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The U.S. dollar gave up its gains yesterday as economic data and the Fed's meeting minutes sent the greenback lower. Durable goods orders declined more than expected following September's strong performance which was revised higher. The declines in the durable goods orders came due to a drop in transportation equipment.

The Federal Reserve released the meeting minutes yesterday. The minutes signaled that the central bank will hike interest rates amid a strengthening economy. But the minutes also showed that some Fed officials were concerned that weaker inflation would persist for longer than expected.

In the UK, the budget release showed that the government was allocating further funds towards Brexit. This comes on top of the 700 million GBP that was already set aside initially. The UK's Office for Budget Responsibility also slashed growth forecasts.

Looking ahead, the economic calendar is quiet today. The Tokyo and New York markets are closed today. Data from the Eurozone will see the final revised GDP from Germany while the UK will also release its revised GDP estimates for the third quarter. The ECB will be releasing the meeting minutes while Canada will release the retail sales numbers.

The Euro is holding in daily cloud on Thursday, with cloud base at 1.1812 acting as support and holding today's action. Doji reversal pattern that was completed on Wednesday's strong rally continues to underpin for extension towards targets at 1.1877 (cloud top) and 1.1886 (Fibo 61.8% of 1.2092/1.1553 descend). The notion is supported by fresh weakness of dollar as minutes of the last FOMC meeting, released on Wednesday, showed concerns of policymakers about stubbornly low inflation which affects expectations for Fed rate hike in December. Daily studies are in full bullish setup (10/100 SMA bull-cross is forming today, to additionally support the advance) and support bullish scenario. Thinner market conditions are expected today as US markets will be closed for Thanksgiving holiday.

Res: 1.1859, 1.1877, 1.1886, 1.1936
Sup: 1.1812, 1.1780, 1.1760, 1.1732

Sunrise Market Commentary

• Rates: Solely EMU to watch out for
  Today's eco calendar focuses on EMU with US markets closed for Thanksgiving. EMU PMI's are expected to remain at very strong levels, which should be sufficient to inflict some losses on the Bund. Minutes of the ECB meeting will reveal more about the October decision to extend APP.
• Currencies: Dollar nears/tests important support levels
  A decline in US yields hammered the dollar yesterday. EUR/USD 1.1880 resistance is again on the radar. USD/JPY dropped below the 111.65 neckline. Today, the focus is on the EMU PMI's and on the German coalition talks. Trading will develop in thin market conditions. Still we look out whether EUR/USD 1.1880 holds

The Sunrise Headlines

• US stock markets traded uneventful yesterday, closing flat with a slight underperformance of the Dow (-0.27%). Asian risk sentiment is positive overnight with China underperforming (-1%) and Japan closed.
• FOMC Minutes showed that the Fed would likely raise interest rates “in the near term” because of a strengthening economy, although several said their support for the move would hinge on whether they see inflation picking up.
• EMU consumer confidence improved more than forecast in November, from -1.1 to +0.1 (vs -0.8 forecast), hitting its strongest level since January 2001.
• Martin Schulz, the head of Germany's Social Democratic party, said he is sure a “good solution” can be found in the coming days and weeks following chancellor Merkel's failure to form a coalition government.
• New Zealand's retail sales growth slowed sharply in the Q3 (0.2% Q/Q) amid signs that a slowing housing market has dented consumer confidence, pointing to slower spending in the year ahead. One-off factors, including an inconclusive election and a recoil from an earlier sports tourism boom, played as well.
• Philip Hammond promised to fix Britain's housing market with a package of investment, planning reform and tax cuts for first-time buyers in a Budget overshadowed by a huge downgrade in the UK's economic prospects.
• Today's eco calendar contains EMU PMI's and the 2nd reading of UK Q3 GDP. The ECB publishes Minutes of its October meeting and governors Villeroy and Coeuré speak. US markets are closed for Thanksgiving

Currencies: Dollar Nears/Tests Important Support Levels

USD losing more interest rate support

Yesterday, USD selling pressure intensified throughout the day. Different curve moves in Europe and the US were to blame. The EMU yield curve bear flattened with higher ST yields. The US curve later bull steepened, with lower ST yields reducing interest rate support for the dollar. The US eco data were not to blame (mixed/close to expectations). Most of the curve moves and of the USD decline took place before the Fed Minute, but the move continued after the publication as several members were worried about the ongoing low level of inflation. EUR/USD closed at 1.1822 (from 1.1738). USD/JPY decline quite sharply closed the session at 111.22 (from 112.45).

