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AUDUSD maintains a neutral bias in the medium term and has shown signs of stabilization after a recent decline. The pair has been trading sideways within a range of 0.7817 and 0.8124 since July. The recent bearish phase has stalled and suggests that the decline could be more of a corrective move of the rally to the highest level since May 2015 rather than a change in the broader bullish trend.

Strong support was found at 0.7817, which is the 38.2% Fibonacci retracement level of the upleg from 0.7328 to 0.8124. Despite several tests of this level in the past few days, AUDUSD was able to record daily closes above it until a strong rebound today. This indicates that downside pressure has eased for now. This is also evident in the RSI which has stopped falling.

Should prices extend higher, there is resistance at 0.7933, which is the 23.6% Fibonacci and also where the 50-day moving average is converging. Above this, the key psychological 0.8000 level comes into view and from here the odds would increase for a rise towards the 0.8124 high. Clearing this peak would see a resumption of the broader uptrend with scope to extend gains towards 0.8300.

Should support at 0.7817 fail to hold then prices could decline to 0.7723. This is the 50% Fibonacci and breaking below it would increase the risk of reversing the May to September uptrend. Further weakness would push prices to 0.7631 (61.8% Fibonacci) and focus would turn to the 0.7328 low.

Looking at the bigger picture, the broader market structure is neutral to bullish and there are no clear signs of a trend reversal yet. The 50 and 200-day moving averages are still positively aligned although the 50-day MA has stopped rising. This raises caution as AUDUSD is still vulnerable to weakness in the near term since MACD is falling and has dropped below zero. RSI is in bearish territory below 50. The oscillators suggest risk is tilted to the downside in the near term.

EURJPY is neutral in the near term and has traded in a range between 132 and 133 since September 25. Trend indicators and momentum oscillators are not showing any clear trend and are mostly flat, highlighting the neutral bias in the market.

Based on Ichimoku cloud analysis on the 4-hour chart, the cloud, as well as the Tenkan-sen and Kijun-sen lines, are all moving sideways. The RSI and MACD oscillators are flat, also pointing to a consolidation phase for EURJPY.

The lack of momentum in the market suggests that downward pressure has eased following a drop from 134.40. This peak was the highest since November 2015. The market has retraced 38.2% of the recent rally from 129.36 to 134.40. More signals are needed to show whether this recent pullback is just a corrective move before resuming the uptrend or if it is the beginning of a new downtrend.

Only a move back above 133 would indicate that risks to the downside have diminished. The 23.6% Fibonacci is also a resistance level at 133.20, which if breached, could lead to further gains towards the 134.40 peak. Extending above this point would see a resumption of the broader uptrend.

There is important support at 132 and at the 50% Fibonacci at 131.86. If the current consolidation phase breaks down and prices move to the downside, then the 61.8% Fibonacci at 131.27 will be the next target and from here the key 130 level is within sight as a key focus.

The neutral bias is expected to hold in the near term due to lack of any momentum in the market. While the broader bull trend has only been reversed by less than 50%, further weakness in EURJPY cannot be ruled out completely as the RSI is below 50 and pointing downwards on the 4-hour chart. Meanwhile, prices have been drifting lower in the past couple of trading sessions.

On Wednesday, economic market drivers were limited as the economic calendar was lacking important data. However, a final list of subsequent Fed candidates and speculations that Trump might nominate a less hawkish candidate pressured the dollar lower during the Asian session, giving a push to other major currencies. However, growing expectations of a third-rate hike in December kept the dollar index above the 93 key-level.

During the Asian session, the dollar index, which gauges the dollar’s strength against its major peers, was trading 0.21% lower at 93.49, below the 1 ½-month high of 93.92 reached on Tuesday. The weakness in the dollar arose after a final list of Fed candidates was given to Trump according to sources familiar with the matter, with markets pricing in that the dovish Fed Governor, Jerome Powell, who has been recommended as a candidate, could be the next Fed Chair after the term of the current Fed chief, Janet Yellen, expires in February. Powell is seen less hawkish than the Fed board governor, Kevin Warsh, who is said to be currently in favor after the latter showed opposition to the Fed’s bond-buying program in the past. The list also includes Janet Yellen, whose re-appointment is seen as less likely by Trump’s inner cycle, the National Economic Council Director, Gary Cohn, the Stanford economist, John Taylor, as well as the economist, Glenn Hubbard, and the US Bancorp Chairman Richard Davis.

Next up, the focus will turn on Janet Yellen’s speech at the Community Banking in the 21st Century Conference.

Dollar/yen was 0.25% down at 112.55.

