After two successive weeks of sizeable losses for equity markets this month last week’s rebound was welcome, led primarily by US markets, with Europe a laggard.

It’s been slightly different this week with a disappointing performance across the board, with some fairly strong moves in both directions, as investors search for direction after last week’s decent rebound.

European markets had a disappointing session yesterday, while US markets rallied modestly before giving up a good chunk of those gains heading into the close.

That we haven’t seen any sort of follow through from last week’s gains should be a bit of a worry and probably speaks to a wider concern that the current down move in stocks may not be quite over.

Investors appear to be wrestling on the horns of a dilemma in the wake of this weeks Fed minutes which suggested that the prospect of four Fed rate rises this year might not be outside the realms of possibility, despite FOMC member and St. Louis Fed President James Bullard’s warnings about being too aggressive on the hiking cycle yesterday.

Will the prospect of rising interest rates and more importantly a move beyond the 3% level and the 2013 highs on the US 10 year mark a shift in sentiment, as concerns that rising wages and prices, may start to eat into company profit margins, and prompt a more critical eye on which companies can absorb higher costs and those that can’t.

Yesterday’s decline in US yields from a four year high of 2.95% may help explain why US markets were able to rally yesterday, and pull the US dollar lower, but the inability of US stocks to close anywhere near the highs of the day only serves to highlight the lack of conviction buyers in the market, as well as some significant indecision, quite a contrast to the complacency of January.

The pound was able to shrug off what was a disappointing set of Q4 GDP numbers as economic output was downgraded to 0.4% from 0.5%.

The euro managed to rebound against the US dollar despite a weaker than expected German IFO report for February, with the latest ECB minutes showing that some members wanted to drop the easing bias on the asset purchase program and shift to a much more neutral stance, helping pull the currency off its lows of the day.

Today’s final EU CPI numbers aren’t expected to alter that shift despite the fact that the central bank remains well short of its inflation target of 2%, with the final January number expected to be confirmed at 1.3%, with core prices at 1%.

EURUSD – still seems to be finding progress beyond the 1.2530 area difficult to sustain, however pullbacks continue to find support just above the 1.2200 area, with a bigger area of support at 1.2160. A break of this sideways consolidation is likely to give a decent indicator of the next move, with a slight bias towards the downside after last Friday’s key day reversal.

GBPUSD – has so far been unable to move beyond last week’s peak of 1.4145 but for now support at the 1.3750 area is holding. A break of that and the 50 day MA could prompt a move back to the 1.3660 area which prompted the recent move higher.

EURGBP – still has significant resistance above the 0.8910 area and while below this peak the risk is for a move back to the recent lows at 0.8800. While below the highs for this year the bias remains for a return to the lower end of the recent range at 0.8740.

USDJPY – having hit a low of 105.54 this week the dollar has rebounded with the 105.00 area being the initial primary support area. The current rebound needs to get back above the 2017 lows at 107.30 to stabilise and signal a more positive story with a move back towards 108.00. Below the 105.00 are targets the 100.00 level.

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