Overnight, Asian markets are trading mixed to lower. Japanese markets are closed. Chinese markets underperform (fear from more credit regulation?). USD weakness propels the likes of the Korean won. USD/KRW dropped well below 1100, the strongest level for the won in two and a half years. EUR/USD holds in the 1.1830 area. Speculation on a new Grand coalition in Germany might be an additional euro support.

Today, US markets are closed in observance of the Thanksgiving holiday. The focus will be on the EMU data and on the German coalition talks. In EMU, the November PMI business sentiment is expected unchanged at 56, a level suggesting solid growth.. An outcome in line with expectations would suggest Q4 growth in line with Q3's 0.6% Q/Q, We don't expect the PMI's to change to broader picture on the EMU economy or on monetary policy. The formation of a new coalition in Germany is a wildcard. Will the SPD return the table, raising the prospect for a Grand coalition? If so, it might be slightly positive for the euro. That said, the euro didn't lose much ground on the German political uncertainty, suggesting no big euro rise if uncertainty declines.

Yesterday, curve moves in the US were important for the decline of the dollar. This factor will be absent today, as US markets are closed. The news flow from Europe might be neutral to slightly supportive for the euro. Over the previous days, we kept the working hypothesis that the EUR/USD 1.1861/80 area would be difficult to break and that the high interest rate differential between the US and Europe would at least help to prevent further USD losses. The jury is still out, but this hypothesis is clearly under pressure

From a technical point of view, EUR/USD set a post-ECB low two weeks ago and regained since intermediate resistance at 1.1690/1.1837. The 1.1880 MT correction top was left intact. A break above the latter would suggest a full retracement to the 1.2092 correction top. We don't preposition for such a scenario, but pressure is rising. On the downside, the 1.1554 reaction low remains the first important reference, but it is far away. We look for confirmation that the 1.1861/80 resistance will be able to do its job, before adding EUR/USD short exposure. Partial stop-loss to defend a break higher might be considered.

The USD/JPY momentum was positive in October, but deteriorated this month. Last week's drop below the 112.96 support reinforces the downside pressure. Yesterday, USD/JPY dropped below the 111.65 neckline. IF confirmed, it would make the picture outright USD negative.

EUR/USD rebounds. 1.1880 range top again within reach

EUR/GBP

Brexit (rather than data) remains key for sterling

The UK Chancellor of the exchequer proposed the UK Budget. The UK government wants to use some of the fiscal room to invest, to support public services and keep taxes low. However, Hammond didn't bring any prospect of a substantial fiscal stimulation. The OBR also reduced the growth forecasts for the coming years, but this was no surprise. Sterling gyrated modestly during the statement and in the end the impact was limited. Sterling was driven by the broader USD moves. EUR/GBP mostly hovered sideways in the upper half of the 0.88 big figure and closed the session at 0.8871. Cable profit from overall USD weakness and closed at 1.3325.

Today, the details of the UK Q3 GDP and the CBI retail data will be published. The composition of the UK Q3 growth is interesting, but a bit old news. The CBI sales are expected to rebound after a sharp setback last month. (3 from -36). We expect it to be only of second tier significance. Markets will continue to keep a close eye on progress in the Brexit talks as May visits Brussels. Probably there won't be official communication on the progress on specific items, but any comments from the parties involved might be important. Sterling might be sensitive to signs of progress. l

MT technical: Recently, the BoE driven sterling rebound ran into resistance and sterling declined again as markets anticipated that the rate cycle would be very gradual and limited. EUR/GBP trades in a 0.8733/0.9033 consolidation range. Last week, the EUR/GBP rebound ran into resistance just ahead of the 0.9033 range top. We changed our ST bias on EUR/GBP from positive to neutral last week. The 0.9015/33 area might be tough to break short-term.

EUR/GBP: topside test rejected, but momentum of sterling rebound slows

Download entire Sunrise Market Commentary

UK Chancellor Phillip Hammond delivered an Autumn Budget that appeared to be somewhat neutral in its content. More sobering was the updated forecast of UK economic growth, which is growing slower than previously thought. Hammond said productivity levels remained “stubbornly flat”, with growth until 2021 expected to be lower than predicted in March. The Office for Budget Responsibility (OBR) is now predicting the UK economy will grow by 1.5% this year – considerably lower than the 2% forecast it made in March. More sobering was the fact that growth will drop to 1.3% by 2020 and rise to 1.5% in 2021 – also lower than its forecast predicted in March. However, the markets recognize that both the OBR and BoE have recently been seen to take a more cautious stance when forecasting growth, so many are looking at these new forecasts as a worst-case scenario that is likely to be bettered. The Budget has done little to appease Prime Minister May's voters and it appears that her continued leadership will, undoubtedly, come into question in the coming weeks/months.

