Given that the DAX made record highs yesterday and both the S&P500 and Dow did the same you would have thought that it would take more than some cautious comments from billionaire investor Carl Icahn to cause a bit of a pullback, given the current levels of exuberance, as investors continue to look on stocks as a one way stimulus dependent bet. Nothing he said was particularly surprising as a lot of people have been thinking the same thing about these moves higher, but it did prompt some profit taking above the psychologically important 1,800 level on the S&P, and 16,000 on the Dow. It is getting to the point that investors care less about the fundamentals of the markets and the companies that they invest in, and more about the direction of policy of the central banks, and in particular the Federal Reserve. This unhealthy obsession does appear to be raising concerns with some Fed policymakers given Charles Plosser’s comments last night. He said the current bond buying program risked damaging the Fed’s credibility, and that the Fed should stipulate a set amount of purchases and then end the current program. His comments have weight as he will be a voting member in 2014, along with a number of other stimulus hawks. As it is last night’s late sell-off looks set to see Europe’s markets opening lower this morning ahead of the release of the latest German ZEW survey for November which is expected to show another increase on the sharp rise seen in October, to a four year high. The importance of this number is slowly losing its relevance to the wider economy, particularly in Europe which saw a massive jump in EU economic sentiment and confidence in October at the same time that unemployment was hitting record highs in Italy and Europe as a whole. It’s not too surprising that investors are confident when the DAX is at record a high which is why the latest German ZEW survey is expected to show a rise to 54.6 from 52.8, and the European ZEW survey is expected to show a rise to 63.1 from 59.1, which would be the highest level since before 2007, and well before the start of the current crisis. If that’s not irrational exuberance I don’t know what is. The OECD is also expected to give its November economic outlook and growth forecasts on the wider euro area and given its critique of France last week I can’t imagine that it will a particularly joyous read. A number of Fed officials are also due to give speeches with FOMC voting members Charles Evans and William Dudley where markets will look for signals of any concern about the current levels of froth in US equity markets. EURUSD – yesterday’s move above 1.3500 brings with it the risk of a move towards the 50 day MA and towards 1.3620. The outlook is now starting to become a little uncertain but as long as we stay below 1 3620 then a move to 1.3000 remains possible in line with the bearish engulfing week at the end of October. Current support comes in at 1.3435 from the lows at 1.3300 post the ECB rate cut. GBPUSD – the pound continues to look strong but remains contained within the broader channel of price action with support at the 1.5880/90 area and resistance at 1.6250/60. The current move beyond 1.6110, hasn’t really taken off but could well work its way back to resistance, while below we could see a drift back towards this week’s low at 1.5855. A sustained break below 1.5900 has the potential to target a move towards 1.5750. EURGBP – continues to look weak but remains in broader range with support around the lows this month at 0.8320 and resistance at 0.8470. While below the long term trend line resistance at 0.8540, from the August highs at 0.8770, the risk remains for a move below the 0.8320 level towards 0.8280, 50% retracement of the entire up move from the 2012 lows and the high this year. USDJPY – the US dollar appears to be finding some resistance near the September highs at 100.60, and with US long term yields remaining soft the risk remains for a move back towards 99.20. Behind 100.60 we then have 103.75 which is the next obstacle to a move to 105.00. If the US dollar breaks below the 99.20 level we could see a deeper fall towards 98.50. Support remains just below the 200 day MA at 97.80 at 97.20 trend line support from the 25th Feb lows. 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.