Although political uncertainty in Spain and Germany continued weighing on the euro, the common currency gained 0.21% on the back of a weaker dollar, rising to $1.1769. Meanwhile, the Catalonian leader Carles Puigdemont argued late Tuesday that independence would be declared by Catalonia in a matter of days, while earlier, Spain’s King Felipe VI stood against the referendum saying that the Catalan leaders violated democratic principles.

The pound was up by 0.26% at $1.3269, a day after the Brexit minister David Davis signalled the possibility of “no deal” between the UK and the EU. However, he added later that officials would work on possible scenarios to avoid any errors in negotiations.

The kiwi rebounded during early Asian hours from its one-month low of $0.7149 touched yesterday due to a 2.4% reduction in dairy prices to $0.7204. Still, these gains were short-lived as the kiwi tumbled back to $0.7169 before the session-end.

Regarding energy markets, oil prices were pressured despite the weekly API report on US crude stock inventories showing that US inventories declined by 4.079mn barrels in the week ending September 29 compared to a reduction of 0.761mn barrels seen previously. However, US gasoline stockpiles rose by 4.91mn barrels. WTI crude was 0.58% down at $50.13 per barrel and Brent retreated by 0.50% to $55.72 ahead of the EIA crude inventory levels published later today.

Key Highlights

• The British Pound is in a major downtrend from the 1.3650 swing high against the US Dollar.
• There is a crucial descending channel forming with resistance near 1.3320 on the 4-hours chart of GBP/USD.
• UK's British Retail Consortium (BRC) Shop Price Index in Sep 2017 decreased 0.1% (YoY).
• Today in the US, the ADP Employment Change figure will be released for Sep 2017, which is forecasted to register 130K, down from 237K.

GBPUSD Technical Analysis

The British Pound after an impressive run found a strong barrier near 1.3650 against the US Dollar. The GBP/USD pair declined below 1.3300, but remains well above a major support near 1.3160.

During the downside move, the pair broke the 100 simple moving averages (H4) (Red Color SMA) and the 23.6% Fib retracement level of the last wave from the 1.2852 low to 1.3657 high.

A crucial descending channel with resistance near 1.3320 on the 4-hours chart is acting as a downside move catalyst. At the moment, the pair is finding bids near 1.3220 and the 50% Fib retracement level of the last wave from the 1.2852 low to 1.3657 high.

On the downside, there is a major support at 1.3160. If the pair dips further, the mentioned 1.3160 support might act as a barrier for sellers in the near term.

UK's British Retail Consortium (BRC) Shop Price Index

Today in the UK, the British Retail Consortium (BRC) Shop Price Index for Sep 2017 was released. The forecast was slated for a minor increase of 0.1% in the index compared with the same month a year ago.

The actual result was on the lower side, as there was a decline of 0.1% in the index (Sep 2017). However, it was up from the last decline of 0.3%.

Commenting on the report, the Chief Executive, British Retail Consortium, Helen Dickinson OBE, stated:

Overall shop price deflation reached an all-time low in September with prices now teetering on the edge of inflation. A number of factors have combined to drive a sharp jump in food price inflation to 2.2 per cent over the year to September.

The non-food index was down 1.5% in Sep 2017 (YoY) and the food index was up 2.2%.

Economic Releases to Watch Today

US Services PMI for Sep 2017 – Forecast 55.1, versus 55.1 previous.

US ISM Non-Manufacturing Index for Sep 2017 – Forecast 55.5, versus 55.3 previous.

US ADP Employment Change Sep 2017 – Forecast 130K, versus 237K previous.

On Tuesday, the UK HIS Markit/CIPS construction Purchasing Managers Index (PMI) for September fell to 48.1 from the previous data release in August of 51.1. With market consensus expecting an unchanged figure for September, the markets reacted negatively and GBP was sold against its peers. The contraction is blamed on weak new orders and this is the first time the index has been below the key 50-change threshold in just over a year – with this release indicating the fastest decline in construction since July of last year. Such poor data, along with the political and economic uncertainty surrounding Brexit, continues to worry the market. In the last week, GBPUSD has fallen 2%, albeit aided by a stronger USD. The markets will be keenly watching today’s’ Service PMI for further clarity as to the “state” of the UK economy.

There is speculation that President Trump’s choice for the next Chairperson of the Federal Reserve could be a more hawkish candidate than many expect. With current Fed Chair Janet Yellen’s term expiring in February, there appears to be a number of “front runners” who both recently had interviews at the White House last week. One such candidate is Kevin Warsh, who was the first candidate to be interviewed and is rumored to be Trump’s preferred choice. Warsh has been vocally critical of the Fed’s bond-buying program and its current policy, and he is considered much more hawkish than Janet Yellen. Indeed, a Warsh nomination would most likely result in higher interest rates and a stronger USD.

