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Key Highlights

• The US Dollar made a good comeback from the 110.80 support against the Japanese Yen.
• The USD/JPY pair is now forming a decent uptrend and is following a bullish trend line with support at 112.40 on the 4-hours chart.
• The US initial jobless claims for the week ending Dec 2, 2017 declined from 238K to 236K.
• Today's US Nonfarm payrolls release for November 2017 is likely to impact the greenback with an expectation of 200K.

USDJPY Technical Analysis

After a bearish run from the 114.75 resistance, the US Dollar formed support around 111.00 against the Japanese Yen. The USD/JPY pair is now in an uptrend and awaits Nov's nonfarm payroll figure for the next move.

It seems like there is a solid support base formed at 110.80 in USD/JPY. There was a RSI divergence created from the mentioned 110.80, which ignited an upside rally.

The pair succeeded in breaking a few important barriers such as 111.50 and 112.00. More importantly, there was a close above 112.00 and the 100 simple moving average (red, 4-hour).

At the outset, the pair is facing a tough challenge near the 113.70-80 resistance. Furthermore, the 76.4% Fib retracement level of the last major drop from 114.73 to 110.84 is at 113.81.

Therefore, the 113.80-114.00 region is an important resistance for further gains in USD/JPY. Should the US NFP data beats the forecast, the pair could easily move above 114.00 in the near term. In terms of the support, there is a crucial bullish trend line forming with support at 112.40 on the same chart.

On the other hand, other majors such as EUR/USD and GBP/USD were seen struggling ahead of the all-important release. EUR/USD broke a key support at 1.1840 and GBP/USD struggled to move above the 1.3600 resistance level.

In addition, gold price extended declines below the $1260 support area and is placed well in the bearish zone.

To sum up, the market is waiting for the November 2017 Nonfarm payrolls report by the US Department of Labor. The forecast is slated for 200K, less than the last 261K. The unemployment rate is forecasted to remain stable at 4.1%. Should the US NFP post less than 180K, the US Dollar might move down in the short term. On the flip side, an increase of more than 200K would accelerate USD/JPY's rise above 114.00 and EUR/USD's decline below 1.1750.

• European Commission to Recommend Moving onto Phase Two of Brexit Negotiations;
• Buy the Rumour, Sell the Fact - Sterling Dips on Brexit Announcement;
• Bitcoin Slides 10% as Crazy Trading Continues;

US Jobs Report Eyed Later in the Session.

European Commission to Recommend Moving onto Phase Two of Brexit Negotiations

European equity markets are poised to open higher on Friday, buoyed by the news that the UK and the EU have come to an agreement on the three contentious issues that make up phase one of the Brexit negotiations.

After months of slow and frustrating negotiations, it has been announced this morning that sufficient progress has been made on the financial settlement, citizens’ rights and the Irish border to move onto phase two of Brexit negotiations. Jean-Claude Juncker stated this morning that the European Commission will now make this recommendation to the European Council, who will vote on this next week.

There has been numerous times when an agreement looked difficult or even unlikely before year-end which would have made achieving a trade deal by March 2019 very tough. Today is a hugely significant step forward towards exiting the EU in 2019 and while both sides will be relieved at the progress, many more tough negotiations lie ahead. But we can’t underestimate how important today is.

Buy the Rumour, Sell the Fact - Sterling Dips on Brexit Announcement

The response in the pound to the announcement may come as a surprise given just how significant today’s agreement is but it’s worth noting that this has been in the making over the last couple of weeks and it was in both sides interest to get this done today. Had the two sides failed to come to an agreement then the downside in the pound may well have been far greater. We’ve seen a rally in the pound over the last couple of weeks on the expectation of a deal being agreed so what we may be seeing is simply a case of buying the rumour and selling the fact.

