foreign Buying of Japan Stocks: +¥360.9B v +¥107.6B prior
• (JP) JAPAN Q3 HOUSING LOANS Y/Y: 2.4% V 2.7% PRIOR
• (JP) Nikkei survey finds that Q4 GDP seen at 2.1% q/q v 1.2% prior
• (JP) Leaders of 16 countries reaffirmed their commitment to the Regional Comprehensive Economic Partnership (RCEP) after they failed to conclude the deal earlier this week - Nikkei
• (JP) Japan MOF sells ¥2.0T v ¥2.0T indicated in 0.10% 5-yr JGB: avg yield: -0.0870% v -0.055% prior, bid to cover: 3.89x v 4.88x prior

Korea

• Kospi opened flat
• (KR) SK Energy Co. Ltd., GS Caltex Corporation and Hanjin Transportation agree to pay $236M fine for their involvement in a bid-rigging scheme in supplying fuel to US military bases in the country
• 207940.KR Trading halted over accounting fraud
• (US) Vice President Pence: Much work remains to denuclearize North Korea, but meaningful progress has been made

China/Hong Kong

• Hang Seng opened +0.8%, Shanghai Composite flat
• (CN) China govt reportedly has sent written response to US regarding trade reforms – press
• (CN) China's PBOC expected to cut RRR by over 0.5 ppts in Q4 - China press
• (CN) China PBoC Open Market Operation (OMO):Skips OMO v skipped prior (15th straight skip)
• (CN) CHINA PBOC SETS YUAN REFERENCE RATE: 6.9392 V 6.9402 PRIOR
• (CN) US Congress report compiled by the US/China Economic and Security Review Commission notes China's hegemonic ambitions pose certain risk to US security and economic interests - Japan press
• (CN) China Oct New Home Prices m/m: 1.0% v 1.0% prior; y/y: 8.6% v 7.9% prior
• (CN) China NDRC: Have not looked into auto purchase tax reduction
• (CN) China said to halt customs clearance of coal imports in 2018 - US financial press

Australia/New Zealand

• ASX 200 opened flat
• (AU) AUSTRALIA OCT EMPLOYMENT CHANGE: +32.8K V +20.0KE (3RD MONTH OF GROWTH); UNEMPLOYMENT RATE: 5.0% V 5.1%E
• GNC.AU Reports FY18 (A$) Net 70.5M v 68Me; Underlying EBITA 269M v 260Me, Rev 4.25B v 4.58B y/y
• (AU) Australia Nov Consumer Inflation Expectation: 3.6% v 4.0% prior
• (NZ) New Zealand PM Ardern: Discussed benefits of free trade with US VP Pence; discussed steel and aluminum tariffs
• (NZ) New Zealand sells NZ$150M v NZ$150M indicated in 2.75% 2037 bonds; avg yield 3.0687%; bid to cover 2.85x
• (AU) Australia Oct RBA Govt FX Transactions (A$): -542M v -801M prior
• (AU) RBA Deputy Gov DeBelle: Major banks' share of new home lending is at the lowest in 10-yrs; tighter mortgage lending standards have sharply lowered housing risks

North America

• (US) Weekly API Oil Inventories: Crude: +8.8M v +7.8M prior
• NTES Reports Q3 $2.55 v $3.04 y/y, Rev $2.45B v $2.0B y/y; Approves up to $1.0B buy back
• (US) Fed Chair Powell: challenges include how much further to hike and at what pace; pretty good reason economy stays on healthy track; reiterates all meetings are live

Europe

• (UK) PM May: collective decision of the cabinet is to support the Brexit deal; I believe this is the best deal that could be negotiated (during US session)
• (UK) Brexiteers say there will be enough letters by 'lunch tomorrow' to force confidence vote against PM May - ITV's Peston
• (UK) Brexiteer MP Rees-Mogg (Conservative Party) says has not called for confidence vote related to PM May - US financial press
• (IE) Ireland PM Varadkar: pleased that the EU and UK have reached an agreement; have reached a satisfactory outcome on Ireland priority's
• (RU) Russia Central Bank Gov Nabiullina: Market volatility could be boosted by swings in oil prices and capital flows

Levels as of 12:50ET

• Hang Seng +0.8%; Shanghai Composite +1.0%; Kospi +0.1%; Nikkei225 -0.3%; ASX 200 +0.1%
• Equity Futures: S&P500 +0.0%; Nasdaq100 +0.2%, Dax +0.0%; FTSE100 +0.2%
• EUR 1.1307-1.1342; JPY 113.43-113.67 ; AUD 0.7188-0.7282;NZD 0.6756-0.6809
• Dec Gold +0.1% at $1,211/oz; Dec Crude Oil -0.2% at $56.12/brl; Dec Copper +0.4% at $2.72/lb