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The euro is unchanged in the Monday session. Currently, EUR/USD is trading at 1.1738, up 0.04% on the day. On the release front, German Industrial Production jumped 3.6%, crushing the estimate of 0.7%. Eurozone Sentix Investor Confidence improved to 29.7, above the estimate of 28.6 points. In the US, banks are closed for Columbus Day, and there are no US events on the schedule.

All eyes are on the Catalan parliament, which will meet on Tuesday. Will Catalonia unilaterally declare independence? Catalan leader Carles Puigdemont has said that it is up to the Catalan parliament to approve independence, but it’s unclear what will happen when the regional lawmakers meet. Puigdemont has not had any talks with Spanish Prime Minister Mariano Rajoy as the crisis goes down to the wire. On Sunday, a demonstration against the referendum attracted some 350,000 people, in a show of support for the Spanish government. Which side will blink first? Madrid could literally shut down the Catalan parliament under Spain’s constitution, but has hesitated to take such drastic action. However, if the Catalan parliament declares independence, Rajoy could respond forcefully. The euro was down only marginally last week, but the crisis could hurt the Spanish economy. Last week, two major banks, Caixabank and Sabadell, said they would relocate their corporate headquarters out of Catalonia, and other large companies could follow suit.

US employment numbers were a mix on Friday. Non Farm Employment change shocked with a decline of 33 thousand, compared to the estimate of a gain of 85 thousand. The weak reading didn’t cause any alarm in the markets, but rather underscored the severe impact of Hurricanes Harvey and Irma, which hit the US in late August and early September. The two storms caused $150-200 billion in damage and also took a toll on the employment market, although the labor market is expected to rebound as the recovery effort intensifies. On a brighter note, wage growth accelerated to 0.5%, above the estimate of 0.3%. This reading is pointing to stronger inflationary pressure, which is good news for proponents of a rate hike. The odds of a December hike have climbed to 91%, which is remarkable, considering that only a month ago, the odds of a December increase were just 31 percent. The markets were also pleased that the unemployment rate fell from to 4.2% in September, down from 4.4% a month earlier.

Gold prices are testing the key 1280 level but it appears unlikely that gains can be sustained above it. The recent bounce higher may be short-lived as the RSI on the 4-hour chart is turning back down, indicating a loss of upside momentum.

Gold's rise above the 50-period moving average helped ease downside pressure. But it remains to be seen whether the current move is merely a pause in the downtrend that has been taking place since the September 8 high of 1357.47.

Gains have stalled at 1285.42, suggesting a short-term top here, with increased odds for a drop towards the October 6 low of 1260.59. From here, support is expected at 1251.49 (August 8 low). A break below this level would increase weakness in the market that would bring the 1200 area into sight.

If prices can remain above 1280 there could be a push higher towards the key psychological level at 1300. A move above 1315 resistance would improve the chance for another leg higher to the September 15 high of 1334.26. A break of this resistance sees the potential for further gains towards the 1357.47 peak and then a likely resumption of the uptrend that started from the July low of 1204.79.

The bearish phase from 1357.47 is still in progress unless prices rise above 1300. The negative alignment and downward-sloping 20 and 50-period moving averages point to a bearish bias. Consolidation around 1280 is expected in the near-term.

EUR/GBP dropped in the first part of the day and could start another bearish movement on the short term. Price opened with a gap down, signaling that the bears could take the lead again. A false breakout above the median line (ML) of the ascending pitchfork could send the rate tumbling towards the LML.

The EUR/JPY posted humble gains in the morning and tries to recover after the minor correction. Price developed a Rising Wedge pattern, but this is far from being confirmed, only a valid breakdown will announce a further drop. We have a major support area between the UML and the inside sliding parallel line (SL), a major drop will appear only after a valid breakdown below this area.

The currency pair decreased today and looks determined to start a minor corrective phase on the short term. Price has found strong resistance and now is expected to drop on the short term again. The Yen could increase only if the Nikkei stock index will slip lower on the short term.

The JP225 increased in the morning and tries to recover after the Friday's drop, a failure to close above the 20756 will confirm a minor drop and a Yen's appreciation. The perspective is bullish on the JP225 despite a minor drop. The index seems like is losing the bullish momentum, but we can't talk about another drop at this moment because we don't have any bearish signal.

A further Nikkei's increase will force the Yen to depreciate further versus all its rivals, technically, the index could develop a Rising Wedge pattern, but is premature to talk about this.

Price has made another false breakout above the median line (ml) of the minor ascending pitchfork, so a minor drop is favored. USD/JPY increased a little in the last hours, but it should drop towards the 38.2% retracement level in the upcoming days.

We had several false breakouts above the median line, signaling an exhaustion, support can be found at the 250% Fibonacci line as well. Technically, its should be attracted by the lower median line (lml) of the ascending pitchfork after the failure to close above the median line (ml).

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).