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USDJPY: The pair closed further lower on Monday opening the door for more weakness. This view remains valid despite its present price hesitation. On the downside, support lies at the 110.00 level where a break if seen will aim at the 109.50 level. A cut through here will turn focus to the 109.00 level and possibly lower towards the 108.50 level. On the upside, resistance resides at the 111.00 level. Further out, we envisage a possible move towards the 111.50 level. Further out, resistance resides at the 112.00 level with a turn above here aiming at the 112.50 level. On the whole, USDJPY faces further bearishness.

Here are the latest developments in global markets:

FOREX: After considerable declines in the days that preceded, the dollar is in the green relative to other major currencies during today's trading, though it managed to recover only a relatively small portion of earlier losses. The dollar index was 0.3% up at 90.73. On Monday it touched 90.46, its lowest since early 2015. The British currency experienced some losses following the release of UK inflation data.

STOCKS: European bourses were broadly in the green around midday, though gains were limited for the most part. The pan-European Stoxx 600 traded 0.25% higher and the blue-chip Euro Stoxx 50 was up by 0.6%. The UK's FTSE 100 was down by 0.1% after previously coming close to a fresh all-time high, while the German DAX and CAC 40 traded higher by 0.9% and 0.2% respectively. Some weakness in the euro/dollar pair was supporting exporter-heavy benchmarks such as the DAX. Luxury fashion house Hugo Boss (up 3.15%) and vehicle-maker Peugeot (up 1.4%) were on a positive footing after releasing upbeat reports that, among others, showed rising sales. Deutsche Bank was down 0.3%; the bank was under pressure on the back of accusations it conspired to rig a Canadian benchmark rate. Futures markets were pointing to a higher open on Wall Street: Dow, S&P 500 and Nasdaq 100 contracts were up by 0.8%, 0.4% and 0.5% respectively. Citigroup will be reporting its Q4 2017 financial results before today's US market open.

COMMODITIES: WTI was down by 0.6% and Brent crude was lower by 1.3%, trading at $63.90 and $69.31 per barrel respectively. These compare to WTI's $64.89 per barrel from earlier in the day – a fresh three-year high – and Brent's $70.37 recorded on Monday, this also being a three-year high. Gold posted losses as the greenback was on the rise. The dollar-denominated precious metal was 0.3% down at $1,333.85 an ounce. In previous days it benefitted on the back of the US currency's weakness, rising as high as $1,344.44 during Monday's trading, a level last experienced in early September.

Day ahead: Dairy auction and API oil data on the agenda; pound declines following data on inflation

UK headline inflation grew by 3.0% y/y/ in December, reflecting the first decline since June. The figure was in line with expectations and below the near six-year high of 3.1% recorded in November, which represented a more than 1% overshoot from the Bank of England's target for inflation of 2% and thus meant that Governor Carney had to write a letter to the Chancellor of the Exchequer Philip Hammond to explain the situation.

Some analysts anticipate CPI to continue declining as the impact from the pound's sharp fall following June 2016's Brexit referendum drops out of the data. However, the British Office for National Statistics (ONS) said "it remains too early" to declare whether that has started taking place. On an annual basis, December core inflation, which excludes energy, food, alcohol and tobacco items, grew by 2.5%, below expectations of 2.6% and November's respective rate of 2.7%.

Sterling experienced volatility upon release of the data, falling overall relative to majors including the dollar and the euro as perhaps forex market participants perceived the numbers as easing pressure on the BoE to proceed with an additional rate hike following the one in November. Pound/dollar was 0.3% down at 1.3755 – but still trading around post-Brexit referendum highs – and euro/pound was little changed at 0.8890.

The UK also saw the release of data on producer price inflation, with input price growth falling short of forecasts and output prices rising more than projected.

The outcome of the bi-weekly dairy auction was scheduled to be made public around 1200 GMT, though the release has yet to take place as it is tentative, lacking a fixed time. Dairy products account for the largest portion of New Zealand's exports and it would be interesting to see if prices lend some support to the kiwi which has retreated notably versus its US counterpart after a survey by think tank NZIER (New Zealand Institute of Economic Research) showed New Zealand business sentiment turning negative to reach a two-year low in the fourth quarter of last year. Worsening sentiment was attributed to pessimism stemming from uncertainty over the policies of the new Labour-led government.

No significant data are expected out of the US during today's trading, with January's New York Fed Manufacturing index being the only release attracting some attention. The reading though does not typically lead to positioning on the dollar.

Oil traders will be paying attention to the API weekly report due at 2130 GMT that includes information on US crude stocks.

In politics, any developments on coalition talks between Chancellor Merkel's conservative bloc and the Social Democrats will be closely watched as they have the capacity to spur movements in euro pairs.

