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European Commissioner Pierre Moscovici said it's a "good signal" that Italy's budget trajectory has been revised "because it shows that the Italian authorities are hearing the concerns and remarks from their partners and the European Commission." However, he also warned that "If it is 2.4 percent, it's possible that the structural deficit will not be within the bounds of the (EU) stability and growth pact".

On the other hand, Italian Economy Minister Giovanni Trial said "even with a deficit goal that takes us further away from the structural adjustment requested by Europe, it doesn't seem to me that it can be said this government is carefree on spending or that it's going to blow apart public accounts to keep promises."

The US 30 index (Dow Jones Industrial Average) hit a fresh all-time high of 26,900.50 in pre-market trading on Wednesday, while it is currently in proximity to this peak.

Adding to the conviction for a bullish bias are the positively-aligned Tenkan- and Kijun-sen lines and the RSI which is heading higher. Notice though that the latter has entered overbought territory above 70; a correction is not to be ruled out.

Further gains may meet resistance around the 27,000 mark which may hold psychological importance. Deeper into uncharted waters, the price action may meet barriers at other round figures, such as 27,100 and 27,200.

A move down could receive support around the Tenkan- and Kijun-sen lines at 26,615 and 26,324 respectively, before the attention turns to the zone around the 26,000 handle. Notice that the area around the latter encapsulates a previous top at 26,166 and the 50-day (simple) moving average at 25,928.

The medium-term outlook is clearly positive: uptrend conditions – higher highs and higher lows – are in place, with trading activity taking place above the 50- and 100-day MA lines, as well as above the Ichimoku cloud.

Overall, both the short- and medium-term outlooks are positive, though some caution is advised in the near-term given the existence of signals pointing to overbought conditions.

Daily Pivots: (S1) 1.1507; (P) 1.1544; (R1) 1.1584; More.....

Intraday bias in EUR/USD remains neutral for consolidation above 1.1504 temporary low. Another recovery could be seen to 4 hour 55 EMA (now at 1.1637). But upside should be limited well below 1.1814 resistance to bring another decline. We maintain the view that corrective rise from 1.1300 has completed with three waves up to 1.1814 already. Below 1.1504 will target a test on 1.1300 low first.

In the bigger picture, a medium term bottom should be in place at 1.1300, on bullish convergence condition in daily MACD and some consolidations would be seen. But still, note that EUR/USD was rejected by 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. That carries some long term bearish implications. Thus, we'd expect fall from 1.2555 high to resume after consolidation completes. Below 1.1300 should send EUR/USD through 61.8% retracement of 1.0339 to 1.2555 at 1.1186. And, in that case, EUR/USD would head to retest 1.0339 (2017 low).

Daily Pivots: (S1) 1.2927; (P) 1.2991; (R1) 1.3042; More...

GBP/USD lost some downside momentum as seen in 4 hour MACD. But with 1.3115 minor resistance intact, deeper decline is expected in the pair to 1.2784 support. Firm break there will likely resume larger down trend from 1.4376 through 1.2661. Nonetheless, break of 1.3115 will argue that the choppy fall from 1.3297 has completed and turn bias back to the upside.

In the bigger picture, whole medium term rebound from 1.1946 (2016 low) should have completed at 1.4376 already, after rejection from 55 month EMA (now at 1.4062). The structure and momentum of the fall from 1.4376 argues that it's resuming long term down trend. And this will be the preferred case as long as 38.2% retracement of 1.4376 to 1.2661 at 1.3316 holds. However, firm break of 1.3316 would bring stronger rebound to 61.8% retracement at 1.3721. And, the eventual depth of the fall from 1.4376, and the chance of hitting 1.1946 low, will depend on the strength of the interim corrective rebound from 1.2661.

Daily Pivots: (S1) 113.46; (P) 113.75; (R1) 113.98; More...

Intraday bias in USD/JPY remains neutral as consolidation from 114.05 temporary top is extending. Another fall could be seen. But in that case, downside should be contained above 112.55 support to bring rise resumption. On the upside, above 114.05 will target 114.73 key resistance. Decisive break there will confirm larger bullish case. Next target will be 118.65 resistance.

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.

Daily Pivots: (S1) 0.9821; (P) 0.9842; (R1) 0.9862; More...

USD/CHF's extends today by taking out 0.9866 cluster resistance and hits as high as 0.9889 so far. Intraday bias is back on the upside. Sustained trading above 0.9866 will pave the way to retest 1.0067 high. On the downside, though, break of 0.9822 minor support will indicate short term topping and bring lengthier consolidations, before staging another rally.

