Over the past few months we've seen the DAX and the S&P500 pretty much move in lock step with each other, pretty much matching each other’s performance in making new highs on a weekly basis. The dynamics of this correlation have diverged in the past month or so with the DAX starting to lose momentum, with the result that we saw the German benchmark post its worst weekly performance since early April, while the S&P has continued to post new record highs, and looks set to post yet another positive monthly performance. The out performance of the S&P500 relative to other markets continues to bemuse with the BIS at the weekend expressing their concern that central bank policies were creating distortions between the performance of global markets and underlying global economic fundamentals. The report stated that "overall, it is hard to avoid the sense of a puzzling disconnect between the markets' buoyancy and underlying economic developments globally." Amen to that. While the S&P500 continues to outperform, the German DAX has started to show some evidence of rolling over, with recent economic data starting to show evidence of a German economy starting to lose momentum. Despite the weakness seen last week across most of Europe's markets we look set to begin this week on the front foot, opening higher as we look forward to a big data week, in the form of key PMI and unemployment data from Europe, the UK and the US, culminating on Thursday with the latest ECB rate meeting and US June employment report. With respect to the recent weakness in the DAX, it can't be a coincidence that this change of momentum came soon after the ECB announced its latest easing measures to address the economic weakness afflicting the various economies in Europe. While the move to negative interest rates was expected the lack of any other action until the TLTRO's start in September appeared to be a case of too little too late, and it would appear that this has translated into disappointment and concern that the recent weakness seen in some of the economic data, could well continue into the second half of the year. Given that and with no further action likely before the autumn, today's EU CPI inflation data is unlikely to prompt any further significant weakness in the euro, ahead of this week’s ECB rate meeting. Draghi's comments earlier this month that interest rates had reached the lower bound appear to suggest that further rate reductions remain unlikely and that any further moves on policy are likely to be in the form of extra liquidity measures. EU CPI for June is not expected to fall any further at this stage with a reading of 0.6% expected, a slight increase from the previous 0.5%. Italian CPI, on the other hand is expected to remain unchanged at 0.4%. Here in the UK, the latest lending data is expected to show that mortgage approvals for May came in lower than the preceding month as the recent new rules on mortgage lending continued to take effect. A number of 61.8k, down from 62.9k is expected, while the latest consumer credit numbers are expected to show a similar pause in light of the recent drop in retail sales for that month. EURUSD – the euro continues to find support at progressively higher levels as it closes in on the resistance at 1.3675 and the 200 day MA. A move beyond 1.3675 argues for a move back towards 1.3780. Support currently comes in at 1.3560 while below that we also have key trend support from the 2012 lows at 1.2045, which now comes in just above 1.3465. GBPUSD – another weekly close above 1.7000 keeps the pressure on the upside towards 1.7330. The risk remains for a move towards 1.7330 the 50% retracement of the decline from the 2007 highs at 2.1160 and the lows at 1.3500 in 2009. Ideally we need to see a monthly close above 1.7000 for this to unfold. Only a move below 1.6910 support delays the scenario above. A drop below 1.6910 sees major support all the way back at the 100 day MA at 1.6725. EURGBP – the attempts to push through 0.8035 failed last week, and we could well see a drift back towards the recent lows at 0.7960. We need to push through 0.8035 to target 0.8085.The pressure remains on the downside while we remain below trend line resistance from the March highs sitting just below the 0.8110 level, with a longer term target at 0.7880. USDJPY – last week’s move below the 200 day MA support at 101.60 opens up the risk for further declines towards the 101.00 area initially, and from there a test of the 100 level. Resistance now sits at 101.80 as well as the range highs just below the 103.00 area and the June high at 102.75. 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.