As we head into the end of another positive week for stock markets it is hard to shake a slight feeling of unease as we look ahead to a fairly low key day with no economic data to speak of. Yesterday’s US economic data continued the theme of an improving economy, which ties in with the slightly more hawkish bias from the FOMC minutes on Wednesday night. While this should be a positive development, it is hard to escape the conclusion that despite another record high for the S&P500 the rally feels forced, as the psychologically important 2,000 level acts like a flame attracting a moth. The concern is that while this particular US market continues to push higher, its sibling markets remain short of their previous record highs, while the smaller cap Russell 2000 is nowhere near its previous peaks of six weeks ago, only retracing 50% of its losses since its July highs. While the US dollar rallied on the back of the Fed minutes the impression appears to be that while certain members are looking at bringing forward the timing of possible rate hike, the committee remain divided as to when and how. In essence, rather than being hawkish, it appears that the committee has moved to a more neutral outlook from an outright dovish one. This change of tone or outlook has inevitably shifted the markets to focus on when rates might rise, hence the move higher in the US dollar. Even allowing for that it still remains way too early to start thinking about a rise in rates, and markets need to remember that the two most hawkish members of the FOMC voting panel, Plosser and Fisher, won’t have a vote next year, when a rate hike is most likely to occur. Another factor keeping investors a little uncertain is Fed chief Janet Yellen’s speech later today at Jackson Hole, with the key question being as to whether she will reinforce the change of tone of this week’s minutes, or whether she attempts to play them down with the traditionally dovish tone she has adopted in recent comments, with most expecting the latter. We’ve also seen a positive week for European markets, despite some pretty poor economic data over the past few days, which has served to confirm negative price pressures, and a fairly lacklustre rate of economic activity as we head in the middle of Q3. While the latest German PMI data came in better than expected for August, and firmly in expansionary territory, it was still worse than previous months, and it had been similarly upbeat in Q2, when the German economy contracted. As we look to open slightly lower this morning, ahead of a long weekend here in the UK, there appears to be an expectation that the pressure for the ECB to do more, will eventually lead to the announcement of potential further measures in the coming months, with some hoping that we might get some clues about that from this afternoon’s speech from ECB President Mario Draghi, after the markets close here in Europe. Despite market expectations the likelihood of the ECB taking any further steps this year remains slim, but that won’t stop Draghi dangling the prospect of further measures under the markets nose in order to keep them on the leash. EURUSD – the euro indulged in a small rebound yesterday but still looks soft having broken below the November 2013 lows at 1.3300, with the potential for a move towards 1.3220. Resistance now comes in at 1.3330, the previous lows, and behind that at the highs this week just above 1.3410. A move through 1.3440 targets a move towards 1.3500. GBPUSD – the pound appears to be finding some support just above the April lows at 1.6555, with the 1.6520 level remaining a key support. Having declined for seven weeks in a row the 200 day MA at 1.6675 remains a key resistance and we need a close back above it to diminish the downside risk. We need to see a move back above the highs this week at 1.6740 to signal a larger squeeze. EURGBP – we appear to be trading sideways for now with the 0.8000 remaining a key pivot. On the downside we have support at 0.7950, trend line support from the recent lows. Above 0.8030 retargets the 0.8085 level last seen in June. USDJPY – the current rebound appears to be looking stretched with the April highs at 104.10 the next resistance. The greenback needs to stay above 102.80 for this to unfold. We also have support at 102.10 and 101.20. 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.