Quiet Before The Storm, ECB Meeting Tonight

Quiet trade overnight with the market cautious ahead of major risk events over the next 48 hours. The ECB and the BOE meet tonight and both could cause large movements with some speculation that the BOE will increase QE and that the ECB might announce new bond buying details. Economic data was good from the US overnight with Services PMI increasing to 55.1 vs. 53.7 previously. Looking ahead, FOMC Minutes released. August Factory Orders forecast at -5.8% vs. 2.8% previously.

The Euro (EUR)
An extremely contained day of trading for the usually very volatile EUR/USD pair. The major stayed in a 60 pip range and closed at 1.2910 5 pips from where it opened. Traders have been sidelined waiting for ECB today where they are expected to hold but traders are interested in the press conference afterwards with ECB President Draghi.

The Sterling (GBP)
The GBP/USD was on the back foot with some analysts suggesting the BOE will move to increase the Asset Purchase Program. GBP/USD broke 1.6100 and is threatening to slide further to 1.6000. The run of bad survey data this week is adding to the gloom with September Services PMI falling to 52.2 vs. 53.7 previously. Looking ahead, BOE forecast to hold at 0.5% and keep the asset purchase program at 375bn. Also, ECB forecast to hold rates at 0.75% and hold Press Conference afterwards.

The Japanese Yen (JPY)
USD/JPY is grinding higher as the US Services PMI beat estimates and EUR/JPY is getting fresh support. The USD/JPY move higher is surprising given the USD strength lately. Traders note the BOJ meeting on Friday could produce more dramatic loosening like last month but most see November as the next point the BOJ will move.

Australian Dollar (AUD)
The AUD/USD selloff continued but support was found at 1.0200 and we spent most of the day at the level. August Trade Balance blew out to a -2bn deficit vs. -700mn forecast. Support is seen at 1.0165 the low from September. UPDATE: August Retail Sales forecast at 0.2% vs. -0.8% previously.

Oil and Gold (XAU)
Gold is edging higher and higher testing the resistance above $1780. Weak Nonfarm Jobs on Friday will help XAU/USD test the critical $1800. Oil was a big mover overnight falling sharply $3 to $88 a barrel as a US report showed the Crude Oil output increased to 15 year highs whilst fuel consumption dropped.

Pairs To Watch
EUR/USD: ECB to spark movement?

AUD/USD: To test 1.0165 Key Support?

TECHNICAL COMMENTARY