eFXplus DATA

• AUD/USD threatens 0.7250 after falling from 0.7286 (European am high)
• Drop influenced by a decline in risk appetite nL8N1XR2SL
• 0.7250 was Thursday's Ldn am low after retreat from 0.7298 (one-week high)
• AUD/USD revisited 0.7298 during NY afternoon. 0.7300/03 = Nov 7/8 highs
• Support points under 0.7250 include 0.7225 and 0.7200
• Huge 0.7225 option expiry for 10am ET NY cut, A$2.4bln strike

Prime Minister Theresa May has been grappling with the biggest crisis of her premiership after a draft agreement on leaving the European Union provoked the resignations of senior ministers and mutiny in her party nL8N1XR1BV.
That triggered a plunge by GBP/USD of 224 pips, the biggest one-day points fall since June 2017, according to Refinitiv data.
That said, the market has yet to challenge the October 1.2697 low.
Traders should be mindful that near-term shorts are likely to want to square up their positions as the weekend approaches, especially if no negative Brexit headlines show up before Friday's New York close.
Refinitiv matching flow data suggest that substantial GBP/USD shorts have built since Brexit Secretary Dominic Raab resigned from the UK government on Thursday.
The odds of a short squeeze will markedly increase if there is a daily close above the 1.2831 Fibonacci level, a 23.6 percent retrace of the 1.3176 to 1.2725 November slump.

• Weeklies set to post a key reversal: lower low, higher high, strong close
• Sizeable two-day 2.6% rally to 0.8890
• Near 100% retrace of Oct 30 0.8939-Nov 13 0.8706 drop
• Modest pullback as bulls re-group: Daily cloud base at 0.8842 a bid level
• Initial target the weekly cloud top, 0.8964, but levls above 0.90 viable

• EUR/GBP surge fuels EUR/USD's 1.1270-1.1363 rise
• EUR/USD likely breaks links to GBP, reverts to own drivers/downtrend
• Pair retraced 50% Nov's rally and 23.6% Sep-Nov 1.1815-1.1216 drop @ 1.1358
• Strong resistance band defined by 61.8% Nov drop @ 1.1395 and 21-DMA 1.1376
• Potentially pair could hit 1.1445 to correct 38.2% of drop from Sep's 1.1815
• EUR 2.5bln expiries @ 1.1445-55, EUR 1.2bln @ 1.1335-40, EUR 1.4bln 1.1300

• While the recovery continued on Thurs, it failed to close above 1.1358 Fibo
• 1.1358 Fibo is a 50% retrace of the 1.1500 to 1.1216 Nov (EBS) fall
• Market outlook mixed due to this failure, though we remain short at 1.1315
• Short for losses towards the our 1.1190 target, ahead of the 1.1187 Fibo
• 1.1187 Fibo is a 61.8% of the 1.0340 to 1.2556 (2017-2018) rise
• Wednesday's failure above a key Fibo was a warning to bulls

• +0.1% in Asia with consistent flow, EUR/GBP flat with occasional interest
• If PM May's deal fails, a hard Brexit/remain referendum gains traction
• Asia cautious in current volatility, as significant news appears in London
• Fall has turned momentum studies, 5, 10 & 21 DMAs negative
• October 1.2697 low is in view - first major support
• Asian 1.2762/1.2805 range is initial support/resistance

EUR/USD: Neutral (since 21 Aug 18, 1.1485): Downward pressure has eased, EUR to trade sideways.

We cautioned yesterday (15 Nov, spot at 1.1315) “the odds for a break of 1.1200 have diminished” and the subsequent break of the 1.1350 ‘key resistance’ (high of 1.1362) was not surprising. As indicated, a break of the ‘key resistance’ would indicate that downward pressure has eased and EUR has likely found a short-term bottom near 1.1215 (low seen earlier this week). In other words, we expect 1.1215 to stay intact for the next one week or so. However, the current price action is deemed as part of a correction/consolidation phase and not the start of a sustained recovery. All in, we expect EUR to trade sideways albeit with a positive bias within a 1.1240/1.1430 range.

GBP/USD: Neutral (since 21 Aug 18, spot at 1.2795): Prospect of a fresh low for the year has increased.

Volatility remains at an elevated level and the whippy price actions over the past few days offer no strong clues on the direction of the next directional move. However, the outsized decline of -1.59% yesterday (NY close of 1.2775) does suggest that the risk of a break of the 1.2662 year-to-date low has increased. All in, we expect GBP to stay pressure in the coming days unless it can move and stay above the 1.2980. Looking ahead, a break of the year-to-date low could lead to acceleration lower towards the next support at 1.2590.

AUD/USD: Neutral (since 13 Sep 18, spot at 0.7170): October’s peak of 0.7315 is back in sight. No change in view. However, ‘key support’ has moved higher to 0.7190 from 0.7150.

