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Asian stocks gapped sharply lower follow steep fall in US equities overnight. But sentiments were then lifted by optimism over US-China trade negotiations. Australian and New Zealand Dollar benefited from the development and are now trading as the strongest ones. On the other hand, Yen and Dollar turn softer, paring yesterday strong's gains. Though for the week so far, New Zealand Dollar is the strongest, followed by US Dollar and Canadian. Euro is the worst as markets are awaiting Italy's formal response to EU budget rejection. Sterling is the second weakest on Brexit impasse.

Technically, after taking out 1.1300 yesterday, there is no sign of bottoming in EUR/USD yet. Medium term down trend is in progress and should be extending to 1.1186 fibonacci level. USD/JPY continues to lose momentum ahead 114.54/73 resistance and we might see a near term reversal from there. AUD/USD breached 0.7182 support briefly but followed Asian stocks and rebound. EUR/AUD also breaks through 1.5601 structure support without much hesitation, which is quite bearish. It's probably not the time for selloff in Aussie yet.

In other markets, DOW closed sharply lower by -602.12 pts or -2.32% at 25387.18. S&P 500 dropped -1.97% and NASDAQ declined -2.78%. Treasury yield were steady though, as 10 year yield closed down -0.003 at 3.186. In Asia, Nikkei lags behind others and is trading down -2.20%. But Hong Kong HSI staged a 500 pts reversal after gapping down. It's now down just -0.07%. Similarly, China Shanghai SSE also dripped to as low as 2597 but it's now at 2653, up 0.86%. Singapore Strait Times also pared back some losses and is down only -0.58%.

Asian Stocks rebound as Chinese VP Liu will visit US for trade shortly

Hong Kong stocks opened the day sharply lower with HSI hitting as low as 25092.30. That followed -2.32% decline in DOW overnight. But sentiments were then lifted by US-China trade news. The HSI just had an over 500pts swing and is now at 25060.49, down just -0.1%. AUD/USD is also lifted notably after breaching 0.7182 minor support earlier today.

It's firstly reported that US Treasury Secretary Steven Mnuchin has resumed discussed with China Vice Premier Liu He on Friday. While there was certainly no breakthrough, it's a positive step on preparation for Xi-Trump meeting at G20 summit on November 30.

Then, another report emerged saying that Liu would visit the US shortly to carry on with the preparations. The Hong Kong SCMP newspaper said two sources, on both sides, have confirmed the development, even though there is no final schedule yet.

Fed Daly: Premature to say Dec hike a definite, Fed not on autopilot

San Francisco Fed president Mary Daly said yesterday that her modal forecasts was for two to three more rate hikes over the next period. However, she also noted that "the exact timing not being certain". She went further saying that it's "premature" to say that a December rate hike is a "definite". And, "we have a lot of time between now and December to see how the economy unfolds."

Nevertheless, Daly still believed that Fed should gradually raise interest rates towards neutral. Her estimate of neutral rate is between 2.5 and 2.8%. For now, she'd "probably" pick the middle of the rate at around 2.7% as the neutral rate. She added that "gradual is helpful because it allows us to raise the rate, look around, evaluate, interpret the data and then, and only then, make another increase". And, "the frequency and size of any increase I think is something that we want to continue to have open and not be on autopilot." Also, she thought it's premature to discuss whether interest rate need to go into restrictive region.

Her comments came after giving a speech titled "A Strong Economy—But We Can Aim Higher". There she said that the current state of economy is "very good". But "some people are getting left behind". She said essentially all labor market indicates are "flashing bright green" and signaled the US labor market is "indeed at full employment". The "key exception is continued low rates of labor force participation". While monetary policy can't directly cure the participation problem, Fed can help by "keeping the expansion going". She also noted that there are "upside potential for US workforce participation".

UK PM May: Brexit negotiations in the endgame, but significant issues remain

Addressing the lord mayor's banquet at the Guildhall in London on Monday night, UK Prime Minister Theresa May declared that "the negotiations for our departure are now in the endgame". She added, "we are working extremely hard, through the night, to make progress on the remaining issues in the withdrawal agreement, which are significant."

May believed that "both sides want to reach an agreement"even though "what we are negotiating is immensely difficult:". But she also emphasized that "this will not be an agreement at any cost".

