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For the 24 hours to 23:00 GMT, the USD declined 0.37% against the JPY and closed at 112.41.

In the economic news, Japan's final machine tool orders climbed 2.9% on an annual basis in September, compared to a gain of 5.1% in the previous month. The preliminary figures had indicated a rise of 2.8%.

In the Asian session, at GMT0300, the pair is trading at 112.54, with the USD trading 0.12% higher against the JPY from yesterday's close.

Overnight data revealed that the nation's Nikkei flash manufacturing PMI advanced to a level of 53.1 in October, expanding at its quickest pace in six months and supported by rise in new export orders. In the preceding month, the PMI had recorded a reading of 52.5.

The pair is expected to find support at 112.12, and a fall through could take it to the next support level of 111.70. The pair is expected to find its first resistance at 112.80, and a rise through could take it to the next resistance level of 113.06.

Looking forward, investors would await Japan's coincident index and leading index, both for August, set to release in a while.

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

For the 24 hours to 23:00 GMT, the USD declined 0.15% against the CHF and closed at 0.9948.

In the Asian session, at GMT0300, the pair is trading at 0.9952, with the USD trading a tad higher against the CHF from yesterday’s close.

The pair is expected to find support at 0.9937, and a fall through could take it to the next support level of 0.9921. The pair is expected to find its first resistance at 0.9969, and a rise through could take it to the next resistance level of 0.9985.

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 0.09% against the CAD and closed at 1.3086.

In the Asian session, at GMT0300, the pair is trading at 1.3083, with the USD trading marginally lower against the CAD from yesterday's close.

The pair is expected to find support at 1.3065, and a fall through could take it to the next support level of 1.3048. The pair is expected to find its first resistance at 1.3111, and a rise through could take it to the next resistance level of 1.3140.

Going ahead, investors would keep an eye on the Bank of Canada's (BoC) interest rate decision, set to release later in the day.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the AUD rose 0.06% against the USD and closed at 0.7083.

LME Copper prices declined 1.9% or $116.5/MT to $6167.5/MT. Aluminium prices declined 0.3% or $5.5/MT to $1997.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7091, with the AUD trading 0.11% higher against the USD from yesterday’s close.

The pair is expected to find support at 0.7066, and a fall through could take it to the next support level of 0.7042. The pair is expected to find its first resistance at 0.7105, and a rise through could take it to the next resistance level of 0.7120.

In absence of key economic releases in Australia today, investor sentiment would be determined by global macroeconomic events.

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

For the 24 hours to 23:00 GMT, Gold rose 0.76% against the USD and closed at USD1234.10 per ounce, amid broad weakness in the greenback and global equities.

In the Asian session, at GMT0300, the pair is trading at 1236.20, with gold trading 0.17% higher against the USD from yesterday’s close.

The pair is expected to find support at 1227.27, and a fall through could take it to the next support level of 1218.33. The pair is expected to find its first resistance at 1244.07, and a rise through could take it to the next resistance level of 1251.93.

The yellow metal 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, Silver rose 1.41% against the USD and closed at USD14.79 per ounce, tracking gains in gold prices.

In the Asian session, at GMT0300, the pair is trading at 14.82, with silver trading 0.20% higher against the USD from yesterday’s close.

The pair is expected to find support at 14.62, and a fall through could take it to the next support level of 14.43. The pair is expected to find its first resistance at 14.92, and a rise through could take it to the next resistance level of 15.03.

The white metal 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, Crude Oil declined 4.79% against the USD and closed at USD66.24 per barrel, after the American Petroleum Institute (API) reported that US crude oil inventories climbed by 9.9 million barrels to 425.0 million barrels in the week ended 19 October.

In the Asian session, at GMT0300, the pair is trading at 66.57, with oil trading 0.50% higher against the USD from yesterday's close.

The pair is expected to find support at 65.09, and a fall through could take it to the next support level of 63.62. The pair is expected to find its first resistance at 68.69, and a rise through could take it to the next resistance level of 70.80.

Going ahead, investors will keep a close watch on the weekly crude inventories data from the Energy Information Administration (EIA), due later in the day.

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

Daily Pivots: (S1) 112.01; (P) 112.44; (R1) 112.93; More..

USD/JPY recovered ahead of 111.94 minor support but it's held below 112.88. Intraday bias remains neutral first. Outlook is unchanged that fall from 114.54 is part of medium term correction. Below 111.94 will likely extend such fall through 111.62 to 38.2% retracement of 104.62 to 114.54 at 110.75. In that case, we'll look for bottoming signal above 109.76 key support. On the upside, above 112.88 will target 61.8% retracement of 114.54 to 111.62 at 113.42 instead.