We have been “anticipating further AUD strength to 0.7315” since last Thursday (08 Nov, spot at 0.7275) but after the relatively sharp pull-back from 0.7303, we cautioned on Tuesday (13 Nov, spot at 0.7175), the “odds for further AUD strength have diminished”. The ‘key support’ at 0.7150 barely held (low of 0.7164 on Tuesday) but the strong surge just a while ago after the release of better than expected Australia job data suggests 0.7315 is back in sight. However, upward momentum is not as strong as preferred and while AUD could move to 0.7315, it may find it difficult to maintain a toehold above this level (next resistance is at 0.7355). For now, there is no change to the ‘key support’ at 0.7150 but this level is expected to rise quickly over the next few days.

NZD/USD: Neutral (since 20 Aug 18, 0.6625): NY closing above 0.6850 would suggest further NZD strength to 0.6900.

NZD continues to move higher at a rapid clip and hit a high of 0.6840. We highlighted yesterday (15 Nov, spot at 0.6790) “further NZD strength is not ruled out but 0.6850 is likely out of reach”. For now, we continue to see strong resistance at 0.6850 but if NZD closes above 0.6850 in NY, then it is likely we will see a move to 0.6900 next. All in, we expect NZD to stay supported as long as 0.6750 is intact.

USD/JPY: Neutral (since 09 Oct 18, 113.10): USD to trade sideways with a downward bias.

We cautioned yesterday the “odds for further USD strength have diminished” and the subsequent breach of the 113.20 ‘key support’ was not surprising (low has been 113.09). While the 114.20 high seen on Monday (12 Nov) is deemed as a short-term top, it is too soon to expect the start of a sustained down-move. USD is more likely to trade sideways in the coming days, albeit with a downward bias (likely within a 112.60/114.05 range).

• AUD/USD up to 0.7288 in early trade then drifts down to 0.7261
• Early optimism on US-China trade fades as uncertainty takes hold again
• Signals mostly bullish with momentum studies and s/t MAs headed north
• But continued failure just below key highs at 0.7300/15 a worry for bulls
• Close back below 10 DMA at 0.7238 would neutralise bullish outlook
• Break of 0.7315 or 0.7160 needed to trigger next move in either direction

• Tight early range after closing off 1.6%, with EUR/GBP +1.8%
• Total political turmoil in the UK on the Brexit deal nL8N1XQ1W6
• Impossible to predict the next move in UK politics, but volatility is back
• Fall has turned momentum studies, 5, 10 & 21 DMAs negative
• October 1.2697 low is in view - first major support
• NY 1.2725/1.2836 range is initial support/resistance

Bank of America Merrill Lynch Research looks at the trends in G10 terms of trade to assess possible FX moves in the medium term.

"Our analysis suggests that, keeping everything else constant, NOK, SEK, AUD, NZD, GBP and JPY should be stronger, while USD, EUR and CHF should be weaker, with CAD being the only currency at the appropriate level," BofAML notes. 

Bottom line: bullish AUD and NOK vs USD "Focusing in particular on currencies with the strongest historical correlations with the terms of trade, our results are bullish for AUD and NOK against the USD. These results are broadly consistent when we look only at the trends in 2018. They are also consistent with our equilibrium estimates and our macro views," BofAML argues. 

• Pair consolidates Asia gains during NY hours, buffeted by opposing risks
• Early equity slide & Brexit concerns drives pair near 0.7250
• Copper rally & reversal for stocks boost pair toward 0.7290 late in the day
• Techs are bullish, RSIs rise, 10-DMA supports & pair above daily cloud top
• 0.7315/30 resistance is key, a break will intensify the short squeeze
• Bulls will then put the 0.7480/0.7500 resistance zone in their sights

EUR/USD is struggling to navigate through vicious cross currents, with Brexit the latest factor causing choppy waters, but euro-negative factors appear likely to prevail. Signaling market indecisiveness, daily doji candles have formed recently, and indeed EUR/USD is facing both bearish and bullish risks.
The Brexit whirlwind combines with wider Italian-German and German-U.S.
spreads to limit rallies on the approach to the 10-DMA.
But, broad-based U.S. dollar sales, possibly due to position unwinding, and the slump in U.S. Treasury yields all along the curve have helped limit the downside.
With traders more focused on Brexit and U.S. yields, directional cues for EUR/USD will be taken by external factors for now.
The downside is still more vulnerable.
Highlighting the downside risks are the bearishly aligned 10- and 21-DMAs, falling RSIs and the long upper wick on the monthly candle.
Should the Brexit situation and budget process between Rome and Brussels deteriorate significantly, uncertainty will escalate, leading EUR/USD to test support near 1.1200 and 1.1185.

Danske Research discusses EUR/CHF outlook and flags the a clear dip below 1.10 level as a possible trigger for an intervention attempt by the SNB.