Bitcoin Slides 10% as Crazy Trading Continues

After two days of extraordinary gains, Bitcoin is experiencing a rocky start to trading on Friday and is currently trading down around 10% having rebounded slightly off earlier lows. While this would typically strongly indicate how an instrument may trade over the course of the session, Bitcoin has never played by the rules and I don’t think anyone would be surprised to see this trading back in the green before the morning is out, let alone the day.

To put today’s move so far into perspective, despite being 10% lower, Bitcoin hasn’t even wiped out Thursday’s gain or come close to doing so yet. I’m not sure that traders will be particularly deterred by what’s happened this morning, although again, Bitcoin is extremely difficult to predict and doesn’t exactly move in a logical manner. I do wonder whether the launching of Bitcoin futures on Sunday is driving people to lock in profits on the expectation or fear of large short positions being accumulated.

US Jobs Report Eyed Later in the Session

There’s plenty of economic data being released this morning, the most notable of which will be the US jobs report this afternoon. With the Fed preparing to raise interest rates next week, traders will be monitoring the data very closely for signs of a continuing tightening of the labour market that should produce inflationary pressures further down the road.

General Themes: Chip-related shares track earlier gains in the US

Retail name Li & Fung gains over 10% amid broker upgrade

Tencent gains over 2% on session in volatile week of trading

China/Hong Kong

Markets opened mixed: Shanghai -0.2%, Hang Seng +0.3%

Hang Seng Information Technology Index +1.9%, Materials +1.7%, Consumer Goods +1.7% (Li & Fung +10% amid broker upgrade) ; Energy -0.7%

Conglomerate HNA Group: Says it is adjusting portfolio and not ‘blindly’ selling assets; Asset sales not related to liquidity; Stakes in Deutsche Bank and Hilton are 'profitable' investments, has no interest in selling the stakes in 'near future'

(CN) China Nov Retail Auto Sales Y/Y: +3.2% v 2.7% prior - PCA

(CN) Dalian Iron Ore extends weakness seen on Thursday’s session, down a further 3% today (**Note: Traded limit down-over 5%- on yesterday’s session)

(CN) CHINA NOV TRADE BALANCE ($): V $40.2B V $35.0BE; Exports Y/Y: 12.3% v 5.3%e (fastest growth since March)

(CN) CHINA NOV TRADE BALANCE (CNY): 263.6B V 240.8BE; Exports Y/Y: 10.3% v 2.0%e

(CN) China Jan-Nov Iron Ore Imports Y/Y: 991M tons, +6%; Nov Iron Ore imports 94.77M tons v79.49M m/m; Nov Natural Gas imports 6.4M tons (record high)

(CN) China State Planner NDRC issues guidelines on producer and user coal stockpiles: Plans to set a cap and floor for stockpiles

(CN) China Nov Export Leading Index M/M: +0.2 to 41.8

(CN) PBoC Open Market Operations (OMO): Skips OMO and says banking system overall liquidity at ‘moderate level*’ v CNY270B injected in 7,14 and 28-day reverse repos prior; Net drain CNY10B v nil prior (*Note: On Dec 5th, the PBoC said that current banking liquidity was at a ‘high level’)

(CN) PBoC sets yuan reference rate at 6.6218 v 6.6195 prior

(CN) CHINA NOV FOREIGN RESERVES: $3.119T V $3.124TE (10th straight month of increases)

(CN) China FX Regulator SAFE: Forex reserves size to remain stable overall

(CN) China PBoC regulators are reportedly clamping down on unlicensed payment companies - China press

(CN) China PBoC said to meet major commercial banks amid the recent bond market sell-off - financial press

(CN) Reportedly 10 Chinese banks push back at new asset management rules in closed meeting - sources

Looking Ahead: China Nov CPI and PPI tentatively scheduled for over the weekend

Japan

Nikkei 225 opened +0.6%: closed: +1.4%

TOPIX Securities index +1%

Chip-related shares gain: Toshiba +1%, SUMCO +2.5%, Tokyo Electron +2.5% (follow-through buying, tracks gains in US chip space)