In the bigger picture, corrective fall from 118.65 (2016 high) should have completed with three waves down to 104.62. Decisive break of 114.73 resistance will likely resume whole rally from 98.97 (2016 low) to 100% projection of 98.97 to 118.65 from 104.62 at 124.30, which is reasonably close to 125.85 (2015 high). This will stay as the preferred case as long as 109.76 support holds. However, decisive break of 109.76 will dampen this bullish view and turns outlook mixed again.

Despite initial steep selloff, US equities staged a strong rebound before close and closed just slightly lower. The turnaround in sentiments carried on in Asian session with major indices all trading in black. With receding risk aversion, Australian and New Zealand Dollar are trading as the strongest one for today so far, followed by Canadian Dollar. Yen is naturally the weakest one for today, but European majors are also weak.

For the week, Sterling is so far the weakest one as weighed down by Brexit uncertainty. Euro is trading as the third weakest as the EU and Italy have now formally started the budget clash. That could also be reflected in the strength of swiss Franc. Canadian Dollar pares back some of last week's post CPI losses. BoC is expected to raise interest rate today. The accompanying statement would determine the next direction for the Loonie. Dollar is the third strongest for the week so far even though it's struggling to extend gains despite hawkish Fed comments.

Technically, we've pointed out before that Yen bulls refused to commit despite yesterday's rally attempt. That' clearly reflected in USD/JPY's recovery from 111.94 minor support and the lack of follow through selling in EUR/JPY and GBP/JPY. To a certain extent, Dollar bulls already refused to commit too. The greenback is for now struggling in tight range against dollar ahead of near term resistance. USD/CAD and USD/CHF are also staying in tight range. Focuses for the rest of the week will be on which sides Dollar and Yen would finally take.

In other markets, DOW closed down -0.50% at 25191.43 after diving to 24768.79. S&P 500 lost -0.55%, NASDAQ dropped -0.42%. Similarly, 10 year yield dropped to as low as 3.111, but closed 3.166, down just -0.030. In Asia, Nikkei is trading up 0.70% at the time of writing, Singapore Strait Times up 0.46%, Hong Kong HSI up 0.13% and China Shanghai SSE up 0.88%. Gold breached 1236/8 cluster resistance yesterday but quickly dipped back, it's now trading at around 1231/2, struggling to find follow through buying to overcome mentioned key resistance zone.

Fed Bostic: With strong economy, rate hikes to neutral appropriate

Atlanta Fed President Raphael Bostic said is a speech that the US economy is "in a good place", and he "struggled to come up with sufficient variations on the word 'strong'".  And to him strong economy means "able to withstand great force or pressure". "Tariffs, trade restrictions, and market volatility" are the headwinds. But there are also tailwinds in "recent tax reform and fiscal stimulus". And because of strong GDP numbers in Q2 and Q3, he's revised up 2018 and 2019 growth projections.

On monetary policy, he said "unless the data talk me out of it, I view a continued, gradual removal of policy accommodation as appropriate until we get to a neutral policy rate." And he emphasized that the current Fed policy rate "has not yet reached a neutral stance" and Fed is "still providing accommodation". The Fed has "yet to pump the brakes".

Trump unsure if he regrets on Fed Powell

Trump repeated his attack on Fed and its Chair Jerome Powell again yesterday. He told WSJ that "I'm very unhappy with the Fed because Obama had zero interest rates". And, referring to Powell, Trump added, "every time we do something great, he raises the interest rates", and Powell "almost looks like he's happy raising interest rates."

Asked if he regrets nominating Powell, Trump said it's "too early to tell, but maybe". Further, when asked on what circumstances would lead him to remove Powell, Trump said "I don't know". That's already a shift in stance from "I'm not going to fire him" on October 11.

House Brady agreed to work on 10% middle class tax cut.

House Ways and Means Committee Chairman Kevin Brady, Republican, said in a statement to work with the White House on delivering the 10% tax cut for the middle class. In the statement, he said "resident Trump believes American families deserve to keep more of what they work so hard to earn. We agree. After all, it's your money – not Washington's."

Brady added "We will continue to work with the White House and Treasury over the coming weeks to develop an additional 10 percent tax cut focused specifically on middle-class families and workers, to be advanced as Republicans retain the House and Senate."

