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With markets in China, South Korea, Hong Kong and India being closed for public holidays, the dollar managed to recover from earlier losses against its peers in Asia – helped by higher US Treasury yields – while the euro recorded a downtrend in the wake of a political crisis in Spain.

The dollar posted gains versus a basket of major currencies during the Asian session on the back of higher US Treasury yields, with the dollar index rising by 0.40% on the day to 93.26. The 10-year US Treasury yields rose from Friday’s closing of 2.326 percent to 2.360 percent.

The yen fell by 0.35% versus the dollar, driving dollar/yen to 112.86. The yen’s weakness and a stronger global demand boosted business confidence in Japan as the BOJ’s Tankan Large Manufacturers index reached 22 in the third quarter, the highest level since September 2007, while analysts anticipated the index to rise by one point to 18. The index for large non-manufacturers remained steady at 23 as expected. Japanese big manufacturers were also the most confident in a decade about their business activities, leading the corresponding index to touch 19, up from the 15 seen in the previous quarter and above the 16 that was projected by analysts.

The euro opened weak against the greenback in Asia after Sunday’s independence vote in Catalonia, which was declared illegitimate by the Spanish government, ended into violence, exacerbating political tensions in the country. Hundreds of people were injured after police forces approached voting polls to prevent the banned referendum, using sticks and rubber bullets. Even though initial estimates showed that 90% of the votes were in favor of independence, this would be a unilateral declaration of independence as the ballot does not have a legal status.

Euro/dollar was 0.43% down on the day at 1.1762, while euro/pound was 0.10% weaker at 0.8806.

In other currencies, the aussie fell by 0.29% to $0.7810 after the AIG manufacturing index dropped by 5.6 points to 54.2 in September, posting the lowest mark since February. However, aussie lovers will keep a close eye on the RBA’s policy decision tomorrow where forecasts are for the rates to remain steady at 1.5%.

The kiwi also pulled back by 0.28% to 0.7185 ahead of coalition talks to form a government in New Zealand that are said to begin this week. According to media, the kingmaker First Party will hold separate discussions with the National and the Labour Party.

Regarding commodities, oil prices followed a downtrend with WTI crude retreating by 0.10% to $51.62 per barrel and Brent declining by 0.23% to $56.66. Gold prices increased by 0.49% to $1,272.50 per ounce on the back of a stronger dollar.

Later in the day, PMI readings are expected to be released from the US, the UK, and the eurozone, while unemployment rate figures out of the eurozone will also be in focus.

Daily Pivots: (S1) 150.14; (P) 150.71; (R1) 151.21; More

Intraday bias in GBP/JPY remains neutral for consolidation below 152.82 short term top. Deeper fall could be seen but downside should be contained above 146.57 support to bring another rally. Break of 152.82 will extend the larger rise from 122.36 to 61.8% projection of 122.36 to 148.42 from 139.29 at 155.39 next.

In the bigger picture, medium term rebound from 122.36 is in progress. Firm break of 38.2% retracement of 196.85 to 122.36 at 150.43 will carry long term bullish implications. In that case, GBP/JPY could target 61.8% retracement at 167.78. For now, the bullish scenario is preferred as long as 139.29 support holds.

The USDJPY pair has moved back above key technical resistance, found at 112.70, as the U.S dollar index continues to hold firm above the key 93.00 handle and US-Japanese 10-year bond yield spreads continue to widen.

A number of financial markets in Asia are away on holiday today, which has created low trading volumes and depressed trading ranges in the Asian session. The USDJPY pair is expected to remain intraday bullish whilst holding above the 112.70 level.

Today, the USDJPY pair will be driven by high-impact United States economic data, as we see the release of key manufacturing data likely setting the intraday direction for the pair.

The U.S dollar index is also expected to be a key driver of the pair, with traders looking for further technical confirmation, after last week's key break-out above the U.S dollar index's 200-week moving average.

Key intraday USDJPY support is found at the 112.70 and the pairs daily pivot point, at 112.49. Once below 112.49, further support is found at the former weekly price-low, at 112.21 and the pairs 50-week moving average, at 111.89.

Key intraday USDJPY resistance is found at the 112.91 and the former weekly price high, at 113.25. Once above the 113.25 level, further strong resistance is found at 113.57 and 113.89.

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The euro has opened the new trading week lower against the U.S dollar, as the weekend's Catalonian independence referendum vote has created new political tensions and uncertainty in the eurozone.

Today, the trading sentiment surrounding the EURUSD pair is currently bearish while trading below the 1.1800 level, caution is still advised, as the single currency is known for being resilient while facing adverse fundamental developments.

The economic calendar is full of market moving events for the EURUSD pair today, with PMI manufacturing data from the eurozone and ISM manufacturing data from the United States.

Technically, the euro faces further trading losses below the 1.1770 support level, with intraday selling pressure likely to subside only once above the 1.1800 level.

Key intraday technical support for the EURUSD pair is found at 1.1770, 1.1751 and 1.1732. Key weekly support is found at the pairs 200-week moving average, at 1.1710, once below this level, the euro's decline can accelerate rapidly towards 1.1660 and 1.1610.

