Financial markets have endured some brutal swings in price action over the past few days, as uncertainty has built up over the outlook for global growth against a backdrop of what can only be described as confusion over the next fork in the road for central bank monetary policy. At one point yesterday equity markets were down between 2% and 3%, before paring back a good chunk of those losses to only close marginally in the red. Even so there remains a good chance that European equity markets could well finish lower for the fourth week in succession, though given some of the recent price swings seen this week, it probably wouldn’t be wise to put any money on that, particularly with a number of keynote ECB speakers due to talk later this morning including Constancio, Coure, Nowotny and Bundesbank Chief Jens Weidmann. Expect plenty of references to central bank toolboxes etc… What the recent volatility does illustrate though is how unsure investors have become after what had been pretty much a one way bet on stocks for the last five years, while bond yields of Europe’s weaker countries now appear to be diverging away from their recent lows, as investors now start to become more realistic about the risks involved in owning Greek, Portuguese, Italian and Spanish bonds. For the past two weeks with the global growth outlook darkening, concerns about Europe, Greece and Ebola weighing on sentiment, the prospects for global stock markets were starting to become more and more uncertain and while the bears have had the upper hand so far the past few weeks, there has been some tentative signs of some brave investors looking to get back into the market. The current uncertainty in markets was no better illustrated by the sharp reaction to comments from St. Louis Fed President James Bullard yesterday, when he suggested that the end of QE should be delayed if necessary, which might suggest a deep anxiety at the heart of the US central bank with respect to the slowdown in global growth, and perhaps the recent strength of the US dollar, pushing down US inflation expectations. We already know from the last FOMC minutes that the Fed is concerned about Europe, and given recent events maybe that concern is rising amongst some of the members. Mr Bullard did then go on to contradict himself somewhat by going on to say that the hard data on the US economy had been good, which begs the question why consider extending QE. The fact is what he thinks probably doesn’t really matter given that he isn’t a voting member this year, or next year for that matter, however the concern is he may not be the only Fed member thinking along those lines, and that reason alone would have been enough to explain yesterday’s sharp rebound. That being said it doesn’t change the overall gloomy picture for the economy outside the US, and as such probably wasn’t the wisest thing to say, given the skittish nature of the markets and the proximity of the next Fed meeting in just under two weeks’ time. As for today with little in the way of economic data out today markets certainly have less potential for sharp moves either way and look set to open lower this morning, though given recent comments from various Fed members this week you can be sure that later today investors will be hanging on every word Fed Chair Janet Yellen has to say in a speech later today, particularly in light of recent moves in equity markets and recent commentary from members of the Fed board. We do have US housing starts for September due out later and they are expected to rise 5.1%, up from the 14.4% decline seen in August. EURUSD – yesterday’s sell off found support at the 1.2720 area before rebounding back towards 1.2800. We need to clear 1.2900 to target a deeper move towards 1.3000. We now have trend line support from the recent lows at 1.2670 to act as a base for now. A move back below 1.2670 could well herald a retest of the 1.2570 level. Below 1.2570 argues for a retest of the 1.2500 level and then 1.2400. GBPUSD – the pound appears to be building up for a potential rebound in a descending wedge, which a break of 1.6130 could well prompt a sharp move towards 1.6220/30. We have also trend line resistance at 1.6240 from the highs in June and this needs to break to mitigate the downward momentum and prevent a move towards 1.5720. EURGBP – the recent short squeeze here has seen the euro stall out just short of the 0.8070 resistance and fall back sharply below the 0.8000 level and retest the lows from yesterday as the currency pair has swung in a 100 point range. The potential bearish reversal could well see us move back below this week’s low at 0.7930, which could then see us head back towards the 0.7850 level. USDJPY – we appear to have held above the 105.50 area for now, which could well the dollar put in a decent rebound back towards 107.60. In the longer term it would appear the damage has been done, and we could well head all the way back to the 100.00 level, but we may well squeeze higher first. 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.