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Asia Summary

Asian equity markets opened generally higher, tracking the gains seen in the New York session.

Honda has gained over 1%, ahead of its earnings report which is expected later today. Nissan and Toyota are also trading higher. Electronic parts manufacturer Murata Manufacturing has declined by over 7%, after reducing its profit forecast. Australian building products manufacturer, CSR, has declined by over 5% after releasing its H1 results and guidance.

In the tech sector, Sony has gained over 9%, as the company reported better than expected Q2 results and raised its FY outlook. Shares of Softbank have rebounded by over 0.5%, after dropping over 4% during the prior session.

Chip equipment firm, Tokyo Electron has also gained over 9% after raising its FY forecast. In South Korea, Samsung Electronics is higher by over 3%. The company has added on to the gains seen in the prior session when it announced its financial results, shareholder return plan and management changes. Hynix has gained over 2%. During yesterday's New York session, chipmaker Micron gained over 6% on above average volume.

Australian retailer Woolworth's has risen by over 1%. During the prior session, the company's shares rose by over 2% after it reported growth in its quarterly sales. Shares of Harvey Norman are higher by over 6% after Australia's securities regulator (ASIC) said that it would not make any further inquiries related to the way the company consolidates its sales figures. Department store Myer Holdings has declined by more than 4%, after reporting a decline in Q1 sales and updating some of its medium-term targets.

Amid the gains being seen in oil prices, Australian energy producer Santos has risen by over 1%, while Woodside Petroleum is also trading higher. Oil Search has declined by over 2% after agreeing to pay $400M to acquire assets in Alaska's North Slope.

In the steel sector, Kobe Steel has risen by over 3%. On yesterday's session, the company's shares gained over 3% amid the release of its most recent earnings report. Following the US equity close, shares of US Steel rose by over 7% on better than expected quarterly earnings.

Mega banks in Japan are generally higher with shares of Mitsubishi UFJ up over 0.7%. In Australia, the ‘big four' banks are also trading generally higher. In China, insurers are trading higher, with shares of China Life up by over 2% and PICC Property P&C has gained over 6%. The Hang Seng Property Index has risen over 0.5%, as shares of Vanke are higher by more than 3%.

Hong Kong listed retailer Tapestry, formerly Coach, said it plans to withdraw its HK listing amid low trading volumes. Earlier in the week, miner Glencore made a similar announcement.

China's Oct Caixin manufacturing PMI met market expectations and was unchanged from the prior figure.

Oct PMI data from Indonesia, Malaysia, Taiwan, Thailand, Vietnam and South Korea declined versus the prior month.

In South Korea, the Oct CPI and Trade Balance data also missed expectations. On yesterday's session, Bank of Korea (BOK) Gov Lee said while Q3 GDP growth was ‘good', he was still monitoring to see if growth continued for a rate hike.

In Japan, there has been renewed speculation in the press that PM Abe is expected to request an extra budget and that Kuroda is likely to be named to another term as governor of the Bank of Japan (BOJ).

USD/JPY has gained over 0.1%, ahead of the later today US Fed decision. The Kiwi has risen by over 0.7% after Q3 jobs data beat expectations.

Looking ahead, US House Tax Committee Chairman Brady said the text of the Republicans tax bill will be released on Thursday. He had previously said there was ‘no announcement of [a] change to Wed's release for the tax bill.'

Japanese companies expected to report earnings later today include ANA Holdings, Hino Motors, IHI Corp, JFE Holdings, Japan Tobacco, KDDI, Mitsubishi Gas Chemical, Mitsui Chemicals, NSK, Rohm, Shinsei Bank, Takeda Pharmaceuticals, Ube Industries and Yamaha.

