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The EURUSD has moved higher to test the pivotal 1.1770 technical area, after the U.S dollar index slipped back towards the 93.00 mark, and the euro found strong buying interest from the 1.1700 level.

Today, the euro's directional bias will be influenced by high-impact jobs data from the United States, and key-note speeches after the European market close, from ECB president Mario Draghi and FED Chair Janet Yellen.

Going forward, the 1.1770 level will be key for the EURUSD, with the pair needing to gain traction above this level to further buying interest.

Technical failure around the 1.1770 level will likely see the euro sold back towards key intraday technical support, around the 1.1736 level.

Key intraday resistance above the 1.1770 level is found at 1.1800, and the pairs weekly pivot point, at 1.1823. Above the weekly pivot point, the former swing price-high, at 1.1832, and the monthly pivot, at 1.1875, are key resistance areas.

To the downside, key intraday support is found at the pairs 100-hour moving average, at 1.1764 and the euro's daily pivot point, at 1.1736. Once below the 1.1736 level, traders focus will turn towards a further technical retest of the key 1.1710 level.

A deluge of market-moving events will take the spotlight on Wednesday, with reports from both sides of the Atlantic set to be released.

Europe will see a deluge of PMI reports beginning at 07:15 GMT. Spain, Italy, France, Germany, United Kingdom and Eurozone are all expected to see final PMI numbers for the month of September. For the Eurozone, the PMI Composite Index is expected to read 56.7. Germany’s Composite index is forecast to read 57.8.

The European Commission’s statistical agency will also report on Eurozone retail sales at 10:00 GMT. Receipts at retail stores are forecast to rise 0.3% on month and 2.6% annually.

In North America, payrolls processor ADP Inc. will report on private sector job creation for the month of September. Private payrolls likely rose by 130,000 last month, based on a median estimate of economists. That follows a 237,000 gain the month before.

Later in the session, IHS Markit and the Institute for Supply Management (ISM) will release separate PMI indicators for the US services sector. Both reports are expected to show steady growth in services for the month of September.

On the monetary policy front, Federal Reserve Chairwoman Janet Yellen and European Central Bank (ECB) President Mario Draghi will each deliver speeches during the afternoon.

The US dollar index (DXY) was down 0.2% on Wednesday, giving up some of its recent gains. Dollar pairs will face heavy action in the coming days as investors turn their attention to US jobs data. The nonfarm payrolls report on Friday could elicit heavy volatility in the currency market.

EUR/USD

The euro is back in recovery mode on Wednesday, as calm returned to the market following the Catalan independence vote. The EUR/USD exchange rate rose 0.2% to 1.1765 in Asian trading. The pair faces immediate support at 1.1696, which represents the daily low from 3 October. On the opposite side of the ledger, the bulls are eyeing 1.18 as a significant milestone.

GBP/USD

The British pound rose against the dollar on Wednesday, although cable remains several hundred pips below last month’s high. The GBP/USD exchange rate rose 0.2% to 1.3262 in the Asian session. From a technical perspective, the pair has the support of the 1.3220 region. A break below that level would expose the 14 September low of 1.3146. On the opposite side of the spectrum, immediate resistance is seen at 1.3340.

USD/JPY

The USD/JPY slammed on the breaks Wednesday, as the greenback paused following multiple rallies. The pair was down 0.2% in Asian trading, where it was seen consolidating in the low 112.60 region. The bulls retain control of the market, with investors expecting a more bullish push toward 113.80.

Oil and Gold entered a holding pattern overnight with quiet range trading ahead of key data.

Oil prices ended Tuesday with more of a whimper than a roar, with Brent and WTI falling around 40 cents to open in Asia at 55.80 and 49.80 respectively. An unexpectedly large drawdown of 4.079 million barrels from the American Petroleum Institute (API) crude inventories, was more than offset by an equally large 4 million plus build in gasoline stocks. It appears that the overhang of speculative long positioning is continuing to overhang oil markets although one suspects this has now been substantially reduced over the past week.

Traders’ will be watching tonight’s official Department of Energy crude inventory data for more clues with the street expecting a small drawdown of around 0.5 million barrels. An unexpected increase from this number could see more short-term pain for speculative longs, particularly in WTI.

Brent spot is perched just above support at 55.50 this morning, the bottom of the long-term resistance zone the contract took out last week. Failure here suggests a test of the 54.80 level ahead of trend line support for the entire June to September rally at 53.65 this morning. Resistance is at 56.60 and 57.00 although both levels now look unlikely to be seen in the Asia session.

