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XAUUSD (1269.94): Gold prices were seen trading weaker yesterday as price action fell below the 1272 level of support. This could potentially see a retest back to the lower support level of 1262 where gold prices could be seen testing this region for the third time. The bias remains flat although there is a potential for gold prices to break down below 1262. The possibility of a descending triangle pattern cannot be ruled out. This puts gold prices to the downside, targeting 1238 - 1240 levels in the near term.

USDJPY (113.86): The USDJPY recovered the losses from Monday as price action turned bullish on yesterday's close. Still, the consolidation above 113.00 which marks a short term support level could see the currency pair trading sideways. The bounce off this support level will see USDJPY likely to test the previous resistance level near 114.00. The short-term range looks to be formed for the moment, and a breakout from either of these levels is required to post further gains or losses.

EURUSD (1.1630): The EURUSD established a short range yesterday as price action closed with a doji type pattern on the daily session. A bearish decline today could signal a continuation to the downside. This could be expected amid a host of economic releases from the U.S. On the 4-hour chart, price action has formed a potential bearish flag pattern. This could be validated on a close below 1.1573 and will see the euro extending the declines towards 1.1411. However, failure to close below 1.1573 could keep the bias neutral with the potential for price action to retrace the gains back to 1.1688.

The markets were seen trading subdued yesterday. The Bank of Japan held its monetary policy steady, and in the Eurozone, flash inflation estimates showed that consumer prices rose 1.4% on the headline and 0.9% on the core. This was weaker than the estimates. However, flash GDP showed a 0.6% increase for the third quarter, while the second quarter GDP was revised higher to 0.7%. In Canada, the monthly GDP data posted a 0.1% decline which missed estimates of a 0.1% increase.

Looking ahead, the economic data today will see the release of the manufacturing PMI for the UK. Economists are forecasting a modest print of 55.8, slightly down from 55.9 in September. The NY trading session will see the ADP private payrolls data coming out. Estimates point to a 202k print for September. Revision for the previous month is expected as well. This is followed by the ISM manufacturing PMI which is expected to show a decline in the index to 59.5 in October, following 60.8 the month before.

The economic calendar concludes later in the day with the FOMC statement and BoC Governor Poloz's speech.

It is a quiet Wednesday in the currency markets. Traders are favoring to remain on the sidelines ahead of multiple key risk events, including the Federal Reserve monetary policy decision latertoday;the Bank of England's rate decision on Thursday;President Trump's nomination of the next Fed Chair; theU.S. tax reform announcement and Friday's NFP report.

Today's FOMC meeting will not be accompanied by an update on economic projections, nor by a press conference. Traders have to act on very few amendments on a 500 words statement. The main theme is unlikely to change, and the Fed will stick to its plans of gradual tightening. However, recent economic releases have shown significant improvement in the U.S. economic activity, and GDP has grown 3% for two consecutive quarters, suggesting that we maysee slight, positive changes in assessing economic activity.

Despite an uptick in headline inflation in September, core CPI continued to miss estimates, and remained below the targeted 2%. Thus, I expect little tono change on inflation assessment.

Overall, the Fed will likely meet market expectations, by keeping interest rates unchanged in November, and signal a rate hike in its final meeting in December.

President Trump's nomination for Fed Chair on Thursday could easily overshadow today's statement, especially if Fed Governor Jerome Powell is not his first choice. Powell has been supportive of Janet Yellen's policy of gradual tightening in monetary policy; thus, I do not expect big moves in Treasuries, or the U.S. dollar, if he is nominated. However, if Stanford University'sProfessor of Economics,John Taylor, is nominatedinstead, expect big moves in Treasury yields and the dollar, which could appreciate sharply against its peers. According to Taylor rule, a forecasting model that determines where interest rates should be, based on targeted inflation and full employment, interest rates should be much higher the current levels.

The Kiwi was the only outperforming currency today, surging 1% against the dollar after labor market statistics showed that the cost of labor grew 1.9%, and the unemploymentrate fell to a nine-year low. If wages continue to show signs of strengthening, the Reserve Bank of New Zealand will likely start raising rates next year, as opposed to earlier forecasts of tightening in 2019.

