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Market movers today

Politics continue to be in the spotlight as Italy faces a deadline today for a revised budget to the EU Commission. There are no signs though that Italy will budge and change it and the way is thus paved for a collision with the EU. The Commission will most likely proceed by initiating an excessive deficit procedure against the country.

Brexit negotiations continue today and tomorrow, as tomorrow is the deadline if there is to be an agreement this month. We think it looks increasingly difficult, see our latest Brexit Monitor , 12 November 2018. Supporting this view is a story from The Guardian claiming the UK Cabinet will not sign off a final deal at its meeting today.

On the data front, German ZEW is expected to stabilise while UK unemployment is set to stay flat at 4.0% (3M).

In Norway, we look for mainland GDP to have risen 0.3% q/q in Q3. In Sweden, Riksbank hawk Deputy Governor Ohlsson is due to give a speech on the economic situation and monetary policy at 15:00. For more on Scandi, see page 2.

Selected market news

According to Wall Street Journal sources (paywall), the Trump administration may take another step in the ongoing trade war by using ' export controls, indictments and other tools to counter the theft of intellectual property'. This might be the first sign that Trump will turn more hawkish on China after elections. While there were more encouraging signs before the elections, this is bad news, in particular ahead of the anticipated Xi-Trump meeting after G20 later this month. Another story reported that the administration is still considering imposing tariffs on auto imports due to national security , something that could jeopardise the US-EU trade talks. On a positive note, China's Vice Premier Liu is said to be visiting the US ahead of the Xi-Trump meeting. An escalation of the trade war is an important risk factor to growth and market sentiment.

We discuss the political and economic outlook after the midterms in our podcast Macro Strategy Views: After the midterm elections - what now Trump? (SoundCloud link) , 12 November 2018.

EUR/USD finally broke below the technically important 1.13 mark yesterday and while we maintain that the cross is set for a decent recovery back to the mid-1.20s in 2019, we still see a range of factors keeping the cross under pressure towards year-end, notably the relative cyclical and yield outlook.

A tech-led fall in US stocks (S&P500 fell 2%) due to concerns over iPhone sales has led to declines in both Japan and South Korea. S&P500 futures point to further loses. Oil trades below USD70 a barrel after a Trump tweet criticising Saudi Arabia's decision to cut oil production, as 'oil prices should be much lower'. The relationship between the US and Saudi Arabia is gradually deteriorating.

Daily Pivots: (S1) 0.7151; (P) 0.7194; (R1) 0.7217; More...

Despite breaching 0.7182 minor support to 0.7164, AUD/USD quickly recovered. 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.

Daily Pivots: (S1) 113.60; (P) 113.90; (R1) 114.15; More..

Further rise is expected in USD/JPY for 114.54/73 resistance zone. But upside momentum is clearly diminishing 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) 1.0071; (P) 1.0091; (R1) 1.0130; More...

Intraday bias in USD/CHF remains on the upside at this point. Rise from 0.9541 is resuming whole rally from 0.9861. Next target is 1.0342 key resistance. On the downside, break of 0.9952 support is needed to indicate short term topping. Otherwise, outlook will remain cautiously bullish as long as 0.9952 support holds.

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) 1.2802; (P) 1.2875; (R1) 1.2922; More...

Intraday bias in GBP.USD remains on the downside. Current fall from 1.3174 should target 1.2661/92 key support zone. Decisive break there will resume larger down trend from 1.4376. On the upside, above 1.2946 minor resistance will turn intraday bias neutral first and bring recovery. But upside should be limited below 1.3174 resistance to bring fall resumption.

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.

Daily Pivots: (S1) 1.1177; (P) 1.1256; (R1) 1.1297; More.....

Intraday bias in EUR/USD remains on the downside at this point. Down trend from 1.2555 is in progress. Next target is 1.1186 fibonacci level first. Break will target 61.8% projection of 1.2555 to 1.1300 from 1.1814 at 1.1038 next. On the upside, above 1.1313 minor resistance will turn intraday bias neutral first. But recovery should be limited below 1.1499 resistance to bring fall resumption.

