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Daily Pivots: (S1) 0.7799; (P) 0.7831; (R1) 0.7856; More...

Intraday bias in AUD/USD stays neutral for the moment. Considering bearish divergence condition in 4 hour MACD, even in case of another rise, upside should be limited by 0.7896 cluster resistance (61.8% retracement of 0.8124 to 0.7500 at 0.7886) resistance zone to bring short term topping. Break of 0.7804 minor support will turn bias to the downside for 55 day EMA (now at 0.7719).

In the bigger picture, we're still slightly favoring the case that corrective rise from 0.6826 medium term bottom is completed at 0.8124, after hitting 55 month EMA (now at 0.8032). But stronger than expected rebound from 0.7500 is dampening this bearish view. On the downside, break of 0.7500 will target 0.7328 key cluster support (61.8% retracement 0.6826 to 0.8124 at 0.7322) to confirm this bearish case. But break of 0.8124 will extend the rise from 0.6826 to 38.2% retracement of 1.1079 (2011 high) to 0.6826 (2016 low) at 0.8451 before completion.

Daily Pivots: (S1) 1.2414; (P) 1.2445; (R1) 1.2494; More....

A temporary low is formed at 1.2354 after USD/CAD hit 61.8% retracement of 1.2061 to 1.2919 at 1.2389. Intraday bias is turned neutral first for consolidations. As long as 1.2623 support turned resistance holds, deeper decline is expected. Break of 1.2354 will extend the fall from 1.2910 to retest 1.2061 low.

In the bigger picture, current development argues that rebound from 1.2061 has completed at 1.2919, rejected by 55 week EMA (now at 1.2850) and kept below 38.2% retracement of 1.4689 to 1.2061 at 1.3065. The development also suggests that long term fall from 1.4689 is not completed yet. Decisive break of 1.2061 low will target 61.8% retracement of 0.9406 to 1.4689 at 1.1424. This will now be the favored case as long as 1.2919 resistance holds.

Daily Pivots: (S1) 112.28; (P) 112.72; (R1) 113.09; More...

Intraday bias in USD/JPY remains neutral as it's bounded in range of 112.02/113.74.Also, outlook remains cautiously bullish as long as 112.02 holds and further rise is in favor. Break of 113.74 will resume the rebound from 110.83 and target 114.73 key resistance. Decisive break there will carry larger bullish implications. However, break of 112.02 will likely extend the corrective pattern from 114.73 with another leg through 110.83 support.

In the bigger picture, we're holding on to the view that correction from 118.65 is completed at 107.31. And medium term rise from 98.97 (2016 low) is going to resume soon. Sustained break of 114.73 should affirm our view and send USD/JPY through 118.65. However, break of 107.31 will dampen this view and extend the medium term fall back to 98.97 low.

Daily Pivots: (S1) 0.9780; (P) 0.9811; (R1) 0.9863; More....

Intraday bias in USD/CHF remains on the upside for 0.9977 resistance. Correction from 1.0037 could have completed three waves down to 0.9698. Break of 0.9977 will confirm this view and resume whole rise from 0.9420 through 1.0037 high. On the downside, below 0.9783 minor support will turn intraday bias neutral first. But this bullish case will be favored as long as 0.9698 support holds.

In the bigger picture, range trading continues between 0.9420/1.0342. At this point, 0.9420 appears to be a strong support level. Therefore, in case of decline attempt, we don't expect a firm break of this level. Nonetheless, strong break of 1.0342 is also needed to confirm upside momentum. Otherwise, medium term outlook will stay neutral.

Daily Pivots: (S1) 1.3502; (P) 1.3541; (R1) 1.3579; More.....

Intraday bias in GBP/USD remains neutral with focus on 4 hour 55 EMA (now at 1.3512). As long as 4 hour 55 EMA holds, further rally is expected. Above 1.3612 will target 1.3651 key resistance first. Break will resume medium term rise from 1.1946 and target key resistance level at 1.3835. However, sustained break of 4 hour 55 EMA will turn focus back to 1.3300 support instead.

