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USDJPY (112.49): The U.S. dollar rose to a one-month high yesterday but price closed bearish towards the end of day. Failure to maintain the gains saw USDJPY reversing gains below the 113.00 handle. We expect the near term declines to push USDJPY back towards the 112.04 level of support. The unfilled gap from Friday's close also resides close to this level which validates this view. Alternately, if the bullish momentum resumes, we could expect USDJPY to test the 113.00 resistance level on a convincing close above 112.65 level of minor support and resistance.

EURUSD (1.1873): The EURUSD closed almost flat yesterday after gapping down on Monday's open. The currency pair however remains supported to the upside in the short term. The decline to the 1.1843 support is consistent with this view. There is scope for the euro currency to retrace the declines and probably rise towards Friday's close at 1.1898 to fill the gap. Price action remains supported above 1.1843 in the near term. Resistance at 1.1920 is likely to keep a lid on any further gains. A breakout from this range is expected which could set the near term bias in the currency pair.

USD/JPY - 112.65

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 112.54

Kijun-Sen level                  : 112.73

Ichimoku cloud top             : 112.48

Ichimoku cloud bottom      : 112.19

Original strategy  :

Buy at 112.30, Target: 113.30, Stop: 111.95

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 112.10, Target: 113.30, Stop: 111.75

Position :  -

Target :  -

Stop : -

As the greenback has retreated after rising to 113.09 yesterday, suggesting consolidation below this level would be seen and pullback to 112.10-20 cannot be ruled out, however, reckon downside would be limited to 111.80-85 and bring another rise later, above said resistance at 113.09 would extend recent rise to resistance at 113.33 but loss of upward momentum should prevent sharp move beyond 113.60-70.

In view of this, we are still looking to buy dollar on pullback as 112.00-10 should limit downside and bring another rise. Below 111.80 would defer and risk weakness to 111.60 but only break of said support at 111.37-41 would abort and signal top is formed instead. 

The British pound was seen trading volatile as the currency pair gave up the gains intraday. This came after news reports emerged that the UK and the EU talks turned inconclusive. The British PM May was in Brussels yesterday to meet with Juncker and discuss the Brexit bill and the Irish border.

In the U.S. the passage of the tax reforms bills boosted the Greenback. Investors expect that the tax cuts will help the U.S. economy while also increase the pace of rate hikes. The news helped stall a three day decline in the U.S. dollar.

On the economic front, the U.S. factory orders showed a 0.1% decline on the month. This was slightly better than the 0.3% decline that was forecast. Previous month's revised data showed an increase of 1.7%. In the UK, the construction PMI was better as data showed an increase to 53.1 beating forecasts of 51.2 and up from 50.8 previously.

Looking ahead, the economic data today will see the UK's services PMI and the non-manufacturing PMI from ISM. Earlier in the day, the RBA's monetary policy meeting showed interest rates staying unchanged at 1.50%.

The U.S dollar is starting to recover upside momentum against the Japanese yen, after falling towards the 112.40 support level during the Asian session. The USDJPY pair currently trades around the 112.60 level, after giving way to strong technical selling earlier on, as the U.S dollar index slipped back from Monday's price-high. The macroeconomic calendar will remain empty for Japan on Tuesday, however later today we see a raft of Manufacturing related data coming from the United States economy.

Should price action on the USDJPY pair hold below the 112.70 technical level, intraday sellers may look to test the 112.40 level again, with extended support found at 111.58.

If USDJPY buyers push price-action above the 112.70 technical level again, a continuation of the recent up-move towards 113.10 and 113.89 may occur.

The British pound has moved lower against the U.S dollar, hitting 1.3418, before recovering, as the UK failed to reach a Brexit deal with the EU on Monday. British Prime Minister has until December 15th to finalize a deal with the European Union, and now needs to work with the Northern Irish coalition party leader, to find a solution to border issues. GBPUSD price-action currently holds above the 1.3450 level, although bearish pressure is mounting on sterling. Traders now look to the release of the UK Services PMI for the month of November, for the next directional move in the pair.

The GBPUSD pair is bullish while trading above the 1.3450 technical level. Further upside towards 1.3510 and 1.3549 appears possible.

A higher time-frame close below the 1.3450 level, may lead to a sell-off towards the 1.3400 and 1.3360 support regions. Extended weekly GBPUSD support is found at the 1.3303 level.

