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The S&P 500 and Dow Jones Industrial Average moved back into positive territory for the year on Thursday erasing most of Wednesday’s losses as earnings from Microsoft, Twitter and Tesla drove the S&P 500 tech sector 3.63% higher. Eighty percent of S&P 500 stocks traded in green yesterday, while only the Telecommunications Services and Utilities sectors ended in red. It seemed as if investors were finally buying the dips and rotating from the defensive sectors to growth stocks. However, it might be too early to confirm that markets have finally found a bottom.

The rally on Thursday may be short-lived after Alphabet and Amazon reported their Q3 results. Shares of Amazon received a sharp hit in after-hours trading, declining by 9% despite the e-commerce firm managing to beat on EPS. The company expects net sales growth to be between 10%-20% in the fourth quarter, below Wall Street’s expectations of 22%. Meanwhile, Google’s parent miss on revenues dragged the stock down 4% in after-hours trading.

In an environment of rising interest rates, trade tensions, signs of slowing economic growth, and lots of geopolitical uncertainty, earnings and future forecasts need to be exceptional for investors to continue buying stocks. Otherwise, the consequences will besevere. This is especially the case whereinvestors have an alternative to equities, which is fixed income.

U.S. futures are indicating a lower open today after more than $100 billion were wiped off Amazon’s and Alphabet’s market cap. This led Asian equities to tumble today.Also expect European markets to be in the red in early trade.

In currency markets, the Dollar traded 0.3% below its 2018 highs. ECB President Mario Draghi failed to provide a boost to the Euro although the central bank is still expected to normalize monetary policy. Markets seem to be unconvinced that risks to the Eurozone outlook remain balanced especially given the recent data which showed economic activity falling to a 25-month low, and the ongoing rise in tensions between Italy and the EU.

Meanwhile, the Chinese Renminbi fell to itslowest level since the global financial crisis and is currently a whisker away from the key psychological level of 7.

On the economic data front, the U.S. Q3 GDP is expected to slow from last quarter’s 4.2% but remain well above 3%. A surprise to the downside will lead to further anxiety in equity markets as if confirms that the current economic cycle has reached its peak. A better than expected number doesn’t necessarily mean that bulls will return, as it suggests the Fed will keep tightening policy. However, the Dollar is likely to benefit the most from a robust figure.

Daily Pivots: (S1) 1.1343; (P) 1.1388; (R1) 1.1420; More....

Intraday bias in EUR/USD remains on the downside with 1.1432 minor resistance intact. Current fall from 1.1814 should extend to retest 1.1300 low. Decisive break there will resume whole down trend from 1.2555. On the upside, above 1.1432 minor resistance will turn intraday bias neutral first. But outlook will remain cautiously bearish as long as 1.1621 resistance holds.

In the bigger picture, corrective pattern from 1.1300 could have completed at 1.1814 after hitting 38.2% retracement of 1.2555 to 1.1300 at 1.1779. Decisive break of 1.1300 will resume the down trend from 1.2555 to 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 will delay the bearish case and extend the correction from 1.1300 with another rise before completion.

Daily Pivots: (S1) 1.2770; (P) 1.2845; (R1) 1.2893; More...

Intraday bias in GBP/USD remains on the downside as fall from 1.3297 is in progress. Break of 1.2784 will target 1.2661 low next. Decisive break of 1.2661 will resume larger down trend from 1.4376. On the upside, break of 1.2919 minor resistance is needed to indicate short term bottoming. Otherwise, outlook will remain mildly bearish even in case of recovery.

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) 0.9963; (P) 0.9990; (R1) 1.0026; More...

Intraday bias in USD/CHF remains on the upside with 0.9955 minor support intact. Current rise should target 1.0067 resistance next. Decisive break there will confirm resumption of larger rise from 0.9186 and should target 1.0342 key resistance next. On the downside, below 0.9955 minor support will turn intraday bias neutral first. But near term outlook will remain bullish as long as 0.9848 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.

