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EURUSD (1.1697): The euro currency continued to post gains with price action attempting to rebound off the 20-period moving average on the 4-hour session. However, the failure to post higher gains indicates a potential correction in the making. This is also validated by the bearish divergence that is currently formed. The first level of support at 1.1626 could be tested with a potential for the currency pair to fall to 1.1540 in a decline below the initial support.

The U.S. dollar was seen trading on the backfoot amid a rather busy day. The economic data from the U.S. showed that the economy advanced by 4.2% during the second quarter. The second revised estimates were higher than the initial estimates which showed a 4.1% increase.

However, other economic data was mixed. The pending home sales index fell 0.7% in July according to data released by the National Association of Realtors (NAR).

In the European trading session, the Pound sterling managed to get a boost after the EU's Chief negotiator, Michel Barnier said that he was prepared to offer the U.K a trade deal that was never before offered a third country.

The remarks stoked optimism just a few days after it was evident that the Brexit talks would miss the October deadline.

The economic calendar today will see the release of the flash inflationestimates from Germany and Spain. Germany's inflation is expected to ease, while consumer prices in Spain are expected to remain steady.

The NY trading session will kick off with the release of Canada's monthly GDP report. Economists forecast that the GDP advanced 0.1% following a strong 0.5% increase the month before.

The U.S. Core PCE price index will no doubt generate headlines as the Fed's preferred inflation gauge. Core PCE is expected to rise 0.2% on the month, advancing from 0.1% the month before. Personal income and spending data are also on the cards.

Sterling traders were caught by surprise on Wednesday after the EU’s Chief Brexit negotiator Michel Barnier said, “We are prepared to offer a partnership with Britain such as has never been with any other third country.” His statement comes after the risk of a hard Brexit, or no-deal Brexit grew significantly over the past few weeks. The Pound rallied sharply on the news, gaining 149 pips against the dollar.

Many investors would be wondering whether Barnier’s statement could be a turning point for the Pound. Although many issues related to trade and the Irish border are far from being resolved, it currently seems that negotiations may begin moving in the right direction. If positive news flows continue when Brexit Secretary Dominic Raab heads back to Brussels on Friday to resume talks, GBPUSD may quickly return to July highs that were above 1.33. However, expect volatility to surge in the coming weeks as we get closer to the Brexit deadline.

Positive news was also flowing from the U.S. leading to new record highs in the S&P 500 and the Nasdaq. President Trump is optimistic that Canada will join Mexico’s and the U.S.’ trade agreement. Canadian Prime Minister Justin Trudeau also shared Trump’s optimism indicating there’s a possibility a trade deal that includes Canada could be reached by Friday. With U.S. midterm elections about two months away, I believe Trump wants to strike deals, not just with Mexico and Canada, but probably the European Union too. This should continue fueling the rally in equities at least in the short run given that economic fundamentals and earnings remain robust.

In Australia and New Zealand, the situation is looking gloomier. AUDUSD fell 0.4% on Wednesday after Westpac, one of the largest nation’s banks raised mortgage rates by 14 basis points as funding costs increased. This move may lead to further delaying an interest rate hike by the Reserve Bank of Australia as more banks are likely to follow Westpac’s actions leading to lower disposable incomes for consumers already struggling with low wage growth. The currency lost another 0.4% today after capital expenditures unexpectedly fell 2.5% in Q2 which will become increasingly worrying if such a trend continues.

The New Zealand dollar is the worst major performing currency today. NZDUSD fell almost 1% in the Asian trading session after business confidence fell to -50.3% in August, a level not seen since April 2008. These figures are likely to be reflected in lower GDP growth for Q3 and lowering interest rates may be taken into consideration. Thus, expect to see further declines in the currency until economic data starts pointing north again.

Swiss KOF Economic Barometer dropped 1.4 pts to 100.3 in August, below expectation of 101.2. KOF noted that it "pints to a level that is only marginally above its long-term average." And, "in the near future Swiss growth should hover around its average over the last ten years."

Also, it's noted that "the strongest contributions to this negative result come from manufacturing, followed by the indicators from the exporting sector." On the other hand, "the indicators related to private consumption give a positive signal. ". Financial and construction sectors were practically unchanged.

Full release here.

EU chief Brexit negotiator Michel Barnier talked to German broadcaster Deutschlandfunk with a more neutral tone on Brexit today. He said that EU should be prepared for every outcome, and "that includes the no-deal scenario". He also mentioned that the issue of Irish border was the "most sensitive point" of the negotiations. But he also noted that it is "possible" to have a solution.

Barnier said yesterday that the EU is "prepared to offer Britain a partnership such as there never has been with any other third country." That's taken as a sign of commitment to a deal.