• Investors Buoyed as Earnings Season Gets Underway.
• USD Pares Losses But Remains Under Considerable Pressure;
• Cryptocurrencies Tumble as Bitcoin Hits Daily Low on CME.
• Investors Buoyed as Earnings Season Gets Underway

New record highs look on the agenda for US equity markets when they reopen on Tuesday, with futures indicating gains of between 0.5% and 1% from Friday's close.

It's been a relatively quiet start to the new year and yet markets have continued to push on higher, with investors clearly very optimistic ahead of the fourth quarter earnings season. Not only is the US coming off a strong quarter previously but the new tax reform measures are continuing to provide a boost, with investors keen to hear more about what impact this will have on future earnings. Only six companies are scheduled to report on Tuesday but this will pick up significantly over the coming weeks.

USD Pares Losses But Remains Under Considerable Pressure

One thing that's not benefiting in any way from tax reform is the dollar, despite the apparent positive impact that it will have on the economy in the coming years. The dollar has been in freefall in recent days, hitting levels not seen since the start of 2015 as traders question whether the Federal Reserve will continue to hike interest rates at the current pace while raising tightening expectations for those elsewhere, in particular the ECB.

The dollar has pared its gains so far today, with EURUSD and GBPUSD coming off three year and 18-month highs, respectively. The drop off in the latter was helped by this morning's inflation data from the UK, the core reading of which eased slightly more than expected. That will alleviate some pressure on the Bank of England to raise interest rates again this year although, of course, this is just one reading and more evidence of this will be needed in the months ahead or some policy makers may become uncomfortable again.

Cryptocurrencies Tumble as Bitcoin Hits Daily Low on CME

Bitcoin has been getting pummelled on Tuesday, falling to its lowest level since 22 December with the CME January contract hitting daily low limit before rebounding. Bitcoin was trading around 20% lower at one stage but has since recovered a little to trade around 14% down at the time of writing. The trigger for the move isn't clear but there hasn't been a shortage of negative headlines for cryptocurrencies recently, be it regulators clamping down on speculation or high profile names warning of bad outcomes.

Cryptocurrency enthusiasts were willing to shrug off these warnings as scaremongering prior to the launch of futures contracts on CME and CBOE, when prices were making huge gains on an almost daily basis. Since then Bitcoin has really struggled and while it showed significant resilience around $13,000 over the last few weeks, it finally gave way this morning which likely exacerbated the move lower as speculators quickly headed for the exit.

While Bitcoin selling hasn't always come during a broader sell-off in the cryptocurrency space, with Ethereum for example having made large gains between the start of the year and yesterday, today's sell-off is being felt throughout. Of the top 100 cryptocurrencies by market capitalisation, none are trading in positive territory over the past 24 hours, according to coinmarketcap.com which may be a worrying sign for what some have labelled a new asset class

WTI oil price moved lower on Tuesday, pressured by stronger dollar and overbought techs which suggest correction.

Oil price posted marginally higher high at $64.87 on Monday (the highest in more than three years) but was unable to sustain gains.

Corrective action looks as likely scenario in the near-term, as overbought daily indicators turned south and are about to generate stronger bearish signal on reversal from overbought territory.

Corrective pullback eyes initial support at $63.08, but could extend towards next significant points at $61.51 (Fibo 38.2% of $56.08/$64.87) and $61.00 (rising 20SMA) on stronger bearish acceleration.

Overall bullish structure favors further advance after correction, as strong bullish sentiment on OPEC-led production cut which reduced global oversupply, is expected to drive oil price higher.

Broader bulls will be looking for test of next target at $66.72 (50% retracement of $107.40/$26.04) after completion of corrective phase.

Res: 64.87; 65.00; 65.88; 66.72
Sup: 63.75; 63.08; 61.79; 61.51

Copper fell sharply on Tuesday, falling nearly 3% for the session, pressured by fresh strength of the dollar which bounced from new three-year low.

Monday's recovery action stall and today's fall generated bearish signal, as fresh weakness completed failure swing pattern on daily chart, on break below previous correction low at $3.2065.

Bears are pressuring next pivotal support at $3.1758 (Fibo 38.2% of $2.9425/$3.3200 rally, with sustained break here to generate fresh bearish signal for extension towards 55SMA ($3.1360) and possible stretch towards 100SMA ($3.1019).

Bear-cross of 10/20SMA is forming at $3.2325 and additionally pressuring near-term price action.

Res: 3.2065; 3.2205; 3.2325; 3.2444
Sup: 3.1758; 3.1646; 3.1360; 3.1019

USD/CAD continues to trade sideways this week. In the Tuesday session, the pair is trading at 1.2441, up 0.09% on the day. It's a quiet day on the release front, with no Canadian events. In the US, the sole indicator is the Empire State Manufacturing Index. The indicator is expected to climb to 18.4 points.

