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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

Cable is taking a breather after three-day bearish acceleration faced strong headwinds on approach to strong supports at 1.3223/14 (rising 30SMA/Fibo 50% of 1.2773/1.3655 ascend.

Consolidation above Tuesday's low at 1.3221 was so far limited by thick hourly cloud (spanned between 1.3278 and 1.3327) which weighs on near-term action and expected to keep the upside protected.

Selling upticks remains favored for renewed attack at 30SMA/Fibo 50% supports, break of which would trigger bearish acceleration towards 1.3124/10 (rising 55SMA/Fibo 61.8% of 1.2773/1.3655).

Conversely, lift above daily Tenkan-sen (1.3408) would neutralize bears and shift focus higher.

UK's Services PMI data for September are in focus today. Forecast shows unchanged value at 53.2 from August, with scenario of PMI falling below forecast (like on Tuesday's Construction PMI miss) would put pound under increased pressure.

Res: 1.3287, 1.3327, 1.3367, 1.3408
Sup: 1.3223, 1.3214, 1.3148, 1.3124

The Euro is higher in early Wednesday's trading after Tuesday's probe through strong supports at 1.1720/10 (Fibo 38.2% of 1.1118/1.2092 rally/weekly 200SMA) failed to close below. Long-legged daily candle on Tuesday signaled indecision at key supports which also limited downside attempts last week. The pair is expected to hold within narrow consolidation before renewed attempts lower. Bearish setup on daily chart supports scenario with formation of 10/55SMA and 20/30SMA bear-crosses on Tuesday seen as bearish signal. The Euro showed little reaction to Catalonia's leader's plan to declare independence in Asian trading on Wednesday, but may come under increased pressure if tensions rise. Falling 10SMA/4-hr cloud base offer initial resistance at 1.1810 which is expected to ideally cap recovery action, guarding more significant daily cloud top/Tenkan-sen at 1.1850. EU Services PMI and Retail Sales are key events in the European session for the single currency. Services PMI is expected to stay unchanged at 55.6 in September. Retail Sales are forecasted to rise by 0.3% in August after falling by 0.3% in July, while annualized number is expected to stay unchanged at 2.6%.

Res: 1.1780, 1.1810, 1.1850, 1.1883
Sup: 1.1720, 1.1710, 1.1696, 1.1662

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.