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On Friday, the pair fluctuated quite intensively amid contradicting reports that the US Senate is ready to vote for tax reform, while General Flynn pledged guilty to lying to the FBI. Despite that an anticipated resistance at 1.1936 and the 200-hour SMA at 1.1860 managed to retain the rate. A s a result, it is still fluctuating in a junior ascending channel and is about to clash with the upper boundary of a dominant descending channel.

As for today, the pair started new trading week in a limbo between the 100- and 200-hour SMAs. Although the upper side is additionally filled with the 55-hour SMA at 1.1884, the 61.8% Fibonacci retracement level at 1.1887 and the weekly PP at 1.1890, the Euro is still projected to pave the path to the north.

However, this assumption holds true unless traders interpreted Friday's plunge as a rebound from larger pattern.

As it appears from hourly chart, the 1.3550 mark signified the two month maximum that the cable could not surpass. In result of a rebound, a new junior descending channel has been formed.

The pattern is expected to stay in force at least until the rate will reach support set up by the 100-hour SMA and the weekly PP near 1.3420.

If this barrier becomes broken, a more mature support zone should be formed by the 200-hour SMA and the monthly PP at 1.3371.

However, there is an assumption about formation of two other medium ascending channels whose lower boundaries might intersect with the 23.6% Fibonacci retracement level located at 11.3256 and the monthly S1 at 1.3195. In that case, bears are likely to take the lead for the upcoming two-three weeks.

An announcement made by General Flynn that led to rapid sell-off of the buck against all major currencies perfectly matched with a breaking point of a readjusted rising wedge formation.

Fortunately, bulls managed to create support near the 111.80 mark that was surrounded by the 100- and 200-hour SMAs as well as the bottom boundary of an ascending channel.

As this event occurred shortly before markets got closed, new trading session the pair started straight from the pre-fall 112.80 level. Accordingly, the pair has once again returned back into boundaries of the above rising wedge pattern.

Since further path to the top is obstructed by the 50% Fibonacci retracement level at 113.00 and the weekly R1 at 113.11, the pair might actually make another turnaround. If a rebound happens, it might confirm validity of a new junior channel down.

In full accordance with expectations, in first half of the previous trading session the buck continued to trade against the gold in a limbo between the 1,270.50 and 1,276.70 marks that were located just above the lower trend-line of a large dominant ascending channel.

However, the subsequent admission of guilt by General Flynn led to 0.76% rise in demand for safe haven metal just in one hour. But as it was an impulse reaction, a combination of the 100- and 200-hour SMAs managed to neutralize the surge.

Since there are no impactful news planned for today, the rate is likely to spend this trading day between the 55-hour SMA at 1,279.00 and the above bottom boundary located near 1,270.00.

In larger perspective, bulls are expected to take the lead once again, although the pair might prolong consolidation for the next couple of days.

Asia:

BoJ Gov Kuroda reiterated that would continue current easing framework until 2% inflation was reached, Yield Control (YCC) program had been quite successful

China Ministry of Commerce (MOFCOM) expressed “strong dissatisfaction and firm opposition” to a statement by the US to the WTO that it opposes granting China market

Europe:

ECB's Villeroy (France) reiterated recovery in euro area was gaining momentum as current favorable economic winds were 'strong'. Still no room for complacency; needed to be 'vigilant' as inflation short of goal

European institutions reach a staff level agreement with Greece authorities on the policy package supporting the ESM program, will presented to EuroGroup on Dec 4th. Greek authorities planned to implement the prior actions necessary to conclude the 3rd review as soon as possible

Bank of International Settlements (BIS) Quarterly Review: Stock prices are above historical averages; Bond-market yields show even more froth than stocks. When and if interest rates begin to rise, corporates may have the incentive to tilt their capital structure back to equity, or at least to reduce stock repurchases, which could raise further questions about stock market valuations

Brexit:

UK Business Sec Clark: Optimistic that Britain and the EU will agree on all major issues before next week’s EU summit. UK fully recognized its payment obligation. Both sides needed to get a clear understanding what these duties are and when they were due. Agreement about rights of EU citizens living in UK an UK citizens living abroad was close

EU official: Britain and EU were 90% of the way to a deal that would open the door for transition and trade talks this month

Diplomatic sources noted that EU was expected to offer a 1st signal this week that enough progress has been made in Brexit talks to start new negotiations with London in Dec on future trade relations. PM May and EU's Juncker to sign a document after meeting in Brussels that would spell out both sides' commitment to sorting out the Irish border conundrum

