After the gains seen in recent days US markets paused for breath yesterday as investors weighed the odds of a retest of the recent highs of last month, or whether this particular up-leg has run its course. Several potential potholes appear to have been navigated successfully with respect to the raising of the debt ceiling, as well as any uncertainty over new Fed Chair Janet Yellen’s testimony on Tuesday to Congress. While that testimony is expected to continue today, this time to the Senate Banking committee the potential for surprises would appear to be remote. Even concerns about Chinese growth appear to have receded after those surprisingly good January trade numbers, however some poor Australian unemployment data has kept Asia stocks on the defensive, as markets once again start to focus on earnings. If anything there is more risk of an adverse move on the back of a poor January retail sales number, which is expected to show a decline from the 0.2% rise seen in December, with expectations of no change (0%). For the past few months US retail sales have been on a slow steady downward trajectory, and given the poor weather seen in January, it would be unwise to rule out a negative surprise, and a decline. If anything a 0% estimate seems somewhat optimistic. Weekly jobless claims are expected to remain steady at 331k, unchanged from last week. Yesterday’s Bank of England inflation report didn’t contain much in the way of surprises, with the central bank trying to appear dovish and failing with the pound once again remaining solidly resilient, no doubt helped by a nice upgrade to the 2014 growth forecast. While Mark Carney didn’t explicitly drop his unemployment threshold he diluted it to such an extent to largely render it irrelevant, by putting in the rather opaque and fluffy indicator of spare capacity. Given that this particular measure is notoriously hard to gauge it now behoves the market to make its best guess estimate of when interest rates are likely to rise, particularly if inflation continues to fall back, which seems quite likely while the pound remains strong. The euro sank back sharply yesterday as once again ECB officials, this time Benoit Coure, started pulling the negative deposit rate genie out of its bottle, and giving it a good airing, while another political squall in Italy could have the potential to unnerve markets, particularly if Matteo Renzi decides to call Prime Minister Letta’s bluff and challenge him for the leadership. EURUSD – we’ve seen yet another failure just shy of the 1.3700 area and a subsequent fall back, with the main support remaining down near 1.3475/80. Above 1.3700 we still have long term trend line resistance at 1.3850 from the all-time highs at 1.6040 and ultimately this remains the key obstacle to a move through 1.4000. The onus remains towards the downside while last month’s bearish engulfing candle on the monthly charts remains valid. GBPUSD – the pound continues to remain strong with the main resistance still at last month’s highs at 1.6660. A move through here would then target a move to the highs in 2011 at 1.6745. Support now resides near the 1.6510/20, and then below that at 1.6420. EURGBP – yesterday’s sharp drop brings the onus back onto the lows last month at the 0.8165 area. Once below that there is the strong possibility for a move to 0.8065 and the 2010 lows. Pullbacks are likely to find resistance around the 0.8270 area and 0.8330. USDJPY – the 103.00 area remains the primary objective while above 101.80. A move back below here retargets the twin lows at the 100.80 area, as well as the 200 day MA at 100.20. Above 103 retargets 105.50 and the highs this year. 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.