But no matter what May said, seeing is believing and nothing is done until 100% is done. For now, it's still seen unlikely for the Brexit deal to be completed within November.

BoJ assets rose to JPY 553.6T, larger than Q2 GDP annualized

Latest data from BoJ showed that the central bank is holding JPY 553.6T of assets as of November 10. Among them, JPY 469.1T are Japanese government securities, accumulated through over five years of the Quantitative and Qualitative easing program.

The total assets now surpassed the countries' GDP. Based on Q2 (April to June) data, Japan's nominal GDP was annualized at JPY 552.8T. Q3's data might, due on Wednesday, might come in a bit lower due to natural disasters. Nevertheless, Japan is now the first among G7 countries to own a pool of assets larger than its own GDP.

The situation drew criticism that the ultra loose monetary policy is clearly not sustainable. Some noted that BoJ would suffer losses if it would have to raise interest rate. But that's not so much of an immediate problem. The bigger risk is that in case of real emergency, like a full blown disaster, BoJ will not be able to finance government bonds any more.

Australia business confidence dragged down by employment, wage growth constrained

Australia NAB Business Confidence dropped 2pts from 6 to 4 in October. Business Conditions also dropped 2pts from 14 to 12. Alan Oster, NAB Group Chief Economist noted that "the decline in the month was driven by weakness in the employment component – though at these levels the survey still suggests ongoing employment growth at around 20k per month. At this rate we should see recent labour market gains maintained".

Also, it's noted in the release that "surveyed wage bill measures and the official wage price index suggest that enough spare capacity has remained in the labour market to constrain a significant pickup in wage growth". Hence, "September quarter wage data to be released later this week will show a small rise in the pace of growth but that overall wage growth will remain low relative to history."

The data certainly supports the "no rush" stance of RBA.

Looking ahead

European data will be the main focus for today. UK will release employment data, including wage growth and unemployment rate. Germany will release ZEW economic sentiment and CPI final. Swiss will also release PPI.

EUR/AUD Daily Outlook

Daily Pivots: (S1) 1.5603; (P) 1.5649; (R1) 1.5683; More....

EUR/AUD's decline continues today and reaches as low as 1.5581 so far. Break of 1.5601 support further affirms the case of medium term bearish reversal. Intraday bias remains on the downside for 1.5271/5313 cluster support zone next. On the upside, above 1.5666 minor resistance will turn intraday bias neutral and bring consolidations, before staging another fall.

In the bigger picture, current development argues that up trend from 1.3624 (2017 low) is possibly completed at 1.6357, ahead of 1.6587 (2015 high). This is supported by bearish divergence condition in weekly MACD. Deeper decline is now in favor to 1.5271 cluster support (38.2% retracement of 1.3624 to 1.6357 at 1.5313). Break will target 61.8% retracement at 1.4668. On the upside, break of 1.5984 support turned resistance is now needed to revive the prior medium term up trend. Otherwise, further decline will be in favor even in case of interim rebound.

Economic Indicators Update

For the 24 hours to 23:00 GMT, the EUR declined 0.94% against the USD and closed at 1.1223, amid political uncertainty and concerns over Italy’s budget plans.

Separately, the US dollar rose against a basket of currencies yesterday, amid hopes that the US Federal Reserve will hike interest rates in December.

In the Asian session, at GMT0400, the pair is trading at 1.1249, with the EUR trading 0.23% higher against the USD from yesterday’s close.

The pair is expected to find support at 1.1200, and a fall through could take it to the next support level of 1.1150. The pair is expected to find its first resistance at 1.1315, and a rise through could take it to the next resistance level of 1.1380.

Going forward, investors would keep an eye on the Eurozone’s ZEW survey economic sentiment index for November along with Germany’s consumer price index for October and ZEW survey indices for November for further indication. Later in the day, the US NFIB small business optimism index for October, will keep investors on their toes.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the GBP dropped 0.68% against the USD and closed at 1.2852, amid renewed Brexit worries, following reports that Prime Minister, Theresa May had cancelled a cabinet meeting to approve a Brexit deal.

In the Asian session, at GMT0400, the pair is trading at 1.2886, with the GBP trading 0.26% higher against the USD from yesterday’s close.

The pair is expected to find support at 1.2828, and a fall through could take it to the next support level of 1.2770. The pair is expected to find its first resistance at 1.2944, and a rise through could take it to the next resistance level of 1.3002.