Key economic data

(NZ) NEW ZEALAND Q3 UNEMPLOYMENT RATE: 4.6% V 4.7%E, EMPLOYMENT CHANGE Q/Q: 2.2% V -0.2% PRIOR; Y/Y: 4.2% V 3.1% PRIOR

(KR) SOUTH KOREA OCT CPI M/M: -0.2% V 0.0%E; Y/Y: 1.8% V 1.9%E; CORE CPI Y/Y: 1.3% V 1.4%E

(KR) SOUTH KOREA OCT TRADE BALANCE: $7.3B V $8.7BE

(JP) JAPAN OCT FINAL PMI MANUFACTURING:52.8 V 52.5 PRELIM

(CN) CHINA OCT CAIXIN MAUFACTURING PMI: 51.0 V 51.0E (weakest pace since June, unchanged from prior)

Speakers and Press

Japan

(JP) BOJ Gov Kuroda being considered for another term - Japan press

(JP) BOJ Gov Kuroda: Reiterates that domestic economy is expanding moderately; downside risks to prices are larger - post rate decision press conference (yesterday)

(JP) Japan PM Abe expected to request extra budget at today's cabinet meeting – Kyodo

(JP) Japan FIn Min Aso: Current economic trends aren't 'bad'

Korea

(KR) US said to pursue direct diplomacy with North Korea - financial press

(KR) South Korea President Moon seeking approval for 2018 budget - speaking at parliament

China/Hong Kong

(CN) PBOC Adviser: See conditions for additional FX reforms - Chinese press

US

(US) Follow Up: House GOP said to delay rolling out tax bill until Thursday - US financial press

Asian Equity Indices/Futures (00:00ET)

Nikkei +1.3%, Hang Seng +0.5%; Shanghai Composite +0.2%; ASX200 +0.5%, Kospi +1.1%

Equity Futures: S&P500 +0.2%; Nasdaq100 +0.3%, Dax +0.7%; FTSE100 +0.2%

FX ranges/Commodities/Fixed Income (00:00ET)

EUR 1.1655-1.1629; JPY 113.94-113.61; AUD 0.7669-0.7648;NZD 0.6914-0.6883

Dec Gold +0.0% at $1,270/oz; Dec Crude Oil +0.4% at $54.62/brl; Dec Copper +1.1% at $3.14/lb

(AU) Australia sells A$900M in 2.25% 2028 bonds; avg yield 2.7273%; bid-to-cover 5.3x

USD/CNY *(CN) PBOC SETS YUAN REFERENCE RATE AT 6.6300 V 6.6487 PRIOR

(CN) PBoC OMO: Injects CNY240B combined in 7-day, 14-day and 63-day reverse repos v CNY300B prior; Net injection CNY0B v CNY80B prior

(CN) China MOF sells 1-year bonds at 3.54%, bid-to-cover 2.19x; Sells 10-year at 3.82%; bid-to-cover 4.16x

Equities notable movers

Australia/New Zealand

WLD.AU Reports first beef shipment to China after lifting of ban; +12.5%

Japan

6758.JP Reports H1 Net ¥211.7B v ¥26.0B y/y; Op ¥361.8B v ¥ 101.9B y/y; Rev ¥3.92T v ¥3.92T y/y; Raises FY17/18 guidance; +10%

2206.JP Reports H1 Net ¥11.4B v ¥11.6B y/y; Op ¥15.5B v ¥16.4B y/y; Rev ¥187.6B v ¥186.2B y/y; -10%

Korea

006400.KR Reports Q3 (KRW) Net 134.9B v -35.2B y/y, Op 60.2B v -110.4B y/y, Rev 1.71T v 1.63Te; +8%

EURUSD

The EURUSD was indecisive yesterday. The bias remains neutral in nearest term. Immediate resistance is seen around 1.1670. A clear break above that area could trigger further bullish pressure testing 1.1725 area but as long as stay below 1.1900 I remain bearish and any upside pullback should be seen as a good opportunity to sell. Immediate support is seen around 1.1625. A clear break below that area could trigger further bearish pressure testing 1.1575 or lower as a part of the “head and shoulders” bearish reversal scenario as you can see on my daily chart below.

GBPUSD

The GBPUSD continued to trade higher yesterday topped at 1.3288 and hit 1.3293 earlier today in Asian session. The bias remains bullish in nearest term testing 1.3330 key resistance. A clear break and daily close above that area would retest 1.3615 resistance area. Immediate support is seen around 1.3250. A clear break below that area could lead price to neutral zone in nearest term testing 1.3200 area. Overall I remain bullish.

