• Yesterday, OPEC and major non-OPEC producers decided to extent the oil production cuts by 9 months, until the end of 2018, as was widely expected. Nigeria and Libya which were exempt from production cuts, now have been given “soft targets” according to news reports. WTI prices declined a little on the announcement, but recovered most of their losses within the next few hours. Moving forward, the outlook for oil remains highly uncertain, in our view. We are not ready to call for any rally in oil prices from current levels, considering that any sustained gains in prices could invite US shale oil producers to boost their production notably and as a result, limit any future advances in oil prices.

• WTI dropped somewhat yesterday after the announcement from near the 58.00 (R1) resistance hurdle, before it found support at 56.90 (S1) and subsequently, it rebounded. Despite the latest decline, the short-term picture still appears to be somewhat positive. WTI continues to trade above both the uptrend line taken from the low of the 31st of August, as well as the key barrier of 55.30 (S3), which acted as the upper bound of a prior sideways range that contained oil gains in the past. As such, we would expect the bulls to take charge again soon and challenge the resistance barrier of 58.00 (R1). A clear break above that level could pave the way for our next resistance of 58.90 (R2). On the downside, a break below 56.90 (S1) could open the road for a test of the 56.20 (S2) territory. That said, as long as the price continues to trade above the crossroads of the uptrend line taken from the low of the 31st of August and the key hurdle of 55.30 (S3), there is still the prospect for a rebound from there.

US Senate tax bill vote expected today

• The US dollar tumbled yesterday, with no clear fundamental catalyst behind the decline. A couple of likely explanations include rumors that US Secretary of State Rex Tillerson may be forced out, as well as a notable downward revision in the Atlanta Fed GDPNow forecast for Q4. Nonetheless, the dollar rebounded later during the European afternoon, especially against the yen, possibly due to some optimistic developments around the topic of tax reform. The rebound began after Republican Senator John McCain indicated that he will support the tax bill, something may have eased market concerns that the proposal would encounter fierce Republican opposition.

• The Senate is expected to vote on the bill later today and expectations that it will pass appear to be elevated, evident by the continued surge in major US equity indices such as the S&P 500, which broke yet another all-time high yesterday. If the bill indeed passes the Senate, then the prospect of a complete tax overhaul as early as this year suddenly becomes much more likely. In this scenario, we would expect the dollar as well as US stocks to come under renewed buying interest.

• USD/JPY plunged during the European afternoon yesterday, briefly falling below 112.40 (S1), to find fresh buy orders near the support barrier of 111.70 (S2). The rate then rebounded to break back above 112.40 (S1). In case the Senate votes for the tax bill today, the latest rebound could continue to challenge the 113.10 (R1) resistance zone. If buyers manage to overcome that level, we could experience further bullish extensions towards 113.80 (R2). On the downside, if the Senate votes against the bill or delays the vote further, investors may be left disappointed and we could see the rate head lower. A decisive break back below 112.40 (S1) could open the way for another test near 111.70 (S2).

As for the rest of today’s highlights:

• During the European morning, we got the final Markit manufacturing PMI for the UK which is increased to 58.2 from 56.3 previously, by beating also the expectations of 56.5. GBP strengthened a bit on the news.

• Also, Canada’s GDP for Q3 and employment data for November are due out. Focus may be primarily on the employment data. Should the unemployment rate fall as expected, it could support the CAD somewhat.

• From the US, we get the ISM Manufacturing PMI for November which is expected to tick down to 58.4 from previous reading of 58.7.

• As for speakers we have three on the agenda: Fed Chair Janet Yellen, St. Louis Fed President James Bullard and Philadelphia Fed President Patrick Harker.

WTI

• Support: 56.90 (S1), 56.20 (S2), 55.30 (S3)

• Resistance: 58.00 (R1), 58.90 (R2), 60.00 (R3)

USD/JPY

• Support: 112.40 (S1), 111.70 (S2), 111.10 (S3)

• Resistance: 113.10 (R1), 113.80 (R2), 114.30 (R3)