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Daily Pivots: (S1) 111.23; (P) 111.42; (R1) 111.68; More...

USD/JPY's fall resumed after brief consolidation and breaks 111.06 temporary low. Intraday bias is turned back to the downside for 61.8% retracement of 107.31 to 114.73 at 110.14. For the moment, we're still favoring the case medium term corrective pattern from 118.65 has completed at 107.31 already. Hence, we'll looking for bottoming below 110.14 to bring another rise. On the upside, above 116.68 minor resistance will turn intraday bias neutral first.

In the bigger picture, as long as 107.31 support holds, medium term rise from 98.97 (2016 low) is not completed yet. And another rise is in favor. Break of 114.73 resistance will target a test on 118.65 high first. However, break of 107.31 will dampen this will and extend the medium term fall back to 98.97 low.

Daily Pivots: (S1) 0.9772; (P) 0.9799; (R1) 0.9817; More....

Intraday bias in USD/CHF remains on the downside as fall from 1.0037 is in progress for 61.8% retracement of 0.9420 to 1.0037 at 0.9656. We'll look for bottoming again below 0.9656 and above 0.9420. On the upside, break of 0.9946 resistance will indicate that the decline from 1.0037 has completed and bring retest of this resistance.

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.

EUR/GBP - 0.8940

Original strategy  :

Sold at 0.8950, Target: 0.8820, Stop: 0.8990

Position : - Short at 0.8950

Target :  - 0.8820

Stop : - 0.8990

New strategy  :

Hold short entered at 0.8950, Target: 0.8820, Stop: 0.8990

Position : - Short at 0.8950

Target :  - 0.8820

Stop : - 0.8990

 
Although the single currency rebounded after finding support at 0.8842, outlook remains consolidative, reckon upside would be limited to 0.8970 and bring retreat later, below 0.8890-95 would suggest the rebound from 0.8842 has ended, bring another test of this level, below there would retain bearishness and extend weakness to support at 0.8812 but break there is needed to confirm the rebound from 0.8733 has ended at 0.9015, bring subsequent fall towards 0.8791 support.

In view of this, we are holding on to our short position entered at 0.8950. Only above indicated resistance at 0.9015 would risk test of previous resistance at 0.9033 but only a breach of this level would signal an upside break of recent established broad range has occurred, then subsequent rise to 0.9070-75 would follow.

Our preferred count is that, after forming a major top at 0.9805 (wave V), (A)-(B)-(C) correction is unfolding with (A) leg ended at 0.8400 (A: 0.8637, B: 0.9491 and 5-waver C ended at 0.8400. Wave (B) has ended at 0.9413 and impulsive wave (C) has either ended at 0.8067 or may extend one more fall to 0.8000 before prospect of another rally. Current breach of indicated resistance at 0.9043 confirms our view that the (C) leg has ended and bring stronger rebound towards 0.9150/54, then towards 0.9240/50.

Daily Pivots: (S1) 1.3286; (P) 1.3322; (R1) 1.3367; More....

Intraday bias in GBP/USD remains on the upside as rise from 1.3038 is in progress for 61.8% retracement of 1.3651 to 1.3026 at 1.3412. Sustained break there will pave the way to retest 1.3651 high. Nonetheless, rejection from 1.3412, or break of 1.3278 minor support will revive the case that price actions from 1.3026 are merely correction. And intraday bias will be turned back to the downside for 1.3026 low in that case.

In the bigger picture, as noted before, GBP/USD hit strong resistance from the long term falling trend line. Nonetheless, subsequent fall was contained by 55 week EMA (now at 1.3069). Outlook is a bit mixed. For the moment, as long as 1.3835 support turned resistance holds, medium term rise from 1.1946 are viewed as a corrective pattern. 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.

The DAX index has started the week with gains. Currently, the DAX is at 13,101.50, up 0.25% on the day. On the release front, there are no eurozone or German events on the schedule.

The ECB changed directions and chopped its asset purchases at the November rate meeting, so analysts were eager to read the details of that meeting. The minutes, published on Thursday, stated that there was "broad agreement" among policymakers that further stimulus was still needed to boost inflation towards the ECB's target of close to 2 percent. The minutes noted that some policymakers wanted the ECB to announce an end date to the asset purchases, but in the end, members decided to extend the program by 9 months, to September 2018.

