Sample Category Title

Daily Pivots: (S1) 1.3211; (P) 1.3238; (R1) 1.3260; More...

Intraday bias in USD/CAD remains on the upside for further rally. Sustained trading above 1.3225 will confirm completion of choppy fall from 1.3385. Further rally should then be seen to retest 1.3385 high. On the downside, break of 1.3056 support is needed to indicate short term reversal. Otherwise, outlook will remain bullish in case of retreat.

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) 0.7181; (P) 0.7202; (R1) 0.7241; More...

Intraday bias in AUD/USD remains neutral for the moment. 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.

Daily Pivots: (S1) 113.54; (P) 113.85; (R1) 114.11; More..

Outlook in USD/JPY remains unchanged at this point. With 112.94 minor support intact, further rise is in favor for 114.54/73. But due to loss of upside momentum as seen in 4 hour MACD, we'd be cautious on strong resistance from 114.54/73 to limit upside and bring reversal. On the downside, break of 112.94 minor support will extend the consolidation pattern from 114.54 with another falling leg back to 111.37. Overall, rise from 104.62 is still in progress and decisive break of 114.73 will confirm resumption.

In the bigger picture, corrective fall from 118.65 (2016 high) should have completed with three waves down to 104.62. Decisive break of 114.73 resistance will likely resume whole rally from 98.97 (2016 low) to 100% projection of 98.97 to 118.65 from 104.62 at 124.30, which is reasonably close to 125.85 (2015 high). This will stay as the preferred case as long as 109.76 support holds. However, decisive break of 109.76 will dampen this bullish view and turns outlook mixed again.

Daily Pivots: (S1) 1.0050; (P) 1.0089; (R1) 1.0110; More...

USD/CHF retreated after forming a temporary top at 1.0128. Intraday bias is turned neutral for consolidation. Another rally is expected as long as 0.9952 support holds. On the upside, break of 1.0128 would resume larger rise from 0.9186 and target 1.0342 key resistance. However, firm break of 0.9952 will indicate short term topping and bring deeper fall.

In the bigger picture, the pullback from 1.0067 has completed at 0.9541 already. And rise from 0.9186 is likely resuming. Firm break of 1.0067 will pave the way to retest 1.0342 key resistance. We'd be cautious on strong resistance from there to limit upside to bring another medium term fall to extend long term range trading. However, firm break of 0.9848 near term support will dampen this view and bring deeper decline back to 0.9541 support and possibly below.

Daily Pivots: (S1) 1.1240; (P) 1.1268; (R1) 1.1318; More.....

EUR/USD recovers after hitting 1.1215 and breached 1.1313 minor resistance. A temporary low is in place and intraday bias is turned neutral for consolidation. But upside of recovery should below limited below 1.1499 resistance to bring fall resumption . 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.

Market movers today

Focus today remains on Brexit, as Theresa May is scheduled to meet with her cabinet at 15:00 CET to discuss the draft Brexit agreement reached with the EU. If the cabinet nods yes, the real test will be whether the deal can survive the House of Commons, as we expect it to be accepted by EU leaders without major problems. Leading hard Brexiteers, the DUP from Northern Ireland and the Labour leadership have already given it a thumbs down, but Theresa May thinks the fear of a no-deal Brexit will make sure moderate Conservatives and Labour MPs will vote in favour of it. A possible EU summit on Brexit on 25 November and the vote in House of Commons may be as early as 10 December. Markets need more certainty before we could see EUR/GBP move even lower. For more details, see our take released this morning, Brexit Monitor: The real test is the vote in the House of Commons.

We look for US inflation to show an unchanged core rate at 2.2% y/y. Inflation has edged lower in recent months despite higher wage growth. Fed Chair Jerome Powell is due to speak overnight, where focus will be on whether the Fed will continue its hiking cycle despite recent market turmoil.

In Europe, UK inflation is due as well as preliminary German GDP for Q3 , which we expect to increase 0.3% q/q, but with clear downside risks.

In Scandi, Sweden is expected to show a rise in underlying inflation from 2.5% y/y to 2.6% y/y by both us and consensus. The Swedish Riksdag is also voting on government formation.

Selected market news

While S&P 500 initially moved higher yesterday on the back of positive signs in the US-China trade wars , where it seems the two countries are trying to restart more real and constructive negotiations, the index ended 0.4% lower, as sentiment soured during the day. This also led to a collapse in oil prices . A higher USD and weak equity market has certainly played a role in the sell-off this week, but more importantly, oil supply fundamentals have flipped from concerns over the effect of Iran sanctions to talk about supply surplus next year. OPEC+ talk about curbing output next year has done little to support prices.

The Italian government maintained the 2.4% budget deficit and 1.5% growth target in the revised budget it sent to the EU yesterday. This makes it more likely that the EU will start the Excessive Deficit Procedure soon. Remember, the EU forecast the budget deficit to be 2.9% next year and to breach the 3% limit next year in the latest projection.

