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Contrary to expectations, the Pound did move horizontally for long but instead tried to break through the weekly R1 at 1.3077. A reaction from release of information on the US ISM Non-Manufacturing PMI was barely enough to neutralize this attempt. In result, today the pair remains squeezed between the weekly R2 from the top and the weekly R1 from the bottom. From a technical perspective, the southern direction contains other various barriers, such as the approaching 55- and 100-hour SMAs. In this sense, the further surge is a more likely scenario. On the other hand, slightly above the 1.3070 level the pair is likely to encounter the upper line of a dominant descending channel, which might turn around the pair and in this way finally confirm its existence.

As it was expected, a pressure from a combination of the 55-, 100- and 200-hour SMAs neutralized any further attempts of the currency pair to slip to the bottom. The exchange rate even managed to from a junior ascending channel and bypass the weekly PP at 1.1918, fluctuating within it. Today will be the next day for the Euro due to announcement of the EU Minimum Bid Rate and the subsequent ECB press conference. Usually, this event leads to very strong traders’ reaction on it. In this context, the pair is expected to make a substantial advance today. Given a reaction to Draghi speech at the Jackson Hole Symposium two weeks ago, the Euro should appreciate today as well. The same direction is also seen from hourly and daily chart perspectives.

Data release on Wednesday showed that the US non-manufacturing activity accelerated over the course of August. Following the report, the EUR/USD marked high volatility, albeit the European single currency gained only 5 pips or 0.04% against the US Dollar to the 1.1930 mark and failed to sustain the position until the Thursday morning session.

The Institute for Supply Management reported that its PMI for the US non-manufacturing sector posted weaker-than-expected increase to 55.3 in August, following the prior month’s figure of 53.9. An expansion was fuelled by strong increase in new orders and employment, suggesting the weaker job growth registered last month was temporary. Data indicated the US economy is set to gather momentum early in the Q3.

Wednesday reports on the trade balance of two North American countries did not have any impact on USD/CAD. Some hours later the Bank of Canada announced its interest rate decision causing a solid drop in the currency pair, where the Greenback fell initially against the Loonie by 206 base points or 1.69% to be seen trading in the 1.22 area.

Statistics Canada reported that the country’s trade balance narrowed more than anticipated to 3.0B over the course of July. Data were released late to affect the BoC rate address, though it raised the Overnight Rate unexpectedly to 1.00% from 0.75%. The Central Bank stated that the next moves would be driven by future economic data and developments in financial markets.

The pair closed positively on Wednesday after sharp fall on Tuesday, as daily cloud twist continues to attract, but limited upside attempts seen so far. Firm bearish setup of daily studies keeps the downside at risk as Tuesday's long bearish daily candle continues to weigh. We need to see firm break below 108.60 support zone for extension of larger bears towards key support at 108.11 (2017 low). Upside attempts should stay capped at 109.45/65 zone (daily Tenkan-sen/Kijun-sen in bearish configuration/converged 10/20SMA's) in order to keep bears intact.

Res: 109.46, 109.55, 109.65, 109.79
Sup: 108.88, 108.60, 108.26, 108.11

Cable is remains firm following strong rally on Tuesday but struggling to break above key barriers, daily cloud top and Fibo 61.8% of 1.3268/1.2773 descend at 1.3080 zone.

Yesterday's action peaked at 1.3081 but failed to sustain gains, leaving daily candle with long upper shadow and failing to close above daily cloud.

Close above cloud top/Fibo barrier is needed to strengthen existing bulls for further extension of bull-leg from 1.2773 (24 Aug trough).

The pair may show further hesitation at 1.3080 zone pivots, with supports at 1.3020/00 zone expected to hold and keep bulls in play.

UK housing data showed upbeat results in August which would be supportive for pound.