EU's Tusk: if UK offer was not acceptable to Ireland then its not acceptable to the EU. Supportive of Irish request for no hard border with N. Ireland; To consult with Irish should UK offer on border be sufficient

Americas:

US Senate voted 51-49 to approve sweeping tax overhaul; talks between Senate and House of Representatives will likely begin during week of Dec 4th

President Trump tweets: Sec State Tillerson is not leaving the administration (**Note: Sec of State Tillerson: no truth to reports that he is being replaced)

ABC News suspended reporter Brian Ross for 'erroneous' story related to former national security adviser Michael Flynn. Noted that It was shortly after the election, that President-elect Trump directed Flynn to contact Russian officials on topics that included working jointly against ISIS

Economic Data:

(TR) Turkey Nov CPI M/M: 1.5% v 1.1%e; Y/Y: 13.0% v 12.5%e; CPI Core Index Y/Y: 12.1% v 12.3%e

(ES) Spain Nov Unemployment M/M: +7.3K v 56.8K prior

(EU) Euro Zone Dec Sentix Investor Confidence: 31.1 v 33.4e

(UK) Nov Construction PMI: 53.1 v 51.0e

(GR) Greece Q3 GDP Q/Q: 0.3% v 0.8% prior Y/Y: 1.3% v 1.6% prior

Fixed Income Issuance:

None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.7% at 386.7, FTSE +0.7% at 7349, DAX +1.1% at 13007, CAC-40 +0.9% at 5362, IBEX-35 +1.0% at 10184, FTSE MIB +1.1% at 22344, SMI +0.8% at 9348, S&P 500 Futures +0.5%]

Market Focal Points/Key Themes:

European Indices trade sharply higher tracking US futures after the US senate voted in favor of tax reform which in tern has also helped lift the dollar. M&A news was the primary theme this morning with Prysmian acquiring General Cable in a $3B deal while Trygvesta acquired Alka Forsinkring for DKK8.2B. Elsewhere Rio tinto provided initial FY18 outlook, whilst Alk Abello trades sharply lower after announces a 3 year investment plan, as well a temporarily suspending its dividend.
Dialog Semi continues to decline after it confirmed it continues to supply Apple, but will know in Q1 whether this relationship will change.

Equities

Materials: [Rio Tinto [RIO.UK] +1.1% (Initial FY18 outlook, Chairman appointment)]

Financials: [Trygvesta [TRYG.DK] +3.5% (Acquires Alka Forsinkring for DKK8.2B)]

Technology: [Soitec [SOI.FR] +2.3% (Capital markets day), Dialog Semi [DLG.DE] -16% (Confirms it continues to supply Apple)]

Telecom: [Prysmian [PRY.IT] -2.1% (Acquires General Cable Corp for $30/shr)]

Healthcare: [Odorsia [IDIA.CH] +3.9% (Collaboration with Janssen Biotech), Circasia [CIR.UK] +12.2% (Tudorza® Successfully Met Both Primary Endpoints in ASCENT Phase IV Study), Alk Abello [ALKB.DK] -11% (3 year investment plan)]

Speakers

Ireland European Affairs Min Mcentee: Not close to a breakthrough on Irish border issue but are making progress

Ireland Dep PM Coveney: Have seen progress on Irish issues. Need clear language that there will be no border. Have a text but no agreement. Could have a breakthrough as early as today

Bavarian Premier Seehofer to step down from position in Q1 (in-line with recent speculation). Soeder to become Bavaria PM with CSU backing

Turkey Dep PM Simsek: Lasting inflation decline to begin in Dec

Japan PM Abe: Infrastructure investment i not keeping up with demand

China reportedly will keep exempting 10% purchase tax on electric vehicles to 2020

China and Japan officials to hold 8th round of discussions regarding maritime affairs during Dec 5-6th period

Russia Nov Oil Production at 10.94M bpd v 10.93M m/m

Saudi Arabia Oil Min Al-Falih: Believed OPEC would not alter course in H2 of 2018. Will not flood the market

Currencies

The USD began the trading week exhibiting a relief rally after the US Senate passed the tax reform bill. Worries about the possibility of the bill being delayed had kept the dollar weak last week

EUR/USD lower by 0.2% at 1.1860 area

GBP/USD was relatively steady as Brexit talks head into the EU deadline for clarity. Pair off 0.2% at 1.3435 area

USD/JPY higher by 0.7% at 112.85

Fixed Income

Bund futures trade 162.99 down 56 ticks, after the U.S. Senate passed the tax cuts bill. Continued dowward pressure sees 162.10 followed by 161.50. A reversal targets 163.40 then 163.75.

