US dollar holds well against Japanese yen and Canadian dollar, but made a dramatic fall versus British pound. Demand for safety of American currency declined before reports that may signal a global manufacturing pickup.
EUR/USD is trading just above $1.3600. In the euro area watch for Spanish and Italian Manufacturing PMIs due at 08:15 and 08:45 GMT (higher readings are expected) and in the US for ISM Manufacturing PMI due at 15:00 GMT (forecast 55.2 vs. previous 56.4). GBP/USD reached $1.6442. Britain will release manufacturing PMI at 09:30 GMT (forecast: 56.5 vs. previous 56.0).
USD/JPY reversed down from the last week’s 6-month high of 102.60 on the news that the one of the authors of Japan's aggressive stimulus, Economics Minister Akira Amari, was hospitalized. The pair has filled the morning bullish gap and dipped lower to 102.22. BOJ Governor Haruhiko Kuroda said today he wouldn’t hesitate to adjust policy fanning speculation the bank could take more easing steps next year. USD/CHF declined to the 0.9040 area, but is trading above Friday’s low at 0.9028. Swiss SVME PMI will be released at 08:30 GMT (forecast 55.1 vs. 54.2).
Commodity currencies are supported by the upbeat Chinese data. China's official November manufacturing PMI, released over the weekend, held at an 18-month high of 51.4, unchanged from October and the forecast of 51.2. HSBC manufacturing PMI, released early Monday, has also come above the forecast at 50.8 (forecast: 50.5, prior: 50.4). As a result, AUD/USD opened the week with a bullish gap at $0.9130, retraced lower to fill it and then has extended growth on HSBC figures. The pair is currently trading around $0.9160. Don’t forget the RBA holds a monthly policy meeting on Tuesday. NZD/USDhas followed the Aussie, touching a session high of $0.8208. USD/CAD opened at 1.0620 and is trading though a bit on the downside, but at highest levels since Oct. 2011.
Weekly. The pair completed the wave [D] which took the form of a Zigzag. Now we are see8ing the beginning of wave [E].
Daily. We may be seeing the construction of the descending correction wave . When it’s complete, the decline in form of impulse will continue.
H4. Wave  is taking form of a complex correction pattern. Wave (y) of  is a rising Zigzag and looks either already completed or nearly so. Thus, in the near future we can expect a reversal. This week may be bearish.
Weekly. The pair was continuously rising last week, and the wave [c] of B is at its end.
Daily. A final upward impulse wave (V) is being currently formed. When it’s over, a downtrend will start.
H4. The market has to form waves  and  and the uptrend will be complete. Wave  will probably be sideways with a downward slope and wave  will be a rising impulse wave and renew highs of the wave . You can see that at the picture.
H12.We may be seeing the construction of the wave III. The first three parts of this wave are likely already formed. In the coming days USD/JPY will be forming the wave , which may take the form of an extended horizontal correction. This may take the whole week. It’s recommended to refrain from trading in that period, or go to the senior time frames.
H12.The figure shows the detailed layout of the wave . According to the chart, the construction this wave is either complete or nearly so. The pair’s expected to move as drawn on the chart.
Weekly. There are 2 scenarios shown on the weekly chart. According to the first one, in the near term an impulse advance will start. According to the second one, AUD/USD will continue falling ant hit new lows this week.
Daily.According to this scenario, in the near future we can expect a trend reversal as the wave II is almost complete. We assume that it took form of a Zigzag. This scenario will be negated if the price doesn’t reverse and slide to new low.
Daily.According to this scenario, we’ll see a rapid and confident decline in the price.
US dollar is supported as American ISM manufacturing PMI for rose to the highest level since April 2011 bolstering expectations the Federal Reserve will soon trim its stimulus,. Investors also wait for ADP employment report due tomorrow: according to the forecasts, US companies added 170K positions last month, which would be the most in 5 months
EUR/USD is trading in the $1.3520/40 area. In euro zone watch for Spanish unemployment change due at 08:00 GMT (forecast 49.3K vs. previous 87.0K) and euro area’s PPI at 10:00 GMT. GBP/USD spiked to $1.6442 yesterday and is currently trading around $1.6365. Britain will release construction PMI at 09:30 GMT (forecast 59.3 vs. previous 59.4). Nothing can stop the JPY’s decline: on TuesdayUSD/JPY extended the upside, facing resistance at 103.40. The Nikkei 225 index hit a 6-month high of 15.780 in the morning session.USD/CHF rose to the levels just below 0.9100.
AUD/USD kept weakening on Tuesday, retesting the $0.9055/65 support. Data showed China non-manufacturing PMI for November came at 56.0, down from 56.3 in October. In Australia, the RBA left interest rates unchanged at 2.50% along with forecasts, saying policy settings remain appropriate. In the meantime, Australia retail sales rose by 0.5% m/m in October (prior: 0.9%; forecast: 0.4%). Note that Australia will release its Q3 GDP on Wednesday. NZD/USD is trading a bit above the daily low of $0.8155. New Zealand finance minister English said today the NZ firms were anticipating interest rate rises in 2014. USD/CAD is trading on the upside, not far from yesterday’s high at 1.0654.