WTI spot has nearby support at 49.60 followed by a series of daily lows and the 200-day moving average at 49.25. A break of 49.25 implies a much deeper correction is on the cards to the 100-day moving average at 47.60. Resistance is at 50.50 initially followed by the 51.40 regions, a daily double top and the former trend line support that WTI broke on Monday.

Gold

Gold ranged quietly overnight, climbing slightly to finish three dollars higher at 1275.00 as Asia trading gets underway. With China on holiday this week we would expect precious metals to be subdued in Asia. However, volatility should pick up in North America as we head into a data-heavy end of the week. The street appears to be on hold for just that given a general lack of volatility in markets overnight.

Gold has initial resistance at 1281.00 and then 1296.00 with the 100-day moving average, just below at 1272.00, serving as an intra-day pivot point. Below here, support appears at 1268.50 and then 1263.00 ahead of the 200-day moving average at 1251.00.

Sunrise Market Commentary

• Rates: Profit taking ahead of Friday's payrolls?
  Stronger eco data could be countered by increased uncertainty over Catalonia, the next Fed chair and promised tax reforms. Adding the prolonged sell-off, it suggests that investors might take some profit on short positions ahead of Friday's payrolls. The US Note future remains in a sell-on-upticks environment with proposed entry levels around 126.
• Currencies: EUR/USD shows no clear trend on political issues in US and EMU
  The dollar rally stalled yesterday. EUR/USD might continue a ST consolidation pattern as political issues in the US (nomination of successor for Yellen, tax reform) and in EMU (Catalonia) might prevent investors to take directional positions. The USD/JPY rally might also slow if the equity rally takes a breather.

The Sunrise Headlines

• WS (+ 0.3%) clocked a second straight day of record highs for each of its major indices. Most Asian stock markets trade positive overnight with China still closed. The Japanese services PMI dropped to its weakest level in 11 months.
• Catalonia will declare independence 'in a matter of days', Catalan President Puigdemont was quoted as telling the BBC, a move that would defy Madrid and attempt to implement the directive of Sunday's illegal referendum.
• Donald Trump said 'you can say goodbye' to Puerto Rico's debt. 'They owe a lot of money to your friends on Wall Street and we're going to have to wipe that out,' Mr Trump told a Fox interviewer. 'You can say goodbye to that.'
• President Trump's aides have given him a final short list of recommended candidates to head the Fed, people familiar said. Janet Yellen, Gary Cohn, Kevin Warsh and current governor Jerome Powell are being considered.
• Auto sales hit their briskest monthly pace for the year, as Labor Day discounts, higher fleet sales and hurricane-related replacements restored momentum heading into the final months of the 2017.
• Boris Johnson has distanced himself from leadership speculation, claiming that 'the cabinet is united' on PM May's Brexit strategy. He laughed off what he called 'potshots from behind' as an 'occupational hazard in my line of work.'
• Today's eco calendar heats up with September services PMI's in EMU (final), the UK and the US (ISM). US ADP employment is also on the agenda while Germany holds a 10-yr Bund auction.

Currencies: EUR/USD Shows No Clear Trend On Political Issues In US And EMU

Dollar rally takes a breather

Yesterday, the dollar rally took a breather, awaiting more guidance from key eco data (including the US payrolls) later this week. A series of pending political issues in the US were also a slightly USD negative. EUR/USD made a cautious intraday rebound and closed the day at 1.1744. USD/JPY hovered in the 113 area for most of the day, but finally dropped below the big figure even as major US equity indices continue to set new all-time record levels.

Overnight, Asian equities ex-Australia continue their uptrend. The Japan services PMI dropped from 51.6 to 51.00 in September, indicating modest growth in the sector. However, it didn't hurt the yen. The dollar declined slightly further as the political debate on a successor for Fed's Yellen intensifies. There are rumours that chances of Fed member Powell, also on the shortlist, are growing. USD/JPY dropped to the mid 112 area. In the same vein, EUR/USD settled again in the upper half of the 1.17 big figure.

Today, the EMU calendar contains the final PMI. The preliminary reading rose to 55.6 from 54.7, suggesting buoyant activity in the sector. Any revision is usually limited and with little impact on markets. The US calendar is more interesting. The ADP employment report is expected to show a modest net 135K gain of private sector jobs. Markets discount an negative effect from the tropical storms. Any significant deviation of consensus will probably be ignored. The ISM non-manufacturing business confidence is expected to have marginally increased to 55.5 from 55.3 in August, but risks are firmly on the upside of expectations.

