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The euro is showing little movement in the Wednesday session. Currently, EUR/USD is trading at 1.1760, up 0.13% on the day. It's a busy day in the US and Europe. In the Eurozone, German Services PMI matched its estimate of 55.6, while the Eurozone Services PMI improved to 55.8, above the forecast of 55.6 points. Later in the day, ECB head Mario Draghi will speak at an event in Frankfurt. In the US, ADP Nonfarm Payrolls kicks off this week's job reports, with the indicator expected to slow to 131 thousand. The ISM Nonfarm Manufacturing PMI is forecast to edge up to 55.5 points. We'll also hear from Federal Reserve Chair Janet Yellen ,who will deliver remarks at an event hosted by the St. Louis Fed.

The crisis in the Catalonia has not affected the euro so far, but the situation remains volatile, as the Spanish government and the Catalan regional government remain deadlocked over Sunday's independent referendum. The violence between police and voters left close to 900 civilians injured, and tensions remains high. Catalan officials claim that 90 percent of the votes were if favor of independence, but the national government has declared the vote unconstitutional and illegal. On Wednesday, Catalonia declared a general strike and some 700,000 people demonstrated in Barcelona. Catalan Carles Puigdemont has not showed any intent to back down, warning that his government plans to act in a matter of days. The crisis is not expected to weigh on the euro, as the referendum is viewed as an issue local to Spain, and not to the eurozone in general. As well, the Spanish economy is in good shape, so a constitutional crisis is unlikely to affect the country's economic growth.

Will the Fed make a rate move in December? Just a few weeks ago, federal futures had priced in a December hike at below 50 percent, but the odds have surged to 76 percent, according to the latest CME Fed Watch release. Although FOMC members remain divided on the prudence of another rate hike in 2017, Fed Chair Janet Yellen has broadly hinted that she favors a December move, and the markets have picked up on her message. The US economy continues to perform well, and the labor market remains close to capacity. The Achilles heel in an otherwise strong economy is inflation, which remains well below the Fed's target of 2 percent. If sentiment towards a December hike remains high, the US dollar could gain ground.

After failing to pass a new health care act through a skeptical Congress, Donald Trump has now set his sights on tax reform, another key campaign pledge from Trump's election campaign. Last week, the White House announced the new tax proposal, called the Unified Tax Reform Framework, which includes lowering corporate and personal income taxes. However, the plan is sketchy and short on specifics, most importantly, how will the plan be paid for? Trump has insisted that the cuts will trigger strong economic growth which will more than pay for itself. However, Moody's, the well-respected credit rating company, is not impressed by the rhetoric. On Monday, Moody's said that the tax plan is “likely credit negative”, arguing that tax cuts would not be offset in spending cuts, which would result in a higher federal budget deficit and debt. The reduction in federal government revenue would negatively affect the US credit rating. Some Republican lawmakers have already come out against the plan, so it appears that the proposal will have an uphill battle to pass through the House of Representatives and the Senate.

The Aussie bounced to 0.7875 in Asia, boosted by weaker US dollar and following repeated strong downside rejection at base of thick daily cloud at 0.7800, reinforced by rising 100SMA. Long-tailed candles in past two days and repeated failure to close below Fibo 38.2% at 0.7820 signal bears may take a break ahead of renewed attack at pivotal supports at 0.7820/00. Falling 10SMA (0.7875) and Tenkan-sen (0.7885) capped recovery attempts for now, with extended upticks expected to hold below cloud top (0.7930) and keep bears intact. Formation of 20/30SMA bear-cross today reinforces overall bearish stance. Firm break below daily cloud could accelerate towards 0.7726 (50% of 0.7328/0.8124 / weekly Kijun-sen). Alternative scenario requires sustained break above daily cloud top to signal reversal.

Res: 0.7875, 0.7885, 0.7930, 0.7945
Sup: 0.7820, 0.7800, 0.7785, 0.7726

It appeared that a breakthrough the 100% Fibonacci retracement level at 1.1715 and the weekly S1 at 1.1710 had a short-term effect. Despite the average market sentiment, which is 61% bearish, the pair managed to restore not only lost positions but also cross a combination of 55- and 100-hour SMAs as well as the upper trend-line of a medium-term descending channel. On the one hand, the further climb to the top is likely to be hindered by the slipping 200-hour SMA near 1.1810. On the other hand, the above retracement level is also not expected to let the rate to drop to the bottom. For this reason, a great impact on the further direction of the pair will have all fundamental events that are scheduled for today, including Draghi and Yellen speeches.

In line with expectations, the currency exchange rate failed to break from the one-month-long descending channel yesterday. Accordingly, it formed a third reaction low and continued to move in the opposite direction. However, it seems that the 55-hour SMA is not going to allow the Pound to gain more value against the Dollar, as it did many other times in the past. On the other hand, if a released data on the UK Services PMI will appear to be better than expected, this barrier is unlikely to withhold pressure from bulls. An additional impulse for surge or, in contrast, for downfall is also expected to be provided by an update on the US employment as well as the Fed Chair Yellen speech. Regardless of outcome, there is a good chance that the pair will manage to stay within the pattern.

As it was expected, after a rapid short-term surge the pair stopped at the 113.21 level and then began to move to the bottom, breaking from a dominant ascending channel. At the moment, the rate is approaching a combined support formed by the 200-hour SMA and the weekly PP at 112.42, which is located slightly above the bottom trend-line of another ascending channel that still remains in force. This fact points out on an upcoming rebound.

However, the pair might continue to slip to the bottom if the US employment data will not justify experts' forecast. An additional impulse is also expected to be provided by the subsequent Janet Yellen's speech in St. Louis.