GBP/USD remains supportedThis week GBP/USD tested the levels above the 2009-2013 trend line, touching $1.6440 on Monday. However, the cable has faced significant resistance in this area (38.2% Fibo, top of the bullish channel) and formed a bearish “shooting star”. The pair retraced to the $1.6345 support on positive US data late Monday, but on Tuesday has recovered to $1.6380.
The short-term bearish correction seems to be over for now; the bulls have regained control over the pair. We don’t see any reasons to sell the pair at least as long as it holds above $1.6340. Next support lies at $1.6260. Break above the $1.6440 resistance would open the way to $1.6760 (2011 high).
British Manufacturing PMI surprised the markets to the upside yesterday, coming at 58.4 (prior and forecast: 56.5). Today Britain is scheduled to release construction PMI at 9:30 GMT (prior: 59.3).
EUR/USD is trading around $1.3585, below yesterday’s high at $1.3613. Euro remains near month-high before the ECB meeting tomorrow, when the central bank is expected to refrain from cutting the benchmark interest rate. Euro area will release retail sales at 10:00 GMT (forecast +0.2% after -0.6%) and revised GDP data. In the US ADP will release its non-farm payrolls figure at 13:30 GMT (forecast: 172K; prior: 130K). Also watch for ISM non-manufacturing PMI and new home sales at 15:00 GMT.
GBP/USD is trading just below $1.6400, below the recent highs in the $1.6400 area. Pound was near the highest since 2011 after a report showed Britain’s construction expanded at the fastest pace in more than 6 years. USD/JPY is trading in a choppy fashion in the 102.25/65 range. The pair is now testing the lower border of the November bullish channel. Japanese Nikkei index dropped by 2.6% from the 5-month high set on Tuesday. USD/CHF edged up to 0.9050 after it slipped by 65 pips to 0.9020 yesterday.
Australia Q3 GDP disappointed the markets, rising only by 0.6% q/q (forecast: 0.7%) and 2.3% y/y (forecast: 2.6%). As a result, AUD/USD fell by almost 100 pips to $0.9050 (3-month low), retesting the $0.9055/65 support. However, this area contains the bearish pressure for now. NZD/USD fell back below $0.8200. China HSBC services PMI for November has also come a little bit below the forecast (52.5 vs. 52.6 prior). USD/CADedged down to 1.0640 after it peaked to 1.0672 yesterday. Canadian dollar remains near 3-year low ahead of a central-bank rate decision today. The Bank of Canada will probably leave its benchmark rate unchanged at 1%.
USD/CAD at new highsUSD/CAD keeps setting new highs: today American currency reached 1.0663, the highest level since August 2010.
Canadian dollar weakened ahead of the Bank of Canada’s meeting tomorrow (15:00 GMT). The consensus forecasts is that the central bank will leave the benchmark rate at the current level of 1%, but there’s speculation of a rising possibility of a rate cut rate (because inflation in Canada declined). As a result, the BOC’s accompanying statement will be very important.
US dollar, on the other hand, is supported by the solid American manufacturing PMI figures and the expectations of the Fed to taper QE soon. Further on Friday we’ll get key Canadian and US employment data, so this week will be really defining for the pair’s trend in the near/medium future.
Note that the pair got oversold on the daily chart. There’s also divergence on MACD and RSI at H4. Resistance lies at 1.0665/1.0685 (June-August 2010 highs) and then 1.0700. Support is at 1.0605, 1.0560 and 1.0500/0480.
RBC:Buy on the pullbacks to 1.0595 and 1.0545 targeting 1.0670 and with stop loss at 1.0520.
HSBC: The Bank of Canada probably won’t change its neutral bias. Still, USD/CAD might not need a dovish BOC outcome to continue on its recent gains. A sustained push above the 1.0658 would open scope for gains to the 1.0800 area (the 38.2% retracement of the decline in 2009-2011). Also watch Canada’s trade balance on Wednesday and employment report on Friday.
Nomura: The Bank of Canada will keep rate at 1.00% and a neutral bias. Currently, the market isn’t pricing in any BOC action, but if that changes, there may be some upward pressure on USD/CAD. The pair will continue rising in 2014 to peak around 1.1100 in Q3 before slipping to around 1.1000 in Q4 2014.
Key currency options (Dec. 4)Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT).
What to expect from the BOC?Bank of Canada will announce its monetary polcy decision today at 15:00 GMT. That's what economists at major banks expect from the meeting:
HSBC: We expect the Bank of Canada to leave interest rates unchanged at 1.00% for the 25th consecutive announcement. We also expect the Bank to again signal that it has no bias to either hike or cut rates in the short or medium term. Despite inflation having fallen to 0.7% y/y, and thus below the bottom of the Bank of Canada’s 1% to 3% inflation target range, robust auto sales and firm housing markets indicate that key interest-sensitive sectors of the economy do not require additional stimulus.
Barclays: Since any policy changes are highly unlikely, the market will focus on the accompanying statement from the BoC meeting. The previous meeting statement dropped any mention of removing policy stimulus from its guidance and said instead “the substantial monetary policy stimulus currently in place remains appropriate”. We remain underweight CAD however, expecting a grind higher in USD/CAD as relative policy diverges.
Commerzbank: At its meeting on 4 December, the Bank of Canada will keep its policy rate unchanged. The BoC will stick to its view that “considerable” monetary stimulus is necessary. A rate hike will not be on the agenda before 2015.