The DAX continues to hover at high levels, buoyed by a robust German economy. The week ended on a high note, as German Ifo Business Climate in November set another record high. The indicator climbed to 117.5, above the estimate of 116.6 points. On Thursday, Final GDP in the third quarter accelerated to 0.8%, its strongest quarter since 2014. Manufacturing PMI surged to 62.5, pointing to strong expansion in the manufacturing sector. On the political front, there are renewed hopes that another election can be avoided, as the SPD (socialist democrats) have reluctantly agreed to hold coalition talks with Merkel's conservative bloc. The SPD was the junior partner in the previous government, and is expected to come with a shopping list if it agrees to a "grand" coalition. This could mean more government spending and no cap on asylum seekers. The euro has not lost a stride since the political crisis, and on Friday, the currency pushed above 1.19 for the first time since late September.

Daily Pivots: (S1) 1.1859; (P) 1.1901 (R1) 1.1967; More....

EUR/USD's rally continues today and edges higher to 1.1956 so far. Intraday bias remains on the upside and rise from 1.1553 should target a test on 1.2091 high. Break there will resume medium term up trend from 1.0339 and target 61.8% projection of 1.0569 to 1.2091 from 1.1553 at 1.2494, which is close to 1.2516 long term fibonacci level. We'd expect strong resistance from there to bring reversal. On the downside, touching 1.1860 support will turn intraday bias neutral first. But break of 1.1712 support is needed to indicate completion of rise from 1.1553. Otherwise, outlook will remain cautiously bullish in case of retreat.

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.

There isn't a clear new direction in the forex markets today. Euro remains firm against as supported by economic outlook, and improving political situation in Germany. But the common currency is out-performed by commodity currencies. On the other hand, Dollar's recovery quickly lost momentum, with EUR/USD continuing to gyrate higher. The greenback is only performing slightly better than Swiss Franc, which trades as the weakest one so far. Overall, trading is rather quiet. Traders are holding their bets ahead of inflation data from US, Eurozone and Japan. Also, the development with US Senate tax bill and Germany coalition talks, as well as Brexit negotiations will also be the drivers later in the week.

Yen on the other hand, is out performing Europeans and Dollar.

Fed Governor Jerome Powell, President Donald Trump's nomination for the next Fed chair, will appears before the Senate Banking Committee on Tuesday for confirmation hearing. Powell's comments will be scrutinized for hints on how monetary policy direction would change in post-Yellen era. And more importantly, his view on inflation will catch most attentions. Meanwhile, current Fed chair Janet Yellen will also testify before Congress.

Tax plan to be floored in Senate

For now, the voting in Senate for the Republican's tax bill this week is the first hurdle to overcome. With a slim 52 majority, Republicans can only afford to lose two votes. Ron Johnson is so far the only Republican that's openly against the last version of the plan. In Johnson's view, large corporations are the ones getting most benefits, leaving small businesses behind. Also, the tax plan is not without oppositions from other Senate Republicans. Bob Corker is very concerned with raising deficit in the long-run. Susan Collins is unhappy that repeal of Obamacare individual mandate is tied to the plan.

It's reported that Senate Republicans are considering some last-minute changes to the tax bill to secure the votes before flooring this week. President Donald Trump hinted changes as he tweeted "the Tax Cut Bill is getting better and better". Generally, it's seen that this week is "make or break" for the tax plan.

Merkel will try to bring SPD back to grand coalition

A breakthrough in German politics was seen as SPD has agreed to discuss with CDU/CSU over the possibility of forming a government. While both a repeat of the grand coalition or a support of a CDU/CSU minority government are possible, it is believe that the former is more likely. On CDU/CSU side, Chancellor Angela Merkel got support from her allies for the grand coalition. Daniel Günther, A CDU member and Minister President of Schleswig-Holstein said that effectiveness won't come from a minority government but "instead an alliance with a parliamentary majority. That is a grand coalition." Leader of the Christian Social Union Horst Lorenz Seehofer also said that "an alliance of the conservatives and the SPD is the best option for Germany - better anyway than a coalition with the Free Democrats and the Greens, new elections or a minority government."

