While yesterday’s strong rally in stock markets was a welcome development after the strong losses over the last few days, the prospect for unpleasant surprises still remains high with the potential for further flash points on Ukraine’s eastern border. Markets largely shrugged off the sanctions announced yesterday by the EU on 21 Russian and Ukrainian individuals with travel bans and asset freezes; while US President Obama went on to supplement these sanctions with some of his own on close advisors to Russian President Putin. These particular sanctions are likely to be an aperitif if Russia looks to raise the stakes further with a longer list of names set to be discussed later this week by EU leaders. For now it seems that EU leaders have fired an early salvo towards Russia but have kept back the rest of their options in the event that President Putin decides to take a decision to annex the Crimea when he talks to the Russian Parliament today. Putin already raised the stakes again late last night when he recognised Crimea as an independent nation, despite the sanctions, and it will be instructive to see how EU leaders react in the event he decides to push on and approve an annexation. It seems that President Putin is of the opinion that EU leaders may lack the stomach to implement further measures given yesterday’s rather timid first salvo. This could turn out to be a mistake despite current splits amongst some EU governments. Given the lack of options open to EU leaders it is more likely that policymakers decided to temper their response, after all you don’t load a gun and then empty the chamber all at once. This then allows for further measures to be implemented in the event of non compliance with the ultimate sanctions being applied to Putin himself. Away from the Crimea we also get the latest German ZEW survey for March which is expected to show a decline in sentiment. It would be surprising if we didn’t get a fall given the falls seen in the DAX over the last few weeks. A decline from 55.7 in February to 52 is expected for economic sentiment. Having thrown a spanner in the works earlier this year with respect to the OMT program the German constitutional court is set to rule later today on the legality of the (ESM) European Stability Mechanism. Unlike the OMT the court is not expected to unveil any surprises with the expectation that it will be considered legal given Germany’s liability is capped and the German parliament has sufficient oversight on how the money is allocated. In the US the latest CPI data for February is expected to show a fall from 1.6% to 1.2%, year on year, while the latest housing starts and building permits could well see a timid recovery after the sharp falls seen in January. Housing starts for February are expected to rise 3.5% after the 16% decline seen in January, while building permits are expected to rise 1.6%, up from a 4.6% decline. Given yesterday’s disappointing NAHB data it is likely to be extremely difficult to read anything too meaningful into any housing data at the moment given the poor weather still being experienced in large parts of the US. EURUSD – the euro continues to find dips well supported but needs to push through the highs last week at 1.3970 to push on through the 1.4000 level. The 1.4000 level remains a key psychological barrier to a move towards 1.4200, while only a move back below 1.3810, has the potential to retarget a move back towards the February lows via trend line support at 1.3770. GBPUSD – while the pound is able to hold above the 1.6570 level then a retest of the February highs at 1.6820 cannot be ruled out. A concerted break below 1.6570 could well see further losses towards 1.6480 and even 1.6300. We need to get back above the highs last month at 1.6820 to suggest a stronger move towards 1.7000. Only a close above 1.7000 could have huge significance in the coming weeks for the future direction of the pound. EURGBP – last week’s break above 0.8350 to the highest levels this year could well be the first sign of a potential double bottom reversal and a move towards the 200 day MA at 0.8430. Support now comes in at the 0.8320 level and below that in the 0.8270/80 area. USDJPY – having found a semblance of support at 101.20 in the last two weeks the focus still remains on the February lows at the 100.70/80 level. The 200 day MA is also a key level at 100.35. We need a move back through 102.70/80 to stabilise and argue for a move back towards 103.30. 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.