EURUSD is 0.2% higher in early Wednesday trading, at 1.1765.

USDJPY is little changed overnight and currently trades around 112.65.

GBPUSD has retraced higher from yesterday’s lows, gaining 0.3% in early trading. Currently, GBPUSD is trading around 1.3270.

Gold has improved against USD overnight to currently trade around $1,276.

WTI is unchanged from last nights close, currently trading around $50.35.

Major economic data releases for today:

At 08:00 BST, the European Central Bank will hold a Non-Monetary Policy Meeting in Frankfurt, Germany.

At 08:55 BST, Markit Economics will release German Services PMI and Composite PMI for September. Composite is forecast to be unchanged at 57.8 and Services also unchanged at 55.6.

At 09:00, Markit Economics will release Eurozone Services PMI and Composite PMI for September. Composite is forecast to be unchanged at 56.7 and Services also unchanged at 55.6.

At 9:30, Markit Economics and the UK Chartered Institute of Purchasing & Supply will release UK Services PMI for September. The release is expected to be unchanged from the previous reading of 53.2.

At 18:15 BST, ECB President Mario Draghi is scheduled to provide opening remarks at the Inauguration of the ECB Visitor Centre in Frankfurt, Germany.

At 20:15, Federal Reserve Chair Janet Yellen gives brief welcome remarks before the Community Banking in the 21st Century Research and Policy Conference, hosted by the Federal Reserve Bank of St. Louis, Missouri.

USDJPY (112.63): The USDJPY closed with a doji type candlestick yesterday. Price action has been consolidating near a long-term falling trend line for the past few daily sessions. This indicates a near-term decline to the downside. On the 4-hour chart, the rising wedge pattern remains in play although price action briefly rallied above the resistance level of 112.88. The reversal near this resistance level signals a possible downside move. Support at 111.74 remains in the picture as the likely downside target.

GBPJPY (149.41): The British pound was seen extending the losses as price action cleared the support level at the support zone of 150.40 - 150.05. This breakdown below the support also validated the descending triangle pattern we see on the 4-hour chart. GBPJPY briefly rallied back to the support level to establish resistance. The reversal off this level could now signal a downside move. Support at 148.23 comes into focus and also marks the measured move of the descending triangle pattern. A decline to 148.23 will signal a reversal off this support level in the short term with GBPJPY likely to move sideways thereafter.

EURUSD (1.1768): The EURUSD closed with an indecisive candlestick pattern following the declines off the resistance level at 1.1822. Price action is currently attempting for a bullish day but the risks remain equally balanced. To the downside, the decline to 1.1688 will mark the completion of the descending triangle pattern. Price action was seen falling short of a few pips before the reversal yesterday. Resistance at 1.1822 - 1.1843 remains in focus for another retest to this level. The bias will shift to the upside on a close above this resistance level. In this case, EURUSD could be attempting to push higher with a new range between 1.2058 resistance and the support at 1.1822 - 1.1843 coming into play.

The US dollar was seen taking a break following the previous sessions which saw the greenback posting some gains. Lack of any clear market moving events from the US yesterday saw investors in a holding pattern, ahead of today's private payroll numbers.

In the UK, the construction PMI was weak, falling to 48.1. This was below forecasts of 51.1 and weakened from the same level from a month ago. The data marked a contraction in the construction sector for the first time since the July 2016 Brexit vote.

Looking ahead the ADP/Moody's private payrolls data will be the main event for the day. Economists forecast that private payroll hiring rose 131k for the month of September, after an initial payroll print of 237k in August. With the hurricanes hitting the US shores last month, the possibility of a weaker jobs print is quite a possibility.

Among the central bank speeches today, the ECB president Mario Draghi and the Fed Chair, Janet Yellen will be speaking closer to the evening.

The USDJPY has slipped below key weekly support, after the pair gave way to strong technical selling, after several failed attempts to push price-above the former weekly price-high, at 113.25.

Today's trading sentiment surround the USDJPY pair is neutral to slightly bearish, as the pair awaits the ADP jobs report for the month of September, and a key-note speech from FED Chair Janet Yellen.

Going forward, the USDJPY pair risks deeper trading losses whilst price-action remains beneath its daily pivot, at 112.90 and the key 112.70 support level.

The U.S dollar index is also seeing broad-based weakness across the board, and that is also a contributing factor to recent softness in the USDJPY pair.

Key intraday technical support below the 112.70 level is found at 112.40, which represents the pairs weekly pivot point. Further support is also found at 112.28 and 111.90, and the USDJPY 200-week moving average, at 111.69.

To the upside, key intraday technical resistance above 112.70 is found at 112.90 and 113.25. Once above 113.25, further resistance is seen at 113.57 and 113.89.