eFXplus DATA

• AUD/USD met headwind pre-0.7187 after vaulting 0.7181 (Asia high)
• 0.7187 is 38.2 pct of 0.7247 (Dec 13 high) to 0.7151 (Friday's six-week low)
• More offers expected near 0.72 (0.7199 = 50 pct of 0.7247-0.7151)
• Big 0.7200 option expiry for 10am ET NY cut, A$1.1bln strike nL3N1YM2B6
• Even bigger 0.7200 expiry at the end of this week, A$1.7bln strike
• Option-related bids are tipped ahead of 0.7150 (option barrier level)

• Continues to consolidate above the 30-day lower bollinger-band at 1.2501
• This after hitting a new 2018 1.2477 Refinitiv Matching low last Wednesday
• Near-term scope grows for recovery moves through last Thur's 1.2687 peak
• Above the 1.2687 high would unmask the 1.2700 psychological level
• A break back below the 1.2477 low, however, will weaken the market structure

• EUR/USD is making recovery attempts from Friday's 1.1270 (EBS) low
• But is likely to run into solid resistance which is layered above
• The overall risk is for a bearish resumption
• Scope is for an eventual test the 30-day lower bollinger-band at 1.1258
• Only a break and daily close above the 30-DMA, now at 1.1353, will defer
• EUR/USD upper candle shadows hint at an upside rejection nL1N1YJ07W

• GBP/USD opens higher, but sold on soft data - range 1.2552/1.2610
• Brexit uncertainty, soft Visa spending, restaurant closures up - all weigh
• Daily and weekly 5,10 and 21 MAs all head lower, confirm strong downtrend
• Previous 1.2660 2018 low, recent 1.2687 high provide strong resistance zone
• Support see at last week's 1.2477/80 lows, break targets 1.2365/75

• EUR/USD marginally higher in very quiet Asian morning session
• AXJ equity index 0.25% higher while S&P futures up 0.35%
• Steady markets encouraging light EUR/JPY buying with cross up 0.15%
• EUR/USD has traded in 1.1299/1.1313 range and at session high into afternoon
• Resistance at 1.1345/55 where the 10 and 21-day MAs converge
• Support at triple-bottom at 1.1260/70 and break targets 1.1215/20

• Asia equity markets edging higher and S&P futures up 0.37%
• Mood in Asia a bit brighter than US mood on Friday, but AUD/USD unchanged
• FX market very quiet in Asia as market positions for FOMC on Wednesday
• AUD/USD range so far this morning 0.7169/79 after closing Friday at 0.7174
• Global growth concerns likely to limit AUD/USD upside ahead of Fed
• Option bids ahead of rumoured 0.7150 barrier discouraging attempts lower
• Resistance at 55-day MA at 0.0.7185 and 10-day MA at 0.7223

• Early gains evaporated, as Brexit uncertainty and fear hits the economy
• Visa spending dropped nL8N1YJ4OU, restaurant closures up nL8N1YJ53P
• Asking prices for UK homes show biggest 2-month fall in 6 yrs nL8N1YJ53P
• No Brexit compromise into Christmas & the New Year - expect further falls
• Daily & weekly 5, 10 & 21 DMAs head south - a bearish trending setup
• Close above Thursday's 1.2687 top would be needed to undermine bias

• AUD/USD under pressure in early Asia on rapidly deteriorating risk sentiment
• China data shows economic gloom deepening , euro zone data disappoints
• Markets tire of U.S.-China trade tensions , ignore good news nL3N1YJ3NA
• Govt issues mid-year fiscal review, likely to show improvement in finances
• Focus moves to Fed meeting, investors hope for comforting words nL8N1YI2XR
• Support @ 0.7163 being eroded, clear loss yields 0.7110-20; res 0.7200-10

• +0.1% in Asia; no game changing weekend Brexit news; the trend remains lower
• UK government continues to reject a second Brexit vote nL8N1YL0FT
• Plenty of Brexit opinions over the weekend, but no consensus nL8N1YK07F
• Despite last week's consolidation, daily & weekly 5, 10 & 21 DMAs head south
• A bearish trending setup - close above Thursday's 1.2687 top would undermine
• NY 1.2530 low & London 1.2631 high are initial support/resistance

Societe Generale Research discusses discusses the EUR outlook in light of yesterday's ECB policy meeting.

"The end of the ECB's bond-buying programme is clearly an important point in the history of the eurozone and the euro, post-crisis. But bond buying was only one of the two key ingredients to Mario Draghi's magic policy sauce. The other was negative rates and the combination was what was so potent in crowding investors out of European bonds and out of the euro itself.

