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Price drops after the retest of the median line (ml) of the ascending pitchfork. The next downside target will be at the 38.2% retracement level, it could reach it if the US data will disappoint later. USD/JPY dropped below the 112.50 psychological level as the Nikkie is going down after the impressive rally. Only a USDX's rally will send the rate much higher again.

Price increased and resumed the yesterday's bullish candle. Is pressuring the upper median line (UML) of the major descending pitchfork, a valid breakout will bring us a good buying opportunity. USD/CHF has managed to stay above the WL2, signaling that the bulls are strong on the short term. Price needs support from the US data, otherwise, we may have another false breakout.

The British pound has fallen below the 1.3200 handle against the U.S dollar, hitting a new weekly price-low of 1.3174, as fears over Theresa May's tenure as British Prime Minister grow.

Bearish trading sentiment surrounding the GBPUSD pair is growing, as data out today showed a sharp decline in new UK car registrations for the month of September. Furthermore, an apparent stalemate in Brexit negotiations between Brussels and the Conservative party are also weighing on the pound.

Today's bearish range-break beneath the 1.3218 level has opened a new leg of GBPUSD downside, with the pair increasingly likely to test towards its key 50-day moving average, at 1.3144.

Only a series higher time frame price close back above the 1.3218 technical level, can negate further selling in the GBPUSD pair.

Key intraday GBPUSD support below the 1.3174 level is found at 1.3144 and 1.3115. Below the 1.3115 level, the pairs 100-day moving average is found at 1.3040.

To the upside, the pairs H4 time-frame 200 period moving average, is found at 1.3202. Once clearly above the 1.3202 level, the 1.3218 and 1.3239 levels become former support turned resistance.

The USDJPY pair continues to trade in an increasingly tight trading-range between 112.33 and 112.93, as investors await the release of the United States September Non-farm payrolls job report.

Today's USDJPY intraday trading sentiment is increasingly neutral, as investors lack a natural catalyst to push price-action beyond the current 30-pip daily trading range.

Going forward, the announcement of the new U.S Federal Reserve Chair and the result of the upcoming Japanese elections will affect the USDJPY pairs medium term directional bias.

Moving to the short term, a number of FOMC members are speaking this afternoon, we also have the release of key U.S Factory Orders data.

Key intraday USDJPY technical support is found at 112.32 and 112.20. Once below the 112.20 level, a deeper decline towards 111.90 and 111.68 should be expected.

To the upside, once clearly trading above the 112.93 level, a further advancement towards 113.10, 113.25 and 113.57 remains likely.

The USDCAD pair surged on better than expected US data )jobless claims fell to 260K vs forecast at 265K while trade gap in August narrowed to $42.4B, compared to forecasted $42.7B and $43.6B gap in July). At the same time weaker than expected Canadian trade balance data for August (trade gap widened to C$3.4B compared to forecasted C$2.6B gap) pressured loonie.

Fresh bullish acceleration cracked Tuesday's recovery peak at 1.2538 and looks for extension of larger bull-leg from 1.2061 (08 Sep low) on sustained break.

Shallow correction from 1.2638 was contained by 55SMA which is turning into sideways mode, with rising 10SMA approaching and on track to form bull-cross.

Fresh rally today broke again above 1.2504 (Fibo 61.8% of 1.2778/1.2061), looking for bullish signal on eventual close above after four failures in past few days.

Bulls are now looking for test of 1.2580 (base of falling daily cloud) which marks strong barrier.

Res: 1.2580; 1.2608; 1.2662; 1.2690
Sup: 1.2504; 1.2461; 1.2443; 1.2419

The Euro slipped from the session high at 1.1778, after recovery attempts repeatedly stalled on approach to falling 10SMA which marks significant barrier.

Stronger dollar in mid-European session and release of ECB minutes helped bears to push the single currency lower.

Minutes showed that the ECB policymakers discussed various scenarios for extension of QE program into next year and also expressed concerns about Euro's rise.

Policymakers need to decide about asset purchase program which expires at the end of the year, as main argument was about the size and duration of QE extension.

Two solutions were on the table: smaller QE cut with shorter duration or bigger reduction with longer duration.

Regarding the monetary policy, it should be highly accommodative under all scenarios.

Final decisions are likely to be made on ECB's policy meeting on October 26.

The Euro stands at the back foot ahead of beginning of the US session and release of US Jobless Claims and Trade Balance data.

Fresh weakness surged below hourly cloud (1.1759/1.1738) but was so far unable to sustain losses below cloud base.

Bearish setup of daily techs favors further downside and renewed attack at 1.1720 pivot, break of which will be seen as bearish signal.

