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Daily Pivots: (S1) 1.2985; (P) 1.3021; (R1) 1.3077; More...

GBP/USD's rise from 1.2692 is still in progress and intraday bias remains on the upside for 1.3257/3297 resistance zone. Such rally is seen as the third leg of consolidation pattern from 1.2661. Hence, we'd expect strong resistance from 1.3316 fibonacci level to limit upside to bring down trend resumption eventually. On the downside, below 1.2951 minor support will turn bias back to the downside for 1.2692 instead.

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.

General Trend:

• Nikkei outperforms amid earnings from Toyota
• Toyota raises FY outlook on FX factors
• RBA comments on economic forecasts ahead of Friday’s Quarterly Statement on Monetary Policy
• Japan Sept Household spending unexpectedly declined amid earthquake
• China PBoC expected to sell yuan-denominated bills in Hong Kong on Wednesday’s session

Headlines/Economic Data

Japan

• Nikkei 225 opened +0.6%
• (JP) Japan Sept Household Spending y/y: -1.6% v +1.5%e (weakest since May)
• Toyota Motors, 7203.JP Reports H1 Net ¥1.24T v ¥1.07T y/y, Op ¥1.26T v ¥1.1T y/y; Rev ¥14.67T v ¥14.2T y/y; To buyback 1.44% of shares for ¥250B, Raises guidance
• 7203.JP Considering JV with Mazda on parts at Alabama plant - Japan press
• Softbank, 9984.JP Reports H1 Net ¥840.1B v ¥102.6B y/y; Op ¥1.42T v ¥874.8B y/y; Rev ¥4.65T v ¥4.41T y/y (yesterday after the close)
• (JP) Japan Finance Min Aso: Japan reduced its oil buying from Iran in order to gain exemption from the US government, to continue talks on Iran exemption
• (JP) Japan Trade Min Seko: US took into account stable energy supply and impact to Japan firms in granting waiver from Iran sanctions
• LINE, 3938.JP To suspend 8 mobile games for 1-month for repair work - Nikkei

Korea

• Kospi opened +0.4%
• (KR) South Korea Sept Current Account Balance: $10.8B v $8.4B prior; Good Balance: $13.2B v $11.2B prior
• (KR) Economist warn that the slowing South Korea economy, investment declining and employment worsening, a simultaneous fall in stock and real estate prices could see the country go through something similar to Japan’s “two lost decades” spanning the 1990s and 2000s - Korean press
• Posco, 005490.KR Chairman: Will expand sales volume of auto steel up to 120Mt/yr by the 2025 to ultimately reach revenue of over KRW100T and Op profit of KRW13T by 2030 - Korean press
• (KR) South Korea targeting to attract KRW80T in investment from domestic and foreign companies at free economic zones by 2027 - Korean press
• (KR) US Sec of State Pompeo to meet with North Korea Kim Yong Chol in New York City on Nov 8th

China/Hong Kong

• Hang Seng opened +0.5%, Shanghai Composite -0.2%
• (CN) China and Singapore complete talks to increase free trade agreement (FTA) – Caixin
• (CN) China to launch a Nasdaq style board in Shanghai and play with registration based IPOs – Caixin
• (CN) China Shanghai Stock Exchange to allow delisted state owned Nanjing Tanker Corp to re-list (1st time to allow a re-listing) – Caixin
• (CN) China PBoC Adviser Ma Jun: USD/CNY rate of '7' is NOT a key level
• (CN) China Securities Regulatory Commission (CSRC) said to have urged mutual funds to support certain companies and limit risks related to share pledge agreements - financial press
• (CN) China VP Wang Qishan: Reiterates unilateralism threatens the global economy, global economy faces biggest change since Cold War
• (CN) China PBoC Open Market Operations (OMO): Skips OMO v skipped prior; Keeps neutral position
• (CN) China PBoC sets Yuan reference rate at: 6.9075 v 6.8976 prior
• (CN) China PBOC Official Pan: Reiterates internationalization of yuan is market driven; see big potential for foreign investment in China financial markets