Looking forward, investors would closely monitor UK’s average weekly earnings and ILO unemployment rate, both for September, slated to release in a few hours.

The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD declined 0.17% against the JPY and closed at 113.79.

In economic news, Japan's preliminary machine tool orders retreated 1.1% on an annual basis in October, deteriorating for the first time since November 2016. In the previous month, machine tool orders had risen 2.9%.

In the Asian session, at GMT0400, the pair is trading at 114.02, with the USD trading 0.20% higher against the JPY from yesterday's close.

The pair is expected to find support at 113.66, and a fall through could take it to the next support level of 113.31. The pair is expected to find its first resistance at 114.29, and a rise through could take it to the next resistance level of 114.57.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.46% against the CHF and closed at 1.0104.

In economic news, Switzerland’s total sight deposits eased to a level of CHF577.2 billion in the week ended 09 November, from CHF577.5 billion in the previous week.

In the Asian session, at GMT0400, the pair is trading at 1.0099, with the USD trading 0.05% lower against the CHF from yesterday’s close.

The pair is expected to find support at 1.0067, and a fall through could take it to the next support level of 1.0034. The pair is expected to find its first resistance at 1.0122, and a rise through could take it to the next resistance level of 1.0144.

Trading trend in the Swiss Franc today, will be determined by the release of Switzerland’s producer and import prices for October, set to release in a while.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the USD rose 0.43% against the CAD and closed at 1.3242.

In the Asian session, at GMT0400, the pair is trading at 1.3217, with the USD trading 0.19% lower against the CAD from yesterday’s close.

The pair is expected to find support at 1.3183, and a fall through could take it to the next support level of 1.3150. The pair is expected to find its first resistance at 1.3250, and a rise through could take it to the next resistance level of 1.3284.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the AUD declined 0.79% against the USD and closed at 0.7176.

LME Copper prices declined 0.1% or $4.5/MT to $6083.5/MT. Aluminium prices declined 1.6% or $30.5/MT to $1934.0/MT.

In the Asian session, at GMT0400, the pair is trading at 0.7216, with the AUD trading 0.56% higher against the USD from yesterday's close.

Overnight data indicated that Australia's NAB business confidence index slid to a level of 4.0 in October, compared to a reading of 6.0 in the prior month. Meanwhile, the nation's NAB business conditions index declined to a level of 12.0 in October, following a revised reading of 14.0 in the preceding month.

The pair is expected to find support at 0.7175, and a fall through could take it to the next support level of 0.7133. The pair is expected to find its first resistance at 0.7247, and a rise through could take it to the next resistance level of 0.7277.

Moving ahead, investors will keep a close watch on Australia's Westpac consumer confidence index for November, slated to release overnight.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages

For the 24 hours to 23:00 GMT, Gold declined 0.92% against the USD and closed at USD1200.80 per ounce, amid broad strength in the greenback.

In the Asian session, at GMT0400, the pair is trading at 1205.00, with gold trading 0.35% higher against the USD from yesterday’s close.

The pair is expected to find support at 1199.73, and a fall through could take it to the next support level of 1194.47. The pair is expected to find its first resistance at 1211.13, and a rise through could take it to the next resistance level of 1217.27.

The yellow metal is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, Silver declined 1.48% against the USD and closed at USD13.97 per ounce, tracking losses in gold prices.

In the Asian session, at GMT0400, the pair is trading at 14.06, with silver trading 0.61% higher against the USD from yesterday’s close.

The pair is expected to find support at 13.95, and a fall through could take it to the next support level of 13.84. The pair is expected to find its first resistance at 14.17, and a rise through could take it to the next resistance level of 14.29.

The white metal is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, Crude Oil fell 3.14% against the USD and closed at USD58.86 per barrel, after US President, Donald Trump, stated that he hopes OPEC does not cut crude production.

In the Asian session, at GMT0400, the pair is trading at 59.20, with oil trading 0.58% higher against the USD from yesterday's close.

The pair is expected to find support at 58.16, and a fall through could take it to the next support level of 57.12. The pair is expected to find its first resistance at 60.76, and a rise through could take it to the next resistance level of 62.32.

Crude oil is trading below its 20 Hr and 50 Hr moving averages.