In China , October data released overnight showed that industrial production and fixed investments were stronger than expected but that retail sales remain under pressure. The rebound in production and investments may be the first sign that the Chinese stimulus is working through the economy. New homes sales grew at the slowest pace in six months.

Daily Pivots: (S1) 1.2857; (P) 1.2952; (R1) 1.3063; More...

GBP/USD's rebound from 1.2825 extends further but stays below 1.3174 resistance. Intraday bias remains neutral and outlook is unchanged. Price actions from 1.2661 are viewed as a consolidation pattern, that could be extending. In case of stronger rise, strong resistance should be seen at 1.3316 fibonacci level to limit upside to bring down trend resumption eventually. On the downside, below 1.2825 will resume the fall from 1.3174 to 1.2661/92 key support zone. Decisive break there will resume larger down trend from 1.4376.

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.

Short term Elliott Wave view on Nifty suggests that the decline to 10004 on Oct 26 low ended Primary wave ((2)). This means that Index has ended the selloff which started from Aug 28 high (11760.20). It is currently either in the process of eventually breaking to new high again or at least rallying in 3 waves to correct the cycle from Aug 28 high before turning lower again.

Up from 10004, Minor wave 1 ended at 10645.5 and unfolded as a 5 waves impulse Elliott Wave structure. Minute wave ((i)) of 1 ended at 10128.85, Minute wave ((ii)) of 1 ended at 10012.65. Minute wave ((iii)) of 1 ended at 10606.95, Minute wave ((iv)) of 1 ended at 10477 and Minute wave ((v)) of 1 is proposed complete at 10644.55. Near term, while below 10644.55, Nifty has scope to turn lower 1 more time in Minute wave ((c)) of 2 before the rally resumes. We don’t like selling the Index and expect Index to extend higher at least 1 more leg higher as far as pivot at 10004 low stays intact. It’s imperative for dips in Nifty to hold above Oct 26 low (10004) as a break below indicates a double correction and can potentially exposes a lot more downside.

Nifty 1 Hour Elliott Wave Chart

Sterling is trading generally firm today as the EU and UK finally agreed on the withdrawal agreement. It will now have to go through Prime Minister Theresa May's Cabinet today. That shouldn't be too much a problem despite some open objection from Brexiteers. The main hurdle lies in the parliament which is now still uncertain. And that could be a reason for the Pound uncommitted strength.. Nevertheless, it's trading as the second strongest next to New Zealand Dollar, followed by Australian Dollar. On the other hand, Canadian Dollar and Yen are the weakest ones. WTI crude oil's free fall continues today and breached 55 to as low as 54.84. Yen could be weighed down slightly by GDP data. Dollar is the third weakest so far.

Technically, there isn't much new development so far. USD/CHF and USD/JPY have both clearly lost upside momentum for further rise remain in favor. Similarly, USD/CAD's rally is still in progress despite losing upside momentum. GBP/USD is seen as staying in consolidation pattern from 1.2661. Even if there is more upside in the pair, strong resistance will likely be see around 1.33, if it's able to reach that level.

In other markets, DOW closed down -0.40% at 25286.49 overnight. S&P 500 dropped -0.15%. NASDAQ was flat at 7200.87. US treasury yields dropped quite notably. 10 year yield closed down -0.041 at 3.145. 30 year yield dropped -0.020 to 3.367. Near term consolidations in yields are extending. in Asia, Nikkei closed up 0.16% at 21846.48. But Hong Kong HSI, China Shanghai SSE and Singapore Strait Times are in red, down -0.57%, -0.88% and -0.58% at the time of writing. 10 year JGB yield is down -0.0053 at 0.11. It's another factor pressuring Yen.

UK and EU agreed Brexit texts, May to hold Cabinet meeting today

The UK and EU have finally agreed on the texts of the Brexit withdrawal agreement after intensive work this week. UK Prime Minister Theresa May's office confirmed and said "Cabinet will meet at 2:00pm tomorrow to consider the draft agreement the negotiating teams have reached in Brussels, and to decide on next steps." And, "Cabinet ministers have been invited to read documentation ahead of that meeting". Approval by the Cabinet will just make the deadline for holding a special EU summit by the end of November for the issue.

It's reported that the agree will adopt a UK-wide customs backstop aimed preventing a hard Irish border. It's so far unsure how much support May could get from her Cabinet. Boris Johnson and Jacob Rees-Mogg have already voiced objection to the draft agreement immediately. Johnson said the plan was "utterly unacceptable to anyone who believes in democracy" and he would vote against it. Rees-Mogg warned that UK would become a  "vassal state" with Northern Ireland "being ruled from Dublin". And Mogg added "It is a failure of the government's negotiating position and a failure to deliver on Brexit".

On the other hand, it's reported that five senior ministers Dominic Raab, Jeremy Hunt, Sajid Javid, Michael Gove and Geoffrey Cox will back the Brexit deal.

