Despite spending most of yesterday trying to push higher, UK markets slid back into the close after a rebound in mining stocks initially helped pull the FTSE100 off its lows. The rally had always looked a touch vulnerable with European markets showing even less inclination to move higher, with the rebound in the euro hampering any upside progress on the other side of the Channel. A rebound in oil prices on a surprise drop in inventories soon gave way to another sharp decline, dragging US markets lower after an initial surge on the open, with Brent prices slipping back below the $40 a barrel mark. It would appear that end of year volatility is making it much more difficult for investors to ascertain whether it’s worth buying back into a market that continues to have the spectre of next weeks Fed meeting having over it, as US markets closed near two and half week lows, and back in negative territory for the year. The selloff in US markets last night is likely to be reflected in a weaker European open this morning, as the momentum gained from the rebound off the lows in September shows increasing signs of rolling over into further weakness as we head towards the end of the year. The main focus of the markets attention is likely to remain on the future direction of commodity prices amidst uncertainty over whether we’ve seen the base, or whether we have further to go, and yesterday’s roller-coaster ride for crude oil prices really reflected that uncertainty. It is also quite unlikely that will change in the near term, particularly given the proximity of next weeks Fed decision. Overnight Australian unemployment dropped for the second month in a row, coming in at 5.8% confounding expectations as concerns about a China slowdown and job losses in the mining sector saw significant jobs gains elsewhere in the economy. 128k jobs have been added in the past two months. The Chinese yuan also continued its gradual depreciation, fixing at 5 year lows and increasing concerns about the prospect of a currency war as Chinese authorities gradually unpick the currency’s gains against the US dollar by guiding it lower. Also on the docket we have the latest Bank of England rate decision, however this is unlikely to prompt much in the way of surprises, unlike last week’s ECB announcement, and potentially next week’s Federal Reserve decision. Having surprised the markets in November with a dovish inflation report and given that CPI inflation is in negative territory it would be unexpected to say the least if there were any significant changes to either the minutes or the voting patterns. It is still likely that Ian McCafferty will continue to dissent and argue for a rise in rates, with the recent decline in commodity prices much more likely to keep the remainder of the MPC cautious, particularly given some of the weaker readings from recent manufacturing data. The Bank of England has already expressed concern this week that next weeks expected US rate rise could cause significant market turbulence in emerging markets. EURUSD – we continue to squeeze higher testing the 200 day MA at 1.1050, as we look to head higher towards 1.1120. We need to remain mindful of a pullback towards 1.0800 but given last week’s bullish reversals we look set for a retest higher. GBPUSD – yesterday’s move through 1.5160 shifts the bias towards further gains towards the 1.5300 area and the 200 day MA. There is a risk of a move back towards 1.5000 but the bias does appear to have shifted slightly. A fall below 1.4880 would negate this prospect of a move higher and prompt the possibility of further losses. EURGBP – we continue to push higher towards the 0.7300 area, which would be 61.8% retracement of the entire down move from the October peaks at 0.7495, and the November lows. We need to hold above the 0.7220 area for this to unfold. USDJPY – yesterday’s fall below the 122.20 area and subsequent break of 121.80 shifts the bias towards for a move towards 120.00. It would take a move back through 122.30 to delay this prospect and argue for a retest of 124.00. CMC Markets is an execution only service 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.