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The British Pound has declined significantly against the Canadian Dollar since late September after the currency pair reversed from the upper boundary of a long-term descending channel at 1.72.

The exchange rate was trading below a support cluster formed by the combination of the weekly and the monthly PPs at 1.6680 and the three SMAs during the morning hours of today's session.

Everything being equal, it likely that the currency exchange makes a U-turn from current price level and aim at the 200-hour simple moving average at 1.6913 during the next 72 hours.

Trade the range

Market sat through a directionless market as no real issues took center stage. Global equities were mixed as movement was based on idiosyncratic events. Overall there remains a slightly bias to be risk off. As the list of issues that would damage global demand and investment confidence has only grown longer. However, the lack of direction indicates unfamiliar uncertainty which does not translate to core measures. Example we view the likelihood of US President Trump to start a Trade War or become China BFF as nearly balanced. Yet the end result would have extremely different outcomes. VIX index remain close to lows reflecting unconcern. While despite marginal slowing in domestic manufacturing indicators globally the situation remains healthy.

Another example of near binary outcome is clearly Brexit. With only week away before first arbitrary deadline and total chaos in UK politics sterling assets are balanced. We suspect that in FX playing the short term range remains the dominate strategy over picking a clear direction. USD advance seems tired as Trumps fiscal boost, IMM longs are stretched (only slightly of highs) and dark clouds over midterms should generate considerable headwinds. Yet Europe is not helping investors focusing on positive as ECB governing council Rehn raised concern over Italy’s budget deficit. Crude oil is providing the onlz real direction lifting commodity linked FX and stocks. With US drillers coming off line, distillate exports near 2 year lows and Iran production coming off line the prospect for $90 brl looks promising.

Turkish inflation rises to record levels

The Turkish lira took another hit on Wednesday amid disappointing inflation figures. Headline inflation measure broke another record in September as it climbed to 24.52%y/y, beating widely market’s estimate of 21.10% and up from 17.90% in August. The core measure does not give more cause for optimism as it surged 24.05%y/y compared to forecast of 19.31% and 17.22% in the previous month. USD/TRY rose as much as much as 1.80% to 6.0969 following the announcement, before easing to 6.0440.

The Central Bank of Turkey already increased the one-week repo rate by 16% this May this but it looks like further hike are coming down the pipeline. Indeed, after finally getting along with market expectations and raising interest rate, the CBRT has no choice but to keep moving in the same direction. A step back would be devastating for the lira, as it would destroy investors’ trust, which is still very fragile. The next central bank meeting is scheduled for October 25. In the meantime, and assuming that Erdogan takes the backseat, the lira should continue to trim losses slowly.

The EURUSD currency pair made a bullish bounce at the support trend line (green) and the round level of 1.15. The bullish reversal could indicate the end of a potential wave A (purple) and the start of a wave B (purple), which could lead to a larger ABC pattern within wave X (pink). The continuation of the wave B seems more likely if candlestick patterns are able to break above the resistance trend lines.

The EUR/USD currency pair's bullish bounce could indicate a wave A (blue) of a larger ABC (blue) pattern in wave B (purple). A bearish retracement could lead to a bounce at the Fibonacci levels of wave B vs A, but a bullish breakout is needed to confirm this potential pattern. A break below the 100% Fib invalidates the ABC wave pattern.

EUR/USD

Current level - 1.1574

The reaction at 1.1503 shows a positive bias and my outlook is bullish, for a violation of the crucial 1.1630, en route to 1.1730 area.

USD/JPY

Current level - 113.81

Allow another leg upwards, for a tight test of 114.40 area before drowning towards 112.40.

GBP/USD

Current level - 1.3004

Yesterday's dip to 1.2940 signals a possible reversal and although it is not confirmed yet, my outlook is bullish, for a break through 1.3100 hurdle, towards 1.3210.

The Aussie dollar holds in red for the second straight day and extends weakness to new three-week low at 0.7156 on Wednesday.

Fresh weakness broke below pivotal support at 0.7172 (Fibo 61.8% of 0.70850.7314 rally), in the second attempt after Tuesday’s probe failed to close below support.

Broken previous strong support at 0.7200 (20SMA / 50% retracement) now acts as solid resistance and caps today’s action.

Negative sentiment is reinforced by rising bearish momentum and MA’s in full bearish setup on daily chart.

Bears look for close below 0.7172 pivot to generate negative signal for test of 0.7140 (Fibo 76.4% / 17 Sep trough), with extension towards key support at 0.7085 (11 Sep low) not ruled out.