USDJPY

The USDJPY failed to continue its bearish momentum yesterday after unable to make a clear break below 113.20 support area, topped at 113.73 and hit 113.81 earlier today in Asian session. The bias is bullish in nearest term testing 114.50 key resistance which is a good place to sell with a tight stop loss. Immediate support is seen around 113.50. A clear break below that area could lead price to neutral zone in nearest term retesting 113.20 key support which need to be clearly broken to the downside to continue the bearish pin bar scenario testing 112.50 – 111.65 region. On the upside, a clear break and daily close above 114.50 would expose 115.50 or higher. Overall I remain neutral.

USDCHF

The USDCHF failed to continue its bearish momentum yesterday topped at 0.9994. The bias is neutral in nearest term. Overall I remain bullish but need a clear break above 1.0037 to nullify the bearish pin bar scenario targeting 1.0100 or higher. Immediate support is seen around 0.9940. A clear break and daily close below that area would resume the bearish pin bar scenario testing 0.9880 or lower.

Rally from 8/29 low in DAX is unfolding as a double three Elliott Wave structure where Intermediate wave (W) ended at 13089 and Intermediate wave (X) ended at 12903. Up from there, the rally from 12903 low appears to be unfolding as an impulse. Minute wave ((i)) ended at 13066, Minute wave ((ii)) ended at 12906.5, and Minute wave ((iii)) ended at 13249.5. Near term, while pullbacks stay above 12903 low, expect Index to extend higher.

Alternatively, the rally from 10/19 low (12903) can also be unfolding as a flat Elliott Wave structure. In this alternate scenario, DAX can start to correct cycle from 10/19 low now in 3, 7, or 11 swing without making another push higher in Minute wave ((v)). However, regardless whether DAX makes another leg higher or not, we expect Index to remain supported and dips remain to be bought in 3, 7, or 11 swing as far as pivot at 12903 stays intact.

DAX 1 Hour Elliott Wave Analysis

Daily Pivots: (S1) 1.1625; (P) 1.1643 (R1) 1.1663; More...

Consolidation from 1.1574 temporary low is still in progress and intraday bias remains neutral. As noted before, break of 1.1879 resistance is needed to confirm completion of the decline from 1.2091. Otherwise, near term outlook will stay bearish. Below 1.1574 will target 38.2% retracement of 1.0569 to 1.2091 at 1.1510.

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 cautious on 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 will suggest that such medium term rebound is completed and could then bring retest of 1.0339 low.

Daily Pivots: (S1) 1.3219; (P) 1.3253; (R1) 1.3316; More....

Intraday bias in GBP/USD remains neutral for the moment. On the downside, firm break of 1.3026 support will resume the decline from 1.3651 and target 1.2773 key support level. This will also revive the case of medium term reversal. On the upside, in case of another rally, upside should be limited by 61.8% retracement of 1.3651 to 1.3026 at 1.3412 to bring fall resumption finally.

In the bigger picture, while the medium term rebound from 1.1946 was strong, GBP/USD hit strong resistance from the long term falling trend line. Outlook is turned a bit mixed and we'll stay neutral first. On the downside, decisive break of 1.2773 key support will argue that rebound from 1.1946 has completed. The corrective structure of rise from 1.1946 to 1.3651 will in turn suggest that long term down trend is now completed. Break of 1.1946 low should then be seen. On the upside, break of 1.3835 support turned resistance will revive the case of trend reversal and target 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466 .

Daily Pivots: (S1) 0.9945; (P) 0.9969; (R1) 1.0001; More....

Intraday bias in USD/CHF remains neutral as consolidation from 1.0037 temporary top continues. Deeper retreat cannot be ruled out. But downside should be contained above 0.9835 resistance turned support and bring rally resumption. Since 61.8% retracement of 1.0342 to 0.9420 at 0.9990 is already met, break of 1.0037 will turn bias to the upside for 1.0342 key resistance next.

In the bigger picture, current development suggests that USD/CHF has defended 0.9443 (2016 low) key support level again. Rise from 0.9420 could is a medium term up move and should target a test on 1.0342 high. This represents the upper end of a long term range that started back in 2015. On the downside, break of 0.9736 support is now needed to indicate completion of the rise from 0.9420. Otherwise, further rally will remain in favor in medium term.