Res: 1.3060, 1.3081, 1.3100, 1.3151
Sup: 1.3020, 1.3000, 1.2967, 1.2957

The Euro maintained slight bullish tone in recent session, posting series of marginally higher highs and higher lows, underpinned by rising 10SMA but the action stayed capped by daily Tenkan-sen. Daily studies are bullish and favor further upside, with markets awaiting today's ECB policy meeting and comments from President Draghi for stronger signals. The ECB is expected to start laying groundwork for start of winding down stimulus program, but Draghi would likely hold off any major commitment in order not to trigger stronger volatility in the market. The central bank is facing a dilemma whether to extend bond-buying program or to start reducing it as economic growth in EU is the strongest in past ten years but inflation remains stubbornly low and holding well below central bank's target. Likely scenario is for Draghi to give initial signals of the future steps regarding QE program and leave stronger action for central bank's meetings in October and December. The Euro is expected to receive support if Draghi's comments today hint action regarding QE program tapering. The pair may probe above 1.2000 and retest recent peak at 1.2070 on bullish signal, with stronger acceleration higher to signal resumption of larger uptrend from 2017 low at 1.0340 towards next target at 1.2166. If Draghi disappoints markets today, the Euro may fall through pivots at 1.1866 (Kijun-sen) and 1.1822 (31 Aug trough) and risk test of daily cloud top at 1.1695.

Res: 1.1950, 1.1979, 1.2000, 1.2070
Sup: 1.1914, 1.1866, 1.1822, 1.1773

Currency traders were in action yesterday, with a couple of unanticipated events causing some wild swings in FX markets. The first was the resignation of the Fed vice-chairman Stanley Fischer, who is considered to be one of the hawks of the Federal Reserve. His departure leaves four of the seven Board of Governors' seats vacant, and it is up to President Trump to nominate new governors who will be supportive of his economic agenda. The news sent USDJPY lower, testing 108.44, but the move didn't last long and was interrupted by Trump's agreement with the Democrats to extend the debt ceiling for three months. Despite the short-term extension upsetting his GOP party, the news was welcomed by the equity markets and the U.S. dollar found some support. Another surprise came from Bank of Canada, as it raised interest rates by another 25 basis points for the second meeting in a row. The unexpected hike sent USDCAD tumbling 270 pips, before settling around 1.22. Although the inflation rate remained below target, the BoC justified the move by presenting stronger than expected economic data and robust consumer spending, supported by continued solid employment and income growth. The BoC's decision brings into even sharper focus today's European Central Bank meeting, which is the main event of the week.

The crucial question facing the ECB is whether Mario Draghi will announce the date of cutting bond purchases. The decision to taper asset purchases was widely expected to occur in today's meeting, after Mr. Draghi hinted on 20 July that the discussion on tapering assets should take place in Autumn. Since then, the Euro has appreciated by more than 4.8% against the dollar, but declined slightly after peaking at 1.2069.

Technically, the Autumn season starts towards the end of September, so even if Mr. Draghi decided to delay the announcement of tapering the asset purchase program, this wouldn't affect his credibility.

However, the day of the announcement isn't the only key driver of the Euro's direction; it's the game plan going forward.

The rising Euro will undoubtedly have a negative impact on the economy through slowing inflation and possibly economic growth, as a higher currency might drag exports from the eurozone, and drive the cost of imported goods lower. This is why ECB's forecast of GDP and CPI should be monitored carefully.

Germany's Finance Minister, Wolfgang Schauble, requested that the ECB end its bond buying program and negative interest rates at a banking conference in Germany yesterday. These remarks are not new to Mr. Schauble, who has consistently criticized the ECB's easy monetary policy, however these have never impacted the central bank's plans.

Investors are convinced that the ECB will begin tapering QE, and it's all about the announcement date and size of the cuts. If the ECB decided to surprise and cut asset purchases by 10-20 billion euros starting January, the Euro will likely revisit the 1.20 level and possibly break above August highs. Postponing the decision will only have a short-term negative impact, and I believe this will create another opportunity to buy the dips towards 1.17-1.18 levels.

USDJPY (109.08): The USDJPY managed to post some gains yesterday as price action continues to consolidate near the major support zone of 109.15 - 108.26. A follow through from here is required in order for the US dollar to post some recovery. On the 4-hour chart, despite price briefly breaking past the falling trend line, the reversal at 108.45 suggests a possible double bottom pattern. USDJPY will need to continue to push higher in order to break above the resistance level of 110.72 to validate this double bottom pattern.

GBPUSD (1.3048): The British pound was seen trading near the 1.3033 resistance level yesterday. Price action briefly posted a 23-day high as GBPUSD traded at 1.3059 before easing back. In the short term, price action at the resistance level of 1.3052 - 1.3033 could potentially post a reversal. This will push GBPUSD down to 1.2908 support in the short term. However, with the daily chart suggesting a potential head and shoulders pattern evolving, further downside could send GBPUSD lower towards 1.2829 support where the possible neckline support could be coming into focus. Alternately, a close above 1.3052 could see further gains coming in the currency pair.