The eco data (US non-manufacturing ISM) might be USD supportive. However, there is also political noise on both sides of the Atlantic. Tensions in Catalonia remain high as the region might declare independence within days. For now, Catalonia was hardly a factor for the euro, but this might change. In the US, investors look for more clarity on the nomination of a successor for Yellen and on the tax reform. However, Investors are unlikely to big directional bets ahead of the payrolls (Friday). EUR/USD might hover in the 1.1696/1.1833 ST consolidation pattern. A more cautious risk sentiment after the recent equity rally might block the topside in USD/JPY

EUR/USD downtrend slows as political issues on both sides of the Atlantic keep investors sidelined

EUR/GBP

EUR/GBP nears 0.89 resistance area .

The positive sterling momentum ebbed recently and this continued yesterday. EUR/GBP rebounded further off the key 0.8742/75 support. The UK construction PMI suggested a contraction in the sector. Coming on the heels of a softer manufacturing PMI on Monday, it was a sterling negative. The BoE also warned for potential disruptions in clearing activity after Brexit and on financing of UK corporations via European banks. EUR/GBP closed the session at 0.8871. Cable still set another ST correction low intraday and finished at 1.3237.

Today, the UK services PMI will be published and UK PM May will give a key speech at the Conservative Party meeting. The services PMI is expected to stabilize at 53.2. Another negative surprise will fuel market expectations that the room for the BoE to raise rates is limited. We don't expect too much from the speech of PM May . Her party is divided on the Brexit strategy and she probably will avoid to give concessions to Europe that will angry the grass root anti-EU party base. The noise on Brexit remain a modest sterling negative. Political uncertainty on Catalonia is a negative for the euro. Even so, we think that the downside in EUR/GBP is becoming ever better protected.

EUR/GBP made an impressive uptrend since April to set a top at 0.9307 late August. UK price data amended the dynamics and hawkish BoE comments reinforced a sterling rebound. Medium term, we maintain a EUR/GBP buy-on-dips approach as we expect the mix of euro strength and sterling softness to persist. The prospect of (limited) withdrawal of BOE stimulus triggered a good sterling countermove. However, this rebound has apparently run its course EUR/GBP supports at 0.8743 and 0.8652 are probably difficult to break. We look to buy EUR/GBP on dips. A sustained rebound above the 0.89 area would improve the ST technical picture of EUR/GBP

EUR/GBP: downside support becomes more solid

Download entire Sunrise Market Commentary

EURUSD Elliott Wave view suggests the decline from 9/8 peak is unfolding as an expanded Flat Elliott Wave structure. Down from 9/8 high (1.2094), Intermediate wave (A) ended at 1.1837 and Intermediate wave (B) ended at 1.2034. Intermediate wave (C) remains in progress as 5 waves. Minor wave 1 of (C) ended at 1.186, and Minor wave 2 of (C) ended at 1.2. Below there, Minor wave 3 of (C) ended at 1.1716, and Minor wave 4 of (C) ended at 1.1832.

While below 1.1832, pair has scope to extend lower in Minor wave 5 of (C) and reach as low as 1.16207. This area will also complete Primary wave ((W)) and end cycle from 9/8 peak. Afterwards, pair should bounce in Primary wave ((X)) to correct cycle from 9/8 peak in 3, 7, or 11 swing before turning lower again. If pair breaks above 1.1832 from here, it could be in Minor wave 4 as a flat before turning lower again in Minor wave 5.

EURUSD 1 Hour Elliott Wave Chart

Expanded Flat is a 3 waves corrective pattern, and the inner subdivision is labeled as A,B,C with 3,3,5 structure. That means waves A and B are always corrective structures i.e. could be WXY, WXYXZ, Zigzag or any 3 waves corrective pattern. Wave C is either 5 waves impulse or ending diagonal pattern. In the graphic below, we can see what Expanded Flat structure looks like. Inner structure has ABC labeling, where wave B can complete below or above the starting point of wave A. Wave C should complete below the end point of wave A (usually at 1.236-1.618 fibonacci extension A related to B).

Currency pair EUR/USD

The EUR/USD broke the resistance trend line (dotted orange) which could indicate that price is making a second bounce at the 23.6% Fibonacci support level of wave 4 (blue). A third attempt to break below the Fib could start a larger correction towards the 38.2% Fib.

The EUR/USD bullish price action broke above two resistance lines (dotted orange) but could still resemble a rising wedge pattern and an ABC (brown). A bullish breakout becomes more likely if price manages to break above resistance (red) and the 1.18 round level.

Currency pair GBP/USD

The GBP/USD is at the round level of 1.3250, which is an important support zone as they are two trend lines (blue) and a 50% Fib of wave 4 vs 3. Price will need to break above resistance (red) of the bearish channel before a larger uptrend continuation becomes more likely.

On the 1 hour chart it seems like price is building a bear flag chart pattern after breaking above the steep resistance trend line (dotted orange). A break above the resistance or below support could confirm a potential breakout.