Gilt futures trade at 125.11 down 34 ticks, following the move in Treasuries and Bunds. Continued upside eyeing 125.15 then 125.65. Downside targets include 124.01 then 123.75.

Friday’s liquidity report showed Thursday's excess liquidity rose to a record high of €1.912T from €1.886T. Use of the marginal lending facility fell to €243M from €265M prior.

Looking Ahead

(RO) Romania Nov International Reserves: No est v $37.6B prior

(UK) PM May's lunch with EU's Juncker ahead of key Brexit clarification deadline.

(CH) Swiss Parliament holds Winter Session in Bern

05:25 (BR) Brazil Central Bank Weekly Economists Survey

05:30 (NL) Netherlands Debt Agency (DSTA) to sell Bills

06:45 (US) Daily Libor Fixing

08:00 (BR) Brazil Oct CNI Capacity Utilization: No est v 77.5% prior

08:00 (SG) Singapore Nov Purchasing Managers Index (PMI): No est v 52.6 prior

08:00 (IN) India announces details of upcoming bond sale (held on Fridays)

08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week

08:05 (UK) Baltic Dry Bulk Index

08:30 (CH) Swiss Government question time in Parliament

08:55 (FR) France Debt Agency (AFT) to sell combined €5.2-6.4B in 2-month, 3-month, 6-month and 12-month BTF Bills

09:00 (MX) Mexico Oct Leading Indicators M/M: No est v 0.12 prior

09:00 (EU) Eurogroup meeting

09:30 (EU) ECB announces Covered-Bond Purchases

09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

10:00 (US) Oct Factory Orders: -0.4%e v+ 1.4% prior, Factory Orders (Ex Transportation): No est v 0.7% prior

10:00 (US) Oct Final Durable Goods Orders: -1.0%e v -1.2% prelim; Durables Ex Transportation: No est v 0.4% prelim

10:00 (DK) Denmark Nov Foreign Reserves (DKK): No est v 464.3B prior

11:00 (IS) Iceland Q3 Current Account (ISK): No est v 16B prior

11:30 (US) Treasuries to sell to 3-month and 6-month bills

14:00 (CO) Colombia Nov Total PPI M/M: No est v 0.8% prior

The Sterling depreciated initially against the Greenback, fuelled by stronger-than-anticipated Britain's manufacturing data. The GBP/USD exchange rate fell 15 base points or 0.11% to be seen trading lower, though bulls attempted to put the pair back above the 1.3510 mark.

The UK factories enjoyed the strongest monthly growth since 2013, indicating that manufacturing would fuel the country's sluggish economic expansion entering next year. The Markit/CIPS survey showed that Britain's Manufacturing PMI rose to 58.2 in November, following an upwardly revised 56.6 in the prior month. A strong manufacturing sector could remain a bright spot in 2018, while overall economic slowdown is expected to deepen as Brexit approaches in March 2019.

The Loonie strengthened significantly against the Greenback on strong job data, rather than on cooling GDP growth showed in the report on Friday. The USD/CAD currency pair dropped 113 base points or 0.88% to touch 1.2771 level and depreciate futher nearing the 1.2700 area.

Statistics Canada said the country's the GDP rate was at an annualised 1.7% in the Q3, following a downwardly revised 4.3% in the preceding quarter. Canadian unemployment rate fell to 5.9% for the first time since 2008, while the economy added 79.5K jobs, which was twice as many positions compared with October. Average hourly wages kept rising at yearly 2.7% in the strongest performance since early 2016, being the one of the factors for the BoC to decide on further policy changes.

The euro has posted slight losses in the Monday session. Currently, EUR/USD is trading at 1.1847, down 0.47% since the close on Friday. On the release front, Eurozone Sentix Investor Confidence dropped to 31.1, short of the estimate of 32.3 points. Eurozone PPI gained 0.4%, matching the forecast. In the US, today's sole release is Factory Orders, which is expected to decline 0.3%. On Tuesday, Germany and the eurozone release services PMIs, and the Eurozone will also release retail sales. The US will publish US ISM Non-Manufacturing PMI.