Daily Pivots: (S1) 113.14; (P) 113.44; (R1) 113.92; More...

USD/JPY recovers after dipping to 112.95 but it's staying below 114.49 key resistance. Intraday bias remains neutral at this moment. Near term outlook will stays cautiously bullish as long as 111.64 support holds. Decisive break of 114.49 key resistance will confirm that correction pattern from 118.65 has completed at 107.31 already. And USD/JPY should then target a test on 118.65. However, sustained break of 111.64 will argue that rebound from 107.31 has completed and bring retest of this low.

In the bigger picture, medium term rise from 98.97 (2016 low) is not completed yet. It should resume after corrective fall from 118.65 completes. Break of 114.49 resistance will likely resume the rise to 61.8% projection of 98.97 to 118.65 from 107.31 at 119.47 first. Firm break there will pave the way to 100% projection at 126.99. This will be the key level to decide whether long term up trend is resuming.

Daily Pivots: (S1) 0.7630; (P) 0.7664; (R1) 0.7689; More...

Intraday bias in AUD/USD remains neutral for consolidation above 0.7624 temporary low. In case of another rise, upside of recovery should be limited well below 0.7896 resistance to bring decline resumption. Firm break of 0.7624 will resume whole decline from 0.8124 and target next key cluster level at 0.7322/8.

In the bigger picture, corrective rise from 0.6826 medium term bottom is likely completed at 0.8124, after hitting 55 month EMA (now at 0.8067). Decisive break of 0.7328 key cluster support (61.8% retracement 0.6826 to 0.8124 at 0.7322) will confirm. And in that case, long term down trend from 1.1079 (2011 high) will likely be resuming. Break of 0.6826 will target 61.8% projection of 1.1079 to 0.6826 from 0.8124 at 0.5496. This will now be the favored case as long as 0.7896 near term resistance holds.

Daily Pivots: (S1) 1.2835; (P) 1.2875; (R1) 1.2927; More....

USD/CAD is still limited below 1.2916 temporary top and intraday bias remains neutral for the moment. More consolidative trading cannot be ruled out. But downside should be contained well above 1.2598 resistance turned support and bring rally resumption. Medium term trend in USD/CAD should have reversed. Break of 1.2916 will extend the rise from 1.2061 to 38.2% retracement of 1.4689 to 1.2061 at 1.3065.

In the bigger picture, USD/CAD should have defended 50% retracement of 0.9406 (2011 low) to 1.4689 (2016 high) at 1.2048. And with 1.2048 intact, we'd favor the case that fall from 1.4689 is a correction. Rise from 1.2061 medium term bottom should now target 38.2% retracement of 1.4689 to 1.2061 at 1.3065. Firm break there will target 1.3793 key resistance next (61.8% retracement at 1.3685). We'll now hold on to this bullish view as long as 1.2450 support holds.

Dollar trades mildly firmer today as markets await FOMC rate decision. Nonetheless, that would likely be a non-event. Fed is widely expected to stand pat. And, December is the month for rate hike, not the current one. Also, traders mind are probably more on the path beyond December. And that heavily ties to who US President Donald Trump will nominate to succeed Janet Yellen as Fed chair after February. It's reported that Trump will announce to nominate Fed Governor Jerome Powell on Thursday. Meanwhile, House Republicans are delaying the rollout of the tax bill due to unresolved questions on some key elements. The announcement was originally scheduled for today but is now delayed by one day to Thursday. Economic data to be released today will also be closely watched including ADP employment and ISM manufacturing from US and PMI manufacturing from UK. We're expecting a lot of volatility for the rest of the week.