Softbank +0.7%, Fast Retailing +2%

Dec Nikkei 225 Futures and Options seen settling at ~22,590 – financial press

USD/JPY trades marginally higher with the Nov US payrolls report in focus

Q3 GDP revised higher supported by Capex

JAPAN Q3 FINAL GDP Q/Q: 0.6% V 0.4%E; ANNUALIZED SA Q/Q: 2.5% V 1.5%E; NOMINAL Q/Q: 0.8% V 0.7%E; Business Spending Q/Q: 1.1% v 0.4%e (highest reading since Q4 2017, revised upwards from +0.2%)

JAPAN OCT LABOR CASH EARNINGS Y/Y: 0.6% V 0.8%E; REAL CASH EARNINGS Y/Y: 0.2% (weakest reading since July) V 0.2%E

Japan Oct BoP Current Account: ¥2.18T v ¥1.72Te (40th straight surplus)

Japan Oct Trade Balance BoP Basis: ¥430.2B v ¥418.1Be

Japan Nov Bank Lending Incl Trusts Y/Y: 2.7% v 2.8%e; Ex-Trusts Y/Y: 2.7% v 2.8% prior

Japan Nov Eco Watchers Survey Current:55.1 v 52.1e: Outlook:53.8 v 54.0e

Australia/New Zealand

ASX 200 opened +0.2%; Energy Index +0.7%, Financials +0.6%; Resources -0.2%; Closed +0.3%

AWE: +7% (received higher bid from China Energy and Chemical Group)

(AU) Lynas, Pilbara Minerals and Wisetech to be added to the S&P ASX 200; To replace Flexigroup, Japara and Regis Healthcare; effective at open of trade on Dec 18th

(AU) Australia Oct Home Loans M/M: -0.6% v -2.0%e; Investment Lending: +1.6% v -6.2% prior

(AU) Australia sells A$500M in Dec 2021 Bonds, avg yield 2.0730%, bid to cover 8.54x

(NZ) New Zealand Q3 Manufacturing Activity Q/Q: 0.5% v 3.9% prior; Mfg Activity Volume: 0.3% v 1.0% prior

Korea

Kospi opened +0.3%

Samsung Electronics +1.6%, Hynix Semi +2.1%

Shipbuilder Samsung Heavy continues to decline after recent profit warning and capital raise announcement; -4.5%

South Korea to announce measures related to shipbuilding in early 2018; to establish a KRW1T corporate restructuring fund – South Korea Press

South Korea Finance Ministry: To enhance monitoring of ‘debt-ridden’ companies to prevent corporate insolvency; Sees economic recovery to continue on 'robust' exports

Russia Foreign Min Lavrov: North Korea would like talks with the US over security guarantees – press

Other Asia

Taiwan computing products firm Compal Electronics plays down speculation Lenovo is seeking a 20% stake

Taiwan Semi: Reports Nov Rev NT$93.2B v NT$94.5B m/m, +0.1% y/y

(TW) Taiwan said to forecast 2018 GDP growth 2.4-2.6% (*Note: On Nov 24th, Taiwan’s government maintained its 2018 GDP growth forecast at 2.3%)

Europe

(EU) ECB's Draghi: confirms Basel III is completed; it's a great day and a major milestone

(EU) EU: Reiterates UK PM May and EU Commission President Juncker likely to meet at 7 AM CET in Brussels; 7:30 CET press conference 'possible'

(UK) EU officials reportedly tell negotiators they hope for a Brexit breakthrough tomorrow morning (Friday) – press

(DE) Germany SPD Party Congress votes in favor of entering talks on joining grand coalition with Merkel's party – press

North America

US equities ended higher: Dow +0.3%, S&P500 +0.3%, Nasdaq +0.5%, Russell 2000 +2.1%

S&P500 Industrials Sector +0.9%, Tech +0.6%; Consumer Staples -1%

(US) Senate passes stopgap spending measure that will keep the govt funded through Dec 22nd; vote 81 to 14

(US) Trump admin reportedly preparing infrastructure plan announcement in Jan – press