However, negotiations for rebirth of grand coalition is not necessarily easier than the Jamaican one, with migration and refugees issues also key points of contentions. According to Ralf Stegner, the SPD's deputy, his party objects that the upper limit policy on refugee arrivals", noting this "goes against the constitution and the Geneva Refugee Convention". Stegner added that the SPD "won't agree to an additional limit on the right to family reunification". Meanwhile, Alexander Schweitzer, SPD's leader in Rhineland Pfalz, requests more investment in education, housing and broadband, and relief to indebted communities. He warned that a new grand coalition remains "out of reach", unless CDU/CSU changes agrees to concede in the above important issues. Foreign Minister Sigmar Gabriel, the former leader of the SPD, sounded non committal as he said that no one should take the grand coalition for granted. But he added that Germany needs "a sufficiently courageous, majority-equipped government that is capable of action" as the leader in EU.

Merkel will meet with SPD leader Martin Schulz, CSU leader Seehofer and President Frank-Walter Steinmeier on Thursday.

UK PM May has one more week to improve Brexit offers

As requested by European Council President Donald Tusk, UK Prime Minister Theresa now has only a week left to come up with a improved offer for Brexit negotiation. EU officials will check the progress to see if sufficient progress was made to move on to trade talk during the December 14/15 summit. UK is starting to soften its stance on the divorce bill and it's reported that May is ready to double the amount offered. But the topic of Irish border has come to spotlight during the weekend.

UK's international trade secretary Liam Fox warned that "we can't come to a final answer to the Irish question until we get an idea of the end state." That is, according to Fox, the decision on Irish border won't be made before reaching a trade agreement with EU. And Fox blamed that "the quicker we can do that the better, and we are still in a position where the EU doesn't want to do that."

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1859; (P) 1.1901 (R1) 1.1967; More....

EUR/USD's rally continues today and edges higher to 1.1956 so far. Intraday bias remains on the upside and rise from 1.1553 should target a test on 1.2091 high. Break there will resume medium term up trend from 1.0339 and target 61.8% projection of 1.0569 to 1.2091 from 1.1553 at 1.2494, which is close to 1.2516 long term fibonacci level. We'd expect strong resistance from there to bring reversal. On the downside, touching 1.1860 support will turn intraday bias neutral first. But break of 1.1712 support is needed to indicate completion of rise from 1.1553. Otherwise, outlook will remain cautiously bullish in case of retreat.

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.

Economic Indicators Update

GOLD: The commodity looks to extend upside pressure as it was seen following through higher on Monday. On the downside, support comes in at the 1,290.00 level where a break will turn attention to the 1,280.00 level. Further down, a cut through here will open the door for a move lower towards the 1,270.00 level. Below here if seen could trigger further downside pressure towards the 1,260.00 level. Conversely, resistance resides at the 1,300.00 level where a break will aim at the 1,310.00 level. A turn above there will expose the 1,320.00 level. Further out, resistance stands at the 1,330.00 level. All in all, GOLD looks to strengthen further on correction.

The British pound continues to press higher against the U.S dollar, with price-action now testing towards the former weekly high, at 1.3360. The GBPUSD pair currently trades around the 1.3350 level, with dip buyers stepping in earlier at the key 1.3307 level. Moving into the U.S session, the key 1.3400 price region may act as the natural upside target above the 1.3360 level for sterling buyers. Tuesday also promises to be volatile day for the GBPUSD pair, with BOE Governor Mark Carney speaking, and the release of the BOE Financial Stability Report.

The GBPUSD pair remains technically bullish while trading above the 1.3307 level. Further intraday upside towards the 1.3400 and 1.3430 levels seems entirely possible today.

Should the GBPUSD pair start to slip much below the 1.3307 technical level, further selling towards the 1.3268 level appears most likely.

The U.S dollar remains under heavy selling pressure against the Japanese yen, with risk-off trading sentiment the prevalent market theme on Monday. The USDJPY pair trades close to the 111 handle, as Chinese stock markets continue to tumble, with credit yields also widening. On Friday we saw the pair slowly push towards and then rejected from the USDJPY 200-day moving average, signaling a lack of overall buying demand. We are likely to see full trading volumes return on Tuesday, as North American desks start to fully open.

The USDJPY pair is likely to remain under pressure while trading below the 111.72 level. Any upside attempts above 111.72, look likely to be capped by the 112.20 resistance level.

Should price action decline below the 111.07 technical level, intraday sellers may look to test the 110.66 level, with a possible deeper decline all the way towards 110.00.