To the upside, the 1.1800 and 1.1823 levels act as strong intraday resistance for the EURUSD. Once above the 1.1823 level, further resistance is found at 1.1851 and the pairs monthly pivot point, at 1.1875.

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Daily Pivots: (S1) 132.40; (P) 132.75; (R1) 133.23; More...

Intraday bias in EUR/JPY remains neutral for consolidative trading below 134.39 high. Near term outlook remains bullish as long as 131.69 holds. Sustained break of 134.20 fibonacci level will extend larger up trend to 141.04 resistance next. However, break of 131.69 will be an early sign of medium term reversal and will target 127.55 key support level instead.

In the bigger picture, current rise from 109.03 is seen as at the same degree as the down trend from 149.76 (2014 high) to 109.03 (2016 low). 61.8% retracement of 149.76 to 109.03 at 134.20 is already met. Sustained break there will pave the way to key long term resistance zone at 141.04/149.76. On the downside, break of 127.55 support is needed to be the first signal of medium term reversal. Otherwise, outlook will remain bullish.

A steady stream of economic data will make headlines on Monday, kicking off a highly active week in the market. Economic figures from both sides of the Atlantic are expected at the start of the week, which should give traders plenty of opportunity to enter the market.

The European data wire begins at 07:15 with manufacturing PMI data for Spain. Over the next two hours, IHS Markit will release final PMI figures for Germany, the United Kingdom, France, Italy and the broader Eurozone.

Meanwhile, the European Commission’s statistical agency will release August unemployment numbers. The jobless rate is forecast to slide to 9% in August from 9.1% the previous month.

In North America, the Institute for Supply Management (ISM) will release US manufacturing PMI at 14:00 GMT. The closely watched report is expected to show a slight cooldown in factory activity at the end of the fourth quarter.

In terms of monetary policy, Federal Open Market Committee (FOMC) member Robert Kaplan will deliver a speech at 18:00 GMT.

The US dollar rose against a basket of global competitors on Monday, as positive momentum returned to the world’s most actively traded currency. The dollar index (DXY) was up 0.3% at 93.36 in Asian trade.

EUR/USD

The euro resumed its descent on Monday, as the dollar regained its momentum. The EUR/USD exchange rate was trading near session lows near 1.1780, having declined 35 pips from the prior close. The pair managed to correct around half of its weekly losses on Friday. However, the near-term outlook remains tilted to the downside as the common currency awaits fresh trading catalysts in the form of economic data and monetary policy.

USD/JPY

The USD/JPY advanced to two-and-a-half month highs on Monday, as risk appetite continued to weigh on the Japanese yen. The pair reached a session high of 112.91 in Asian trading before consolidating near 112.81. That represents a gain of 0.3%. Technical indicators have eased off oversold levels, a sign that the bulls continued to lead the market. Upside should remain intact insofar as price action remains above the 100-day simple moving average, which is currently situated at 111.10.

GOLD

Gold prices have been in a perpetual state of decline for the past three weeks. After a sharp rally last Monday, prices resumed their descent to reach one-month lows on the Comex division of the New York Mercantile Exchange. Spot gold was down 0.3% on Monday to trade around $1,275.00 a troy ounce. Bullion is approaching oversold territory on the 15-minute Relative Strength Index (RSI). The MACD is also trekking in negative territory, confirming the sell signal. These data points suggest that the bears remain in firm control of the near-term outlook.

Daily Pivots: (S1) 1.1417; (P) 1.1442; (R1) 1.1457; More...

No change in EUR/CHF's outlook. With 1.1511 minor resistance intact, deeper fall is expected for 1.1355 support first. Break will target 1.1257 cluster support (38.2% retracement of 1.0652 to 1.1622 at 1.1251). Strong support is expected there to contain downside and bring rebound. Meanwhile, break of 1.1511 minor resistance will suggest that the pull back is completed and bring retest of 1.1622.

In the bigger picture, long term rise from SNB spike low back in 2015 is still in progress. EUR/CHF should now be heading back to prior SNB imposed floor at 1.2000. For now, this will be the favored case as long as 1.1198 resistance turned support holds.

Daily Pivots: (S1) 1.5012; (P) 1.5053; (R1) 1.5115; More....

Intraday bias in EUR/AUD remains neutral for consolidation in range of 1.4791/5173. On the upside, break of 1.5173/5226 resistance zone will finally resume larger rise from 1.3624. In that case, EUR/AUD will target 1.5644 resistance first. On the downside, break of 1.4791 support will turn bias to the downside and extend the fall from 1.5173 to retest 1.4421 support.

In the bigger picture, we're holding on to the view that corrective decline from 1.6587 medium term top has completed at 1.3624. Rise from 1.3624 is expected to extend to retest 1.6587. The corrective structure of the price actions from 1.5226 is affirming this view. Above 1.5226 will target a test on 1.6587 key resistance. However, break of 1.4421 support will dampen our view and would drag EUR/AUD lower to retest key support zone around 1.3624.