USD/CHF - 0.9987

Most recent candlesticks pattern : N/A

Trend                                    : Up

Tenkan-Sen level                  : 0.9984

Kijun-Sen level                    : 0.9973

Ichimoku cloud top                 : 0.9973

Ichimoku cloud bottom              : 0.9961

Original strategy :

Buy at 0.9915, Target: 1.0030, Stop: 0.9880

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.9915, Target: 1.0030, Stop: 0.9880

Position : -

Target :  -

Stop : -

Although dollar found support at 0.9938 and recovered since, reckon 1.0000-05 would limit upside and near term downside risk remains for the corrective fall from 1.0038 (last week’s high) to bring retracement of recent rise to 0.9920-25 (38.2% Fibonacci retracement of 0.9737-1.0038), however, 0.9905-10 should limit downside and bring another rise later, above 1.0000-05 would bring retest of said resistance at 1.0038, break there would extend recent rise from 0.9421 low to 1.0050-55, then towards 1.0075-80 but price should falter below 1.0100 resistance.

In view of this, we are looking to buy dollar again on pullback as 0.9915-25 should limit downside, bring another rise later. Below 0.9885-90 (50% Fibonacci retracement of 0.9737-1.0038) would defer and suggest top is possibly formed, risk test of support at 0.9869.

GBP/USD - 1.3288

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.3281

Kijun-Sen level                    : 1.3246

Ichimoku cloud top              : 1.3187

Ichimoku cloud bottom        : 1.3143

Original strategy :

Sold at 1.3255, stopped at 1.3290

Position : - Short at 1.3255

Target :  -

Stop : - 1.3290

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

As cable has surged again and broke above indicated previous resistance at 1.3279-87, suggesting early erratic rise from 1.3027 low is still in progress and near term upside risk remains for this move to bring retracement of early decline to 1.3310, then towards resistance at 1.3338, however, as broad outlook remains consolidative, reckon upside would be limited and price should falter below 1.3380-90, bring retreat later.

In view of this, would not chase this rise here and would be prudent to stand aside for now. below the Kijun-Sen (now at 1.3246) would bring pullback to 1.3215-20 but only break of minor support at 1.3196 would signal top is formed, bring further fall to 1.3170, then test of the lower Kumo (now at 1.3143) which is likely to hold from here.

EUR/USD - 1.1647

Most recent candlesticks pattern   : N/A

Trend                      : Down

Tenkan-Sen level              : 1.1640

Kijun-Sen level                  : 1.1643

Ichimoku cloud top             : 1.1635

Ichimoku cloud bottom      : 1.1616

Original strategy  :

Sell at 1.1700, Target: 1.1595, Stop: 1.1735

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.1700, Target: 1.1595, Stop: 1.1735

Position : -

Target :  -

Stop : -

Euro’s near term sideways trading is likely to continue and although initial upside risk remains for the rebound from 1.1574 low to extend gain to 1.1670-75 (38.2% Fibonacci retracement of 1.1837-1.1574), as this move is still viewed as retracement of recent decline, reckon upside would be limited to 1.1700-05 (50% Fibonacci retracement) and bring retreat later, below 1.1600-05 would signal the rebound from 1.1574 low has ended, bring retest of this level first. A drop below said support at 1.1574 would extend recent decline from 1.2093 top to 1.1550-55 but loss of downward momentum should prevent sharp fall below 1.1520-25 and reckon 1.1500 would hold.

In view of this, we are looking to sell euro on further subsequent recovery as 1.1700-05 should limit upside and bring another decline. Only above previous support at 1.1725 (now resistance) would signal low is formed instead, bring retracement of recent decline to 1.1750-55 first. 