In trade-weighted terms, the euro is already well past its worst levels, but a significant move higher against the dollar can wait a few more months," SocGen argues. 

• Yen, in NY, took over fm USD as top haven after poor China, EZ data
• USD/JPY unable to make a new high for first time this week
• Plenty of supply ahead of 114 and options market long gamma
• Thur's low & Kijun @113.21-22 key to string of higher lows
• US retail sales and IP bullish, but Markit PMI missed
• Traction on US-China trade issues not helping risk right now
• EUR/JPY diving away from Cloud cover on lousy EZ data
• AUD/JPY sinks on poor China data after nearing 50% Fib above
• GBP/JPY giving back about half of rebound from Monday's low

Bearish sentiment on AUD/USD is growing after disappointing Chinese data nB9N1Y5026 pushed the currency pair below 0.7165/70 support, leaving the Fed as the key event that can tip the balance toward accelerated losses or back to recovery. The yuan weakened to send USD/CNH, to which AUD/USD is highly inversely correlated, above 6.9100. Pushed-back RBA rate hike expectations helped AUD/USD slide as well.
National Australia Bank now sees the RBA's initial hike in H2 2020 instead of mid-2019.
Big upward revisions to October U.S. retail sales, significant upside surprises to the November retail control series and industrial production should temper AUD/USD bulls as gains in U.S. rates could bolster Fed confidence for future hikes.
AUD/USD bears do face risks though.
Fed funds futures price just over 30 bps of Fed hikes before end-2019 and net-long U.S. dollar positions remain elevated.
Should the Fed take a cautious view next week, U.S. yields and the greenback should stumble.
A scenario such as that could lead AUD/USD to erase the recent slide and test December's high.

Danske Research discusses its expectations for next week's FOMC December policy meeting.

"We expect the Fed to raise rates again when the committee meets next week. This would bring the target range to 2.25-2.50%, i.e. the lower end of the broad range of the estimates of the neutral rate according to the September dots (2.5-3.0%, with most saying 3.0%). While we think the Fed’s base case remains that the gradual hiking cycle will continue a bit further, the Fed will probably remove more of its forward guidance to increase its flexibility (as it did in June), as risks to the rate outlook become more two-sided with the Fed funds rate in the broad neutral range.

Do not be surprised if the Fed removes that it ‘expects further gradual increases in the target range’ from the statement. It makes sense to get rid of the one-sided rate outlook, as monetary policy becomes more neutral," Danske projects. 

"We think the Fed will continue to signal three hikes next year but see risks that the 2020 and 2021 dots are lowered. The longer-run dot is likely to be unchanged at 3.00%," Danske adds. 

Dour data is adding to EUR/USD's post-ECB losses and could persist ahead of next week's Fed meeting.
Downside surprises to euro zone December PMIs, especially Germany and France, combined with downwardly revised Italian November CPI add to downside risks Draghi highlighted.
The heightened downside risks have led some investors to push back expected ECB hikes.
Euribor futures now suggest no hike until late 2019 and that helps weigh EUR/USD down.
The upside surprise to core U.S. November retail sales and a big upward revision to November's headline retail sales has boosted the dollar as yields on U.S. Treasuries and fed funds futures rise.
The sales data could help bolster Fed confidence to proceed with projected rate hikes.
Brexit remains a bear risk for EUR/USD also as U.K. PM May's trip to Brussels yielded few positive results.
EUR/USD bears are emboldened now and are targeting 2018's low.
However, should the Fed strike a cautious tone next week, some downside pressure for EUR/USD will erode and bears will run for cover.

MUFG Research discusses EUR/USD outlook and adopts a neutral bias but flags next week's FOMC as a possible trigger for reversing USD strength through next year.

"The euro is continuing to stabilize at lower levels against the US dollar. A narrow trading range between the 1.1200 and 1.1500-levels remains in place for now. The ECB’s latest policy meeting proved largely uneventful for the euro. The ECB was more cautious on the growth outlook but it was largely as expected as market participants have already pushed back the timing of the first expected ECB rate hike into 2020," MUFG notes. 

"The main focus in the week ahead for the US dollar will be the upcoming FOMC meeting. If the Fed pare back plans for further rate hikes in 2019 and open the door to rate pause as early as in March, it could encourage a weaker US dollar," MUFG adds. 