Sterling jumped as EU Barnier ready to speed up talks

Sterling jumped sharply yesterday on positive news on Brexit negotiations. EU's chief Brexit negotiator Michel Barnier said that he's ready to speed up the negotiations with UK. And the schedule for next round of talks would be see in the coming days. Meanwhile, UK Brexit Secretary David Davis told a House of Lords committee that "the withdrawal agreement, on balance, will probably favour the [European] Union in terms of things like money and so on. Whereas the future relationship will favour both sides and will be important to both of us." This is taken as an signal that the UK team is finally ready to clear out all the smokescreens to move on quickly with the talks. And that would likely raise the chance of making sufficient progress by EU summit in December to move on to trade talks afterwards.

Nonetheless, GBP/USD is staying in range of 1.3026/3337, lacking a clear direction. BoE rate decision will be one of the most critical factors in determining the pair's near term direction. BoE is widely expected to raise the Bank Rate by 25bps to 0.50%, first hike in a decade. In our view, this will be a one-off as the Bank Rate will be brought back to pre-Brexit referendum level. The vote split of the decision is the first key point to watch. The tighter the decision, the more unlikely for another hike in near term. In addition, BoE will release the quarterly inflation report. Revision in inflation projection there will tell us how policymakers general feel about the recent surge in inflation.

BoC Poloz: Canada economy at a crucial spot

BoC Governor Stephen Poloz sounded cautious yesterday as he told the parliament that Canada is at a "crucial spot in the economic cycle". He also warned that "significant uncertainties are clouding the way forward". Poloz also reiterated the central bank's statement that any future adjustments in rate will be "cautious". Recent economic data from Canada has been disappointing. GDP showed -0.1% mom in August, below expectation of 0.1% mom rise. That raised some concerns that BoC's two consecutive rate hikes this year are a little too quick.

Kiwi rebounds after strong job data

New Zealand Dollar rebounds notably today after solid job data. Employment rose 2.2% qoq in Q3, well above expectation of 0.8% qoq. Unemployment dropped to 4.6%, down from 4.8%, better than expectation of 4.7%. That's also the lowest level since 2008. Nonetheless, the support to Kiwi could be temporary as there shouldn't be any change in RBNZ's neutral stance. The central bank is far from hiking interest rate from the current 1.75% level.

Additionally, markets are concerned with the uncertainties from the new government's policies. Reform on RBNZ is expected after appointment of a new governor in March 2018. Finance Minister Grant Robertson confirmed earlier this week that the government will push for a broader mandate for RBNZ. Robertson expressed that RBNZ would not be tie to a specific target on employment. But " we want to be clear about the bank's role not only in managing inflation, which is extremely important, but also in terms of the overall health of the economy".

NZD/USD should have formed a short term bottom at 0.6817, after being supported by 0.6816 key support level. Some recovery should be seen in near term. But upside should be limited below 0.7055 cluster resistance (38.2% retracement of 0.7432 to 0.6817 at 0.7052) bring fall resumption. It should also be noted that decisive break of 0.6816 key support level will carry larger bearish implication and would pave the way to 0.6102 (2015) low.

Elsewhere

UK BRC shop price dropped -0.1% yoy in October. Japan PMI manufacturing was finalized at 52.8 in October. China Caixin PMI manufacturing was unchanged at 51.0 in October. Swiss and UK PMI manufacturing will be the main focus in European session. US will release ADP employment, ISM manufacturing and construction spending later in the day. Also, FOMC will announce November rate decision.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2835; (P) 1.2875; (R1) 1.2927; More....

USD/CAD is still limited below 1.2916 temporary top and intraday bias remains neutral for the moment. More consolidative trading cannot be ruled out. But downside should be contained well above 1.2598 resistance turned support and bring rally resumption. Medium term trend in USD/CAD should have reversed. Break of 1.2916 will extend the rise from 1.2061 to 38.2% retracement of 1.4689 to 1.2061 at 1.3065.

In the bigger picture, USD/CAD should have defended 50% retracement of 0.9406 (2011 low) to 1.4689 (2016 high) at 1.2048. And with 1.2048 intact, we'd favor the case that fall from 1.4689 is a correction. Rise from 1.2061 medium term bottom should now target 38.2% retracement of 1.4689 to 1.2061 at 1.3065. Firm break there will target 1.3793 key resistance next (61.8% retracement at 1.3685). We'll now hold on to this bullish view as long as 1.2450 support holds.

Economic Indicators Update