In the bigger picture, the break of long term trend line resistance from 1.7190 (2014 high) is seen as a sign of long term reversal. However, rise from 1.1946 (2016 low) is not impulsive looking. And the pair is limited below 1.3835 key resistance. Hence, we won't turn bullish yet and would continue to monitor the development. On the downside, break of 1.3038 support will now indicate that rebound from 1.1946 has completed and turn outlook bearish. Meanwhile, sustained break of 1.3835 should at least send GBP/USD to 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466.

Daily Pivots: (S1) 1.1908; (P) 1.1942 (R1) 1.1968; More....

Intraday bias in EUR/USD remains on the downside as fall from 1.2088 is in progress. Such decline could be the the third leg of consolidation pattern from 1.2091. Break of 38.2% retracement of 1.1553 to 1.2088 at 1.1884 will target 61.8% retracement at 1.1757 and below. On the upside, above 1.1981 minor resistance will turn bias neutral first. But firm break of 1.2091 is needed to confirm up trend resumption. Otherwise, we'd expect more corrective trading in near term.

In the bigger picture, rise from 1.0339 medium term bottom is still seen as a corrective move for the moment. Therefore, in case of another rally, we'd be expect 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516 to limit upside and bring reversal. That is also close to 61.8% projection of 1.0569 to 1.2091 from 1.1553 at 1.2494.

Risk appetite remains strong in global financial markets. All three major US indices, DOW, S&P 500 and NASDAQ made record highs over night. Optimism carries on in Asian session. Even though Nikkei is trading a touch lower, stocks in China and Hong Kong are strong. The biggest surprise overnight was the surge in US treasury yields. 10 year yield close up 0.066 at 2.546. 2.621 key medium term resistance is now within reach. The development also helped lifting the dollar index back above 92.5. The greenback is probably finally preparing for a sustainable rebound.

10 year yield surged sharply to close at 2.546. The development continues to affirm the case that correction from 2.621 has completed at 2.034. Rise from there is in progress for retesting 2.621 resistance. Decisive break there will resume the up trend from 2016 low at 1.336. Such development should give a strong boost to Dollar. This will remain the favored case as long as 2.405 holds.

As we mentioned, before, Dollar index was close to 100% projection of 95.15 to 92.49 from 94.21 at 91.55. And it touched lower channel support already. If the fall from 95.15 is a correction, the index should be close to bottoming and reversal. Break of 55 day EMA (now at 93.21) would affirm this and turn focus to 94.21 resistance for confirmation. However, another decline through 91.55 will resume the larger down trend instead.

UK Ministers urged close cooperation between regulators after Brexit

In UK, Chancellor of Exchequer Philip Hammond and Brexit Secretary David Davis published a joint article for German newspaper Frankfurter Allgemeine Zeitung. They urged close cooperation between EU and UK finance regulators after Brexit. And with that, "such a catastrophe" like 2008 global financial crisis "doesn't happen again". And they urged to "re-double our collective effort to ensure that we do not put that hard-earned financial stability at risk, by getting a deal that supports collaboration within the European banking sector, rather than forcing it to fragment."

Moody's optimistic on APAC sovereign outlook and growth

Rating agency Moody's said that APAC sovereign outlook for 2018 is stable. It noted that the region's economic strength and high levels of trade openness well positions the nations to benefit from stronger global growth. APAC emerging markets are projected to grow by 6.5% in 2018. Frontier economies are projected to grow by 5.9% while advanced economies by 1.8%. India and China will remain the fastest growing countries in the region. While there would be gradual moderation in China and temporary slowdown in India, the impact will be offset by robust growth in other countries.

On the data front

China CPI quickened to 1.8% yoy in December but missed expectation of 1.9% yoy. PPI slowed to 4.9% yoy, above expectation of 4.8% yoy. UK productions and trade balance are the main feature in European session. Canada will release building permits, UK will release import prices later in the day.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.1908; (P) 1.1942 (R1) 1.1968; More....