Brexit is on the menu in Brussels. as Britain and the European Union appear close to moving to trade talks. Prime Minister May and European Commission President Jean-Claude Juckner meet later on Monday in Brussels, hoping to move closer to wrapping up the first phase of the talks. May has moved closer to the European's demands on a divorce bill of around EUR 50 billion, but two items have yet to be resolved. One is the border between the UK (Northern Ireland) and Ireland, which is a member of the EU. The UK will clearly not remain in a customs union with the EU, but Ireland is insistent that there not be a hard border. The second issue is whether the European Court of Justice will have a role protecting European citizens in the UK. The EU is in favor of a role for the court, while many British lawmakers feel that such a move would impinge on British sovereignty.

All eyes are on Washington, as the Senate is set to vote on its version of tax reform. A vote was expected on Thursday night, but this has been delayed until Friday. Republican lawmakers are confident that they have the necessary votes to pass the bill, but with the vote expected along party lines, the results will be close. If the Senate does pass the bill, the stock markets and US dollar will likely respond with gains. The next step in the tax reform saga would be for the House and Senate to bridge the differences between the two bills and come up with a single version.

After some stumbling on Friday, the US Senate passed a tax reform bill on the weekend. The vote was a squeaker, with 51 Republicans voting yes, against 49 Democrats and 1 Republican. The Senate vote is a big win for President Trump, who wants to sign a tax bill before Christmas. The Senate and House must now reconcile their two bills, and the new uniform bill will then have be passed in both houses. Investors are pleased with the bill, and the US dollar has responded to the vote with broad gains.

A steady stream of economic data will make its way through the financial markets on Monday, giving investors a taste of what’s to come later in the week.

The European calendar begins at 08:00 GMT with a report on Spanish unemployment. Later in the morning, Markit and the Chartered Institute of Purchasing and Supply will release the latest UK construction PMI.

At the same time as the PMI release, Sentix will unveil its December investor confidence indicator covering the Eurozone. As the name implies, the monthly release conveys a snapshot of market opinion about the current economic situation in the currency region.

Earlier in the day, the University of Melbourne reported a 0.2% uptick in Australia’s inflation rate last month. That followed a gain of 0.3% the previous month. In annualized terms, this translated into 2.7% growth.

Later in the session, the European Commission will release the latest producer inflation report for the Eurozone.

The only noteworthy North American release takes place at 15:00 GMT when the US Commerce Department unveils the latest factory orders report.

AUD/USD

The Australian dollar was little changed against its US counterpart Monday, with the AUD/USD holding just above 0.7600. The pair broke out of a weeklong slump on Friday to reach a high of 0.7634. The technical picture remains neutral, with 0.7640 offering the key short-term resistance. That level continues to limit major upside moves for the pair. A break above this level would lead to a test of the 0.7700 region. On the opposite side of the spectrum, immediate support is located at 0.7595, followed by 0.7530, which corresponds with the November low.

EUR/USD

The euro fell further below 1.1900 US on Monday, as investors awaited a deluge of fundamental indicators later in the week. The common currency has made a series of up moves in recent weeks, but is finding it difficult to return back above 1.2000 US. At last check, the EUR/USD was trading around 1.1872 for a loss of 0.2%. From a technical perspective, immediate support is located at the 1.1860 level, followed by 1.1820. On the opposite side of the ledger, resistance is likely found at 1.1930, followed by 1.1960.

GBP/USD

Cable has enjoyed a surge of momentum in recent weeks as investors shrugged off Brexit risks. The GBP/USD traded as high as 1.3548 on Friday before giving back most of its gains subsequently. At press time, the pair was seen trading at 1.3469. Cable is testing its immediate support level of 1.3450. A further breakdown below this level would expose 1.3420 as the next target. In terms of resistance, the first line of contention is offered at 1.3505, followed by 1.3550.

WTI oil price extended lower on Monday and returned below falling weekly 200SMA ($58.07) which was briefly broken in past two weeks. Reversal signal is developing on weekly chart after last week's action ended in weekly Hanging Man candle and closed in red after six straight bullish weeks. Overbought weekly slow stochastic and RSI turning lower after denting overbought zone border are additional negative signals. Today's weakness could extended towards key supports on daily chart at $57.10 (20SMA) and $56.75 (29 Nov low), with sustained break here needed to confirm reversal. Overall bias remains bullish with positive sentiment being boosted by OPEC's decision to extend output cut agreement until the end of 2018. Buying on correction remains favored for final push towards $60.00 target, with extended pullback to risk dip towards next key support at $54.80 14 Nov trough).

Res: 58.31, 58.86, 59.02, 60.00
Sup: 57.41, 57.10, 56.75, 56.41