A deluge of economic data will make headlines on Tuesday, with the Eurozone region set to take primacy. Action begins early and will continue for the rest of the day leading into the North American session.

IHS Markit will release several PMI reports beginning at 08:15 GMT. The research institute will report on Germany, France, Italy and the 19-member Eurozone through a series of service and composite PMIs. Markit will also report on British PMI early on Tuesday.

The European Commission's statistics agency is also scheduled to release the latest Eurozone retial sales numbers at 10:00 GMT. Receipts at retail stores are expected to fall 0.7% in October.

In North America, Markit and ISM will each release their own versions of US services PMI. The ISM report is more closely followed by the financial markets.

Earlier in the session, Caixin China reported stronger than expected services sector growth for the world's second-largest economy. The Caixin services purchasing managers' index (PMI) rose to 51.9 in November from 51.2 the previous month.

According to the official release:

'The Caixin PMI readings in November showed the economy has maintained stability and there was no imminent risk of a significant decline in its growth rate. But we should be cautious because the economy may come under rising inflationary pressure at the start of next year due to continued price increases.”

Meanwhile, the Reserve Bank of Australia (RBA) held its trend-setting interest rate at a record low of 1.5%, where it has stood since mid-2016.

The RBA has remained on the sidelines in support of economic growth and inflation. There is currently no timeline as to when policymakers will vote for higher interest rates.

AUD/USD

The Australian dollar rose after the RBA decision, with the AUD/USD exchange rate climbing 0.4% to 0.7643. The upside move came even as the near-term momentum indicators appeared mixed at the start of Tuesday trading. The pair faces immediate support at the 0.7587 level, which also corresponds with the 21 SMA. On the opposite side of the ledger, AUD/USD has breached the 0.7627 and 0.7640 resistances. The next resistance test is likely to come at 0.7675.

EUR/USD

Europe's common currency slipped at the start of Tuesday trading, with the EUR/USD falling further below the 1.1900 handle. The pair was last seen trading at 1.1874, and faces immediate resistance around 1.1930. A deluge of economic data later in the week could dictate where this pair ends up in the short run.

GBP/USD

Cable was little changed on Tuesday, as investors awaited fresh trading catalysts later in the day. The GBP/USD exchange rate was last seen holding steady around 1.3472 after slipping from two-month tops above 1.3500. That level continues to offer strong psychological resistance. On the support side, cable is likely to find demand around 1.3430.

Despite U.S. equities closing at new records on the tax breakthrough, it was interesting to see the dollar retreating slightly against its major counterparts. It seems investors are still anxious about how the Senate will reconcile its tax bill with the House of Representatives before it goes to President Trump to sign it into law. There's no doubt the differences between both Houses are vast. However, it's in the best interest of the Republicans to get the deal done, or they risk losing the majority in November's 2018 election,and this is why it looks like just a matter of time before the final bill reaches Trump for his final blessings. This scenario will probably continue to provide the greenback support for the remainder of 2017, with pullbacks seen as an opportunity for bulls. However, the longer-term outlook may not be as bright, especially that long-term bond yields are not reflecting stocks markets' optimism. U.S. 10-year bond yields are trading below 2.4% early Tuesday, and the yield curve continues to flatten.

Friday's non-farm payrolls report is the key macro risk event on the U.S. calendar, and if no material development seen on the political side, investors aren't likely to make huge bets. Nonfarm payrolls are expected to have increased by 198,000 in November, after climbing by 261,000 in October, but it's the wages figure that will determine the dollar's direction. A reading of 0.4% or above, will support the central bank's argument that low inflation should be attributed to temporary factors, and this should lead to steepening the yield curve.

Sterling made most of the headlines yesterday. After moving higher on reports of growing confidence that the first phase of negotiations is drawing closer to a successful conclusion, GBPUSD fell sharply as Theresa May and Jean-Claude Juncker failed to reach an agreement, with Irish border being the main obstacle. The next 10-days are very critical for the Pound, as the decision to proceed to phase two of talks, will be made at the EU summit, on 14 & 15 December. Pound traders are likely to ignore fundamentals for the next couple of days and react on how the story over the Irish border develops from its currentstage.