Data from the US showed new claims for jobless benefits fell for the week ended November 18th, further underlining the robust labour market the US is experiencing. For the week ending November 18th, new claims for unemployment insurance dropped by 13K to 239K, in line with market expectations. Jobless claims have now held below 300K for 142 weeks (nearly 3 years), the longest streak since 1970.

The US Commerce Department released data for US Durable Goods on Wednesday, showing a surprisingly larger-than-expected decrease of 1.2% from October to a seasonally adjusted $236 billion. The fall follows a 2.2% increase in September. The markets had been forecasting a slight increase of 0.2% in October. GDP, excluding transportation, rose 0.4% in October and has increased for 4 consecutive months – albeit below the forecast 0.5% rise. The disappointing data saw USD come under selling pressure in late Wednesday trading.

Late on Wednesday saw the release of the minutes of the Fed's last policy meeting. Many Fed policymakers expect that interest rates will have to be raised in the “near term”, confirming market expectations that the Fed will hike rates in December. The minutes, however, indicated that “Some members expressed concerns about the outlook for inflation expectations and inflation; they emphasized that, in considering the timing of further adjustments in the federal funds rate, they would be evaluating incoming information to assess the likelihood that recent low readings on inflation were transitory and that inflation was on a trajectory consistent with achieving the Committee's 2% objective over the medium term.” Following release of the minutes USD came under selling pressure that has continued into early Thursday trading.

EURUSD is 0.1% higher in early session trading at around 1.1832.

USDJPY is near a 2-month low, trading around 111.20.

GBPUSD is 0.1% lower in early Thursday trading at around 1.3310.

Gold is 0.15% lower, trading around $1,290.

WTI is 0.2% lower in early trading at around $57.90.

Major data releases for today:

At 09:00 GMT, Markit Economics will release Eurozone PMI Composite, Services PMI and Manufacturing PMI for November. Composite PMI is expected unchanged at 56, Service PMI is expected slightly higher at 55.1, from the previous release of 55.0, and Manufacturing PMI is forecast to come in at 58.3, lower than the previous release of 58.5. If any data is far from the forecast we can expect to see EUR volatility.

At 09:30, the UK Office for National Statistics (ONS) will release UK Gross Domestic Product (MoM & YoY) for Q3. Both data sets are expected to be unchanged with the month-on-month release expected at 0.4% and the year-on-year release expected at 1.5%. If the actual release is significantly different from the forecast we can expect to see GBP volatility.

At 16:30, the European Central Bank will release Monetary Policy Meeting Accounts. The markets will be analyzing the tone and the words used to determine future economic policy for the Eurozone. Officials familiar with the thinking of policy makers have suggested that the European Central Bank is likely to make multiple small adjustments to its guidance on monetary policy next year, rather than any major change in language as it ends quantitative easing. Depending on the content of the release the markets may see EUR volatility.

USD/CHF - 0.9820

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9819

Kijun-Sen level                    : 0.9858

Ichimoku cloud top                 : 0.9916

Ichimoku cloud bottom              : 0.9913

Original strategy :

Sold at 0.9935, met target at 0.9835

Position : - Short at 0.9935

Target :  - 0.9835

Stop : -

New strategy  :

Sell at 0.9865, Target: 0.9765, Stop: 0.9900

Position : -

Target :  -

Stop : -

Dollar’s decline accelerated yesterday after breaking previous support at 0.9876 and 0.9846, adding credence to our bearish view, our short position entered at 0.9935 met downside target at 0.9835 (with 100 points profit) and downside bias remains for the decline from 1.0038 top to extend further weakness to 0.9800, then 0.9770, however, oversold condition should prevent sharp fall below 0.9740-50 and bring rebound later. 

In view of this, we are looking to sell dollar again on recovery as 0.9875-80 should limit upside and bring another decline. Above 0.9900 would defer and suggest low is possibly formed, bring rebound to 0.9920-25 burt resistance at 0.9947 should remain intact, bring another decline.

USDJPY has been bearish since October 16 and has now reversed around half of the rally that took place from 107.31 to 114.73. The market is testing two-month lows at the 50% Fibonacci (111.04) of the September 8 to November 6 upleg.