In the bigger picture, focus is now back on 0.9866 support turned resistance. Decisive break there will suggests that pull back from 1.0067 has completed at 0.9541. And larger rise from 0.9186 low is ready to resume. Decisive break of 1.0067 will pave the way to 1.0342 key resistance next. Meanwhile, break of 0.9541 will extend the decline but we don't expect a break of 0.9186 low even in that case.

Dollar is back in control today and it's trading as the second strongest one in early US session, next to Sterling. Stronger than expected ADP employment report, which showed 230k growth in September, gives the greenback an extra push. Sterling is rather steady as UK Prime Minister Theresa May's Conservative Party conference speech is ignored. At least, it isn't a disaster like last year. Euro's recovery lose some momentum as the lift from Italian budget rumor fades. Nonetheless, the common currency is still way better than Australian and Zealand Dollar, which are the worst performing one today.

In other markets, DAX is on holiday. CAC is trading up 0.56% while FTSE is up 0.50% at the time of writing. German 10 year bund yield trades up 0.0293 at 0.454. Italian 10 year yield trades down -0.113 at 3.331. German-Italian spread narrows today but remains huge. Earlier today, Nikkei closed down -0.66%< Hong Kong HSI down -0.13%. But Singapore Strait Times gained 0.76%. One development to note is that Japan 10 year JGB yield added another 0.0126 to close at 0.142. It's now notably outside BoJ's band of -0.1% to 0.1%. Gold's rally lose momentum ahead of 1214 resistance and retreated. But for now, it's holding above 1200 handle.

Technically, USD/CHF takes out 0.9866 resistance rather firmly today. Rebound from 0.9541 could now be on course for retesting 1.0067 resistance. AUD/USD is pressing 0.7143 support. Break will be a strong signal of larger down trend resumption through 0.7084 low.

Italy EM Tria: Gradual reduction in deficit after 2019

Italy Economy Minister Giovanni Tria said today that the while the budget deficit will increased compared with previous forecast in 2019, "there will be a gradual reduction in the following years". His comments echo reports that the populist government has revised their original plan after strong pressure from the EU.

Originally, the plan was to have budget deficit target at 2.4% of GDP in the three years from 2019. But according to unnamed government sources, the plan now is to keep 2.4% in 2019, but lower to 2.2% in 2020 and then 2% in 2021. Prime Minister Giuseppe Conte is due to meet with key ministers today. The details could then be defined after the meeting.

But even in case of this watered down version, Italy still risks downgrade by credit rating agencies. More in Italy Rating Downgrade Inevitable Although Government Might Water Down Stimulus.

Eurozone PMI services finalized at 54.7, points to 0.5% Q3 GDP growth

Eurozone PMI services was finalized at 54.7 in September, unrevised, up from August's 54.4. PMI composite was finalized at 54.1, down from August's 54.4. Among the countries, German PMI services hit 2-month low at 55.0. France PMI services dropped to 21-month low at 54.0. Spain PMI services dropped to 58-month low t 52.5. But Italy PMI services improved slightly to 2-month high at 52.4.

Chris Williamson, Chief Business Economist at IHS Markit noted that the survey data are equivalent to 0.5% GDP growth in Q3. However, he warned that Q4 is "unlikely to see such robust growth, as recent months have seen a clear loss of momentum in terms of both output and new order gains." In particular, "the most worrying signs come from exports".

Also from Eurozone, retail sales dropped -0.2% mom in August versus expectation of 0.2% mom rise.

UK PMI services dropped to 53.9, clarity on Brexit needed to sustain growth

UK PMI services dropped to 53.9 in September, down from 54.3 and matched expectations. The key points are "growth of business activity eases only slightly since August", "job creation edges up to seven-month high", "higher fuel prices lead to sharp rise in input costs".

Chris Williamson, Chief Business Economist at IHS Markit said the released that the " service sector continued to report solid steady business growth". And, along with other survey results, the UK economy could had expanded by just under 0.4% in Q3. Though, "Brexit worries continue to dominate the outlook", and "clarity on Brexit arrangements is therefore needed as soon as possible to help sustain growth."

Fed Evans: A slightly restrictive policy could keep extremely well economy going

Chicago Fed President Charles Evans said the US economy is doing "extremely well", the "fundamentals are strong, the labor market is doing terrific." He added that "I spent quite a long time indicating that I think inflation needs to get up to 2 percent, and here we are." Evans also noted "by setting the policy rate just a little above neutral, that will continue to keep things going for quite some time" referring to the "very well" state the economy is in.

