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USD/CAD has bounced back after testing hourly support lies at 1.2667 (10/11/2017 low). Hourly resistance stands at 1.2917 ( 27/10/2017 high). Expected to show further bearish consolidation.

In the longer term, the pair has broken longterm support that can be found at 1.2461 (16/03/2015 low). Strong resistance is given at 1.4690 (22/01/2016 high). The pair is likely to head further lower.

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USD/CHF's volatility is lower. The pair lies in a short-term bullish momentum. Yet, the technical structure indicates further downside risks. The pair has failed to hold consistently above the parity.

In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.

USD/JPY keeps on pushing higher. The pair has strongly bounced back. Hourly resistance is given at 112.70 (30/11/2017 high).

We favor a long-term bearish bias. Support is now given at 99.02 (10/08/2013 low). A gradual rise towards the major resistance at 125.86 (05/06/2015 high) seems unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

GBP/USD has been trading lower over the past few days but the technical structure indicates an extension of bullish momentum. Support is given at a distance at 1.3027 (06/10/2017 low). Expected to show continued decline towards 1.3300.

The long-term technical pattern is reversing. The Brexit vote had paved the way for further decline. Long-term support can be found at 1.1841 (07/10/2017 low). Long-term resistance given around 1.35 is at stake and indicates a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

EUR/USD lies in a short-term bearish momentum. Hourly resistance is given at 1.1961 (27/11/2017 high). Hourly support given at 1.1809 (30/11/2017 low) has been broken. Expected to show continued decline.

In the longer term, the momentum is now turning largely positive. We favour a continued bullish bias. Key resistance is holding at 1.2252 (25/12/2014 high) while strong support lies at 1.0341 (03/01/2017 low).

Notes/Observations

Germany Industrial Production misses expectations - Irish border issue highlights that the Brexit process would not be solved overnight; More reports of a potential revolt within PM's party over her strategy

German SPD party will formally decide later today whether it resume talks with the Union on a Grand coalition

China Nov FX Reaserves rise for the 10th straight month

Asia:

BoJ Gov Kuroda reiterated long way to go to reach 2% price target, would 'persistently' continue 'powerful' easing with the current yield curve policy appropriate for now. BoJ had necessary tools to engineer a smooth exit from QQE but too early to speak about details of future exit

Europe:

Allies of Brexit Min Davis reportedly have launched attempt to replace PM May (**Reminder: On Nov 12th reports circulated that 40 MPs had agreed to sign a letter of no confidence in PM May, short of number required to force leadership vote (48 required)

EU Juncker said to be concerned that UK PM May's Govt could collapse next week if Brexit talks remained deadlocked; Juncker would extend deadline for PM May to settle a dispute over the Irish border to the eve of an EU leaders' summit next Thursday (Dec 14th) to maximize her chances of success

Ireland PM Varadkar and UK PM May joint statement agreed on the 'paramount importance' of no hard border in Ireland

Ireland PM Varadkar: had a good phone call with UK PM May, and willing to look at any proposals from the UK side. PM May did not suggest any new wording on the Irish border today. Any new wording on the Irish border must be consistent with the substance of the text that was agreed upon on Monday. There was very little room to maneuver

Americas:

President Trump: recognized Jerusalem as Israel's capital (as expected); believed it's in the best interests of the US and the pursuit of peace between Israelis and Palestinians

White House: President Trump looking forward to productive discussion with Republican, Democrat leadership on Thursday (Dec 7th); administration hopes to find fiscally responsible ways to avoid a government shutdown

Sen Cornyn (R-TX): Congress might wrap up tax negotiations before Dec 22nd to send bill to President Trump

US House Republicans said to seek to link debt ceiling increase to spending bill

Economic Data:

(NL) Netherlands Nov CPI M/M: -0.2% v +0.1% prior; Y/Y: 1.5% v 1.3% prior

(NL) Netherlands Nov CPI EU Harmonized M/M: -0.4% v +0.2% prior; Y/Y: 1.5% v 1.4%e

(CH) Swiss Nov Unemployment Rate: 3.1% v 3.1%e, Unemployment Rate (Seasonally adj): 3.0% v 3.1%e