EUR/USD: Neutral (since 21 Aug 18, 1.1485): Dip below 1.1300 would not be surprising but break of 1.1265 seems unlikely. No change in view.

EUR recovered and the bottom of our expected 1.1300/1.1440 consolidation range at 1.1300 remains unchallenged (low of 1.1311). Despite the recovery, the underlying tone remains soft and we continue to see chance for EUR to dip below 1.1300. However, as highlighted yesterday, a break of the next support at 1.1265 seems unlikely.

GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Downward momentum has waned, GBP is likely to consolidate for now.

There is not much to add to yesterday’s (13 Dec) update. As highlighted, while the recent downward momentum has waned, it is too early to expect a sustained recovery. GBP is more likely to consolidate and trade sideways for the next couple of weeks, likely within a broad 1.2480/1.2800 range.

AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): AUD is still under pressure but a break of 0.7130 would come as a surprise.

While AUD closed higher for the third day in a row (albeit marginally by +0.05%), only a move above the 0.7270 ‘key resistance’ (no change in level) would indicate that the current downward pressure has eased. Until then, the downside bias is still intact even though lackluster momentum indicates that a break of the major 0.7130 support is unlikely.

NZD/USD: Neutral (since 07 Dec 18, 0.6880): NZD has moved into a consolidation phase. No change in view.

NZD dipped briefly to 0.6825 yesterday, not far from the bottom of our expected 0.6820/0.6930 consolidation range. The quick rebound from the low reinforces our current view wherein NZD is trading in a consolidation phase for now (same view since last Friday, 07 Dec). Looking further ahead, the weakened underlying tone suggest higher risk of a clear break below 0.6820 but for the next one week or so, we do not expect the late-November low near 0.6755 to come into the picture.

USD/JPY: Neutral (since 09 Oct 18, 113.10): USD has moved into a consolidation phase.

USD touched 113.70 yesterday before ending the day on a firm note (NY close of 113.62, +0.62%). While the underlying tone has improved, we still view the current movement as part of a consolidation phase between 112.40 and 113.90 (same view since Tuesday, 11 Dec). From here, an intraday move above 113.90 is not ruled out but based on the lackluster momentum, we do not expect last month’s 114.20 peak to come under threat.

The weekly trend is bearish, but the market is struggling to make headway below the 200-WMA, currently 1.1312, EBS data.
Failure to close below that since November 2017 has stalled the bear run; a close below today could open the downside again.
Medium-term action highlights market reluctance to push EUR/USD too far from the 200-WMA but monthly activity is less euro-friendly.
There is doji candle indecision here, too.
November's long wicked doji star was recorded following September and October's 3.5 percent decline from 1.1815, but the weight from a thick monthly cloud prevents rebounds.
Cloud base is at 1.2222 and the top at 1.3696.
A bear target can be drawn off the retracement of the January 2017 1.0340 low to February 2018 1.2556 high.
The 50 percent line was breached in August and current weakness brings 61.8 percent Fibonacci into play at 1.1187.
The bear view is negated only by a close on the week above 1.1420 10-WMA and it will take a climb above 1.22 to bring a longer-term reversal.

• Decent asset manager demand and positive flows from model into USD/JPY
• USD/JPY scope grows for recent peaks while above the 30-DMA nL1N1YJ06U
• Friday's range has been a narrow 113.42-113.65, according to EBS prices
• Large 113.75 NY cut expiry worth 1.4B could attract later this session
• Net USD/JPY sales since the start of this week almost squared up
• Dollar bulls find support ahead of key Fibo after setback nL1N1YI0GO

• Leaving large upper shadows, reinforcing the underlying bearish market
• Bull setback since spot broke but failed to close above 1.1424 Fibo
• The 1.1424 Fibo, a 76.4 percent of the 1.1216 to 1.1472 recent (EBS) fall
• Bias for a near-term test of the recent 1.1306 matching lows
• EUR/USD gains likely to encounter headwind at daily cloud nL1N1YI07D
• Daily cloud, which currently spans the 1.1432-1.1559 region, should weigh

• Bulls grappling with the 113.61 Fibonacci level after staying above 30-DMA
• The 30-DMA is now at 113.33. 113.61 Fibo is a 76.4% of 114.03 to 112.23 drop
• Daily close above 113.61 Fibo needed to accelerate above Nov 28 114.03 high
• A break above the 114.03 will unmask the overall Nov 114.21 peak for a test
• However, a daily close back below 30-DMA will weaken the market structure
• USD/JPY bulls gear up for next leg higher through key Fibo nL1N1YH099