Though, he also indicated that "Long-term inflation expectations are now, in my opinion, a little bit too low." Therefore, "we don't have to raise the funds rate as restrictively as we may have in the past.". And, "if the outlook continues to be as good as it is, at a slightly restrictive level and then hold there for quite some time until we begin to see signs that we need to make an adjustment."

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9821; (P) 0.9842; (R1) 0.9862; More...

USD/CHF's extends today by taking out 0.9866 cluster resistance and hits as high as 0.9889 so far. Intraday bias is back on the upside. Sustained trading above 0.9866 will pave the way to retest 1.0067 high. On the downside, though, break of 0.9822 minor support will indicate short term topping and bring lengthier consolidations, before staging another rally.

In the bigger picture, focus is now back on 0.9866 support turned resistance. Decisive break there will suggests that pull back from 1.0067 has completed at 0.9541. And larger rise from 0.9186 low is ready to resume. Decisive break of 1.0067 will pave the way to 1.0342 key resistance next. Meanwhile, break of 0.9541 will extend the decline but we don't expect a break of 0.9186 low even in that case.

Economic Indicators Update

Here are the latest developments in global markets:

• FOREX: The common currency crawled up on Wednesday from six-week lows on news that the final version of Italy’s budget deficit could be less worse than originally reported. Government sources signalled possible reductions to the deficit targets in 2020, 2021, according to reports. Earlier today, retail sales in the Euro area dropped by 0.2% m/m in September from a downwardly revised 0.6% decline in the previous month, missing market expectations of a 0.2% gain. It was the second consecutive month of decrease in retail sales. In other data, the final IHS Markit Eurozone Services PMI was confirmed at 54.7 in September in line with preliminary estimates but slightly higher than the 54.4 mark reported in August. A downward surprise however was identified in the German services PMI which ticked down to 55.9 in September versus the forecast of 56.5. Following the data, euro/dollar continued to weaken towards 1.1543 (-0.02%), reversing earlier gains. Turning to the UK, the British Prime Minister, Theresa May, said during her speech at the Conservative Party Conference that a no-deal Brexit would be a bad outcome for both the EU and the UK, but the British government is not afraid to leave the bloc without an agreeement. In the wake of her comments, pound/dollar slipped as low as 1.2961 before inching up to 1.2973 (-0.02%). Prior May’s remarks, the UK IHS Markit services PMI for the month of September added some pressure to the pound as the indicator appeared lower than expected at 53.9 compared to 54.3 in the previous month and 54.0 forecasted. Dollar/yen was set to recoup yesterday’s losses trading below 114.00 at 113.77 (+0.11%), while dollar/loonie was struggling to recover, gaining 0.08% in the day. In monetary policy-related news, Chicago Fed President Charles Evans admitted that the US central bank is more comfortable with inflation than in previous years and appeared positive with regards to additional rate hikes to come, reiterating a gradual pace.  In the antipodean sphere, aussie/dollar and kiwi/dollar  slipped to two-week lows, losing 0.53% and o.61% respectively.
• STOCKS: European equities moved higher on Wednesday as investors kept an eye on Italian politics and the government’s spending plans. The pan-European Stoxx 600 was 0.59% higher with every sector in positive territory, while the blue-chip Euro STOXX 50 rose by 0.77% at 1200 GMT. The UK FTSE 100 climbed by 0.64%, the French CAC 40 increased by 0.70%, while the Italian FTSE MIB surged up by 1.11%. Futures tracking US indices such the S&P 500, Dow Jones and Nasdaq 100 were slightly up, pointing to a softer positive open. Note that German markets will be closed on Wednesday for a public holiday.
• COMMODITIES: Oil prices were moving sideways slightly below 4-year highs posted on Tuesday. West Texas Intermediate (WTI) crude and Brent were last seen at $75.27/barrel and $84.84 respectively. In precious metals, gold jumped marginally above the $1,200/ounce level (+0.02%) as the dollar softened.

Day Ahead: ADP employment report & ISM non-Manufacturing PMI next in focus; Italian budget eyed

The ADP employment report will display the number of job positions added to the US private sector in September at 1215 GMT with investors waiting for some clues ahead of the all-important Nonfarm payrolls Job statement due on Friday. According to analysts, the number of employees in the non-farm private sector increased by 185k compared to a rise of 163k in August. While an upward surprise could lift the dollar higher, that cannot be a guarantee that Friday’s NFP hiring will be more encouraging as well since the reports are not as strongly in sync as in the past.