Australia/New Zealand

• ASX 200 opened +0.1%
• (NZ) New Zealand shadow board continues to recommend no change in the Official Cash Rate (OCR)
• SPK.NZ Pleads guilty to Commerce Commission proceedings on two operational and billing issues; Affirms FY19 guidance
• (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence: 116.8 v 114.6 prior
• LNK.AU PEXA accepts Link consortium takeover offer at enterprise value of up to ~A$1.6B
• (AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH TARGET RATE UNCHANGED AT 1.50% (AS EXPECTED): Reiterate low rates supporting the economy

Other Asia

• (PH) Philippines Oct CPI m/m: 0.3% v 0.8% prior; y/y: 6.7% v 6.6%e
• (PH) Philippines sells PHP15B v PHP15B indicated in 10-year Bonds; Avg Yield: 8.035% v 6.350% prior; bid to cover 1.89x (1st successful sale since May)

North America

• (US) President Trump: Think will make a deal with China President Xi
• AMZN One of the company's second headquarters’ locations said to be Long Island City (NY)and Arlington, VA - NYT
• (US) Former Fed Chair Yellen: Discontent with capitalism in US is due to inequality; US economy at full employment shows benefits

Europe

• (UK) Cabinet Ministers to tell PM May that she needs to stand firm on Ireland border issue or face Brexit deal failing - UK press
• (EU) EU reportedly to offer compromise on the Irish border - UK's Times
• (UK) Brexit Min Raab and Foreign Min Hunt said to insist on control of any Brexit backstop - UK's Sun
• (IE) Ireland PM Varadkar: Ireland is willing to examine ways in which a “backstop” to keep the Irish border open after Brexit could be reviewed so long as it does not permit Britain to unilaterally walk away from it – press
• (UK) UK citizens would support remaining in the EU if there were another vote by a 54% to 46% margin, according to a study by Survation – UK Media

Levels as of 01:30ET

• Hang Seng -0.2%; Shanghai Composite -0.9%; Kospi -0.4%; Nikkei225 +1.2%; ASX 200 +1.0%
• Equity Futures: S&P500 +0.1%; Nasdaq100 -0.0%, Dax +0.1%; FTSE100 +0.1%
• EUR 1.1357-1.1424; JPY 113.17-113.36 ; AUD 0.7205-0.7220; NZD 0.6645-0.6669
• Dec Gold -0.1% at $1,231/oz; Dec Crude Oil -0.2% at $62.98/brl; Dec Copper +0.3% at $2.76/lb

US midterms may not spring any shocks in terms of who wins control of what but investors are understandably taking a cautious approach ahead of the results, given how markets have been over the last month.

With the Democrats favourites to take control of the House and the Republicans the Senate, the next couple of years may be far more difficult for Trump. When you consider how markets have done since his election victory – granted, primarily on the back of tax reforms – it’s easy to see why this may not be the most investor-friendly result.

A couple of relatively flat days may also not be the worst thing for the markets as well. An extended run without a big sell-off is just what the doctor ordered after a rather unpleasant October. And while memories may be quite short, I don’t think the anxiety we saw last month has fully passed so the longer this run can last the better.

It’s all gone a bit quiet on the Brexit front, which may be a good thing if that means the time for media bashing has ended and serious talks are taking place. All the speculation last week about the 21 November completion date and deals on financial services were quickly dismissed by both sides - although I still believe there is some truth to the latter – but that doesn’t mean progress isn’t being made elsewhere.

Naturally, investors are taking precautions against the possibility of a no deal Brexit but I still firmly believe that everything will be done to avert it and a fudge will be found to see us through the end of March and into the transition period. It’s simply a case that all the technical work and final negotiations take time. And while it may have been a quiet week so far, I expect plenty more rumours, leaks and reports over the coming weeks.

We’re also seeing some stability in oil markets following a quite brutal October. Brent and WTI are both now trading back around the early summer lows, with all that talk of $100 a barrel crude seeming a distant memory. The bulls have been seriously hurt over the last month and with momentum still very much against them, there may not be too much of a rush to hop back in. That said, the $71 level in Brent and $62-63 level in WTI are very interesting technical levels, a break of which could be very bearish for the pair.

Gold is another that has stabilised over the last few weeks, finding a range between $1,220 and $1,240. A dollar that’s still well bid and risk appetite returning are two significant headwinds for the yellow metal but I am curious how long one of these will last and whether the greenback taking it easy over the festive period may be a tailwind for Gold even as risk appetite returns.