USD/JPY - 113.91

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 113.81

Kijun-Sen level                  : 113.47

Ichimoku cloud top             : 113.72

Ichimoku cloud bottom      : 113.25

Original strategy  :

Sell at 114.10, Target: 113.00, Stop: 114.45

Position :  -

Target :  -

Stop : -

New strategy  :

Stand aside

Position :  -

Target :  -

Stop : -

As the greenback has continued moving higher after staging a strong rebound from 112.96 in part due to active cross-selling in yen, suggesting near term upside risk remains for gain to 114.20-25, however, still reckon strong resistance at 114.45-50 would cap upside and bring retreat later. Below the Kijun-Sen (now at 113.47) would suggest the rebound from 112.96 has possibly ended and bring weakness to 113.20, then towards said support at 112.96 which is likely to hold from here.

In view of this, would not chase this rise here and stand aside for now. Only break of indicated strong resistance at 114.45-50 would revive bullishness and signal early upmove has resumed for headway to 114.75-80 and later towards 115.00 but near term overbought condition should limit upside.

On Tuesday, the Bank of Japan made no changes to its huge monetary stimulus plan even as it reduced its inflation forecasts. The BoJ board voted, 8-1, to maintain the central bank’s yield curve control program and asset purchases. The board kept its view that its 2% inflation target is likely to be met at the start of the fiscal year that begins in April 2019. Governor Kuroda continued to stress the importance of maintaining monetary easing as the world major Central Banks are moving towards monetary normalization. However, this is whilst the Japanese economy is seeing its longest expansion since 2001, with equities at their highest level in 20 years and a labor market that is the tightest for several decades.

Data released by Eurostat on Tuesday showed economic growth beat forecasts in Q3. Preliminary GDP climbed 0.6% in Q3 from Q2. That is down slightly from the upwardly-revised 0.7% quarter-on-quarter growth in Q2, but ahead of a forecasted estimate of 0.5%. In addition, the Eurozone Unemployment Rate dropped to 8.9%. Unemployment below 9% has not been seen for nearly 8 years. Year-on-year GDP rose to 2.5% in the Q3, up from a 2.3% annual increase in Q2, again beating expectations of a 2.4% rise.

The markets are focusing on today’s US Federal Reserve’s two-day policy meeting for indications on future monetary tightening. The Fed has raised rates twice since January and currently forecasts one more hike by the end of the year as part of a tightening cycle that began in late 2015. The Fed is expected to leave interest rates unchanged but the markets will be looking for any new indications that the Fed will, as expected, hike rates in December.

EURUSD is slightly lower in early Wednesday trading at around 1.1634.

USDJPY is 0.2% higher in early session trading at 113.85.

GBPUSD is currently unchanged, trading around 1.3275.

Gold is 0.3% higher overnight, currently trading around $1,274.

WTI is 0.15% higher in early trade at around $54.81.

Major data releases for today:

At 09:30 GMT, the UK Chartered Institute of Purchasing & Supply and Markit Economics will release Markit Manufacturing PMI for October. Forecasts are calling for a lower reading of 55.8, from the previous 55.9.

At 13:45 GMT, Markit Economics will release US Markit Manufacturing PMI for October. The forecast is for the release to be unchanged at 54.5.

At 14:00 GMT, the Institute for Supply Management (ISM) will release US ISM Prices Paid and ISM Manufacturing PMI for October. Prices Paid is forecast to come in lower at 68 from the previous release of 71.5, with PMI also forecast lower at 59.5 from the previous 60.8.

At 14:30 GMT, the US Energy Information Administration (EIA) will release EIA Crude Oil Stocks change for the week ending October 27th. The forecast is calling for a drawdown of -2.575M compared to the previous small increase in stocks of 0.856M. The markets will be looking for any significant deviation from the forecast as this will cause volatility in Oil.

At 18:00 GMT, the US Federal Open Market Committee (FOMC) will release its statement on Monetary Policy. The statement may influence the volatility of USD and determine a short-term positive or negative trend.

At 18:00 GMT, the US Federal Reserve will announce its Interest Rate Decision. The markets are not expecting any change in US interest rates until December with the Fed holding interest rates at 1.25%. Naturally, any unexpected rate hike will cause volatility in USD.