(US) Fed's Dudley (dove, FOMC voter): high college costs lower economic mobility; Did not discuss monetary policy in prepared remarks

M&A: Silicon Labs agrees to acquire Sigma Designs, Inc. for $7.05/shr in $282M deal

Looking Ahead: US Nov Avg Hourly Earnings and Nonfarm payrolls due for release on Friday

Fed FOMC meeting due on Dec 12-13 (Tues-Wed)

Levels as of 01:00ET

Hang Seng +1%; Shanghai Composite +0.6%%; Kospi +0.2%

Equity Futures: S&P500 +0.1%; Nasdaq100 +0.4%, Dax +0.1%%; FTSE100 flat

EUR 1.1761-1.1777 ; JPY 113.08-113.39 ; AUD 0.7502-0.7517 ;NZD 0.6823-0.6841

Dec Gold -0.2% at $1,250/oz; Jan Crude Oil flat at $56.67/brl; Dec Copper +0.7%% at $2.984lb

Daily Pivots: (S1) 1.2802; (P) 1.2835; (R1) 1.2886; More....

Intraday bias in USD/CAD remains on the upside for 1.2916 resistance first. Firm break there will resume the rally from 1.2061 and target 1.3065 medium term fibonacci level next. In case consolidation from 1.2916 extends, near term outlook will remain bullish as long as 1.2598 resistance turned support holds.

In the bigger picture, USD/CAD should have defended 50% retracement of 0.9406 (2011 low) to 1.4689 (2016 high) at 1.2048. And with 1.2048 intact, we'd favor the case that fall from 1.4689 is a correction. Rise from 1.2061 medium term bottom should now target 38.2% retracement of 1.4689 to 1.2061 at 1.3065. Firm break there will target 1.3793 key resistance next (61.8% retracement at 1.3685). We'll now hold on to this bullish view as long as 1.2450 support holds.

USD/JPY - 113.47

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 112.28

Kijun-Sen level                  : 113.00

Ichimoku cloud top             : 112.43

Ichimoku cloud bottom      : 112.32

Original strategy  :

Bought at 112.10, met target at 113.30

Position :  - Long at 112.10

Target :  - 113.30

Stop : -

New strategy  :

Buy at 113.00, Target: 114.00, Stop: 112.65

Position :  -

Target :  -

Stop : -

As the greenback has surged again and broke above previous resistance at 113.09, adding credence to our bullish view that recent upmove is still in progress and our long position entered at 112.10 met target at 113.30 with 120 points profit, outlook remains supportive for the rise from 110.84 low to extend further gain to 113.60, then test of resistance area at 113.91-114.07, however, a sustained breach above this region is needed to signal early uptrend has resumed for headway to 114.34.

As we have taken profit on our long position entered at 112.10, would not chase this rise here and would be prudent to buy dollar again on pullback as the Kijun-Sen (now at 113.00) should limit downside and bring another rise later. Below 112.80 would deer and risk test of 112.55-60 but only break of latter level would signal top is formed instead, bring subsequent fall to 112.20-25.

Market movers today

It is time for US payrolls, where we look for a solid report. We look for a rise in employment of 195,000 in line with consensus. In our view, hourly earnings will be equally important for markets. We look for a lift to 2.6% y/y in November, from 2.4% y/y. It is still quite moderate wage growth, though, which should keep the Fed on track for a very gradual hiking pace

This morning Germany releases labour costs for Q3. As Germany has the tightest labour market in the euro area, with the lowest level of unemployment in decades, this is likely to be where we should look for the first signs of wage pressure. However, so far, wage growth has been muted. It was 2.3% y/y in Q2. Despite a tight labour market , we believe wage increases will continue to be quite moderate keeping a benign outlook for inflation.

The UK is due to release manufacturing production and the NIESR GDP estimate for November.

