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On Monday, the dollar could not recover from Friday's losses as North Korean tensions came back to the spotlight and as liquidity was limited during the session with South Korea, Japan, and China being closed for holidays, while US markets will be partially shut for Columbus Day.

Although the report on US nonfarm payrolls released on Friday raised hopes for a third hike in December as wage growth picked up unexpectedly and the unemployment rate retreated further, renewed US-North Korea tensions gave a breather to the dollar and support to safe-haven assets. Particularly, traders were cautious after Russian lawmakers returning from North Korea, reported to Russia's RIA news that Pyongyang was preparing another missile test in the near-term, which has the power to reach the west coast of the US.

The dollar, which immediately gave up gains made from nonfarm payrolls following the news on Friday, continued retreating in Asia, falling to 93.58 against a basket of major currencies after touching a 2 ½ – month high on Friday. Against the yen, the dollar also dropped from 2 ½ month highs, trading flat at 112.68 during the session. The safe-haven gold jumped by 0.35% to $1,279.70 per ounce.

An arrest of a US consulate employee in Turkey made the US and Turkey suspend visa services for citizens visiting those countries and hence escalated tensions between the nations. As a result, the dollar surged by 3.2% against the Turkish lira to 3.7694, posting the highest mark since July 2016.

While the Catalan leader, Carles Puigdemont, is preparing to address the Catalan Parliament on Tuesday, in an attempt to achieve unilateral Independence from Spain, a crowd of thousands of people in Catalonia's capital Barcelona, demonstrated against breaking away from Spain on Sunday, widening divisions over the issue. Meanwhile, Spain's Prime Minister, Mariano Rajoy, reiterated in an interview on Sunday he would not let independence to happen, saying that “we will take whatever decision that we are permitted to by law, in view of how things are unfolding”.

In other news, Eurogroup leaders will meet today to share views on the future role of the European Stability Mechanism.

Euro/dollar held steady at 1.1726.

Brexit talks are due to enter the fifth round today in Brussels, while UK Prime Minister Theresa May is due to express her optimism on negotiations in front of British lawmakers on Monday after her leadership was put in question following her poor speech at the annual Conservative party, last week, which she admitted was “uncomfortable”. Besides that, May said on Sunday that she is considering to demote the UK Foreign Minister, Boris Johnson, insisting that she will not “hide from a challenge”. The pound gained 0.33% on the day, last seen at $1.3107.

The Aussie weakened moderately against its US counterpart, slipping down to 0.7759 after the Chinese Caixin index for service activities came in worse than expected. The index fell by 2.1 points to a 21-month low of 50.6, missing expectations of 53.1.

Final general election votes released on Saturday in New Zealand failed to give a majority to a single party, with the ruling National Party attracting 56 sits and the opposition's Labour and Green holding together 54 sits. This leaves the decision of coalition again to the small nationalist First Party. The kiwi dropped to a 4-month low of $0.7056 in the first Asian trading hours before it edged up to 0.7076, remaining 0.20% down on the day.

In energy markets, oil prices recovered slightly from Friday's sharp losses of 2% as markets expect Saudi Arabia to continue restricting its output, while the US Baker Hughes oil rig counts showed that US active oil drillings dropped from 750 to 748 in the week ending October 6. Moreover, several oil refineries in the Gulf of Mexico remained shut on Monday after hurricane Nate passed the area during the weekend, causing minor damage. WTI crude was trading 0.22% up on the day at $49.40 per barrel and Brent moved higher by 0.25% to $55.76.

German August manufacturing output increased 3.2%
The business activity in China still grew but the rate of the growth was the slowest in nearly 21 months
The Turkish Lira plunged to a record low against its basket of currencies.

European markets are trading higher on the back of more encouraging economic data from the biggest economy in the Eurozone. German August manufacturing output increased 3.2% compared to the last month. This is surely positive news for the ECB, however, the data hasn’t produced any meaningful colour for the Euro-dollar pair. The pair continues to trade near the lows of the day (low 1.17418) and a break of 1.17 would imply more selling pressure. What pushed the euro lower was the German August construction output which fell 1.2% from its previous month.

As for Asia., the Chinese economic data released overnight was clearly lacklustre but investors didn’t pay too much attention to the number. The business activity in China still grew but the rate of the growth was the slowest in nearly 21 months. The reason behind this was mainly due to the dull performance of new businesses which has cooled off. The Caxin/ Markit services purchasing manager index printed the reading of 50.6. A reading above 50 is associated with expansion. The index published its three month high of 52 during the month of August. Although investors have largely ignored this week’s number. The threat to the slower growth and lower expansion have become stronger and it would become a major headache for the investors.