Daily Pivots: (S1) 111.92; (P) 112.30; (R1) 112.77; More..

Intraday bias in USD/JPY remains neutral at this point. On the upside, break of 112.88 resistance will resume the rebound from 111.62. But upside should be limited by 61.8% retracement of 114.54 to 111.62 at 113.42 to bring another decline. On the downside, break of 111.82 will likely resume the fall from 114.54 to 38.2% retracement of 104.62 to 114.54 at 110.75. As the fall from 114.54 is viewed as part of medium term correction, we'll look for bottoming signal above 109.76 key support.

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) 1.3023; (P) 1.3061; (R1) 1.3106; More...

USD/CAD surges to as high as 1.3141 so far today. The break of 1.3132 resistance indicates resumption of rise from 1.2781. More importantly, the break of near term channel resistance argues that the corrective fall from 1.3385 has completed. Intraday bias is now on the upside for 1.3225 resistance. Firm break there will confirm this bullish case and target 1.3385 high and above. On the downside, break of 1.2969 support is needed to indicate completion of the rebound. Otherwise, outlook will stay cautiously 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 resume 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) 0.7057; (P) 0.7078; (R1) 0.7101; More...

AUD/USD drops sharply to as low as 0.7022 so far today. The break of 0.7040 low confirms resumption of the down trend from 0.8135. Intraday bias is back on the downside for 61.8% projection of 0.7314 to 0.7040 from 0.7159 at 0.6990. Break there will target 100% projection at 0.6885. On the upside, break of 0.7099 resistance is needed to signal short term bottoming. Otherwise, outlook will stays bearish in case of recovery.

In the bigger picture, 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). On the upside, break of 0.7314 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook stays bearish even in case of strong rebound.

US equities staged a strong rebound overnight with DOW ended up more than 400 pts. But positive sentiment didn't carry on in Asia as major indices are all in red. Intensification in selloff in the Chinese Yuan is a possible factor even though we're not too convinced by this theory. Both Chinese and Hong Kong stocks are just down less than -1% only. Weakness in Asian stocks is more of an extension of recent down trend.

In the currency markets, pressure in back on commodity currencies. New Zealand Dollar lead the way lower, followed by Australian and Canadian. In particular, the resilient AUD/USD has finally taken out 0.7040 low to resume medium term down trend. On the other hand, Yen is the strongest one on risk aversion. The Sterling is the second strongest for now as it's digesting recent declines. But the recovery in Pound is unlikely to last long. Dollar drew some strength as Trump's new Fed addition turned out to be hawkish. But it's cautiously mixed, awaiting Q3 GDP. For the week, Yen is the strongest one while Sterling is the weakest.

Technically, as AUD/USD has resumed recent down trend, it's time for AUD/JPY to break equivalent support at 78.67 to resume the down trend from 90.29. USD/CAD has reversed all the post BoC losses already. 1.3132 resistance in the pair will be a key focus today, especially with US GDP scheduled. Downside acceleration in both EUR/JPY and GBP/JPY further solidify the case of bearish near term reversal. We'd probably see a take on 124.89 and 139.88 key support level respectively next week. At the same time EUR/USD and GBP/USD should also be heading to recent low at 1.1300 and 1.2661 respectively.

In other markets, DOW closed up 1.63% or 401.13 pts overnight at 24984.55. S&P 500 rose 1.86% and NASDAQ rose 2.95%. 10 year yield rose 0.012 to 3.316 but 30 year yield was flat at 3.346. In Asia, Nikkei closed down -0.40% at 21184.60. Singapore Strait Times is down -1.47%. China Shanghai SSE is down -0.55% and Hong Kong HSI is down -0.86%. Also, Japan 10 year JGB yield is down -0.004 at 0.111.

Chinese Premier Li invites Japanese PM Abe for more mature, steady and progressive relationship

Chinese Premier Li Keqiang invited Japanese Prime Minister Shinzo Abe to build a "more mature, steady and progressive" relationship together. Abe is in a three day visit to China, the first the Prime Minister did in seven years.

