After the Friday plunge we got the Monday bounce back as equity markets recovered their poise yesterday in the wake of an unexpectedly larger than expected reduction in China’s bank’s reserve requirements ratio, from 19.5% to 18.5%. Even so the extent of yesterday’s rebound came nowhere near reversing the falls that we saw on Friday, let alone last week, where we saw the biggest falls in European markets this year. This begs the question as to whether the next move will be a move back to the recent highs, or whether the falls seen last week are the beginning of a long overdue correction after some impressive gains so far this year. While European markets enjoyed a broadly positive session Greek markets continued to be roiled by the uncertainty about the direction of travel with respect to the talks between Greece and its creditors, with ECB President Mario Draghi insisting that while a Greece default was not wanted, the ECB stood ready to act if the Greek crisis worsened. If bond markets are any guide, investors are steering well clear with 3 year bond yields hitting their highest levels since the last restructuring in 2012, above 28%, and 10 year yields at 2 year highs above 13%, as the value of Greek bonds continues to plunge. This pressure on Greece also manifested itself by reports that the Greek government issued a decree for all local government entities to transfer their cash reserves to the Central Bank due to “unforeseen needs”. With no agreement likely at this week’s finance ministers meeting in Riga on Friday attention appears to be shifting into May when Greece needs to make payments to the IMF on the 1st and 12th May. US markets also got a boost from better than expected earnings numbers from Morgan Stanley, but the strong US dollar continues to remain a concern, particularly in the context of companies with a significant export capability. IBM’s numbers after the closing bell bore this out with revenues declining in Europe, Middle East and Africa, by 19% and sales declining 18% in Asia. Today’s European open is set to be a slightly mixed one with the only data of note being the latest German ZEW survey of investor expectations. This fell short last month and given the lacklustre performance of the DAX last week the potential for disappointment cannot be ruled out. A slight improvement is expected to 55.6 from 54.8, but this indicator is very fickle and the German IFO business survey, which is due on Friday is likely to be a better indicator, as to how the German economy is doing. EURUSD – we’ve seen the euro slip back after last week’s peak at 1.0850, and are currently holding above the 1.0700 level. If we slip below 1.0700 we could well revisit the 1.0500 level, but while above 1.0700 the risk remains for a move back towards the highs last week and the potential for a move towards 1.1000. GBPUSD – last week’s rebound could well a reversal in recent sterling weakness, with a bullish weekly reversal candle. The main resistance remains at the 1.5000 level and the 50 day MA, while the current pullback is currently finding support at the 1.4880 level. A fall below 1.4880 retargets 1.4780. EURGBP – currently finding it difficult to move above the 0.7235 area, which means we remain susceptible to a pull back to the lows last week at the 0.7150 level. A break above the 0.7235 area, retargets the 0.7280 area, with 0.7385 the main resistance level. USDJPY – while below the 119.70 level the bias remains for a return towards the March lows at 118.30. A move below 118.30 retargets the 116.50 level. We need to push back above the 120.70 level to retarget the highs at 122.00. 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.