Italy defies EU demand, kept deficit target and growth forecasts unchanged in 2019 budget

Italy refused to meet European Commission's demand on revising its budget. Instead, the coalition government said that 2019 budget deficit target will be maintained at 2.4% of GDP. Growth forecast was also kept unchanged at 1.5%. The government statement noted that "we have the conviction that this is the budget needed for the country to get going again." Nevertheless,the government pledged to beef up asset sales and monitor spending closely.

The European Commission have rejected Italy's draft budget plan and requested re submission by November 13, yesterday. European Commission President Jean-Claude Juncker warned earlier this week that "the Italians are moving away not just from what they have promised us but also away from the minimum requirements of the stability pact."

EU Malmstrom: If US auto tariffs were to happen, that would not be on EU

The US Commerce Department has submitted the draft recommendations regarding Section 232 national security tariffs on autos to the White House this week. The recommendations were discussed at a regular weekly meeting of Trump's top trade officials yesterday. So far, no immediate action is taken by Trump.

At the same time, EU Trade Commissioner Cecilia Malmstrom will meet US Trade Representative Robert Lighthizer on Wednesday to carry on trade negotiations. Ahead of that, she said "We assume that if that (U.S. auto tariffs) were to happen, that would not be for the European Union,". She referred to the agreement between Trump and European Commission President Jean-Claude Juncker that auto tariffs won't apply to the EU when negotiations are still on going. Malmstrom also reiterated that the scope of the EU-US trade deal will be "limited" to industrial goods. She emphasized "be very clear, it will not include agriculture."

Juncker said earlier this week that "we had achieved that there will not be a new trade conflict over the summer months until the end of the year, particularly with regard to car tariffs."

Japan GDP contracted -0.3% qoq, exports contracted at fastest pace in over three years

Japan GDP contracted -0.3% qoq in Q3, matched expectation. Annualized rate showed -1.2% contraction, worse than expectation of -1.0%. GDP deflator dropped -0.3%, lowest than expectation of -0.2%. One detail to note is that exports contracted -1.8% qoq, fastest decline in over three years. It seems that the contraction in Q3 cannot be explained only by natural disasters. But the steep contraction in exports argued that US related trade tensions was also weighing on the economy of Japan. Though, it will take another quarter or two to really gauge the impact from protectionism.

Japan Economy Toshimitsu Motegi sounded confident and optimistic though. He said that "Japan's economy is expected to recover driven mainly by domestic demand. Though he also warned that "we need to be vigilant to the impact of overseas uncertainties, financial market volatility and how trade problems affect the global economy."

Also from Japan, tertiary industry index dropped -1.1% mom in September versus expectation of -0.4% mom. Industrial production dropped -0.4% mom versus expectation of -1.1% mom.

Looking ahead

The economic is rather busy today. Eurozone and Germany will release Q3 GDP. UK will release CPI and PPI. Later in the data US will also release CPI.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.2857; (P) 1.2952; (R1) 1.3063; More...

GBP/USD's rebound from 1.2825 extends further but stays below 1.3174 resistance. Intraday bias remains neutral and outlook is unchanged. Price actions from 1.2661 are viewed as a consolidation pattern, that could be extending. In case of stronger rise, strong resistance should be seen at 1.3316 fibonacci level to limit upside to bring down trend resumption eventually. On the downside, below 1.2825 will resume the fall from 1.3174 to 1.2661/92 key support zone. Decisive break there will resume larger down trend from 1.4376.

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

For the 24 hours to 23:00 GMT, the EUR rose 0.83% against the USD and closed at 1.1316, amid news that Britain and the European Union are close to reach a Brexit deal.

On the data front, the Euro-zone’s ZEW economic sentiment index fell to a level of -22.0 in November, compared to a reading of -19.4 in the prior month.

Separately, in Germany, the final consumer price index (CPI) rose to a 10-year high level of 2.5% on a yearly basis in October, at par with market expectations and confirming the preliminary print. In the previous month, the CPI had climbed 2.3%. Moreover, the nation’s ZEW economic sentiment index unexpectedly advanced to a level of -24.1 in November, defying market anticipations for a fall to a level of -26.0. In the preceding month, the index had recorded a reading of -24.7. On the other hand, Germany’s current situation index dropped to a level of 58.2 in November, compared to market consensus for a decline to a level of 65.0. In the prior month, the index had registered a level of 70.1.

In the US, data showed that, the US NIFB small business optimism index unexpectedly slid to a level of 107.4, defying market expectations for a gain to a level of 108.0. In the previous month, the index had recorded a reading of 107.9.

In the Asian session, at GMT0400, the pair is trading at 1.1299, with the EUR trading 0.15% lower against the USD from yesterday’s close.

The pair is expected to find support at 1.1241, and a fall through could take it to the next support level of 1.1182. The pair is expected to find its first resistance at 1.1339, and a rise through could take it to the next resistance level of 1.1378.

Going forward, traders would await Euro-zone’s 3Q gross domestic product (GDP) data and industrial production for September, along with Germany’s 3Q GDP data, set to release in a few hours. Later in the day, the US consumer price index and average hourly earnings, both for October along with MBA mortgage applications, will keep investors on their toes.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.