Key Highlights

• The Euro tumbled this past week and broke the 1.1860 support against the US Dollar.
• There was a break below two important bullish trend lines with support near 1.1870 on the 4-hours chart of EUR/USD.
• Japan's Nikkei Manufacturing PMI in September 2017 posted a rise from 52.6 to 52.9.
• Japan's Tankan Large Manufacturing Index in Q3 2017 rose from 17 to 22.

EURUSD Technical Analysis

The Euro started a downside move from 1.1960 against the US Dollar and declined sharply. The EUR/USD pair broke many supports such as 1.1860 and 1.1820 to move into the bearish zone.

Looking at the 4-hours chart of EUR/USD, there was a break below two important bullish trend lines with support near 1.1870. The pair also broke the 100 and 200 simple moving averages (H4) to trade towards 1.1710.

Later, after forming a low at 1.1717, the pair started a correction. It traded towards the 38.2% Fib retracement level of the last decline from the 1.2004 high to 1.1717 low where sellers appeared.

The pair is once again gaining downside momentum and eyeing a retest of 1.1720-1.1700. As long as the pair is below 1.1860, it might continue to struggle in the near term.

Japan's Nikkei Manufacturing PMI and Tankan Large Manufacturing Index

Today, Japan saw a few major economic releases such as Nikkei Manufacturing PMI (Sep 2017) and the Tankan Large Manufacturing Index (Q3 2017).

First, the Tankan Large Manufacturing Index for Q3 2017 was released by the Bank of Japan. The market was looking for a rise in the index from 17 top 18. The actual result was above the forecast, as there was an increase to 22.

The Tankan large Manufacturing Outlook was forecasted to increase from 15 to 16, but again the actual was positive as the index rose to 19.

The Tankan Large All Industry Capital Expenditure was forecasted to rise by 8.3% in Q3 2017. However, the result was a bit lower, as the increase was 7.7%, which was also less than the last 8%.

Moreover, the Nikkei Manufacturing PMI for September 2017 was published today. The forecast was slated for no change in the PMI from 52.6. The actual was positive, as there was a rise from 52.6 to 52.9.

Commenting on the report, the Principal Economist at IHS Markit, Annabel Fiddes, stated:

Latest data signalled a further improvement in growth momentum across Japan's manufacturing sector with the PMI rising to a four-month high in September.

The results favored the Japanese Yen, but the USD/JPY pair remains in an uptrend and looks set to gain pace above 113.00 in the near term.

On Sunday, The Confederation of British Industry released their monthly indicator of output for UK manufacturers, retailers and service companies. The release, of +11, was down from +14 for the June to August period. CBI Chief Economist Rain Newton-Smith commented that 'Growth in the economy has held steady through the summer, although at a slightly slower pace than expected by many firms'. Overall output expectations for the following 3 months edged higher to +18 (+2 from August). The data is unlikely to influence Bank of England Policy makers as long as the economy is growing and prices are rising. So, a UK rate hike is still a strong likelihood before this year is over – possibly as early as November.

Data released on Friday indicated US Consumer spending hardly rose in August, with Harvey blamed for lower than expected Auto sales. Further data indicated that US inflation, annualized, grew at its slowest pace in more than 24-months. With such lethargic data, it is highly likely that US economic growth is likely to be somewhat subdued for Q3.

Friday’s Eurostat data release of Eurozone inflation data was below forecasts. The poor growth of inflation endorses the European Central Bank’s stance that stimulus within the Eurozone should be pared back gradually.

On the Geo-Political front, there has been no new 'war of words' between the US and North Korea over the weekend. However, on Sunday, President Trump dismissed the prospects of talks with North Korea as a waste of time. This followed a comment made on Saturday by the US Secretary of State who said 'the United States was maintaining open lines of communication with North Korean leader Kim Jong Un' – according to the White House 'Pyongyang had shown no interest in dialogue'.

EURUSD loss nearly 0.3% in early Monday trading, as the markets watched the referendum in Catalonia – early suggestions are that 90% of the 'unofficial' vote have called for independence from Spain. Currently, EURUSD is trading around 1.1765.

USDJPY is 0.2% higher in early Monday trading, even with a higher than expected factory data release from Japan earlier in the trading session. Currently, USDJPY is trading around 112.90.

GBPUSD is slightly lower following calls from senior government officials that Theresa May’s tenure as Prime Minister may be coming to an end. GBPUSD is currently trading around 1.3350.

Gold is down 0.5% in early trading, as risk-on sentiment has pushed the precious metal down to levels last seen over 7 weeks ago. Currently, Gold is trading around $1,274.

WTI is little changed from Friday, currently trading around $51.70pb.

Major economic data releases for today:

At 15:00 BST, Markit Economics will release the Markit Manufacturing PMI for September. As manufacturing forms a major component of total GDP, this release is an important indicator of business conditions and the overall economic condition in the US.

At 15:00 BST, the US Institute for Supply Management (ISM) will release Manufacturing PMI and Prices Paid for September. Akin to the Markit PMI released at the same time, the ISM PMI is also an important indicator as to the 'health' of the US economy. PMI is expected to come in at 58 (Prev. 58.8) and prices paid are expected to come in at 64 (Prev. 62).