Intraday bias in EUR/USD remains on the downside as fall from 1.2088 is in progress. Such decline could be the the third leg of consolidation pattern from 1.2091. Break of 38.2% retracement of 1.1553 to 1.2088 at 1.1884 will target 61.8% retracement at 1.1757 and below. On the upside, above 1.1981 minor resistance will turn bias neutral first. But firm break of 1.2091 is needed to confirm up trend resumption. Otherwise, we'd expect more corrective trading in near term.

In the bigger picture, rise from 1.0339 medium term bottom is still seen as a corrective move for the moment. Therefore, in case of another rally, we'd be expect 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516 to limit upside and bring reversal. That is also close to 61.8% projection of 1.0569 to 1.2091 from 1.1553 at 1.2494.

Economic Indicators Update

DAX Short Term Elliott Wave view suggests that pullback to 12731.46 ended Intermediate wave (X). Up from there, rally is unfolding as a 5 waves impulsive Elliott Wave structure where Minutte wave (i) ended at 12943, Minutte wave (ii) ended at 12881.5, Minutte wave (iii) ended at 13408.5, and Minutte wave (iv) is proposed complete at 13328.5. Short term, while above 13228.5, Index has scope to extend another leg higher in Minutte wave (v) before ending 5 waves up from 1/2 low (12731.46).

Minute wave ((a)) of a larger degree should end after Minutte wave (v) higher is complete. Index should then pullback in Minute wave ((b)) to correct cycle from 1/2 low before the rally resumes. Chasing the Index higher in the short term is risky, but we don’t like selling the Index either. We expect buyers to appear after Minute wave ((b)) pullback is complete in 3, 7, or 11 swing for an extension higher, provided that pivot at 1/2 low (12731.46) stays intact.

DAX 1 Hour Elliott Wave Chart

STOCKS

Dow (25385.80, +0.41%) is headed towards 25400-25600 as mentioned earlier and looks bullish for the coming sessions.

Dax (13385.59, +0.13%) is trading just at important resistance at 13400. In case this holds, the index could come off towards 13200 or lower; else it could move up towards 13600. We await confirmation of either a break or a rejection from current levels to get more clarity on further course of direction.

Nikkei (23796.45, -0.22%) seems to be holding below 24000 just now. But we need to see a further fall towards 23500 or lower to negate a rise past 24000 in the coming sessions. Near term likely to be bearish.

Shanghai (3428.68, +0.43%) is up strongly and is headed towards the Nov’17 high of 3450. A break above 3450 on the upside would be strongly bullish for the medium term. Watch price action near 3450.

Nifty (10637.00, +0.13%) and Sensex (34443.19, +0.26%) looks bullish just now and could be headed towards 10750-10800 and 34500-34650 levels respectively.

COMMODITIES

The US Crude stockpiles showed a decrease by 11.2mln barrels in a week against expectations of decrease by 3.9mln barrels. This has lead to a sharp rise in the Crude prices. Brent (69.21) and WTI (63.51) have moved up from levels near 68.22 and 62.25 seen yesterday morning. We now have to see if Brent stops near 70, the crucial weekly resistance or tries to move beyond that in the near term. Nymex WTI has broken above 63, faster than expected and could move up towards resistance near 65 on the weekly line charts.

Brent-WTI spread could come off to test support near 5.3-5.0 in the coming sessions before bouncing back towards 6 or higher in the longer run. Near term looks bearish.

Gold-WTI (20.66) has broken below the support near 22 and could be headed towards 19 soon. Near term looks bearish.

Gold (1311.48) has come off from 1325-1330 levels and may possibly delay the test of 1350. The current dip could extend to 1300 on the downside before rising back above 1330.

Copper (3.2300) is stable and could test 3.20 or lower in the coming sessions. Near term looks bearish to sideways.

FOREX

Dollar-Yen (112.25) has been the big mover yesterday, falling on news of BOJ reducing it's purchase of long-tenor (10-25 year) bonds. This increases the chances of a fall to 110 over the next couple of weeks.

