After five successive days of declines, European stock markets enjoyed a modest rebound yesterday on the back of a stabilisation in commodity prices and some significant M&A activity, ahead of the culmination of today’s FOMC rate meeting. This rebound looks set to spill over into today’s European open as wary investors start to put money back into the market on the back of some better than expected company reports, as well as a stabilisation in Chinese markets, and strive to finish the month of July in positive territory. It is perhaps not surprising that we found ourselves on the end of a bout of US dollar weakness against commodity prices yesterday, given that we will get to see the results of two days deliberation from Fed officials later this evening, with respect to the committee’s views on the strength of the US economy. It is no secret that a number of Fed officials are itching to start nudging rates higher sooner rather than later, unfortunately once the first turn of the rate dial happens, markets always look towards when the next turn might happen, and with the strength of the US dollar still acting as a brake on some company’s foreign earnings, Fed officials will be keen not to start a bandwagon they can’t control. Over the past few weeks we’ve seen housing data show some level of improvement, yet data yesterday showed that US home ownership fell to its lowest levels since the 1960’s at 63.4%. Manufacturing also appears worryingly subdued, despite a robust labour market. The US consumer also seems rather reticent about spending any spare cash if durable goods and retail sales numbers are any guide. Inflation still remains a concern, or rather the lack of it, particularly in the context of the slump in commodity prices in the last 12 months, while wages growth also remains sluggish. It therefore seems highly unlikely that the Fed will commit itself one way or the other in its statement this evening, in order to give themselves plenty of wriggle room between now and the September meeting. The fact is under their own corrected forecasts, growth this year is expected to come in at 1.6%, while inflation is expected to remain below the Fed’s 2% target until 2020. Furthermore despite recent improvements in the labour market, the same forecasts appear to suggest that there is still quite a bit of slack in the labour market, something that Janet Yellen admitted to Congress earlier this month. That won’t stop the dissection of the statement between both hawks and doves as both sides seize on the various paragraphs to support their view. A lot can happen, not only data wise between now and then, but there also remains a great deal of uncertainty between now and then with respect to the China growth story, as well as a successful outcome to what is currently going in Greece. With Greece talks already delayed by a week it is highly unlikely that we will see a third bailout agreement concluded in time for the August 20th ECB payment date, which will inevitably mean that the subject of further prior actions, and bridging finance are likely to be argued over between now and then. EURUSD – the move through 1.1050 and trend line resistance from the highs at 1.1435 increases the prospect of a move back through the highs this month at 1.1215, and a return to the June highs, but we need to stay above 1.1000 initially. A move through 1.0970 targets the 1.0800 level and trend line support from the lows this year at 1.0460. GBPUSD – still in a range below the highs of the last two weeks at 1.5675. Support remains down at 1.5470 as well as the 200 day MA at 1.5410. While we remain above the 200 day MA at 1.5410 the prospect of further gains remains intact and only a move below 1.5400 would argue for a move towards the 1.5200 level. A move above the highs of the last two weeks at 1.5675, would retarget the 1.5820 level. EURGBP – this week’s break above the 0.7120 level could well see a move towards the 0.7220 level and the highs this month. The recent gains of the last few days could suggest that a short term base is in, but we need to hold above 0.7050 for this to unfold having pushed below 0.7120 yesterday. USDJPY – yesterday’s rebound saw us pull back from the 123.80 level. A move back through here is needed to suggest a return to the 124.50 level. Support currently comes in at 123.00 for now, while below that we could see a move towards 122.50. 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.