(DE) Germany Oct Industrial Production M/M: -1.4% v +0.9%e; Y/Y: 2.7% v 4.3%e

(NO) Norway Oct Industrial Production M/M: -1.4% v -1.7% prior; Y/Y: -2.0% v +12.3% prior

(NO) Norway Oct Manufacturing Production M/M: 0.7% v 0.7%e; Y/Y: 1.9% v 1.2% prior

(DK) Denmark Oct Industrial Production M/M: +2.5 v -5.1% prior

(FR) France Oct Trade Balance: -€5.0B v -€4.7Be

(CH) Swiss Nov Foreign Currency Reserves (CHF): 738.2B v 745.0Be (1st decline since Jun)

(CN) China Nov Foreign Reserves: $3.119T v $3.124Te (10th straight month of increases)

(UK) Nov Halifax House Prices M/M: 0.5% v 0.2%e; 3M/3M: 3.9% v 3.9%e

(SE) Sweden Nov Average House Prices (SEK): 2.944 v 2.972M prior - (SE) Sweden Nov Budget Balance: No est v 6.7B prior

(IT) Italy Q3 Unemployment Rate: 11.2% v 11.2%e (matched lowest quarterly reading since 2012)

(EU) Euro Zone Q3 Final GDP (3rd reading) Q/Q: 0.6% v 0.6%e v 0.6% prelim; Y/Y: 2.6% v 2.5%e

(EU) Euro Zone Q3 Household Consumption Q/Q: 0.3% v 0.4%e, Govt Expenditure Q/Q: 0.2% v 0.3%e, Gross Fixed Capital Q/Q: 1.1% v 0.7%e

(BR) Brazil Nov FGV Inflation IGP-DI M/M: 0.8% v 0.6%e; Y/Y: -0.3% v -0.5%e

Fixed Income Issuance:

(ES) Spain Debt Agency (Tesoro) sold total €3.66B vs. €3.0-4.0B indicated range in 2022, 2027 and 2041 Bonds

Sold €1.24B in 0.45% Oct 2022 SPGB; Avg yield: 0.290% v 0.363% prior, Bid-to-cover: 1.9x v 2.34x prior\

Sold €1.63B in 1.45% Oct 2027 SPGB; Avg yield: 1.410% v 1.536% prior; Bid-to-cover: 1.5x v 1.52x prior

Sold €790M9Bn 4.70% July 2041 SPGB; Avg Yield: 2.427% v 2.545% prior; Bid-to-cover: 1.6x v 1.40x prior

Spain Debt Agency (Tesoro) sold €490M vs. €250-750M indicated range in 0.30% Nov I/L 2021 bonds (SPGBei;Bonoei) bond; Real Yield: -1.183% v -0.927% prior; Bid-to-cover: 2.67x v 3.28x prior

(FR) France Debt Agency (AFT) sold total €3.997B vs. €3.0-4.0B indicated in 2026, 2029 and 2039 Oats

Sold €1.99B in 0.25% Nov 2026 Oat; Avg Yield: 0.36% v 0.91% prior; Bid-to-cover: 1.86x v 2.75x prior

Sold €942M in 5.5% Apr 2029 Oat; Avg Yield 0.60% v 0.93% prior; Bid-to-cover: 1.79x v 1.90x prior

Sold €1.065B in 1.75% 2039 green Oat; Avg Yield: 1.27% v 1.51% prior; Bid-to-cover: 1.69x v 1.87x prior

(- SE) Sweden sold SEK 500M in 0.125% I/L 2026 bond; Avg Yield: -1.4879% v -1.277% prior; Bid-to-cover: 2.57x v 1.95x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.3% at 387.5, FTSE +0.3% at 7371, DAX +0.5% at 13064, CAC-40 +0.3% at 5392, IBEX-35 +0.3% at 10214, FTSE MIB +0.3% at 22371, SMI +0.3% at 9336, S&P 500 Futures +0.2%]

Market Focal Points/Key Themes: European Indices trade higher across the board following a mixed session in Asia, and tracking gains in US futures overnight. In the UK Bookmakers Ladbrokes Coral and GVC have has discussion over a potential merger, with shares up sharply as a result. Else where Uniper shares trade lower after 2018 guidance, while Orange trades higher after providing mid and long term guidance ahead of its investor day. On the earnings front DS Smith trades higher, while Schaffner trades lower, while Steinhoff Intl continues to decline sharply after the company's update after the close failed to provide assurance. Looking ahead notable earners include Dollar General, Ciena and Jinksolar.