Li said, "the China-Japan relationship has gone through wind and rain in the past four decades, yet peace, friendship and cooperation have always been the mainstream." And he added "we need adhere to the general direction of peace, friendship and cooperation and conform to the trend of the times, so as to jointly build a more mature, steady and progressive China-Japan ties."

Li also urged "both sides would work hard to promote regional peace, safeguard multilateralism and free trade, and become the axis of stability, growth and momentum for not just Asia but the world,"

Abe said when he arrived in Beijing yesterday that "Today, Japan and China are playing an essential role in economic growth not only in Asia but in the world," And, "as problems that cannot be resolved by one country alone have risen, the time has come for Japan and China to jointly contribute to world peace and prosperity."

Today, China and Japan signed a broad range of agreements covering cooperations in areas from finance and trade to innovation and securities listings. In particular, the currency swap arrangement dropped back in 2013 will be revived.

Chinese Yuan selloff intensifies, heading to decade low

Chinese Yuan's selloff picks up some momentum today. USD/CNH (offshore) break 6.9586 yesterday, as well as a near term channel resistance. The upside acceleration suggests that Yuan selling might intensify for the near term. Now, it looks like a break of 6.9875 high in USD/CNH (2017) low is inevitable. That is, Yuan will hit the lowest level in a decade. The question now is whether there will be intervention of some sort to keep USD/CNH below 7.000 handle.

Trump's new Fed addition Clarida backs further gradual rate hikes

Fed Vice Chair Richard Clarida, Trump latest addition to the Federal Reserve Board, delivered his first public speech yesterday. And he backs further rate hike by Fed. He said, "if the data come in as I expect, I believe that some further gradual adjustment in the federal funds rate will be appropriate."

Clarida also noted that "even after our September decision (a 25bps hike), I believe U.S. monetary policy remains accommodative." He pointed out that 'the funds rate is just now--for the first time in a decade--above the Fed's inflation objective". However, "inflation-adjusted real funds rate remains below the range of estimates for the longer-run neutral real rate, often referred to as r*."

Additionally, he also noted that "if strong growth and robust employment gains were to continue into 2019 and be accompanied by a material rise in actual and expected inflation, that circumstance would indicate to me that additional policy normalization might well be required beyond what I currently expect."

Fed Mester: We are beyond maximum employment

In a speech delivered yesterday, Cleveland Fed President Loretta Mester talked down recent market slump again. And as a known hawk, she continues to support further gradually remove of monetary policy accommodation ahead.

She said that "while a deeper and more persistent drop in equity markets could dash confidence and lead to a significant pullback in risk-taking and spending, we are far from this scenario." And, "similar to the swings in the market we saw earlier this year, the movements of late do not seem to be signaling that investors are becoming overly pessimistic."

On labor market, she noted that "we are beyond maximum employment". Much of the explanation of "moderate wage growth", lies with " low levels of inflation and productivity growth over this expansion". And, "I wouldn't expect to see a strong acceleration in wages unless we see a strong pickup in productivity growth." Meanwhile, she also emphasized that "maintaining stable inflation expectations will be the key to maintaining inflation at target.

ECB stands pat, confident over outlook

Yesterday, ECB left it policy rates and the asset purchase program unchanged. The main refi rate stays at 0% and the deposit rate at -0.4%. The rationale for the latter is to encourage banks to increase lending, hence stimulate the economy. It reaffirmed that the policy rates would stay on hold until at least the summer of 2019, to ensure that inflation returns sustainably to the target of below, but close to, 2%. Meanwhile, ECB maintains the target of buying 15B euro of assets per month from October to December, reiterating the anticipation that the entire program would finish by until the end of the year.