A few hours later at 1400 GMT, the ISM non-manufacturing PMI for the month of September could be another market mover for the greenback. Forecasts are for the index to slow down by 0.5 points to 58, though that may not be much of a worry given that any mark above 50 indicates an expanding industry.

Staying in the US, the Energy Information Administration will publish data on US oil inventories for the week ending September 28 at 1430 GMT, probably bringing a fresh wave of volatility to oil prices. Predictions support an increase of 1.98 million barrels in crude stocks from a 1.85mn rise seen previously. Gasoline stocks are expected to build up too but less than in the previous week, whereas distillate inventories are projected to post a softer decline.

Elsewhere, the Australian Bureau of Statistics will update Australia’s trade figures at 0130 GMT on Wednesday, with analysts seeing the positive trade balance easing for the second straight month to A$1.40 billion in August. In July, the trade surplus stood at A$1.55bn.

Meanwhile, in the EU, the Italian budget story will continue to keep investors on toes. On Tuesday headlines showed that the Italian government is not planning to change its budget plans, which aim for a public deficit of 2.4% of GDP for the next three years. Today,however, the Italian Deputy Prime Minister, Luigi Di Maio revealed that Rome is considering lowering its deficit targets after 2019, with some official sources stating that these could drop to 2.2% and 2.0% in 2020 and 2021 respectively. This indicated that Italy is willing to appease its EU counterparts who claimed that the country’s budget goals deviated significantly from earlier commitments.

In terms of public appearances, several Fed policymakers are scheduled to speak later today, with the Fed chairman Jerome Powell attracting the most interest at 2000 GMT. Separately, remarks by Richmond Fed President, Thomas Barkin (FOMC voter, 1205 GMT), Philadelphia Fed President, Patrick Harker (non-voter, 1715 GMT), St. Louis Fed President, James Bullard (non-voter, 1800 GMT) , Cleveland Fed President, Loretta Mester (voter, 1815 GMT) and Fed Board Governor, Lael Brainard (permanent voter, 1800 GMT) will gather interest. Dallas Fed President, Robert Kaplan will be also commenting at midnight.

Chinese markets will remain closed for the rest of the week due to a public holiday.

The Canadian dollar is trading sideways in the Wednesday session. In the North American session, USD/CAD is trading at 1.2835, up 0.09% on the day. On the release front, there are no Canadian events for a second straight day. In the U.S, ADP nonfarm payrolls is expected to jump to 185 thousand. We’ll also get a look at ISM Non-Manufacturing PMI, which is forecast to drop to 58.0 points. On Thursday, the U.S releases unemployment claims.

After months of intense negotiations, Canadian and U.S officials have finally hammered out a trade agreement on Monday, which paves the way for a new trade agreement between Canada, Mexico and the United States. The NAFTA agreement, which was a pillar of the Canadian economy for 24 years, gives way to the USMCA – the U.S-Mexico-Canada Agreement. Canada and the U.S both offered concessions in order to reach a deal. Canada’s auto sector, which is highly dependent on cross-border movement, will be shielded from U.S tariffs. In return, U.S farmers will be granted increased access to Canada’s dairy market, which has been highly protected. The new agreement is expected to be signed in November and must then be ratified by the legislature of all three countries. This means that the provisions of the USMCA are not expected to go into effect before 2020. The agreement boosted the Canadian dollar, which has shown strong gains of late – the currency has jumped 2.4% since mid-September.

Entering into US session, Dollar trades notably higher after ADP employment beat expectations and showed 230k growth in September. Sterling is the strongest one so far, but is vulnerable to another selloff. Euro's recovery has already lost steam. The news that Italy would lower budget deficit target slightly after 2019 just received mildly positive reactions by the markets. On the other hand, Australian and New Zealand Dollar are trading as the weakest ones for today, followed by Swiss Franc and Yen.

In other markets, DAX is on holiday today. CAC is trading up 0.67% while FTSE is up 0.60% at the time of writing. German 10 year bund yield trades up 0.031 at 0.456. Italian 10 year yield trades down -0.11 at 3.334. German-Italian spread narrows today but remains huge.

Earlier today, Nikkei closed down -0.66%< Hong Kong HSI down -0.13%. But Singapore Strait Times gained 0.76%. One development to note is that Japan 10 year JGB yield added another 0.0126 to close at 0.142. It's now notably outside BoJ's band of -0.1% to 0.1%.