Res: 0.7172, 0.7200, 0.7220, 0.7232
Sup: 0.7140, 0.7100, 0.7085, 0.7030

In the crypto space, the currency worth looking at it is Ripple, all that FUD is fading really fast as the price of Ripple's XRP has dropped nearly 14% in just two days. This is despite the fact that Ripple launched its xRapid services, allowing its currency XRP to carry out the international transactions. Ripple certainly brought a number of big stars at its conference in San Francisco where Former President Bill Clinton was a keynote speaker.

Barack Obama's economic advisor was also at the conference and this is a huge message which Ripple tried to send out to his community about its reach and to the regulators. The U.S. must get its act together to make the regulatory environment friendlier, a key reason why we have seen so much sell off in the cryptomarket. An adequate control is an answer when it comes to regulation and without that, the U.S. is risking losing its crown jewel- its innovators.

In terms of technical analysis, the price is trading below the 50-day moving average (shown in yellow) on a 4-hour time frame. This confirms that the bulls have lost some control of the price. However, bears still need to keep the downward momentum going to have odds stacked up on their side. This is because the price of XRP is still trading above the 100-day moving average.

The price has also broken its upward channel which is another bearish signal but this bearish signal should be taken with a caution because the RSI is reaching near a critical level of oversold which usually triggers big buy orders.

The euro is directly paying the price of the Italian debt crisis.

European markets are kick-starting the day on the front foot and the bulls are taking the lead shaking the negative sentiment from yesterday. This is despite the fact that a large number of investors are concerned about the Italian debt situation. As long as the Italian politicians continue to throw garbage towards Brussels, we do not think that the situation would be even close enough to a respectful resolution.

Italian deputy prime minister is reluctant to make any change in the country’s budget. His message is simple: it is what it is and no changes will be made. The euro is directly paying the price of this crisis. Despite a relief rally that we are seeing we maintain our view that it is highly likely that we may see the move towards the 14-handle or even lower under the current circumstances.

Italians are simply not ready to bow to the EU like the Greeks did. Looking back at the situation, even Greece did put up a big fight before submitting to the EU’s will. The European Commission wants the Italian government to bootstrap its expenses and start paying respect to the fiscal rules. However, the Italian government is of the mind frame that we do not need to dictated by the EU.

Back at home, the British Pound had more of a roller coaster ride yesterday and the trend remains to be intact. Boris Johnson decided to back Theresa May about her recent decision on Northern Ireland. Brexit is the most thorny issue for Sterling which is stopping the businesses to make significant decisions about their future plans. The UK construction PMI data confirmed this argument yesterday and the number showed that the economic activity has slowed to its lowest level since March. The upcoming services PMI data due later today will be something which everyone will be watching and if we see a similar message there we could see the British pound taking some beating.

Crude To Touch $80

As for the commodity market, we are seeing the oil prices relatively more stable at the current level. Of course, the bears are feeling the pain because the price of crude is trading towards its four year high because fears around supply crunch are under focus. Moreover, U.S. sanctions on Iranian oil are about to hit the market in a matter of a few weeks and nearly 2 million b/d of oil could vanish off the market if countries are going to comply according to the sanctions. There are strong odds in favour of crude oil touching the price of $80 by the end of this year and even on Wall Street, we are hearing that more and more investment banks are raising their price target for the year-end.

Demand for the US currency is still high after the conclusion of a deal between the United States, Mexico and Canada. Yesterday, the US dollar index (#DX) updated its two-week high and closed in the positive zone (+0.22%). Meanwhile, the US dollar slightly weakened against the Japanese yen. This movement is caused mostly by technical factors. Today, participants have taken a wait-and-see attitude before publication of the important economic reports from the United States.

The euro weakened against a basket of currencies due to resumed concerns about the Italian budget. Yesterday, Deputy Prime Minister of Italy, Luigi Di Maio, said that the government did not intend to deviate from its stated goals for government expenditures, which implied a budget deficit of 2.4% of GDP. However, this indicator significantly exceeds the limit value set by the European Union.

The "black gold" prices are consolidating. At the moment, futures for the WTI crude oil are testing a mark of $75.35 per barrel. At 17:30 (GMT+3:00), a report on the US crude oil inventories will be published.

Market Indicators

Yesterday, there was a variety of trends in the US stock market: #SPY (-0.06%), #DIA (+0.31%), #QQQ (-0.23%).

At the moment, the 10-year US government bonds yield is at the level of 3.06-3.07%.

The news feed on 2018.10.03:

The index of economic activity in the UK services sector at 11:30 (GMT+3:00);

ADP nonfarm employment change in the US at 15:15 (GMT+3:00);

ISM non-manufacturing business activity in the US at 17:00 (GMT+3:00).