Daily Pivots: (S1) 1.0023; (P) 1.0046; (R1) 1.0069; More...

Intraday bias in USD/CHF remains neutral as it's staying in range of 0.9968/1.0094. On the upside, decisive break of 1.0094 as well ass 1.0067 key resistance will confirm resumption of larger rise from 0.9186 and should target 1.0342 key resistance next. On the downside, below 0.9968 will extend the correction from 1.0094 towards 0.9848 support next.

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 resistance will dampen this view and bring deeper decline back to 0.9541 support and possibly below.

The RBA meeting this month is a non-event. As widely anticipated, the members left the cash rate unchanged at 1.5%, for the 25th consecutive meeting. The members remained upbeat over the economic outlook, expecting the job market to strengthen further and wage growth to improve. The central bank left its assessment in the housing market unchanged, while acknowledging tighter credit conditions. However, sluggish inflation might lead the RBA to keep its powder dry for most of  2019.

Policymakers are more upbeat over the domestic economic outlook. At noted in the accompanying statement, they have “revised up a little” GDP growth forecasts for 2018 and 2019 to around 3.5%. Yet, growth would moderate in 2020 “slower export growth or resources”. Growth in household consumption, the biggest component of GDP, remains a “continuing source of uncertainty” as wage growth has remained subdued, together with high debt levels and decline in asset prices.

On the trade outlook, RBA, while affirming high level of trade, forecast the momentum would slow over time.

On the job market, the members retain their “positive” outlook, forecasting unemployment rate to fall to about 4.75% in 2020.

Admitting that inflation remained “low and stable”, the members projected CPI to reach 2.25% in 2019 and a bit higher in 2020. They judged that a tight employment situation would lead to gradual improvement in wage growth. This, in turn, should help the pickup in inflation in coming years.

We expect the RBA to leave the policy rate in the near-term. Indeed, the monetary policy stance has stuck by low wage growth, subdued CPI inflation and falling house prices. These would persist the concern on the economic growth outlook.

Market movers today

Today, US voters are voting in the midterms and the results are expected in the early hours of Wednesday morning (CET). Opinion polls suggest a divided Congress with the Democrats controlling the House of Representatives and the Republicans the Senate. We think the economic and market implications are limited, as economic policy is expected to remain unchanged after the election.

In the UK, Prime Minister Theresa May's Brexit Cabinet is scheduled to meet and discuss the recent developments in Brexit negotiations.

In terms of economic data releases, we will mainly get tier-2 data releases today.

Norges Bank Governor Øystein Olsen is due to speak today.

Selected market news

Trading is quite mixed this morning with the regional equity indices in Asia showing either minor gains or losses. Yields on 10-year US treasuries and the US dollar are steady as investors await the outcome of the US midterm elections.

There was little support for the Italian budget at yesterday's Eurogroup meeting. The finance ministers backed the EU commission's stance on the Italian budget for 2019 and that Italy must change their budget for 2019. The head of the Eurogroup, the Portuguese Finance Minister Centeneo stated that he hoped that Italy would revise their budget. The recent comments from the Italian government has been 1diverse . On one hand the Finance Minister Tria has stated they are looking at revising the budget, while the head of the 5SM - De Maio has stated they will not change the budget. The revised budget has to be send to Brussels no later than Tuesday next week (November 13) and the Eurogroup has called for an extraordinary meeting on November 19. However, despite the risk of a renewed confrontation between the EU commission and the Italian government, the market has remained fairly calm. We attribute this to the rating agencies and their comments on Italy.

In Sweden, the Moderate leader Ulf Kristersson stated yesterday at a press conference that he is trying to form a four-party coalition government and there will be a vote in parliament for a government next week. However, it is not certain whether he will be voted in as the next Swedish PM. Four rejections will trigger a snap election. Hence, either we will have a Kristersson-led government in place by the end of next week or we are one step closer to an extra election. The latter scenario could open for a messy December for the SEK.

The Reserve Bank of Australia kept the official interest rate unchanged this morning. It was the 25 th consecutive meeting with no changes to the policy rate and it was widely expected in the market and no reaction in the Australian dollar.

Today the US is voting in the mid-term elections and we should get the results in the early hours of Wednesday (CET).