Currency pair USD/JPY

The USD/JPY failed to break the resistance trend line (red) and instead broke below the support trend line (dotted blue). The bearish breakout could indicate the completion of wave A or 1 and the start of wave B or 2.

The USD/JPY could be in a bearish wave 3 (red).

Price drops further as the Nikkei stock index retreats after the yesterday's amazing rally. A further Nikkei's increase forces the Yen the appreciate versus all its rivals on the short term. The next downside target will be at the 148.46 static support, only a valid breakdown will confirm a larger drop.

The price has found strong resistance and now drops again on the short term. Has show an overbought in the previous days after the failure to close above the median line (ml) of the minor ascending pitchfork and after the failure to close near this dynamic resistance. The yesterday’s false breakout above the upper median line (uml) of the descending pitchfork signaled another leg lower. Price developed a minor Rising Wedge pattern, a valid breakdown from it will confirm a drop towards the 0.9634. USD/CHF could be attracted by the lower median line (lml) of the ascending pitchfork.

The AUD/USD has increased sharply in the morning and has ignored a dynamic resistance. Price is trading in the buyer’s territory, but we still need a confirmation because this could be a false breakout if the USDX will start an amazing rally.

The Aussie increased even if the AIG Services Index dropped from 53.0 to 52.1 points. The greenback drops ahead of the US high impact data release, this could be crucial for the USD. The ADP Non-Farm Employment Change could drop from 237K to 131K in the previous months, while the ISM Non-Manufacturing PMI is expected to increase from 55.3 to 55.5 points.

We may have a high volatility in the US trading session, so you should be careful not to ruin your account. The FED Chair will speak tonight, but remains to see if will give some clues regarding the monetary policy.

The rate is trading in the green and tries to recover after the corrective phase. I’ve said in the last day’s that the AUD/USD seems a little oversold, but I’ve said that only a valid breakout above the median line (ml) of the descending pitchfork will confirm a minor increase on the short term. The failure to stay below the median line (ml) of the descending pitchfork will send the rate towards the upper median line (uml) of the descending pitchfork.

Technically, it could e attracted by the confluence area formed between the LML with the upper median line (uml) of the descending pitchfork. This scenario will take shape only if the US data will disappoint in the afternoon.

Market movers today

In the US, Fed Chair Yellen is due to give the opening remarks at a Conference Bank seminar tonight . It is scheduled to take only 15 minutes and we do not expect her to express any new views (also because she has been quite outspoken recently). We think markets are more interested in ADP employment , as it may give us some hints about how jobs growth was affected by Hurricanes Harvey and Irma (but keep in mind that ADP jobs growth has overest imated non-farm payrolls this year). Also note that ISM nonmanufacturing is due at 16:00 CET.

In the UK, PMI service are due, which we estimate fell to 52.7 in September from 53.2 in August . If so, this would be another sign that growth was also weak in Q3 after the weak GDP growth prints in Q1 and Q2. Also, there will be focus on PM Theresa May, due to speak here on the final day of the Conservative Party conference.

In Poland, we expect the central bank to keep the policy rate unchanged at 1.50% in line with consensus.

The Oil market is likely to be positioned for EIA data today (4:30 pm CEST) to show a large drop in crude inventories after API data yesterday posted a 4mb drop last week. There was a limited response in oil market to the news though.

In the Nordics, PMI services in Sweden are due at 08:30 CEST and Norwegian house prices for September at 11:00 CEST. See also the Scandi section on page 2.

Selected market news

The US equity markets closed at record high levels and Asian markets also increased overnight, spurred by strong US September vehicle sales data suggesting that US consumption continues to do well. Meanwhile, the dollar's rally and the fall in US treasuries stalled as investors assessed the prospects for tax reform after a Republican senator raised a question about the deficit impact of such proposals. Prominent investors such as Warren Buffet and Blackrock CEO Larry Fink quest ioned the structure of the tax proposal, calling into question the necessity of deep cuts to corporate income taxes. The various criticism underscores our belief that passing of the tax reform will be difficult (see also our take on the Republican tax reform proposalStill a long way to go for tax reform, 29 August ). Furthermore, the USD witnessed some headwinds after news broke that US Treasury Secretary Steven Mnuchin is said to favour Jerome Powell as new Fed Chair over Kevin Warsh. Powell is seen as less hawkish.

The Chinese financial markets are on a weeklong holiday ahead of the important Party Congress on 18 October. We published a review yesterday of the congress and why it is key for China's road ahead. We are cautiously optimistic that Xi Jinping will find a middle road and not strengthen his power so much that it creates a backlash at a later stage. We also see a good chance that reform implementation will move up the agenda next year following his first term in which Xi has focused on politics and his power base.