"While the CHF has proved surprisingly resistant to Italian risks and the equity selloff lately, we stress that the deteriorating Swiss outlook amid still largely absent inflation could lead the market to test the SNB’s policy toolbox. This should keep EUR/CHF on the defensive in the short term. The SNB would likely remain reluctant to change its communication in light of the stubbornly subdued inflationary pressure and a still distant first hike from the ECB.

However, in the absence of new political risks, this should allow EUR/CHF to see a gradual move back towards 1.20 in 12M. It would likely require a clear dip towards 1.10 for the SNB to start intervening on a larger scale," Danske argues. 

Though today's 0.8 percent rise in U.S. retail sales nUSNFMEENN appears dollar-bullish, it was boosted by factors that should fade by the next report and leave the Fed less confident about raising rates in December.
That's troubling for USD/JPY, especially with Fed Chair Powell becoming more circumspect about potential economic headwinds.
Fed funds futures are pricing out some expected rate hikes over the next 12-24 months, with two hikes over that span now favored versus three earlier this month.
Key for the rates and risk sensitive USD/JPY will be if two- and 10-year Treasury yields break their 3.05 and 2.78 percent late-October pullback lows.
USD/JPY is threatening to close below its 113.58 tenkan and 10-DMA supports as the correlation between falling Treasury-JGB yields spreads intensifies.
If USD/JPY closes below the kijun at 112.80, another reversion to the 100-DMA, last at 112, is likely.
Moreover, yen haven buying may rebound because China appears unwilling to meet U.S. trade and IP demands ahead of the Trump-Xi meeting nL4N1XQ34U and Europe's Brexit and Italy issues remain unresolved.

CIBC Research discusses its reaction to today's US retail sales report for the month of October.

"There are plenty of worries about slowing global growth these days, but don't tell that to American shoppers, who were still out on a spending spree at stores in October. Retail sales rose 0.8%, in line with our view that a rebound from hurricane impacts and higher gasoline prices would boost the headline number above expectations.

That said, there was a two tick downward revision to the prior month, which now shows a -0.1% monthly change. Much of the gain in October was in auto sales (post hurricane) and gasoline (lifted by higher prices), with sales in the "control group' (ex autos gas, building materials and food service) up a trend like 0.3%, matching the prior month's (downward revised) gain. Look for consumer spending to remain a healthy growth contributor for Q4 as a whole, helped by better wages and ongoing job growth, but the quarter/quarter impacts of tax cuts are fading from these numbers relative to what we saw in the spring.

Not likely to be a market mover, as revisions to the prior month offset some of the upside headline surprise, and the "control" figure was essentially on-trend," CIBC notes. 

• AUD extended north to 0.7298 early Europe as continent digested Oz jobs data
• Australian jobs data was strong nL4N1XP7FQ. 0.7298 = one-week high
• Ensuing retreat to 0.7250 influenced by USD buying on British Brexit turmoil
• GBP/USD fell two-and-three-quarter cents to 1.2751 during the European am
• 0.7229 was AUD/USD low in Asia, pre-jobs data (0.7224 was Tuesday's high)
• 0.7300/03 (last week's highs) and 0.7315 (Sept high) are resistance levels

• Was looking for a stronger bull signal and the market obliges
• Rally from 0.8706 session low runs headlong into the 200DMA at 0.8835
• Next hurdles the daily cloud base at 0.8845 and 55DMA at 0.8849
• Sharp jolt to daily bear momentum and stochs cross bull side
• Favour buying dips to 21DMA, 0.8795, for daily cloud top at 0.8911
• Weeklies crack cloud base and now knocking on door of 55WMA/30DMA at 0.8842

• AUD/USD popped higher on strong Australian jobs data
• Hour of data release saw spot close up 44 pips according to Refinitiv data
• Opened at 0.7233 and closed at 0.7277, biggest hourly gain since Feb 14
• Second biggest one-hour gain of 2018, this puts bulls in a strong position
• Though Refinitiv hourly volume has not confirmed rise, nothing spectacular
• That said there is scope for a run at the Nov 0.7303 peak

• Cross strangled by market indecision Wednesday: long wicked candles
• Neutral daily stochs and bearish momentum, divergence noted
• Constructive early Thursday action but price mired within range
• Tuesday 0.8656 low and Monday 0.8772 high the levels to watch
• Weekly hammers point to bull advantage but 0.8766 cloud base containing
• A tentative buy but stronger signals needed to lessen bearish risk

• EUR/USD made recovery attempts Wed, breaking above the key 1.1324 Fibo
• 1.1324 Fibo is a 38.2% retrace of the 1.1500 to 1.1216 November (EBS) drop
• Crucially spot failed to register a daily close above the 1.1324 Fibo
• Outlook mixed after Fibo failure, a marginal downside bias persists
• We are short at 1.1315, stop is well above 1.1358 50% Fibo of same Nov drop
• EUR/USD leap above Fibo . Bleak, protection needed