European Commission rejected Italy's budget, Italy Di Maio demands respect

European Commission formally rejected Italy's budget after its regular meeting yesterday. Vice President For the Euro Valdis Dombrovskis said in a press conference that "today, for the first time, the Commission is obliged to request a euro area country to revise its draft budget plan." He added, "we see no alternative than to request the Italian government to do so. We have adopted an opinion giving Italy a maximum of three weeks to provide a revised Draft Budgetary Plan for 2019,"

Regarding Italy's letter to the Commission on Monday, Dombrovskis said "Unfortunately, the clarifications received yesterday were not convincing to change our earlier conclusions of a particularly serious non-compliance with the recommendation addressed to Italy by the Council on the 13th of July." And, "the Italian Government is openly and consciously going against the commitments it made."

Italian Deputy Prime Minister, leader of the Five-Star Movement Luigi Di Maio said in his Facebook page that European Commission's rejection of the country's budget is not a surprise. He said, "this is the first Italian budget that the EU doesn't like. I am not surprised. This is the first Italian budget that was written in Rome and not in Brussels."

And he added "with the damage they had done before, we could not continue with their policies", referring to the European commission". Di Maio pledged to " continue to tell the European commission what we want to do with respect. But equally respect must be for the Italian people and the government that represents it today."

Japan PMI manufacturing rose to 53.1, upbeat start to Q4

Japan PMI manufacturing rose to 53.1 in October, up from 52.5 and beat expectation of 52.6. Markit noted that "growth of key macroeconomic variables (output, new orders and employment) all accelerate", and "rates of input cost and output price inflation both quicken to multi-year highs."

Joe Hayes, Economist at IHS Markit said in the release that the "manufacturing sector looks set to start Q4 on a more upbeat note". And, "the latest survey indicated stronger expansions in all the key barometers of macroeconomic health". Also, "export sales rose for the first time since May" despite global trade tensions.

BoC to raise interest rate, focus on forward guidance

BoC rate decision is a major focus today. The market has fully priced in that BoC would raise its policy rate by 25 bps to 1.75%. Despite a mixed employment market and moderating inflation in September, clarity of the trade relationship with the US still warrants a rate hike. Indeed, if macroeconomic developments continue to evolve according to BOC' projections, two more rate hike a probably justified in 1H19. But for now, BoC would at most be cautiously optimistic, retaining the stance of gradual and data-dependent tightening.

More in BOC Preview – Rate Hike Fully Priced but Future Decision Still Data- Dependent

Looking ahead

Eurozone PMIs will be the major feature in European session, together with M3 money supply. UK will release BBA mortgage approvals. Later in the day, US will release PMIs, house price index and new homes sales. Fed will also release Beige Book economic report. But major focus will be on BoC rate hike.

USD/JPY Daily Outlook

Daily Pivots: (S1) 112.01; (P) 112.44; (R1) 112.93; More..

USD/JPY recovered ahead of 111.94 minor support but it's held below 112.88. Intraday bias remains neutral first. Outlook is unchanged that fall from 114.54 is part of medium term correction. Below 111.94 will likely extend such fall through 111.62 to 38.2% retracement of 104.62 to 114.54 at 110.75. In that case, we'll look for bottoming signal above 109.76 key support. On the upside, above 112.88 will target 61.8% retracement of 114.54 to 111.62 at 113.42 instead.

In the bigger picture, corrective fall from 118.65 (2016 high) should have completed with three waves down to 104.62. Decisive break of 114.73 resistance will likely resume whole rally from 98.97 (2016 low) to 100% projection of 98.97 to 118.65 from 104.62 at 124.30, which is reasonably close to 125.85 (2015 high). This will stay as the preferred case as long as 109.76 support holds. However, decisive break of 109.76 will dampen this bullish view and turns outlook mixed again.

Economic Indicators Update

Japan PMI manufacturing rose to 53.1 in October, up from 52.5 and beat expectation of 52.6. Markit noted that "growth of key macroeconomic variables (output, new orders and employment) all accelerate", and "rates of input cost and output price inflation both quicken to multi-year highs."

Commenting on the Japanese Manufacturing PMI survey data, Joe Hayes, Economist at IHS Markit, which compiles the survey, said:

"Following a rather disappointing slew of PMI data over the third quarter, Japan's manufacturing sector looks set to start Q4 on a more upbeat note. The latest survey indicated stronger expansions in all the key barometers of macroeconomic health, with output, new order and employment growth quickening since September. Furthermore, export sales rose for the first time since May, despite several respondents highlighting problems arising from global trade tensions.

"That said, next month's data will be important to assess whether the latest growth rebound is a transitory response to weakness resulting from recent natural disasters."

Full release here.