Opinion polls continue to look favourable for the Democrats, as they are leading by more than eight percentage points. Still, FiveThirtyEight models indicate a divided Congress as there is nearly an 86% probability that Democrats win the majority in the House. In the Senate, things looks less promising for the Democrats as there is an 85% probability of Republicans retaking the Senate. Trump's approval rating continues in the range 40-45% but a majority still disapproves of him (although the share has declined compared to late 2017).

Last week, Trump signalled he may be ready for a trade war ceasefire at the Xi-Trump meeting on 1 December. According to US sources, Trump has instructed his trade officials to start drafting potential terms for an agreement. While markets welcomed the news, as it may reduce the probability of a prolonged and worsening trade war, the question is whether this was just rhetoric to improve markets ahead of the mid-term elections. We see a 60% probability of a ceasefire but any real deal will take time to reach and is unlikely to be done until some point in 2019. There is also a high probability that the relationship worsens. In this regard, it is important to note that the Trump administration has shifted to a harsher stance against China, so it is no longer just about trade.

If the polls are right and US Congress is divided, it means Trump will be unable to push his domestic policy agenda through. On the other hand, it is very difficult for the Democrats to roll back Trump's economic policy (even if they win both chambers), as Trump can veto the attempt. So, the most likely outcome is that there will be no changes to economic policy, which is why we think the mid-term elections should have limited implications for the markets and the economy.

In the case of a divided US Congress, Trump is likely to focus on foreign and trade policy, as the President has more power here without Congressional approval. US foreign policy will remain more hawkish than during Obama and Trump may continue to put pressure on trading partners. Remember, the Republican voters are in favour of the more protectionist stance.

In the less likely scenario that the Republicans retake both chambers, it would give Trump confidence to push even harder towards the America that he wants. If Republicans retake both chambers, they have another shot at passing new laws together with Trump, not least a tax reform 2.0. Trump has also hinted at this during the election campaign (although to the surprise of the leadership of the Republican Party)..

Daily Pivots: (S1) 1.3082; (P) 1.3100; (R1) 1.3128; More...

USD/CAD is staying in range of 1.3048/3170 and intraday bias remains neutral first. On the upside, break of 1.3170 target 1.3225 key near term resistance. Break will confirm completion of choppy fall from 1.3385 and target a retest on this high. Though, break of 1.3048 will turn focus to 1.2969 support. Firm break there will indicate completion of whole rebound from 1.2781. In that case, whole fall from 1.3385 might extend through 1.2781 support before completion.

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.

For the 24 hours to 23:00 GMT, the EUR rose 0.22% against the USD and closed at 1.1411.

On the macro front, the Euro-zone's Sentix investor confidence index eased for the third consecutive month to a 24-month low level of 8.8 in November, compared to a level of 11.4 in the previous month. Market participants had expected the index to drop to a level of 9.8.

In the US, data showed that the US final Markit services PMI climbed to a level of 54.8 in October, compared to a reading of 53.5 in the prior month. Market had envisaged the PMI to advance to a level of 54.6, while preliminary figures had recorded a rise to 54.7.

In the Asian session, at GMT0400, the pair is trading at 1.1405, with the EUR trading 0.05% lower against the USD from yesterday's close.

The pair is expected to find support at 1.1365, and a fall through could take it to the next support level of 1.1324. The pair is expected to find its first resistance at 1.1435, and a rise through could take it to the next resistance level of 1.1464.

Going ahead, traders would closely monitor the Markit services PMI for October, due to release across the euro bloc along with Euro-zone's producer price index and Germany's factory orders, both for September, set to release in a few hours.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP rose 0.54% against the USD and closed at 1.3060.

Data showed that UK's services PMI slid to a seven-month low level of 52.2 in October, compared to a level of 53.9 in the prior month. Market participants had anticipated the PMI to drop to a level of 53.3.

In the Asian session, at GMT0400, the pair is trading at 1.3053, with the GBP trading 0.05% lower against the USD from yesterday's close.

The pair is expected to find support at 1.2989, and a fall through could take it to the next support level of 1.2926. The pair is expected to find its first resistance at 1.3092, and a rise through could take it to the next resistance level of 1.3132.

With no macroeconomic releases in the UK today, investors would look forward to global macroeconomic releases for further cues.

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