US data are also expected to impact performance of EURUSD pair.

Res: 1.1778; 1.1790; 1.1816; 1.1832
Sup: 1.1734; 1.1720; 1.1696; 1.1662

Daily Pivots: (S1) 1.3218; (P) 1.3254; (R1) 1.3285; More....

GBP/USD's fall extends to as low as 1.3133 so far. Intraday bias remains on the downside for 61.8% retracement of 1.2773 to 1.3651 at 1.3108. Firm break there will target a test on 1.2773 key support it's still early to call for trend reversal as it's staying well inside medium term channel. But a break of the channel support (1.2942) will build up the chance of the bearish case. On the upside, above 1.3221 minor support will turn intraday bias neutral first.

In the bigger picture, current development argues that the long term trend in GBP/USD has reversed. That is, a key bottom was formed back in 1.1946 on bullish convergence condition in monthly MACD. Current rise from 1.1946 will target 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466 next. In any case, medium term outlook will now stay bullish as long as 1.2773 support holds.

Fresh, broad based selling is seen in Sterling today and the currency staying as the weakest one for the week. Political uncertainty seems to be a main driver. Talks of UK Prime Minister Theresa May being ousted by her own party members surface. That comes after May's keynote speech at the Conservative Party Conference yesterday. And the occasion was overshadowed by her coughing as a prankster storming the stage.

It's reported that some Tory MPs want May to quit. However, the underlying split down the middle of the party is seen as the more serious problem. A clear representation of the division is the conflicting messages from ministers regarding UK's Brexit position. And that leads to a lack of position which has been heavily criticized by EU officials.

Meanwhile, markets could be reassessing BoE outlook after a string of weaker than expected data released this week. This is no change in the expectation for BoE to hike in November. And, the central bank will continue to do so barring any disasters. However, a 25bps hike would just bring interest rate back to pre-Brexit referendum level. BoE will very likely stop there afterwards, until the Brexit picture becomes clearer.

ECB account showed discussion on policy adjustment started

The account of ECB's September 6-7 monetary policy meeting showed that policymakers kicked start the discussion on adjustment of policies after the current asset purchase program ends in December. And, "a view was put forward that conditions were increasingly falling into place that would allow the intensity of monetary policy accommodation to be adapted and would provide an opportunity to scale back the Eurosystem's net asset purchases."

The account also noted that there were discussions on "general trade-offs inherent in various scenarios for the future recalibration of the APP and, in particular, the choice between the pace and the intended duration." It added that,  "the benefits from a longer intended purchase horizon, combined with a greater reduction in the pace, were compared with those from a shorter period of purchases and larger monthly volume."

Still, the account emphasized that "any reassessment of the monetary policy stance should proceed in a very gradual and cautious manner, while maintaining sufficient flexibility." And there was "broad agreement" among ECB officials that substantial accommodation is still needed. Also, "discomfort was widely expressed about the very prolonged period over which inflation had been -- and was still expected to remain -- distant from the Governing Council's aim."

Released from Eurozone, retail PMI rose to 52.3 in September. Also from Europe, Swiss CPI climbed to 0.7% yoy in September.

Dollar firm but lacks decisive momentum

Dollar is trading generally firm, except versus Yen. But there is still no follow through buying in the greenback yet. Traders seem to be holding their bets ahead of non-farm payroll report tomorrow. In addition, the lack of decision from US President Donald Trump on the next Fed chair could be rather unsettling. adding to that, there is no more news regarding Trump's tax plan, which he targets to get through Congress by the end of the year. Release from US, initial jobless claims dropped 12K to 260K in the week ended September 30. Trade deficit narrowed to USD -42.4B in August. Canada trade deficit widened to USD -3.4B.

Yen rebounding, looking forward to Oct 22 election

Yen is picking up momentum for a more sustainable rebound as traders are starting to turn cautious. And, volatility in Japanese financial markets is set to intensify as the snap election for the parliament (Lower House), scheduled on October 22, approaches. Our base case is that PM Shinzo Abe's LDP would remain the biggest party. He would continue to be the leader of the LDP/Komeito coalition in the new term. However, the rapid rise of the new party Kibo no To (Party of Hope), led by Tokyo Governor Yuriko Koike, might result in a decrease in number of seats for LDP. This, together with the decline in Abe's approval rating, has created much uncertainty in the upcoming election. More in Japan's Snap Election And The Impacts On Policies.

