While there were no surprises from yesterday’s central bank meetings investors were unable to look past events in Ukraine and Russia’s widely expected response to EU and US sanctions. In his press conference yesterday ECB President Mario Draghi when asked about the potential effects recent events could have on the European economy responded by saying that the ECB was still in the process of assessing the effects of sanctions so far. In a clear case of upping the ante yesterday’s actions by Russia in banning a whole range of food imports for one year from the EU, US, Canada, Australia and Norway, adds another level to escalation risks, potentially costing businesses billions of euros. While inconvenient for European exporters, and likely to hamper any sort of recovery in Europe, and Germany in particular, it is likely to be even more expensive for the weak Russian economy, and could well drive food prices sharply higher at the worst possible time as we head towards winter. Of wider concern is the possibility that Russia may not stop there with talk that they may ban US and European airlines from flying over Russian airspace to destinations in Asia. Coming as it does against a backdrop of fears about an imminent Russian push into eastern Ukraine it is not altogether surprising that markets have continued to decline given the economic damage this crisis could bring about over the coming months, as Putin plays Russian Roulette with the Russian economy, as well as the global economic recovery. Given these concerns, flight to safety plays like US treasuries, German Bunds, which posted record low yields yesterday, and gold have pushed higher, as investors take money out of equities, as fears grow that this episode could prove to be a significant drag on European economic output for the remainder of the year. Chinese July trade data overnight might have had the ability to help inject a more optimistic tone to the end of the week, with exports rising sharply by 14.5% however imports slid 1.5% suggesting that internal demand continued to remain weak despite the recent pick up in Chinese economic data. Unfortunately this doesn’t seem likely with European markets expected to open lower this morning after US President Obama authorised air strikes in Iraq in an attempt to halt the worrying advance of Isis and in the process prevent a possible genocide of a Kurdish minority in the northern part of the country. This new development along with existing concerns about an escalation in the Ukraine could well keep markets and investors firmly on the back foot for some time to come. In the UK the latest trade balance numbers for June are expected to see a reduced deficit of -£8.9bn, down from -£9.2bn in May, while construction output is expected to rise 4.7% year on year in June increasing from the 3.5% rise seen in May. EURUSD – while we remain above this week’s low at 1.3333 the daily hammer and potential rebound scenario remains intact Having posted a daily hammer, there is a chance we could well have seen the lows in the short term. We have resistance at the previous lows at 1.3475, but would need to see a move back through 1.3500 to retarget the 1.3570 level and then on to 1.3640. GBPUSD – still finding support in the low 1.6800’s but the current resilience needs to overcome the 1.6920 area to retarget 1.7000. The 1.6780 level remains a key support with a break retargeting 1.6700. EURGBP – could well see further range trading between the recent highs just below the 0.8000 level and support back towards the 0.7900 area with the bias remaining towards the downside and the 0.7870/75 area. The pressure remains for a move towards 0.7780, with any rebound needing to overcome the 0.8000 level to stabilise in the short term. USDJPY – having been unable to overcome the recent range highs at 103.00/10 we’ve seen the US dollar pullback along with US yields. There is nothing to suggest though that we won't continue to trade within the broad range that we've been in over the last six months. We have resistance at 103.00, and support at 101.80. 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.