The members remained confident over the economic outlook but acknowledges some risks, including protectionism and financial market volatility, that could derail the recovery path. As we had anticipated, ECB has kept the details of the reinvestment schedule after QE ends until December. More in ECB Reveals No Details about Reinvestment. December in Focus

Further reading on ECB:

• Draghi Seeks To Reassure By Suggesting Economy Is Solid But ECB Will Be Slow
• ECB Recap: Draghi Sticks to the Script, EUR/USD Bears Eye 16-Month Low Near 1.13
• ECB Review: Steady Draghi Amid Disappointing Data
• ECB press conference live stream, starting in a few minutes

On the data front

Japan Tokyo CPI rose was unchanged at 1.0% yoy in October, matched expectations. US Q3 GDP is the main focus today and is expected to show 3.2% annualized growth

Suggested reading on US GDP: US Q3 GDP Growth Seen Softer But Still Trump-Supportive

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.7057; (P) 0.7078; (R1) 0.7101; More...

AUD/USD drops sharply to as low as 0.7022 so far today. The break of 0.7040 low confirms resumption of the down trend from 0.8135. Intraday bias is back on the downside for 61.8% projection of 0.7314 to 0.7040 from 0.7159 at 0.6990. Break there will target 100% projection at 0.6885. On the upside, break of 0.7099 resistance is needed to signal short term bottoming. Otherwise, outlook will stays bearish in case of recovery.

In the bigger picture, 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). On the upside, break of 0.7314 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook stays bearish even in case of strong rebound.

Economic Indicators Update

USDCAD continues to rise above the 20- and 40-simple moving averages (SMAs) as well as above the 23.6% Fibonacci retracement level of the upleg from 1.2060 to 1.3385, around 1.3072, remaining below the short-term descending trend line for the moment.

According to the stochastic oscillator, positive momentum could push for further gains in the daily chart as the indicator is picking up steam and is ready to create a bullish crossover within the %K and %D lines. The RSI is also advancing, above the threshold of 50, indicating a possible upward penetration of the falling trend line.

In the positive scenario, where the price continues to expand above the 1.3100 handle, a new top could be formed around the 1.3230 resistance barrier, shifting the near-term bearish structure back to a bullish one. If the market manages to overcome that area, traders could look for resistance at the 1.3290, before steeper bullish actions take the price up to the one-year high of 1.3385.

A reversal to the downside and a drop below the moving averages could open the door for the 1.2910 support level, slightly above the 38.2% Fibonacci mark of 1.2880. Further below, the 1.2780 level could also provide support as the pair was unable to fall significantly under that line in the last three weeks and any violation at this point could potentially trigger a further sell-off in the market towards the 50.0% Fibonacci of 1.2730.

In the short-term, the negative picture has somewhat softened after the touch on the downtrend line, but traders might still want to see the market closing decisively above this line before confirming that the recent bounce is sustainable.

Regarding the bigger picture the bullish outlook remains intact as USDCAD stands above the ascending trend line, which has been holding since September 2017.

General Trend:

• Asian equity markets generally decline in early trade
• Shanghai Composite moves between gains and losses
• Nasdaq Futures decline in Asian trading; Google, Amazon and Western Digital decline post earnings
• Fujitsu declines following earnings
• Kia Motors Q3 results hurt by quality costs, shares rise on the session
• Canon Inc declines over 5%, cut FY forecast
• Fuji Electric shares volatile post earnings
• China fixed the USD/CNY rate above 6.95, first time since early Jan 2017
• Japan/China business deals in focus amid PM Abe’s visit to China
• Fed’s Mester comments on IOER, housing market
• US Q3 Advance GDP data due later today

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.4%
• (AU) Australia to sell A$1.0B in April 2029 bonds on Nov 2nd