We also recommend paying attention to the speech by the Fed Chairman Powell.

Here are the latest developments in global markets:

FOREX: The dollar index – which tracks the greenback's performance against a basket of six major currencies – is lower by 0.20% on Wednesday. This is owed mainly to a recovery in the currency with the heaviest weight in this index, the euro, which bounced overnight following news that Italy is willing to compromise on its budget deficits from 2020 onwards. Elsewhere, the pound grinded lower during the Conservative Party Conference, with all eyes now turning to PM May, who will deliver remarks later today.

STOCKS: The Dow Jones (+0.46%) closed at a fresh record high on Tuesday, propelled higher by strong gains in chipmaker Intel (+3.55%). The benchmark S&P 500 (-0.04%) and the tech-heavy Nasdaq Composite (-0.47%) were not as fortunate though, with losses in giants like Facebook (-1.91%) and Amazon (-1.65%) dragging the broader market down. Futures tracking the Dow, S&P, and Nasdaq 100 are pointing to a higher open today. Asia was mostly in the red on Wednesday, with Japan's Nikkei 225 (-0.66%) and Topix (-1.17%) edging lower, alongside the Hang Seng in Hong Kong (-0.22%). In Europe, all the major indices are set for a much higher open today according to futures, with news that Italy is willing to compromise on its budget deficit for 2020 and 2021 supporting sentiment.

COMMODITIES: Oil had a rather uninspiring session, with neither WTI nor Brent moving much, both benchmarks holding on to the spectacular gains they posted on Monday. Additionally, both continue to hover just below their respective four-year highs, with WTI at $75.38 per barrel and Brent at $84.97/barrel. In precious metals, gold showed some signs of life again on Tuesday, spiking higher to trade around the $1,204 zone on the back of Italian budget worries, even as the dollar was also rising. Since gold is denominated in dollars, an appreciating greenback typically weighs on demand for the yellow metal.

Major movers: Euro bounces on reports Italy is willing to compromise on future budgets

The euro experienced another bout of weakness during the early European session on Tuesday, after a senior lawmaker in one of Italy's ruling parties said that having its own national currency would solve most of Italy's problems, resurrecting specters of “Italexit”. He later clarified though, multiple times, that the idea of leaving the euro is “out of the window”. Euro/dollar initially grinded lower towards the 1.1500 support handle, found fresh buy orders and bounced from that level. It later spiked even higher back towards 1.1580 during the Asian session Wednesday, after media reports suggested the Italian government plans to lower its budget deficit in 2020 and 2021. This provided a glimmer of hope, indicating both that Italy wants to avoid a real clash with the EU, and that lowering the nation's high debt level remains a priority.

From a technical standpoint, the fact that 1.1500 held as the proverbial “line in the sand” is encouraging for the bulls. Although the euro may remain “heavy” for a while unable to stage a sustained rally, as long as the 1.1500 hurdle holds, there is cause for optimism that the pair won't revisit the 1.1300 neighborhood again but may instead hover near current levels until the Italian fog clears. The real question for the single currency may be how much of the “bad news” is priced in by now, and to what extent the European Commission – who is set to deliver its verdict on this budget by October 15 – will seek to confront Italy at the risk of fueling another crisis resembling the one in Greece.

The dollar, meanwhile, ended the day higher overall on Tuesday on the back of euro weakness, but has given back all those gains and is trading even lower on Wednesday. The world's reserve currency barely responded to some remarks from Fed chief Powell yesterday, not least due to the absence of any fresh policy signals. All eyes remain on the employment data due on Friday.

Elsewhere, the pound was hammered lower as the Conservative Party Conference failed to impress investors looking for reassuring signs around the Brexit process. Boris Johnson spoke yesterday and generally attacked PM May's Chequers plan, though he later called on Tories to continue backing her. Theresa May will speak today at 0900 GMT, and any Brexit remarks will be closely scrutinized.

Day ahead: UK services PMI, eurozone retail sales, US ADP jobs report & ISM services PMI on the agenda; PM May's speech in focus with Italian budget updates to be monitored

Of note on Wednesday's agenda are the UK services PMI, the ADP jobs report and the ISM's non-manufacturing PMI out of the US, as well as retail sales out of the eurozone. Beyond releases, of great interest will be PM Theresa May's speech at the Conservative Party Conference, as well as any updates having to do with Italy's budget plans.

At 0800 GMT, the eurozone will be on the receiving end of September's final PMI prints for the services sector, as well as the composite PMI that blends manufacturing and services and which is considered a good overall growth indicator for euro area economies. Not much of a reaction is anticipated as the numbers are made public as the flash releases tend to be fairly reliable; market positioning usually takes place in the aftermath of the preliminary estimates. In fact, the two measures are anticipated to be confirmed at 54.7 and 54.2 respectively. Meanwhile, Germany and France, the eurozone's two largest economies, will see the release of their respective PMI prints earlier in the day; at 0755 GMT and 0750 GMT correspondingly.

