Despite a sharp slide at the end of last week, US markets recouped most of their Friday losses as once again investors tried to make sense of where the next major move is likely to come from, against a backdrop of continued mixed economic data and a Federal Reserve that continues to keep the markets guessing. Last week’s speech by Fed chair Janet Yellen at Jackson Hole was construed in a fairly hawkish fashion by the markets if the reaction of the US dollar was any guide, while the probability of a move in September moved up ever so slightly from 30% to 36%. The reality is that she didn’t tell us anything new that we didn’t know already. The line continues to be of an improving economy and data dependence. The Federal Reserve wants to keep markets guessing as to its intentions as to whether it will hike rates in any of the upcoming meetings between now and the end of the year, and recent comments from Fed policymakers appeared designed to just such a prospect in mind. This of course places even more importance on this week’s US employment report for August, which will now be the next most important employment report this year. Fed vice chairman Stanley Fischer has already indicated that this week’s number will be a key indicator, but the jobs numbers have been strong for a few months now, despite the weak number we got in May. Ultimately the August jobs number isn’t likely to make that much difference to the Fed’s deliberations, it is the benign inflation numbers that appear to be the cause of most concern along with weak productivity which currently appears to show no signs of picking up, and in fact continues to slide. Yesterday’s personal spending numbers for July were fairly positive, however manufacturing data continues to be a weak spot for the US economy, and this was reflected by another weak regional number from the Dallas Fed. It’s also set to be an important week for the UK economy in the wake of recent positive economic data on unemployment and retail sales, as we get the latest PMI numbers for August from the manufacturing and construction sector. Both of these surveys fell off a cliff in July weakening sharply into contractionary territory in the aftermath of the June Brexit vote. Now that the dust has settled somewhat we may get to see whether these slumps were a kneejerk reaction which now hopefully has given way to a more measured response in the same way that the UK consumer has reacted. There currently appears to be a divergence between business confidence and consumer confidence, with consumer confidence much more resilient. EURUSD – having fallen back below the 1.1240/50 level we look set to slip back towards 1.1120. While above 1.1120 the risk remains for a return towards 1.1400 and the June highs. Below 1.1120 retargets the low 1.1000’s. GBPUSD – having failed just below 1.3300 last week we’ve slipped back but as long as we stay above 1.3020 then the risk remains for a return towards last week’s high. Below 1.3000 retargets the lows at 1.2800. We need to push through 1.3300 and trend line resistance there to target 1.3500. EURGBP – still looks toppy despite finding support at the 0.8490 area, with only a break below targeting 0.8400. A move back through 0.8620 is needed to retarget the highs just above the 0.8700 area. USDJPY – recovered back through 101.30 and could well head back towards 103.50, but still remains vulnerable to a retest of the lows around the 99.50 area. The bias remains for a move towards the recent lows at 98.95, and potentially lower towards 95.00, and levels last seen in June 2013. CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.