Because of the speech that is expected to be delivered by the Fed Chair Janet Yellen at a banking conference in St. Louis, the gold traders not only managed to pull the pair from the weekly S1 lying at the 1,266.63 level but also to push it from a junior descending channel. At the moment, the only barrier that it faces on its way is the 100-hour SMA, which is located slightly below the 61.8% Fibonacci retracement level. Whether the pair will succeed to break through this resistance as well will heavily depend on release on information on the US employment data and of course the subsequent Yellen’s speech. Nevertheless, none of these events are likely to change to the general picture, according to which the rate is expected to reach the lower support line of a dominant ascending channel.

The GBP/USD fell from the intraday high after the report on Tuesday indicated contraction in the UK construction sector. The Sterling lost 29 base points or 0.22% to continue losing ground, finishing the trading session near the 1.3249 mark. Though, the currency pair jumped back to the 1.3260 area this morning.

The UK construction firms reported that activity fell dramatically in September to the lowest level since after the Brexit vote, putting the construction PMI reading to 48.1 points in the reported period, down from 51.1 registered in August. Though, construction makes up to 6% of the country's GDP, the results suggested it could drag on Q3 figures, just as the Bank of England will be ready for the interest rate hike.

The Australian Dollar fell against the Greenback after the Australian Central Bank announced its interest rate decision. The AUD/USD currency pair lost 20 base points or 0.26% to be seen trading below the 0.7800 mark. Though, bulls kept the Aussie above aforementioned level during the trading session on Tuesday.

The Reserve Bank of Australia stated that it left its key interest rate unchanged at a historical low of 1.50% for the 14th month in succession. An unchanged reading was widely predicted by experts and economists, with the majority expecting the next rate increase by the middle of 2018 or later. The Bank commented that the economy is likely to accelerate growth pace in the coming years, but warned about weak gains in wages.

Global Markets:

• Asian stock markets: Nikkei up 0.20 %, Shanghai Composite rose 0.28 %, Hang Seng gained 0.80 %, ASX 200 down 0.77 %
• Commodities: Gold at $1278.07 (+0.28 %), Silver at $16.75 (+0.61 %), WTI Oil at $50.00 (-0.73 %), Brent Oil at $55.69 (-0.59 %)
• Rates: US 10-year yield at 2.31, UK 10-year yield at 1.35, German 10-year yield at 0.46

News & Data:

• (GBP) Construction PMI 48.1 vs 51.1 expected
• (NZD) GDT Price Index -2.4 % vs 0.9 % expected
• (NZD) ANZ Commodity Prices m/m 0.8 % vs -0.8 % previous
• (EUR) Spanish Unemployment Change 27.9 K vs 21.3 K expected
• (EUR) PPI m/m 0.3 % vs 0.1 % expected
• (JPY) Consumer Confidence 43.9 vs 43.5 expected
• (AUD) Commodity Prices y/y 18.3 % vs 20.8 % expected
• U.S. oil dips below $50 over doubts recent rally will last
• World Bank raises 2017, 2018 East Asia growth forecasts, sees geopolitical risks- RTRS

Markets Update:

Asian equities opened higher on Wednesday building on fresh records for U.S. indexes overnight and led by Japanese and Hong Kong markets today. The Hang Seng has been one of the world’s best-performing stock indexes this year, If the index finishes up more than 0.9% today, it would notch its highest close in a decade. The rally in the dollar petered out as investors awaited President Donald Trump’s decision on the leadership of the Federal Reserve and gauged prospects for U.S. tax cuts.

USDJPY is seen trading at 112.639 after falling over 40+ pips to lows of 112.50 as it was a broad-based USD drop in Asia today around the Tokyo fix. Overall, the Yen advanced 0.2 percent against the US Dollar. Meanwhile, Japan’s Nikkei Stock Average Nikkei 225 also added 0.2% despite a rebound in the yen

EURUSD rose 0.2 percent to 1.1768 managing to gain over 30 pips with Spanish Prime Minister Mariano Rajoy fighting to maintain control after 2.3 million Catalans voted in Sunday’s makeshift referendum, Catalan President Carles Puigdemont said he will declare independence within days. The dollar index, which tracks the dollar against a basket of currencies fell 0.2 percent and is currently valued at 93.44

AUDUSD is currently seen trading around 0.7857 as the AUD gained closed to 50 pips earlier in the session against the US Dollar reaching highs of 0.7875 before retracing to current levels. The Kiwi was the real winner in terms of gains as it climbed over 60 pips earlier in the session to reach highs of over 0.7200 against the US Dollar, currently the NZDUSD is seen trading lower at 0.7175.

Upcoming Events:

• All Day – (CNY) Chinese Bank Holiday
• 08:30 GMT – (GBP) Services PMI
• 12:15 GMT – (USD) ADP Non-Farm Employment Change
• 14:00 GMT – (USD) ISM Non-Manufacturing PMI
• 14:30 GMT – (USD) Crude Oil Inventories
• 17:15 GMT – (EUR) ECB President Draghi Speaks
• 19:15 GMT – (USD) Fed Chair Yellen Speaks

The pair stands at the back foot on Wednesday, following previous day's repeated failure to sustain break above 113.00 barrier. Today's dips were so far contained by initial supports at 112.40 zone (rising 10SMA/daily Tenkan-sen/rising 4-hr cloud) with larger bulls expected to stay intact while the latter supports hold. However, risk of deeper pullback exists as the pair failed in several attempts to resume larger uptrend which could signal rally's stall. First bearish signal will be generated on break below 112.40 and expose next pivot at 111.95 (200SMA), loss of which would increase risk of deeper correction.

Res: 112.90, 113.25, 113.57, 114.00
Sup: 112.40, 112.21, 111.95, 111.47