Aussie lower after worse retail sales contraction in four years

Australian Dollar trades mildly lower today after disappointing retail sales, that contracted -0.6% mom in August, much worse than expectation of 0.3% mom rise. That's also the steepest decline in more than four years. Also, the contraction is broad-based, as sales dropped in every state and territory across the country. The sluggish sales is seen partly a result of poor wage growth in the job market, and partly due to high household debt level. Also from Australia, trade surplus widened to AUD 0.99B in August, above expectation of AUD 0.87B. Exports grew 1% to AUD 32.2B while imports were flat at AUD 31.2B. The trade data was somewhat also consistent with retail sales, suggesting weak domestic demand growth. That's seen as one of the major reasons for RBA to stand pat while global central banks are exiting stimulus.

Staying in Australia, former RBA board member John Edwards warned that "very low interest rates at a time of firm economic expansion invite trouble." And, there is "too great a risk that the price of assets like houses and shares may get too far out of whack with what prove to be sustainable levels." Then he pointed to Australia 10 year bond year at around 2.6%, 1.1% above the cash rate. The long-term average premium sits at 0.8%. So, "there is perhaps some allowance for a rise in the cash rate over the ten years of the bond, but not much."

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3218; (P) 1.3254; (R1) 1.3285; More....

GBP/USD's fall extends to as low as 1.3133 so far. Intraday bias remains on the downside for 61.8% retracement of 1.2773 to 1.3651 at 1.3108. Firm break there will target a test on 1.2773 key support it's still early to call for trend reversal as it's staying well inside medium term channel. But a break of the channel support (1.2942) will build up the chance of the bearish case. On the upside, above 1.3221 minor support will turn intraday bias neutral first.

In the bigger picture, current development argues that the long term trend in GBP/USD has reversed. That is, a key bottom was formed back in 1.1946 on bullish convergence condition in monthly MACD. Current rise from 1.1946 will target 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466 next. In any case, medium term outlook will now stay bullish as long as 1.2773 support holds.

Economic Indicators Update

The cross slumped in Europe on Thursday and hit three week low near 148.00 handle, as rising political concerns over PM May's position hit pound across the board.

Bears are looking for target at 147.67 (Fibo 38.2% of 139.30/152.85 rally) and could move further down on extension of current third wave of five-wave sequence from 152.85, towards its FE 138.2% at 147.03.

Meanwhile, bears may take a breather ahead of 147.67 target as near-term studies are oversold.

Broken 20SMA now acts as good resistance at 149.17 and should ideally cap corrective rallies.

Res: 148.70; 149.17; 149.45; 150.00
Sup: 148.00; 147.67; 146.51; 147.03

• Are we on course for a perfect week for US indices?
• GBP lower on speculation over Theresa May's position;
• Four Fed policy makers scheduled to speak;
• ECB minutes get muted response.

US futures are indicating a slightly higher open on Wall Street on Thursday, as indices target a fourth consecutive record close this week.

Sterling is coming under pressure again this morning following speculation that Theresa May's position is increfasingly under threat following yesterday's shambolic speech at the Conservative party conference. A change of leadership so soon after the election and just as Brexit talks appear to be making some progress may seem like a ludicrous idea but a leadership challenge has been brewing since the disastrous election campaign and yesterday was just the icing on the cake.

It seems more a matter of when rather than if a challenge will come. You get the feeling that those below her gunning for her job are simply biding their time, waiting for the opportune moment rather than fully throwing their support behind her. Naturally, all of this uncertainty is not good for the pound, especially as a change of leadership will likely alter the direction of the Brexit negotiations which have already progressed at a much slower pace than hoped.

The pound will likely remain in focus today, with speeches from Bank of England policy makers Ian McCafferty and Andy Haldane still to come. While McCafferty is a known hawk and already in favour of raising interest rates, Haldane has previously sided with the majority but has shown a willingness to jump ship. Should he indicate today that he's tempted to do so at the November or December meetings, we could see the pound rally once again.

We'll also hear from four Federal Reserve policy makers throughout the course of the day, including one of the leading candidates for the Fed Chair post, Jerome Powell. With the Fed having indicated at the last meeting that it still intends to raise interest rates again this year, it will be interesting to hear whether the data since then has changed this view or whether the same still applies. Jobless claims, trade data and factory orders make up today's economic releases, although traders will be more focused on tomorrow's jobs report.

The ECB minutes from the last meeting received a somewhat muted response in the markets. The minutes effectively reiterated points already made in the statement and during Mario Draghi's press conference, including how they will manage the QE programme beyond the end of the year – albeit without any indication of what the preferred method is – and a reference to the difficulty that the FX rate poses. The lack of a reaction is unsurprising as the minutes were quite clearly carefully worded to generate such a response and leave little to be interpreted, or more importantly, misinterpreted.