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) 1.1317; (P) 1.1360; (R1) 1.1384; More...

EUR/CHF's break of 1.1343 suggests resumption of fall from 1.1501. Intraday bias remains on the downside for 1.1154/98 key support zone again. On the upside, break of 1.1470 will turn focus back to 1.1501. Decisive break of 1.1501 will revive the case of bullish reversal.

In the bigger picture, price actions from 1.2004 medium term top is seen as a correction only. Downside should be contained by support zone of 1.1198 (2016 high) and 61.8% retracement of 1.0629 to 1.2004 at 1.1154 to complete it and bring rebound. This cluster level is in proximity to long term channel support (now at 1.1243) too. A break of 1.2 key resistance is still expected in the medium term long term. However, sustained break of the mentioned support zone will mark reversal of the long term trend. In that case, 1.0629 key support will be back into focus.

Daily Pivots: (S1) 0.8701; (P) 0.8738; (R1) 0.8766; More...

EUR/GBP is staying in consolidation above 0.8690 and intraday bias remains neutral. Outlook remains unchanged too. As long as 0.8800 minor resistance holds, another fall is expected. On the downside, break of 0.8690 will extend whole fall from 0.9098 to 0.8620 support first. Break will target 100% projection of 0.9098 to 0.8722 from 0.8939 at 0.8563 next. However, break of 0.8800 will turn focus back to 0.8939 resistance instead.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). Medium term fall from 0.9305 is possibly in progress and could extend through 0.8620. On the upside, break of 0.8939 resistance is needed to indicate medium term reversal. Otherwise, outlook will remain cautiously bearish even in case of rebound.

General Trend:

• Markets pare losses amid reports of more upcoming talks between the US and China
• Asian automakers trade generally lower, Toyota down over 2.5%
• US Commerce Dept. said to have circulated draft report on auto tariffs (press)
• Apple suppliers decline amid outlook concerns, Hon Hai drops over 2%
• Japan Display declines over 7% after cutting outlook
• Yuan pares loss amid intervention speculation
• Japan mega-banks Mitsubishi UFJ and Sumitomo Mitsui may report results after the market close (unconfirmed report)
• Australia Q3 wage price index due on Wednesday
• Japan Q3 prelim GDP due tomorrow
• China Oct Industrial Production, Retail Sales and Fixed Asset Investment due for release on Wed

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -1.5%
• (AU) AUSTRALIA OCT NAB BUSINESS CONFIDENCE: 4 V 6 PRIOR; CONDITIONS: 12 V 15 PRIOR
• (AU) Australia sells A$150M v A$150M indicated in 2022 Linkers, avg yield 0.4792%, bid to cover 4.53x
• (NZ) RBNZ Deputy Gov Bascand: financial sector is sound and well regulated
• (NZ) New Zealand Oct Food Prices m/m: -0.6% v -0.1% prior

China/Hong Kong

• Shanghai Composite opened -1.1%, Hang Seng -2.1%
• (CN) China Vice Premier Liu He to visit the US to pave the way for the Xi-Trump meeting - Hong Kong Press
• (CN) On Friday (Nov 9th), US Treasury Sec Mnuchin and China Vice Premier Liu He resumed talks and spoke by phone; the conversation did not lead to any 'breakthrough' - US financial press
• (CN) China Premier Li: Reiterates willing to improve free trade through discussion; Reiterates global economy and politics are complicated, global uncertainties are rising; China and US will find solution that meets common interest
• (CN) 'Major' China state-owned banks said to have been seen selling US dollars (USD) in the onshore spot FX market at around the 6.97 level
• (CN) CHINA PBOC SETS YUAN REFERENCE RATE: 6.9629 V 6.9476 PRIOR
• (CN) China PBoC Open Market Operation (OMO):Skips OMO v skipped prior (13th straight skip)
• (CN) Brokerage firm in China has launched ~$1.4B relief fund aimed at supporting private companies - Chinese Press