Equities

Consumer discretionary [Ladbrokes Coral [LCL.UK] +23%, GVC [GVC.UK] +4.1% (Discussions with GVC over possible combination), William Hill [WMH.UK] +2.1% (Reach agreement on NYX), Steinhoff [SNH.ZA] -30% [Updates market on concerns) ]

Industrials: [Skanska [SKAB.SE] +1.2% (New CEO) ]

Financials: [ Xafinity [XAF.UK] +6% (Earnings, Acquisition)]

Telecom: [Orange [ORA.FR] +1.5% (Investor day)]

Energy: [Uniper [UN01.DE] -1.0% (Initial FY18 outlook)]

Speakers

ECB approved new Eurosystem-wide collateral management system

ECB's Nouy (SSM chief): Bank NPL measures will not happen automatically; proposals to be presented in Q1

Sweden Central Bank (Riksbank) Floden: No reason to be alarmed over housing market macro effects at this time. Development on housing market importance needed to be analyzed. Could stop the QE bond buying program and resume it if necessary (**Note current program runs through December)

Poland Parliament said to have rejected a motion of no confidence in govt (**Note: awaiting the announcement of a new PM)

Turkey Econ Min Zeybekci: Q3 GDP growth to exceed 10%

China FX Regulator SAFE: Forex reserves size to remain stable overall. More balanced international payments, steady cross-border capital flows to help maintain stable forex reserves overall

Currencies

GBP currency remained vulnerable as talks between the UK and the EU remain at an impasse over the question what will happen with the Irish border after the UK leaves the bloc. Renewed circulation that allies of Brexit Min Davis have launched an attempt to replace PM May before the end of the year

EUR/USD was steady in quiet trading. German SPD party will formally decide later today whether it resume talks with the Union on a Grand coalition (party went into the opposition following the Sept elections)

USD/JPY was higher to move back above the 112.60 area as the Nikkei stock index bounced back after suffering its worst decline in 2017 during Wed's session

Fixed Income

Bund futures trade 163.50 up 5 ticks, as investors focus on technical levels. Continued downward pressure sees 162.10 followed by 161.50. A reversal targets 163.75 then 164.33.

Gilt futures trade at 125.58, little changed and near the highs of December. Continued upside eyeing 125.75 then 126.35. Downside targets include 124.50 then 123.75.

Thursday's liquidity report showed Wednesday's excess liquidity rose to €1.914T from €1.910T. Use of the marginal lending facility rose to €123M from €704M prior.

Corporate issuance saw 3 issuers raise $5.7B in the primary market

Looking Ahead

05:30 (UK DMO to sell £2.25B in 1.5% July 2047 Gilts

05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds (3 tranches)

05:30 (PL) Poland to sell Bonds - 06:00 (IE) Ireland Oct Live Register Monthly Change: No est v -2.4K prior

06:00 (CL) Chile Nov CPI M/M: 0.1%e v 0.6% prior; Y/Y: 1.9%e v 1.9% prior

06:00 (ZA) South Africa Oct Manufacturing Production M/M: +1.0%e v -0.8% prior; Y/Y: +1.1%e v -1.6% prior

06:30 (CL) Chile Nov International Reserves: No est v $39.3B prior

06:30 (CL) Chile Nov Trade Balance: $0.7Be v $0.6B prior; Total Exports: $6.3Be v $6.0B prior; Total Imports: $5.6Be v $5.4B prior

06:45 (US) Daily Libor Fixing - 07:30 (US) Nov Challenger Job Cuts: No est v 29.8K prior; Y/Y: No est v -3.0% prior