On Monday, the US Commerce Department released Factory Orders data for October, indicating that the continued strength in the Manufacturing sector will help support the growing US economy. With the markets forecasting a drop of 0.4% in October, Factory Goods Orders only dipped 0.1% in the midst of a fall in demand for both civilian and defense aircraft after an upwardly revised 1.7% jump in September. The modest decrease in Factory Orders came as orders for durable goods fell by 0.8 %, more than offsetting a 0.7% increase in orders for non-durable goods.

Eurozone Producer Price data from Eurostat on Monday showed a faster than expected easing in October. Producer prices climbed 2.5% annualized in October, slower than September’s 2.8% rise, which was revised down from 2.9%. The markets had forecast PPI to drop to 2.6%. PPI excluding energy increased slightly to 2.3% from the previous 2.2%. Industrial producer prices rose in all EU member states, with the largest increases recorded in Belgium, Bulgaria, Poland, Hungary and Ireland.

GBP gave back some of its recent gains on reports that the discussions between Prime Minister May and EU Commission President Juncker had ended on Monday without a formal agreement. The Prime Minister is under pressure to get an agreement on EU divorce issues before European leaders meet on December 14th to decide whether to give formal approval to start talks on post-Brexit trade. The stumbling blocks appear to center around the Irish border and the role of the European Court of Justice in overseeing EU citizens’ rights in the UK after Brexit. Talks are believed to resume on Wednesday in Brussels.

USD has held onto recent gains following the passing of the US Tax Reform Bill in the Senate over the weekend. Both the Senate and the House of Representatives now need to reconcile each of their versions of the Bill – a process that is likely to face some challenges. This is standard practice and there is no reason to suggest that it will not be successful. There is every possibility that this Bill will be made law by the end of this year.

In an unsurprising move, the Reserve Bank of Australia (RBA) has left the cash rate on hold again today at 1.5%. This marks the fifteenth meeting in a row the RBA has held rates steady, with the last rate movement taking place in August 2016 with a 25-basis point rate cut. Being the last rate update for this year, the RBA board will next meet on 6 February 2018.

EURUSD is unchanged overnight, currently trading around 1.1873.

USDJPY is marginally higher in early Tuesday trading at around 112.55.

GBPUSD is unchanged in early session trading at around 1.3470.

AUDUSD is 0.7% higher, following the RBA decision to leave interest rates unchanged, currently trading around 0.7652.

Gold is slightly lower overnight, currently trading around $1,274.75.

WTI is 0.2% higher, currently trading around $57.55.

Major data releases for today:

At 08:55 GMT: Markit Economics will release German PMI and Composite PMI for November. Both PMI and Composite PMI are forecast unchanged at 54.9 and 57.6 respectively. Any significant deviation from forecast will likely see EUR volatility.

At 09:00 GMT: Markit Economics will release Eurozone Composite & Services PMI for November. Both data releases are forecast to be unchanged at 57.5 and 56.2 respectively. Any significant deviation from forecast will likely see EUR volatility.

At 13:30 GMT: the US Bureau of Economic Analysis and the U.S. Census Bureau will release the US Trade Balance for October. Forecasts are calling for an increase from the previous reading of -$43.5B to -$43.8B.

At 14:45 GMT: Markit Economics will release US Services & Composite PMI for November. Services PMI were previously 54.7 and Composite PMI was 54.6.

At 15:00 GMT: The Institute for Supply Management (ISM) will release US Non-Manufacturing PMI for November. Forecasts are calling for a lower release of 59.3 compared to the previous reading of 60.1. Any significant deviation from the forecast is likely to cause USD volatility.

GBPUSD is in a bullish phase in the near term and is poised to re-test the September peak at 1.3656. In the medium term, the pair is neutral and appears to be trapped between the key levels of 1.3000 and 1.3600.

Last week's high of 1.3549 remains a strong resistance level. Near-term upside momentum has weakened after RSI reached overbought levels at 70. The overbought conditions in the market could lead to a consolidation phase at current levels.

Any downside is expected to be contained in the support zone near 1.3300 and the 38.2% Fibonacci retracement level (1.3447) of the upleg from 1.2773 to 1.3656. A further retreat would target the 50-day moving average (1.3240) and 50% Fibonacci (1.3215). The market needs to remain above this area to keep the short-term bullish bias in place.

The overall outlook remains positive based on bullish technicals and only a move back below 1.3000 would erase the latest bullish move.