Japan

• Nikkei 225 opened -1.7%
• (JP) Japan Finance Min Aso: Does not expect auto tariffs to come up in talks with US Vice President Pence, will meet Pence but not as part of economic dialogue talks
• (US) US Vice President Pence: US has had trade imbalance with Japan for too long; US President Trump is looking forward to meeting with China President Xi, Trump believes progress can be made with China
• (JP) Japan PM Abe: US/Japan alliance stronger than ever; Agreed with US Vice President Pence to expand bilateral investment and trade
• (JP) Bank of Japan (BoJ) asset holdings reach ¥553.6T, which is larger than Japan's GDP
• (JP) Japan MoF sells ¥700B v ¥700B indicated in 0.90% 30-yr JGBs, avg yield: 0.8740% v 0.8980% prior, bid to cover 3.99x v 3.92x prior

Korea

• Kospi opened -1.6%
• (KR) Bank of Korea (BOK) held meeting to discuss impact from US equity market decline; reiterates to closely monitor financial markets and economic conditions
• (KR) South Korea's Ruling Party seeks North Korea visit in Dec - Local Press
• (KR) South Korea Oct Import Price Index M/M: 1.5% v 1.5% prior; Y/Y: 10.7% v 9.7% prior
• (KR) South Korea Sept L Money Supply M/M: 0.1% v 0.2% prior; M2 M/M:-0.1 % v +0.6% prior

Other

• (ID) Indonesia Central Bank Official: To maintain liquidity in onshore NDF market, to hold auction in onshore NDF market if needed

North America

• US equity markets ended lower: Dow -2.3%, S&P500 -2.0%, Nasdaq -2.8%, Russell 2000 -2%
• Amazon: Announcement related to two new headquarters may come by as early as Tuesday - US financial press
• (US) Commerce Dept reportedly circulating a draft report on auto tariffs; Pres Trump to hold meeting Tues with trade advisers to discuss the report – press
• (US) San Francisco Fed Pres Mary Daly (voter): 'Neutral' rate is uncertain so shouldn't view it as a stopping point; won't be surprised by a Dec rate hike and at least a couple more in 2019 - press interview
• (US) Former Fed Chair Yellen: Sees Fed increasing interest rates by 3-4 times over next year

Europe

• (UK) Prime Min May: both sides are working hard to reach Brexit deal but significant issues remain; talks are now reaching their 'end game'
• (DE) Germany Bundesbank official Wuermeling not concerned by the low stress test scores of German banks - financial press

Levels as of 01:30ET

• Nikkei 225, -2.3%, ASX 200 -1.8%, Hang Seng flat; Shanghai Composite +0.8%; Kospi -0.9%
• Equity Futures: S&P500 +0.5%; Nasdaq100 +0.5%, Dax +0.3%; FTSE100 +0.2%
• EUR 1.1252-1.1215 ; JPY 114.06-113.58 ; AUD 0.7218-0.7163 ;NZD 0.6751-0.6707
• Dec Gold +0.1% at $1,204/oz; Oct Crude Oil -1.4% at $59.09/brl; Dec Copper +0.8% at $2.689/lb

Daily Pivots: (S1) 1.5603; (P) 1.5649; (R1) 1.5683; More....

EUR/AUD's decline continues today and reaches as low as 1.5581 so far. Break of 1.5601 support further affirms the case of medium term bearish reversal. Intraday bias remains on the downside for 1.5271/5313 cluster support zone next. On the upside, above 1.5666 minor resistance will turn intraday bias neutral and bring consolidations, before staging another fall.

In the bigger picture, current development argues that up trend from 1.3624 (2017 low) is possibly completed at 1.6357, ahead of 1.6587 (2015 high). This is supported by bearish divergence condition in weekly MACD. Deeper decline is now in favor to 1.5271 cluster support (38.2% retracement of 1.3624 to 1.6357 at 1.5313). Break will target 61.8% retracement at 1.4668. On the upside, break of 1.5984 support turned resistance is now needed to revive the prior medium term up trend. Otherwise, further decline will be in favor even in case of interim rebound.