While Europe’s markets posted their second daily decline in a row yesterday US markets managed to stay pretty close to their all-time highs last night, despite some significant haven buying of US treasuries, on news that Russian troops were doing training exercises near the Ukraine border. This nervousness is likely to translate into a softer European open this morning, ahead of German unemployment data and a keynote speech by new Fed chief Janet Yellen later this afternoon to the US Senate. The continued deterioration in US economic data over the past couple of weeks, yesterday’s surprise rise in new home sales data notwithstanding, has focussed attention today on what new Fed chair Janet Yellen might say this afternoon in her testimony to the Senate, which was delayed from two weeks ago, due to the bad weather in Washington. If investors are hoping that the new Fed chief might show her hand with respect to the deterioration of the data and the weather related effects of it they are likely to be disappointed. The approach is likely to be pretty similar to her performance just over two weeks ago, insisting on measured steps and a data dependant approach to monetary policy. The reality is that she is unlikely to deviate from what she said in her Humphrey Hawkins testimony earlier in that same week; for fear that it might give the impression that there are some Fed officials who might be concerned that some of the recent data weakness could be more than weather related. As things stand, given recent comments by other Fed officials it would need the economic data to fall off a cliff between now and March 18th to prevent another taper of $10bn. By the time that meeting comes around Ms Yellen and the FOMC will have in its possession another employment report, which is due next week, as well as another month of fresh data to chew over. As such the focus is likely to remain on the economic data and today’s durable goods orders for January which are expected to show a decline of 1.6%, and weekly jobless claims which are expected to remain unchanged at 336k. Before the latest Fed testimony the latest German unemployment numbers for February are expected to continue to show the out performance of the German economy relative to the majority of Europe with unemployment expected to decline by 10k, and the rate to remain at 6.8%. The latest preliminary German CPI numbers for February are expected to remain unchanged at 1.3%, disappointing those who think there is a strong possibility that we might see some further action from the ECB at next week’s rate meeting. The more pressing concern is the continued decline in private loans to consumers and businesses in the private sector which is expected to remain negative at -2.2% for the fourth month in a row. This is the real problem in Europe, not the level of rates, or concerns about disinflation. EURUSD – having failed again to push up towards 1.3800 the euro slipped lower yesterday and could well be about to break lower towards 1.3620 initially on the way towards 1.3475/80. The euro bias still remains negative while we remain below 1.3840 but the lack of any dip does raise the concern we could push higher. GBPUSD – continues to range trade with some selling interest above 1.6710 and bids in the low 1.6600’s. The failure at 1.6820 last week keeps the risk for a fall back towards 1.6510/20, particularly if GDP data disappoints later this week. The bias remains for further gains but we could well see a correction first. EURGBP – while below resistance near the 0.8270/80 area the bias remains for a retest of the 0.8160/70 area. A drop below 0.8160 targets a move towards the 2010 lows and 0.8065. USDJPY – the US dollar continues to find selling interest anywhere near the 102.80 level with a move above the 103.00 area required for a move back higher. Support comes in at 102.05 at the moment with the potential for a drift lower towards the 200 day MA at 100.20. Last weeks low at 101.40 keeps the pressure on the downside with the first support at the twin lows at 100.80. To stabilise we need to see a move back above the 103.00 level, and the highs this month to argue for a return to the 105.50 area. 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.