In terms of currencies, it is the Turkish Lira against the US dollar pair which gathered a lot of attention among investors. The geopolitical tension was the reason which pushed the Lira close to its all-time low (against the dollar). The US suspended immigration visa for the Turkish citizens and Turkey did the same for the US citizens. The Turkish Lira plunged to a record low against its basket of currencies.

Over in the UK, Theresa May would be busy in reshuffling her cabinet and her party leaders want her to show courage by firing Johnson Boris out of his position. May’s authority and her command within the party has been under a major question. Her power has been eroding and her last speech to conservative leaders was not nothing short of a disaster. So far she has faced nothing but failure to start the negotiation process with Brussels. The clock is ticking as the UK has only two years to have a deal. It is expected that she is going to tell her party leaders that she has offered generous terms to European leaders and now it is up to them to accept the offer.

In geopolitics tensions, President Trump likes to keep the tensions high and he threatened North Korea over the weekend with his tweet by saying “only thing will work”. If the US goes to war with North Korea, it will be alone only because no other country is backing the move yet. This would trigger a risk-off trade. This has pushed the price of gold well above its recent low of 1260.

Back in Spain, a senior leader from the Catalanian administration has invited Spain to initiate the talk process again. We do expect this development to take priority because Catalonia leaving Spain simply implies more challenges for the whole of Europe. We do expect the Spanish Prime Minister to take this opportunity to de-escalate the unnecessary tension.

Crude oil is bouncing lower below the $50 level. Key support is given at 45.40 (17/08/2017 high). Strong resistance lies at 52.86 (28/09/2017). Expected to show continued weakness.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness are very likely. Strong support lies at 35.24 (05/04/2016) while resistance can now be found at 55.24 (03/01/2017 high).

Silver is trading mixed. Hourly resistance is given at 16.99 (intraday high) while hourly support can be found at 16.33 (06/10/2017 low). Expected to show further bearish move.

In the long-term, the trend is rater negative. Further downsides are very likely. Resistance is located at 25.11 (28/08/2013 high). Strong support can be found at 11.75 (20/04/2009).

Gold has bounced back above broken hourly support given at 1267 (15/08/2017 low). Hourly resistance is located at 1290 (29/09/2016 high). Strong support lies at 1204 (10/07/2017 high). Expected to show further downside move.

In the long-term, the technical structure suggests that there is a growing upside momentum. A break of 1392 (17/03/2014) is necessary ton confirm it, A major support can be found at 1045 (05/02/2010 low).

Bitcoin is definitely on a strong momentum. Strong support is given at 2975 (22/08/2017 low). Sell walls around $4000 have been broken. Key resistance can be located at 4921 (01/09/2017 high). The road is wide open for further increase.

In the long-term, the digital currency has had an exponential growth. There are decent likelihood that the asset will reach $10'000.

EUR/CHF is trading into a new short-term trend. Yet momentum is not "that" strong at the moment. Strong resistance lies at a distance at now at 1.1623 (22/09/2017 high). Support is given at 1.1388 (02/09/2017 low). Downside risk is very likely.

In the longer term, the technical structure has reversed. Strong resistance is given at 1.20 (level before the unpeg). Yet, the ECB's QE programme is likely to cause persistent selling pressures on the euro, which should weigh on EUR/CHF. Supports can be found at 1.0184 (28/01/2015 low) and 1.0082 (27/01/2015 low).

EUR/GBP is trading higher. The pair has broken the resistance at 0.8899 (19/09/2017 low). The very short-term technical structure is now biased to the upside. Hourly support is given at 0.8746 (27/09/2017).

In the long-term, the pair has largely recovered from recent lows in 2015. The technical structure suggests a growing upside momentum. The pair is trading above from its 200 DMA. Strong resistance can be found at 0.9500 (psychological level).

AUD/USD continues to push lower over the past weeks. Hourly resistance is given at 0.7883 (27/05/2017 high). The pair is approaching support at 0.7786 (18/07/2017 low). Expected to show continued decline.

In the long-term, the trend is turning positive. Key supports stands at 0.6009 (31/10/2008 low) . A break of the key resistance at 0.8164 (14/05/2015 high) is needed to invalidate our long-term bearish view.

USD/CAD continues to move higher within uptrend channel. Strong support is located at a distance 1.2062 (08/09/2017 low). Hourly support lies at 1.2331 (26/09/2017 high). Resistance is given at 1.2663 (31/08/2017 high). Expected to show continued short-term bullish pressures.

In the longer term, the pair has broken longterm support that can be found at 1.2461 (16/03/2015 low). Strong resistance is given at 1.4690 (22/01/2016 high). The pair is likely to head further lower.