With US, German and UK markets closed yesterday, what was left of world markets had somewhat mixed fortunes, with Asia markets surging to multi year highs on reports that Chinese authorities had given the green light to hundreds of proposed infrastructure projects, which it wants private investors to help fund and build, while a weaker yen helped push the NIKKEI to new 15 year highs, with Japanese exporters leading the way. In Europe the markets that were open saw thin trading volumes with Spanish and Greek stocks in particular in focus, in the wake of increased political uncertainty. Spanish stocks got sold off yesterday after the incumbent government succumbed to heavy losses in regional elections over the weekend. Spanish PM Mariano Rajoy’s PP party suffered its worst result in 20 years as the voters punished his government for four years of austerity, and record high unemployment. Anti-austerity parties from both sides of the political divide performed extremely well with the left wing Podemos party and the more business friendly “Citizens” party gaining a significant share of the vote. This fragmentation of politics that has been seen throughout Europe bodes ill for this year’s Spanish general election which if these results are replicated nationally, could well complicate Spain’s relationship with the EU with respect to its future spending plans. Some have suggested that Spain’s current economic recovery could well see support for these new parties slip away as the election day gets nearer, and while that may well be true, it may well not make that much difference if unemployment remains at its current levels. A growing economy is all well and good but if unemployment remains high, voters probably won’t make that much of a distinction, and might be prepared to bet on the parties untainted by corruption and mismanagement. One thing is certain Spanish politics is likely to become that much more unpredictable and fragmented in the coming months, which is unlikely to make for a positive investment environment. This uncertainty in Spain is one of the main reasons why EU leaders are playing hardball with Greece, as any concessions granted to the Greeks are likely to play badly elsewhere in Europe where hard decisions have been made. The possibility of a Greek default early next month appears to be moving closer as politicians in Athens raised the possibility that the paying of pensions and salaries over the next few weeks would take precedence over payments to creditors, with the 5th June scheduled payment to the IMF the first test. The main focus today is likely to be on how investors react to the recent weekend events, while US markets will be focussing on the latest US economic data after a US dollar rally saw the greenback post its best and first positive week in six weeks. Despite some fairly neutral comments from Fed Chief Janet Yellen late on Friday markets continue to price in a rate rise sometime this year, with September the next probable date on the back of a slightly stronger than expected CPI inflation number at the end of last week. The phrase “clutching at straws” springs to mind, but with all the uncertainty in Europe the greenback appears to be regaining some of its lustre after six weeks of losses. Today’s economic data includes April Durable Goods and May consumer confidence. The US consumer has been noticeably absent when it comes to spending in recent months and the hope is that we could see a turnaround in April. Expectations are for a rise of 0.3%, unchanged from the revised March number of 0.3%. Consumer confidence for May is expected slip back slightly to 95 from 95.2. EURUSD – last week’s break below the 1.1050 level doesn’t bode well for further gains with support now at the 50 day MA at 1.0950, and below that at 1.0880. We need a move back above the 1.1050 level to stabilise and argue for a move back towards 1.1220. GBPUSD – breaking below the trend line from the 1.4560 lows has seen the pound slide back and support now comes in at the 1.5440/50 area. A move through here retargets the 1.5200 level. We need to rebound back above the 1.5570/80 level to stabilise. EURGBP – while below the 0.7120 level the bias remains for a move towards the March lows at 0.7015. Resistance on any pullbacks is likely to be found at the 0.7120/30 area, which had been support up until last week’s break. USDJPY – the momentum remains intact for a move back to the highs at 122.00. We also need to be aware of trend line resistance at 122.15 from the 1990 highs at 160.30. Support remains near the recent range lows between 118.30 and 118.65. CMC Markets is an execution only service provider. 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