A move above 112.00 would help ease downside pressure but a rise above 113.00 (23.6% Fibonacci) would invalidate the current bearish bias.

The market is expected to be supported at current levels as it trades in a critical zone between the key 111.0 level and the 50% Fibonacci. But a deeper decline cannot be ruled out since RSI has dropped below 50. An extension lower would target the 61.8% Fibonacci at 110.14. From this point, the market would head towards the lower end of the longer-term range (108.00) that has been forming since January.

The break below the 50 and 200-day moving averages adds to the bearish view in the short-term. In the bigger picture, the market remains neutral.

GBP/USD - 1.3275

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.3324

Kijun-Sen level                    : 1.3275

Ichimoku cloud top              : 1.3241

Ichimoku cloud bottom        : 1.3233

Original strategy :

Buy at 1.3200, Target: 1.3300, Stop: 1.3165

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.3270, Target: 1.3370, Stop: 1.3235

Position : -

Target :  -

Stop : -

As cable has surged after holding above support at 1.3209 and the breach of 1.3280 resistance (now support) confirm recent upmove from 1.3039 is still in progress and may bring a test of previous resistance at 1.3338, however, break there is needed to retain bullishness and signal an upside break of recent established broad range, bring subsequent rise to 1.3370 and later towards 1.3400 but resistance at 1.3425 should hold from here. 

In view of this, would not chase this rise here and would be prudent to buy cable on pullback as 1.3270-80 should limit downside. Below the lower Kumo (now at 1.3233) would defer an suggest top is possibly formed, risk test of said support at 1.3209. 

Currency pair GBP/USD

The GBP/USD bullish channel (red/green) has reached the top of the channel (orange) and the resistance of the sideways range (red). A breakout above the resistance could indicate a new uptrend whereas a bearish bounce could see price fall back to the bottom of the channel.

The GBP/USD has reached a key decision zone for a bearish bounce or bullish breakout.

Currency pair EUR/USD

The EUR/USD broke above the resistance trend line (red) which seems to be part of an uptrend continuation within wave 5 (purple).

The EUR/USD is probably building a wave 5 pattern (blue) within wave 5 (purple).

Currency pair USD/JPY

The USD/JPY is in the bearish channel which has reached potential support level at the 50% Fibonacci.

The USD/JPY bearish breakout saw price fall towards the bottom of the bearish channel.

EUR/USD - 1.1833

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.1826

Kijun-Sen level                  : 1.1788

Ichimoku cloud top             : 1.1761

Ichimoku cloud bottom      : 1.1738

Original strategy  :

Buy at 1.1680, Target: 1.1780, Stop: 1.1645

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.1780, Target: 1.1880, Stop: 1.1745

Position : -

Target :  -

Stop : -

As the single currency has rallied after finding renewed buying interest at 1.1713 and broke above 1.1809 resistance, signaling the correction from 1.1861 (last week’s high) has ended and retest of this level would be seen, however, break there is needed to retain bullishness and confirm recent upmove has resumed for headway to 1.1880 resistance, then 1.1900-10 but near term overbought condition should limit upside to 1.1940-50.

In view of this, we are looking to buy euro on pullback as 1.1775-80 should limit downside and bring another rise later. Below the lower Kumo (now at 1.1738) would abort and signal the rebound from 1.1713 has ended instead, bring retest of this level later. 

USD/JPY - 111.25

Most recent candlesticks pattern   : N/A

Trend                      : Near term down

Tenkan-Sen level              : 111.23

Kijun-Sen level                  : 111.64

Ichimoku cloud top             : 112.35

Ichimoku cloud bottom      : 112.34

Original strategy  :

Sold at 112.60, met target at 111.60

Position :  - Short at 112.60

Target :  - 111.60

Stop : -

New strategy  :

Sell at 111.85, Target: 110.85, Stop: 112.20

Position :  -

Target :  -

Stop : -

Yesterday’s anticipated selloff adds credence to our bearish expectation for recent decline to resume (our short position entered at 112.60 met target at 111.60 with 100 points profit) and as price has remained under pressure, downside bias remains for recent fall from 114.74 top to extend further weakness to 111.00-05 (50% Fibonacci retracement of 107.32-114.74) but near term oversold condition should limit downside to 110.70 and reckon 110.40-50 would hold from here.

In view of this, we are looking to sell dollar on recovery as 111.88 (previous support now resistance) should limit upside and bring another decline later. Above 112.00-10 would defer and risk test of the upper Kumo (now at 112.35) but price should falter below resistance at 112.72, bring another decline later.