A third successive day of losses on US markets yesterday appears to confirm the prognosis that with markets near multi year highs prudent investors appear to be availing themselves of the opportunity to lock in some gains ahead of this week’s key data announcements from the other side of the Atlantic, though we could well see a slight rebound into the European open this morning. Some of the recent resilience shown in US data has shifted the odds towards a probability that we might see a token indication from the Fed that a paring back of asset purchases may come sooner rather than later. This is certainly being reflected in the bond market with 10 year yields approaching 2.8%. While a December taper remains very much an outlier, any cautious portfolio manager would be remarkably imprudent if they didn’t lock in some gains in a month where liquidity traditionally starts to slip back the nearer we get to Christmas. We will get an early indication into how the US employment market is performing this afternoon with the release of the November ADP employment report. This particular report gave markets a false steer in regard to the official BLS October report when it showed a disappointing 130k, well below expectations, so its reliability as a leading indicator for Friday’s numbers should be taken with a significant degree of caution. Be that as it may, a good or bad number here will provoke a reaction in the US dollar, as well as the bond markets Expectations are for a number around 170k, which will certainly be enough for taper tension to be maintained. Other data due for release today includes the October trade balance numbers which is expected to show a $40bn deficit and services ISM for November which is expected to decline slightly to 55, from 55.4. Later on in the evening the latest Fed Beige Book survey is expected to give clues as to economic activity in the various Fed regions. Before all of that in Europe we have the small matter of a host of services PMI data from Germany, France, Italy and Spain to follow up on Monday’s manufacturing PMI data. Monday’s data was notable for an out-performance from Germany and Italy, while France continues to give grave cause for concern it is slipping back into recession, while Spain suffered a bit of a setback. Markets will be particularly focussing on France, given its role as second biggest economy and its continued economic divergence away from Germany’s economic performance. Expectations are fairly low with a final services PMI reading of 48.8, while Spain will be hoping Monday’s disappointing manufacturing number doesn’t translate into a similarly disappointing services performance for November. Expectations are for a reading of 50.7. Germany is expected to post a November reading of 54.4 and Italy a reading of 50.4. We are also expected to see a revision of Q3 EU GDP which is expected to come in unchanged at 0.1%, while retail sales for October are expected to rise 0.1%, up from the 0.6% decline seen in September. There is potential for a negative surprise here given last weeks surprise decline in the German number for the same month. Finally, the UK economy continues to go great guns with yesterday’s construction PMI blowing away expectations with a block busting 62.6 reading. If today’s services PMI posts a similarly positive number then we could be well on the way to seeing Q4 outperform the Q3 GDP number of 0.8%. Given that last month the services sector posted the best reading for over 6 years expectations are starting to run riot a little. Estimates for the November number are for a slight decline from 62.5 to 62, but even if we do miss slightly it will still mean that services has posted a number above 60 for five months in a row. At this rate we could see 7% unemployment sometime next year, which should make the forward guidance discussion a lot more interesting at tomorrow’s Bank of England rate meeting. EURUSD – the euro continues to remain resilient but until we get above the 1.3650 level the risk remains for a pullback towards the 1.3480 area. Any pullbacks need to stay above the 1.3480 area for the current positive momentum to continue and a potential test of long term trend line from the all-time highs at 1.6040 which comes in at 1.3940. Only a break below the 1.3480 level would then argue for a move to the lows last week at 1.3400, and then below that 1.3300. GBPUSD – the pound appears to be marking time between the highs this week at 1.6445 and the lows at 1.6340 this week. As long as any pullbacks stay above broader break out support at 1.6250, then momentum should remain positive for a move towards 1.6520. Pivot support remains at 1.6110, a break of which argues for a move back to the multi week support at 1.5880/90. EURGBP – the market does appear to be struggling near to the lows at 0.8250, and needs to overcome the 0.8320 level to argue for a squeeze back to 0.8370. This weeks break low does argue for further losses towards 0.8170 the 61.8% Fibonacci level of the 0.7750/0.8820 up move. Only back above the highs last week near the 0.8400 level would suggest the risk of a larger squeeze higher. USDJPY – the highs this year at 103.75 remain the principal objective, and main obstacle to a move to 105.00. Any pullbacks could well find support at the 100.60 level, and if we were to break below the 99.20 level we could see a deeper fall towards 98.50. 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. 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