In yesterday’s note we did suggest that a deterioration in the geopolitical backdrop could see things turn a little bit ugly, and it would appear that reports of a build up of Russian troops on Ukraine’s eastern border in the afternoon session yesterday was the catalyst to tip European markets sharply lower, only this time we also saw US markets turn lower as well, and today’s market action looks set to pick up where yesterday left off with a lower open for Europe this morning. The German DAX fell on its backside hitting its lowest levels since last October to be down over 6% on the year to date. Last night’s decline also saw the S&P500 give all its gains for the year, though the damage so far hasn’t been anywhere near as bad, which suggests that the S&P may have some catching up to do on the downside. With S&P margin debt at its highest levels since 2007 the question in the event of any further falls is likely to be what individual investors pain thresholds are, with the key support on the S&P at 1,815. Concerns about China are also likely to continue to resonate, particularly given yesterday’s comments from Chinese Premier Li Keqiang that future defaults on bonds and other financial products were “unavoidable”, suggesting the potential for a domino of defaults, whose effects could ripple out across the globe, and in the process drive growth expectations for 2014 lower. One thing is for sure traders would be foolish to make the mistake they made two weeks ago and go home long into the weekend, particularly with the situation on the ground in Ukraine so potentially fluid, and the Crimea referendum vote due on Sunday. With economic data fairly light on the ground today it seems likely that market attention will be focussed on events in Russia and Ukraine, while the final German inflation data for February is likely to be a sideshow. Final annualised CPI data is expected to be confirmed at 1%, while the latest UK trade balance numbers are expected to show that the January trade balance has widened to -£8.6bn, and the total trade balance to -£2.2bn. Yesterday’s US data was a bit of a mixed bag with jobless claims continuing to improve, but retail sales where somewhat mixed with February slightly better than expected at 0.3%, but the sharp downward revision to January’s numbers from -0.4% to -0.6%, keeps US Q1 GDP expectations on the lower side of expectations. Today’s PPI data for February is likely to remain steady at 1.2% EURUSD – the euro stalled out at 1.3970 yesterday before retreating sharply as the US dollar bounced back. The 1.4000 level remains a key psychological barrier, while a move back below 1.3810, could well retarget a move back towards trend line support at 1.3745, from the February lows. GBPUSD – yesterday’s failure at 1.6720 has seen the pound drift back towards the 1.6600 level A concerted break below 1.6570 could well see further losses towards 1.6480 and even 1.6300. We need to get back above the highs last month at 1.6820 to suggest a stronger move towards 1.7000. Only a close above 1.7000 could have huge significance in the coming weeks for the future direction of the pound. EURGBP – this week’s break above 0.8350 to the highest levels this year could well be the first sign of a potential double bottom reversal and a move towards the 200 day MA at 0.8430. Support now comes in around the 0.8270/80 area. USDJPY – yesterday’s fall has brought us back towards the March lows around the 101.40 area, and trend line support from the February lows at 100.75. A move back above 103.30 retargets the 104.00 level. CMC Markets is an execution only 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.