Separately, it's reported that EU officials are considering an unscheduled summit in November to conclude Brexit negotiations. It's actually not news as the October summit is too tight while December one is too late to finalize all the parliamentary approvals.

Daily Pivots: (S1) 143.69; (P) 144.64; (R1) 146.44; More...

GBP/JPY's rebound from 139.88 is still in progress and reaches as high as 145.67 so far. Intraday bias stays on the upside for trend line resistance (now at 147.04). Firm break there will be a signal of bullish reversal and should target 149.30 resistance for confirmation. On the downside, below 143.65 minor support will turn intraday bias neutral first.

In the bigger picture, at this point decline from 156.59 is still seen as a corrective move. Focus remains on 139.29 cluster support (50% retracement of 122.36 to 156.59 at 139.47). Strong rebound from there will re-affirm the bullish case that rise from 122.36 is still to extend through 156.59 high. However, sustained break of 139.29/47 should confirm medium term reversal. GBP/JPY would then target a retest on 122.26 (2016 low).

Daily Pivots: (S1) 129.94; (P) 130.40; (R1) 131.20; More....

EUR/JPY's rally from 124.89 is still in progress and reaches as high as 130.86 so far. Intraday bias stays on the upside for resistance zone between 131.97 and 61.8% retracement of 137.49 to 124.61 at 132.56. On the downside, below 129.57 minor support will turn intraday bias neutral and bring consolidations first.

In the bigger picture, EUR/JPY once again rebounded ahead of 124.08 key resistance turned support. It's also held above long term trend line from 109.03 (2016 low). The development argues that such rise from 109.03 might now be over yet. Decisive break of 61.8% retracement of 137.49 to 124.61 at 132.56 will pave the way to retest 137.49 high. But, firm break of 124.08 will argue that whole rise from 109.03 (2016 low) has completed at 137.49. Deeper decline would be seen to 61.8% retracement of 109.03 to 137.49 at 119.90 next.

Daily Pivots: (S1) 0.8948; (P) 0.9021; (R1) 0.9058; More...

EUR/GBP's rejection from 0.9097 was rather strong and it drops sharply to as low as 0.8971. For now, deeper pull back could be seen. But the cross is staying inside rising channel and well above 0.8895 support. Larger rally from 0.8620 is still expected to extend higher. Break of 0.9097 will target a test on 0.9305 high. Though, sustained break of channel support will be the first sign of reversal, and focus will be turned back to 0.8895 for confirmation.

In the bigger picture, EUR/GBP is staying in long term range pattern from 0.9304 (2016 high). The corrective structure of the fall from 0.9305 to 0.8620 is raising the chance that rise from 0.8312 to 0.9305 is an impulsive move. But we're not too confident on it yet. In any case, we'd stay cautious on strong resistance from 0.9304/5 to limit upside in case of further rally. Meanwhile, if there is another medium term decline, strong support will likely be seen from 0.8303 to contain downside.

Daily Pivots: (S1) 1.5932; (P) 1.5995; (R1) 1.6077; More....

EUR/AUD's rally is in progress and reaches s high as 1.6081 so far. Intraday bias remains on the upside for target 100% projection of 1.5271 to 1.5886 from 1.5601 at 1.6216, which is close to 1.6189 high. On the downside, below 1.5953 resistance turn support will turn intraday bias neutral and bring consolidation first, before staging another rally.

In the bigger picture, EUR/AUD drew strong support from 55 week EMA and rebounded. And the development argues that medium term rally from 1.3624 (2017 low) is still in progress. Firm break of 1.6189 will target a test on 1.6587 (2015 high). On the downside, break of 1.5601 support will now be the first sign of medium term reversal, and will bring a test on 1.5271 key support for confirmation.

Daily Pivots: (S1) 1.1327; (P) 1.1379; (R1) 1.1415; More...

EUR/CHF's break of 1.1363 minor support suggests that rebound from 1.1242 has completed earlier than expected at 1.1452, ahead of 1.1489 support turned resistance. Intraday bias is turned back to the downside for retesting 1.1242 low first. Break will bring a test on key support zone at 1.1154/98. On the upside, though, above 1.1452 will resume the rebound from 1.1242. Further break of 1.1489 will add to the case of bullish trend reversal.

In the bigger picture, for now, the price actions from 1.2004 medium term top is seen as a correction only. Downside should be contained by 1.1198 (2016 high), 61.8% retracement of 1.0629 to 1.2004 at 1.1154 to complete it and bring rebound. This cluster level is in proximity to long term channel support (now at 1.1189) too. A break of 1.2 key resistance is still expected in the medium term long term. However, sustained break of the mentioned support zone will mark reversal of the long term trend.