Selected market news

Asian stock markets rallied this morning after the value of a Bitcoin broke above USD16,600, intensifying the debate whether it is a bubble about to burst . US equity index futures are little changed, while the GBP rallied overnight on rising expectations that a deal between the UK and EU might be reached today.

In the US, Congress has averted a government shutdown on Saturday, by passing legislat ion that will maintain funding for two weeks, deferring decisions on spending for defence and domestic programmes. Lawmakers now have unt il 22 December to overcome lingering differences, while Republicans still hope to finish tax legislation before year-end.

China's November trade figures released overnight surprised on the upside, as exports and import s grew by 12.3% y/y and 17.7% y/y, respect ively. Chinas' t rade performance has rebounded this year thanks to st rong domest ic and external demand but we st ill expect the export engine to slow somewhat . Meanwhile, revised GDP figures showed that Japan's economy grew twice as quickly as originally estimated in Q3 (2.5% annualised) due to big gains in capital expenditure.

Germany's SPD party has decided t o hold talks wit h Angela Merkel's CDU party but wit hout committing to a specific outcome. This opens the door to Germany's third grand coalition in 12 years but, in our view, talks are likely to drag on well into 2018. Martin Schulz was also re-elected as SPD party leader but the party dismissed his proposal for a United States of Europe by 2025.

Time is running out for PM Theresa May to find a solution for the Irish border issue to be cleared ahead of the EU summit next week, as EU chief negotiator Michel Barnier stressed that the UK/EU have only 48 hours left to reach an agreement. If no deal is reached, the next EU summit is in March. May is set to meet EC president Jean-Claude Juncker and European Council President Donald Tusk today in Brussels in the hope of finalising an agreement on phase 1 of Brexit negotiations.

Daily Pivots: (S1) 1.1757; (P) 1.1786 (R1) 1.1800; More....

EUR/USD's fall from 1.1960 extends to as low as 1.1742 so far. With 1.1712 support intact, we're still treating it as a correction. Intraday bias stays neutral first. On the upside, above 1.1847 minor resistance will turn bias back to the upside for 1.1960 first. Break will resume whole rise from 1.1553 and target 1.2091 high. However, decisive break of 1.1712 will indicate completion of the rise from 1.1553 and turn near term outlook bearish for this support.

In the bigger picture, rise from 1.0339 medium term bottom is 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. Meanwhile, sustained trading below 55 week EMA (now at 1.1393) will suggest that such medium term rebound is completed and could then bring retest of 1.0339 low.

Daily Pivots: (S1) 1.3366; (P) 1.3425; (R1) 1.3530; More....

GBP/USD rebound strongly after hitting 1.3319 but upside is limited below 1.3549 so far. Intraday bias remains neutral first. As long as 1.3337 holds, further rise is expected. Break of 1.3549 will target 1.3651 high and above. However, decisive break of 1.3337 will argue that rise from 1.3038 has completed and turn bias back to the downside for this support.

In the bigger picture, while the medium term rebound from 1.1946 low is strong, it's still limited below 1.3835 key support turned resistance. As long as 1.3835 holds, we'd view such rebound as a correction. That is, we'd expect another leg in the long term down trend through 1.1946 low. However, 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) 0.9892; (P) 0.9919; (R1) 0.9969; More....

Intraday bias in USD/CHF remains on the upside as rise from 0.9734 is still in progress for 1.0037 resistance. Firm break there will confirm resumption of whole rise from 0.9420 and target 61.8% projection of 0.9420 to 0.9734 from 1.0047 at 1.0115 next. On the downside, below 0.9909 minor support will turn bias neutral and bring consolidations first.

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) 112.48; (P) 112.81; (R1) 113.42; More...

USD/JPY's rise from 1108.3 resumed by breaking through 113.08 and reaches as high as 113.47 so far. The development also revived the case that pull back from 114.73 is completed at 110.83. Intraday bias is back on the upside for retesting 114.73 key resistance. On the downside, break of 111.98 support is needed to indicate near term reversal. Otherwise, outlook will be mildly bullish in case of retreat.

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