China/Hong Kong

• Shanghai Composite opened +0.3%, Hang Seng opened +0.2%
• (CN) CHINA PBOC SET YUAN REFERENCE RATE: 6.9510 V 6.9409 PRIOR (first fix above 6.95 since Jan 4 2017)
• (CN) China Premier Li: Reiterates China will not engage in competitive devaluation of yuan (CNY) currency; China willing to advance Japan ties and return to healthy and normalized ties
• (CN) PBoC Pan: Reiterates stable fundamentals to keep yuan (CNY) currency stable; yuan 'healthy' amongst emerging market (EM) currencies
• (CN) China PBoC Open Market Operation (OMO): Skips OMO v CNY100B injected in 7-day reverse repos prior: Net: CNY30B drain v CNY100B injection prior
• (CN) China PBoC said to ask banks not to call back loans 'indiscriminately' - Chinese Media
• (CN) China Agriculture Ministry: Mandates additional laboratories to conduct African Swine Fever virus tests
• (CN) China said to tell large state-owned companies to halt purchases of oil from Iran - US financial press

Japan

• Nikkei 225 opened +0.8%
• (JP) Some at the Bank of Japan (BoJ) said to see 10-year JGB yield limit higher than 20bps; officials are said not to want 'sharp' 10-yr yield moves - US financial press
• (JP) China NDRC He: Japan-China companies to sign about 50 memorandums of understanding (MOUs) today
• (CN) China and Japan sign 3-yr agreement for CNY200B or ¥3.4T currency swap
• (CN) China and Japan said to sign agreement to prepare annual plans for talks, dialogues and exchanges - financial press
• (JP) Japan PM Abe comments from Beijing (China): Wants to bolster China cooperation on intellectual property
• (JP) Japan Finance Min Aso: At the earlier this year Japan/China summit talked about the yuan (CNY) currency, would like discussions to speed up this time; US trade deficit with China should be decreased

Korea

• Kospi opened +0.2%
• (KR) South Korea Exchange: Closely monitoring market-related data; US rate hikes and trade tensions impact domestic stock market
• (KR) South Korea Oct Consumer Confidence: 99.5 v 100.2 prior

Other

• (MY) Malaysia Sept CPI Y/Y: 0.3% v 0.6%e (lowest annual pace in three years)
• (PH) Philippines Central Bank (BSP) Gov Espenilla: To gauge if one more modest rate hike is needed, 2019-2020 CPI forecasts are key
• (SG) Monetary Authority of Singapore (MAS): No significant deterioration in domestic exports to China yet

North America

• US equity markets ended higher: Dow +1.6%, S&P500 +1.9%, Nasdaq +3.0%, Russell 2000 +2.2%
• Mellanox Technologies [MLNX]: Mellanox said to be working with adviser on possible sale - CNBC
• (US) Fed Vice Chair Clarida: Some further rate hikes are warranted; Possible trend growth has shifted higher and structural unemployment moved lower; Signals on inflation 'Not flashing red' (first comments since joining the Fed in Sept)
• (US) Fed’s Mester (hawk, FOMC voter): Nearing end of extraordinary policy, close to 'normal'; reiterates expects further gradual US rate hikes; no compelling reason to drop interest rate target range

Europe

• (UK) Brexit talks reportedly are paused due to disagreements within PM May's own cabinet – press
• (EU) ECB said to be studying distributing large Public Sector Purchase Program (PSPP) reinvestments over a longer period from next year on – press
• (EU) ECB's Villeroy: question of TLTROs will need to be considered; ECB is increasingly confident in the inflation path - comments in Paris

Levels as of 01:30ET

• Nikkei 225, -0.3%, ASX 200 flat, Hang Seng -1.1%; Shanghai Composite -0.2%; Kospi -1.7%
• Equity Futures: S&P500 -0.6%; Nasdaq100 -1%, Dax -1.2%; FTSE100 -0.8%
• EUR 1.1377-1.1360; JPY 112.46-112.11 ; AUD 0.7084-0.7023 ;NZD 0.6532-0.6473
• Dec Gold +0.2% at $1,234/oz; Oct Crude Oil -1% at $66.69/brl; Dec Copper -0.5% at $2.735/lb