All eyes are on the Bank of Canada, which holds its monthly policy meeting on Wednesday. Most experts expect the BoC to raise rates by a quarter-point, from 1.0% – 1.25%. The last time the benchmark rate was above 1.0% was back in December 2008. The Canadian economy has looked strong of late, underscored by unexpectedly strong employment data. At the same time, BoC Governor has some concerns about the economy, particularly looming dark clouds over NAFTA. The free-trade agreement, crucial to the Canadian economy, is in trouble, as US President Trump has threatened to cancel the pact unless Mexico and Canada make major concessions to the US. If the agreement is terminated, the Canadian dollar would likely take a tumble.

The Canadian dollar held recorded strong gains in December, and has held its own against the greenback in January. There are two important factors for this positive trend. First, Canada recorded outstanding employment numbers in the past two months. In December, the economy added 78.6 thousand jobs, defying experts who predicted a minuscule gain of 1.8 thousand. This release comes on the heels of a superb November release, when the economy added 79.5 thousand news jobs. The unemployment rate dropped to 5.7% in December, down from 5.9% a month earlier. Second, the recent rise in oil prices, which are up 6.7% since December 1, has boosted the commodity-based Canadian currency.

The CAC index has posted slight losses in the Tuesday session. Currently, the index is at 5523.50, up 0.25%. On the release front, the France's government deficit widened to EUR 84.7 billion, a 3-month high. On Wednesday, the eurozone releases Final CPI.

European stock markets have jumped out of the gate since New Years' and the CAC is up 4.2% since the start of the year. The rally could continue, as there is speculation that the ECB could normalize and wind up its asset purchase program. The ECB minutes from the December meeting were hawkish. In the minutes, policymakers said that risks to the current outlook were to the upside, which could necessitate a gradual shift in guidance in the next few months. As for the eurozone, the minutes stated that the economy was displaying "continued robust and increasingly self-sustaining economic expansion". Policymakers have echoed the sentiment that tighter policy could be on the way. On Monday, ECB Governing Council member Ardo Hansson said if the economy and inflation develop as expected, the ECB could wind up the asset purchase program in one shot after September.

The political vacuum in Germany has been a setback for French President Emmanuel Macron, a staunch proponent of European unity. Macron has grandiose plans for the further integration of the eurozone, such as harmonizing corporate tax regimes and establishing a eurozone budget. Merkel would make an ideal partner to reform the bloc, but she has her hands full trying to set up a new government in Germany. Investors are bullish after reports last week that Merkel and the Social Democrats had reached a preliminary agreement on forming a new government. Still, the talks are only in the preliminary stage, and further negotiations will take at least several weeks before it is clear that the talks have been successful. Macron's grand plans for Europe will have to remain on the shelf until Merkel has a government in place.

The Aussie dollar holds in red on Tuesday, dragged by stronger dollar and fall of copper price.

Bullish structure favors further advance after correction, as bulls showed signs of stall after testing barrier at 0.7977 (Fibo 76.4% of 0.8124/0.7500 fall) and overbought daily indicators are turning south.

Solid bids lay at 0.7900 (daily Tenkan-sen / Monday’s low), followed by rising 10SMA (0.7877) which is expected to ideally contain dips.

Otherwise, deeper correction on break below 10SMA, would expose key near-term supports at 0.7800 zone (correction lows of 09/10 Dec / 20SMA).

Res: 0.7977, 0.8000, 0.8035, 0.8102
Sup: 0.7938, 0.7900, 0.7877, 0.7847

The pair is consolidating above strong supports and targets at 110.15/00 (Fibo 61.8% of 107.31/114.73 ascend / psychological support) which were approached on Monday’s extension to 110.32.

Strong near-term bearish bias favors selling upticks on correction for final break through 110.15/00 pivots which could trigger fresh bearish acceleration towards next significant support at 109.10 (weekly cloud base).

Recovery attempts were so far limited by falling hourly cloud and failed to sustain probes above first strong barrier at 110.83 (former key support, low of 27 Nov).

However, stronger correction cannot be ruled out as bullish signals are developing on reversal of daily RSI from o/s territory, with deeply oversold slow stochastic turned sideways.

Lift above thickening hourly cloud (110.90/111.14) is needed to generate bullish signal for extended recovery.

Broken 200SMA marks strong barrier at 111.68 which is expected to cap extended rallies.

Res: 110.90, 111.14, 111.68, 111.89
Sup: 110.47, 110.32, 110.15, 110.00

WTI oil futures rallied to a fresh 3-year high of 64.86 on Monday after successfully rebounding off the 63 level. The underlying trend remains bullish but in the near term, prices are making a correction lower. Upside momentum has weakened, and RSI is turning back down on the 4-hour chart.

The market has dipped below what was support at the 64 level and any additional losses would shift the focus to the next support level at 63. To the upside, immediate resistance is seen at the round figure level of 65.

Following the sharp rise to the 65 handle, the market is expected to take a breather and pull back. The near-term picture looks more consolidative, with downside risk expected to be limited to the 63 handle.

In the bigger picture, the bullish move that began from late December after the rebound from the mid-58 area is still in progress and there are no signs of a reversal in the trend as long as the market remains above the key 60 level.