An even bigger mover has been the Euro-Yen (134.07), which has fallen sharply from levels near 136.65 a few days ago, arresting a rise that could have otherwise targeted 138+. Now the Cross can dip towards 133.60 in the near term, which is a medium term channel Support on the weekly candles. Note that a break below 133 (not happening immediately, but if it happens at all) could be a big game changer for all markets.

This brings us to the Euro (1.1942) which is holding above the 21-day MA Support at 1.1902. It has potential to start moving up again, either from current levels or from deeper down near 1.1865. If so, the upside targets would be 1.2150-2250.

The Pound (1.3533) is marking time just above immediate Support at 1.3500 and may continue to trade sideways for a few more days within the overall uptrend that has Support in the 1.34-33 region.

We had hinted at a pause in the Aussie (0.7819) between 0.7800-60, and it has dipped within that. Further dip towards 0.7750 is possible, especially due to the new strength in the Yen.

It will be interesting to see whether the Chinese Yuan (USDCNY = 6.5288) weakens further due to Yen strength or recoups some of its losses if the Dollar weakens again.

Dollar-Rupee (63.70) looks a little Overbought in the near term and may have intra-week Resistance in the 63.80-64.00 region.

INTEREST RATES

Japanese 10 Yr Yield (0.084%) has shot up and broken resistance on the long term charts near 0.07% post the announcement of a reduction in bond purchases by the Bank of Japan. Yields had been rising for the last few days, which indicates that possibility of this policy shift was already being factored in by the markets. Consequently, the US-Japan 10 Yr yield spread has risen to 2.4654% and could rise further towards resistance near 2.52%-2.53% on the short term charts.

The US 10Yr (2.5494%), US 5 Yr (2.3274%) and US 30 Yr (2.8920%) have all risen, with the 10 Yr and 5 Yr moving past resistances on medium term and short term charts respectively. We might now see some consolidation around current levels. However, a rise in US 10 Yr towards 2.62% (last seen in Dec-16 and March-17) is possible, given that inflation expectations have risen and bearishness in global bond markets is beginning to set in. It would be interesting to keep an eye on the yields post the CPI data release on 12th Jan.

The German-US 10 Yr Yield Spread (-2.0834%) has broken support on medium term charts and might now move towards -2.10%-2.15% (last seen in Mar-Apr 2017) before moving up again. German Bund Yields (5 Yr: -0.196%, 10 Yr: 0.469%, 30 Yr: 1.316%) have all risen beyond long term resistances and we could expect some consolidation ahead.

Unexpected moves from the Chinese and Japanese central banks threaten to shake-up the complacency in markets. The yen was the top performer Tuesday while the Swiss franc lagged. Chinese CPI is due up next. The Premium Insights locked in 145-pip gain in the EURUSD short with a detailed explanation on the next move in the pair.

USD/CNY has risen to 6.52 from 6.47 in the past two days and a big reason why might be a tweak at the PBOC. A newswire report said banks were told to adjust their use of the counter-cyclical factor. It was a factor intended to against appreciation at the time. It's worked and the yuan is close to its best levels since 2015. That strength has helped to stall investment outflows from China but with the new shift, they could once again pick up.

Ashraf has mentioned earlier this summer that the PBOC's managed appreciation of the CNY was partly forced by FX outflows into Bitcoin.

The PBOC will remain in focus in the day ahead with PPI and CPI numbers due at 0130 GMT. The CPI is expected to tick up to 1.9% from 1.7% but even with the rise, the low inflation numbers are yet-another reminder that strong growth is no guarantee of jobs.

Another move that is minor on the surface but could have major implications is the BOJ decision to trim about $20 billion of purchases of +10 year bonds. The move was seen as a possible precursor to tightening and it sent US 10-year yields to the highest since March 2017. However, it could simply be a technicality due to the yield-curve control program.

In the short-term, this will put an additional focus on the BOJ and raises the risk of further yen gains. It's complicated by the short window until the Jan 23 BOJ meeting. Look for Kuroda to try to clarify his stance then.