08:00 (PL) Poland Nov Official Reserves: No est v $110.6B prior

08:00 (RU) Russia Gold and Forex Reserve w/e Dec 1st: No est v $430.2B prior

08:00 (RU) Russia Nov Official Reserve Assets: $428.5Be v $424.9B prior

08:05 (UK) Baltic Dry Bulk Index

08:30 (US) Initial Jobless Claims: 240Ke v 238K prior; Continuing Claims: 1.92Me v 1.957M prior

08:30 (CA) Canada Oct Building Permits M/M: No est v 3.8% prior

08:30 (US) Weekly USDA Net Export Sales

09:00 (MX) Mexico Nov CPI M/M: 1.0%e v 0.6% prior; Y/Y: 6.6%e v 6.4% prior, CPI Core M/M: 0.3%e v 0.3% prior

09:00 (FI) Finland Parliament no-confidence motion

09:00 (BR) Brazil to sell 2018, 2019 and 2021 LTN Bills

09:30 (TR) Turkey Nov Cash Budget Balance (TRY): No est v -4.5B prior

10:00 (CA) Canada Nov Ivey Purchasing Managers Index (seasonally Adj): 62.5e v 63.8 prior

10:30 (US) Weekly EIA Natural Gas Inventories

11:00 (US) Treasury announcement for upcoming 3-year, 10-year and 30-year issuance during week of Dec 11th

12:00 (US) Q3 Financial Accounts: Household Change in Net Worth: No est v $1.698T prior

14:00 (CO) Colombia Central Bank Nov Minutes

15:00 (US) Oct Consumer Credit: $17.0Be v $20.8B prior

Bitcoin: Greed is the main driver at the moment.

Sheer greed is driving the cryptocurrency higher, perhaps to USD 20,000 per coin by Christmas. This would put Bitcoin’s market cap above US$300 billion, one third that of Apple! Bitcoin is unique in history, true, but a correction will likely be very tough.

Two Chicago exchanges, the CBOE and the CME, will soon launch trading of cryptocurrency futures. This signals an impending stampede of institutional investors – many speculators, some hedgers. Just watch the fireworks fly.

Swiss inflation pause

November inflation in Switzerland fell slightly, allowing the Swiss National Bank to sign with relief. This allows the central bank to avoid tightening monetary policy. The bank and most exporters are pleased that the CHF has weakened 5.5% over the past year.

Markets are pricing in the first interest rate hike of only 0.25% only in March 2019. In 2018 the franc will remain a favourite funding currency. We remain positive on EUR/CHF and USD/CHF: dips are opportunities to reload long positions.

As it was projected yesterday, an attempt of the currency exchange rate to reach the 1.1866 level was neutralized by the slipping 55-hour SMA. Accordingly, the Dollar continued to appreciate against the Euro. The only difference is that this downward movement led to transformation of a descending channel into the falling wedge formation. The new pattern presupposes an upcoming rebound, which might happen once the pair will reach the 38.2% Fibonacci retracement level located at 1.1760. However, even in case this scenario materializes the surge might not last for long due to pressure of three moving averages. In addition to that, the northern side is covered by the support-turned-resistance monthly PP at 1.1806.

In line with expectations, the overall optimism related to progress made on tax reform and decreased probability of a government shutdown continued to push the cable downwards. Although the pair has crossed the 200-hour SMA, the further plunge was temporarily stopped by the monthly PP at located at the 1.3372 level. But since information background remains positive and the currency rate is located within junior descending channel, it is expected to continue moving to the bottom towards the 1.3340 mark. In any case, an active surge is unlikely as northern side became protected by a combination of the weekly PP, the 55- and 200-hour SMAs. The only factor that might break the above resistance would be political news especially the one that are related to Brexit.

As it was forecasted yesterday, after making a rebound from combined support set up by the weekly PP, the 200-hour SMA and the lower line of a junior descending channel the pair started moving in the opposite direction and managed to bypass two other MAs. The surge happened despite release of negative employment data, which means that markets are mainly focused on situation related to tax reform and the US government shutdown. Today the upward movement is expected to continue as well, even though there is a high chance that it will be stopped, first, by resistance zone near the monthly PP and then by the 50% Fibonacci retracement level located at 113.00. However, a change in information landscape or aggravation of situation with North Korea might alter this generally bullish scenario.