Also out of the euro area, retail sales figures for August are due at 0900 GMT. Month-on-month, sales are forecast to grow by 0.2%, after contracting by the same proportion in July. This would allow the annual pace of growth in sales to stand at 1.7%, above July's 1.1%.

But of more importance for the euro are likely to prove developments revolving around Italy's budget plans and the prospect for a clash with the European Commission over those; the higher the odds for such an outcome, the greater the drag on the euro is likely to be and vice versa.

Turning to the UK, the nation's services PMI for September will be made public at 0830 GMT. The gauge is expected at 54.0, slightly below August's 54.3. The fact that the services sector accounts for roughly 80% of the UK economy renders the release important; also, unlike the eurozone, the UK sees one and only release. Despite this, of more significance for sterling pairs will be PM May's speech at her party's annual conference, set to take place at 0900 GMT. Will she be able to unite her party under her Brexit vision? Will she be seen as coming closer to a breakthrough from the current backstop in negotiations? If the answer is “Yes” to both these questions, then sterling can be reasonably expected to post gains.

Out of the US, September's ADP national employment report on the number of positions added to the economy by the private sector is due at 1215 GMT. The number of jobs added is forecast to stand at 185k, up from 163k in August. Some analysts use the ADP data to speculate on how the nonfarm payrolls report will come out, though it should be kept in mind that the two are not as correlated as they may have been on occasion in the past. Elsewhere, the ISM's non-manufacturing PMI for September will be hitting the markets at 1400 GMT. It is predicted at 58.0, below August's 58.5, though still comfortably in expansion territory above 50.

Fed chief Powell will be delivering remarks at 2000 GMT. Numerous other Fed policymakers will be making public appearances today: Evans (non-voting FOMC member in 2018 – 1030 GMT and 1800 GMT), Barkin (voter – 1205 GMT), Harker (non-voter – 1715 GMT), Bullard (non-voter – 1800 GMT), Brainard (permanent voter – 1800 GMT) and Mester (voter – 1815 GMT).

In energy markets, EIA data on US crude stocks are due at 1430 GMT. An inventory buildup of around 2.0 million barrels is projected for the week ending September 28, following a rise by around 1.9m during the previously tracked week

Technical Analysis: EURUSD bearish bias in place, though stochastics bullish in very short-term

EURUSD is trading roughly 70 pips above yesterday's one-and-a-half-month low of 1.1505. The negatively-aligned Tenkan- and Kijun-sen lines continue to project a bearish short-term bias. The stochastics, though, are pointing to a bullish picture in the very short-term: the %K line is above the slow %D one and both are heading higher. Should the pair's recovery extend further, then the negative near-term bias will increasingly come under question.

Easing worries over Italy are likely to push EURUSD higher. Resistance to gains may take place around the Kijun-sen at 1.1630, with an upside violation turning the attention to the current levels of the 100- and 50-period moving average lines at 1.1668 and 1.1677 respectively.

Conversely, rising Italian budget angst is expected to push the pair lower. Immediate support to losses could occur around the Tenkan-sen at 1.1549, with yesterday's low of 1.1505 coming into view next. Steeper losses would increasingly bring within scope mid-August's nadir of 1.1300, a level previously experienced in late June 2017.

Eurozone and US releases later in the day can also move the pair.

The EUR/USD currency pair has dropped from the weekly R1 pivot point resistance, and at this point we can see a consolidation. We can also see an emerging piercing line pattern straight from the main Pivot Point. Although tomorrow is a German bank holiday, traders need to pay attention to the ADP (Automatic Data Processing) data release. The ADP measures the estimated change in the number of employed people during the previous month, excluding the farming industry and government. The news should move the EURUSD currency pair. Don't forget to follow our Forex calendar for all regular updates on the news, economic announcements, forecasts and much more.

Technically, the EUR/USD currency pair has formed a piercing line pattern, so we might see a bounce from the 1.1530-50 zone. If this happens, the targets are 1.1590 and potentially 1.1650, where we can see a big confluence of the Pivot Point, the R3 daily resistance and the EMA. ADP can be volatile sometimes, so pay attention to the price action just after the release. Additionally, the bullish counter trend move is negated if the price drops below the 1.1500 support.

Pivot Lines - Weekly Support and Resistance

POC - POC - Point Of Confluence (The zone where we expect the price to react - aka the entry zone)