The US dollar pulls back from overnight’s fresh highs against the basket of major currencies. The dollar index posted new eight-month high at 98.81, as the greenback maintains firm tone. The third consecutive strong bullish weekly close confirms dollar’s strong bullish stance, as recent hawkish comments from Fed officials prompted investors to price in an interest rate increase this year.
Interest rates futures imply about a 70% chance that the Fed will hike interest rates in December.
Speculators raised their bets on the U.S. dollar for a fourth straight week, with net long positions hitting their highest since late January, as data from the Commodity Futures Trading Commission showed on Friday.
Another factor that supports the dollar was recent opinion polling that favored Democratic candidate Hillary Clinton to win the Nov. 8 U.S. presidential election, defeating Republican Donald Trump.
The Euro dipped to fresh multi-month low at 1.0858 against the dollar on Monday, after three straight weeks in red. Investors’ main consideration seems to be the difference between the Fed and ECB. While Fed officials remain hawkish and keep signalling interest rate hike towards the end of the year, The ECB signalled a likely extension of its asset purchases.
The European Central Bank kept interest rates at historic lows on its meeting last Thursday and President Mario Draghi kept the door open for more stimulus, diminishing speculation that the bank was poised to taper its 1.7 trillion euro asset-buying program.
British pound returned above 1.2200 handle in early Monday trading, after posting fresh low at 1.2169 on Friday and maintaining negative tone towards key 1.2087/1.2000 supports.
Japanese yen was a tad lower against dollar on Monday, holding within strong support at 103.50 and 104.00 barrier.
Spot Gold showed no significant changes at the beginning of the week and trading within narrow range in early Monday, under last week’s recovery peak at $1274. Despite last week’s bullish close, the first after three consecutive weeks in red, gold price returned below 200SMA, which marks significant technical resistance, currently at $1268, following last week’s two unsuccessful attempts above.
The yellow metal moved lower on uncertainty about the timing of US interest rate hike, as stronger dollar prompted investors to reduce long positions on gold.
Oil price were lower in early Monday, after Iraq said on Sunday it wanted to be exempt from any deal by producer cartel OPEC to cut production to prop up the market, and as U.S. drillers stepped up work. OPEC plans to reduce production to a range of 32.5 / 33.0 million barrels per day, down from 33.39 million barrels in September.
Oil eases from fresh 3 ½ month high at $52.21, posted on Friday, after five straight weeks of gains from $43.05, mid-September low.
Asian stocks held earlier gains on Monday, but lacked clear direction, following sluggish performance of Wall Street on Friday. MSCI index ticked higher by 0.2%; Australian stocks lost 0.5%, hit by decline in energy shares, while Japan’s Nikkei 225 was up 0.2%.
European stocks opened higher on Monday, as expected. UK’s FTSE100 index was up 0.37%; German DAX gained 0.64% and French CAC-40 was up 0.51% from Monday’s opening levels.

Highlights of the day

Europe
Series of PMI data from EU countries are the highlight of European session on Monday. Manufacturing PMI from France beat the forecast at 50.00 on October’s release at 51.3.
German Manufacturing PMI also beat the forecast at 54.3, coming at 55.1 in October
Eurozone’s Manufacturing PMI Eurozone is expected to stay unchanged at 52.6 in October.

Services PMI data from France came at 52.1, below the forecast for October at 53.0.
German Services PMI overshoot forecast at 51.5 for October, coming at 54.1.
Services PMI in Eurozone is forecasted at 52.4 in October, compared to 52.2 in September.
America
Canada’s Wholesale Sales are forecasted at 0.6% in August, up from July’s 0.3% and is due at 12:30 GMT.
FOMC member Bullard is due to speak at 13:05 GMT.
US Manufacturing PMI is scheduled at 13:45 GMT, with forecast for October at 51.6, tick above September’s 51.5 release.

Important levels
EURUSD
The Euro trades within narrow range above fresh low at 1.0858, posted on Friday and retested today. Firm bearish tone eyes immediate targets at 1.0820/00, with extension towards 1.0775/10, not ruled out on fresh bearish acceleration. Consolidation should be capped by 1.1000 barrier.
USDJPY
The pair is trading within narrow range in early Monday, with daily cloud base marking good support at 103.50 and upside being so far capped at 104.00 barrier. Clear break out of recent range, marked by 103.15 and 104.62, is needed to signal near-term direction, following several unsuccessful attempts to break out of range boundaries. Bullish dollar keeps near-term focus shifted higher for now.
GOLD
Gold trades below fresh recovery high at $1274 and returned below 200SMA at $1268, which continues to mark strong resistance, despite brief probes above. The downside is expected to stay vulnerable while 200SMA caps. Firm break below daily Tenkan-sen line at $1260 will signal further easing.
At the upside, $1268/74 zone marks the breakpoint and sustained break higher is needed to signal fresh extension of recovery from $1241 low., Market Analysis