If investors were concerned about the short term direction of equity markets a week ago last Friday’s disappointing US payrolls report hasn’t done anything to dispel those concerns. More interesting was the markets response to the numbers, given that despite the weakness the markets finished strongly higher, when the obvious reaction would probably have been for greater uncertainty surrounding the health of the US economy. The rise in the participation rate was encouraging, as was the fall in the unemployment rate to 6.6%, but neither tallied up with the weak jobs number and despite the strength of Friday’s rally none of the problems that have been troubling markets and investors since the beginning of the year have gone away, yet for all of these concerns, markets in Europe look set to open higher this morning. The apparent softness of some of the recent earnings announcements, the health or otherwise of China and emerging market economies in the face of tighter monetary policy, or whether the patchy data coming out of the US is a symptom of the cold weather, or emblematic of a wider economic malaise. None of these problems has gone away yet we saw the strongest one day gains seen so far this year. Two disappointing jobs reports in a row certainly throw into question as to whether the Fed might be inclined to ease back on the pace of its stimulus reduction program and maybe there was an element of that in Friday’s rebound, however early indications would seem to suggest that belief is misplaced if FOMC voting member and Dallas Fed chief Richard Fisher’s comments were anything to go by in the wake of the release of the numbers. He said that the Fed was unlikely to be influenced by one single number and given recent comments from other Fed officials last week, including the much more dovish Charles Evans that the bar to delaying tapering was a high one, then markets could be being rather presumptuous about the next Fed response. Despite the poor number the payrolls report does give new Fed Chief Janet Yellen a tricky line to walk this week as she gets set to take the stage for her first meeting with US lawmakers tomorrow and Thursday given that the unemployment rate is within a whisker of the 6.5% unemployment rate threshold. We already know that the Fed will keep rates below zero well past the time the jobless rate hits 6.5%, however this could well happen next month and I would imagine markets and lawmakers will want some form of definition of “well past” given we’re now knocking on the door of the threshold of the FOMC’s forward guidance. As such we can expect markets to play close attention to what Janet Yellen has to say tomorrow. While Janet Yellen faces Congress this week, Bank of England governor Mark Carney has a similar guidance problem which he will be wrestling with this week when he presents the quarterly inflation report from the Bank of England Both central bank chiefs will have to tweak their guidance in such a manner for it to remain credible so that markets don’t start to price in rate hikes any sooner than policymakers would like, while at the same time not appearing to be too pessimistic about recent falls in the unemployment numbers. EURUSD – despite last week’s late rally above 1.3600 the main resistance remains around the 1.3700 area, while behind that we still have long term trend line resistance at 1.3855 from the all-time highs at 1.6040 and ultimately this remains the key obstacle to a move through 1.4000. We still have fairly strong support at the 1.3475/80 area which is currently supporting the euro. That being said the onus still remains towards the downside and a move towards 1.3300, while last month’s bearish engulfing candle on the monthly charts still remains valid. As such the bias still remains towards the downside, and a subsequent retest of the 1.3000 level. GBPUSD – last week’s rally has brought the pound back to resistance at 1.6420 and the 50 day MA. A break through here has the potential to retarget the 1.6510 area. Support remains at the 1.6250 area and 100 day MA which remains the last obstacle to a drop on the 1.6000 area. EURGBP – last week’s move through 0.8330 level has so far find it difficult to push on towards the 0.8375 level and trend line resistance from last August highs. On the downside we have support at 0.8260, and below that at our previous lows at the 0.8165 level. USDJPY – last week’s rebound back above the 101.80 level shifts the focus back towards the 103.00 area. The 101.80 level should now act as support for this move to unfold. A move back below 101.80 retargets the recent lows at 100.80, and even potentially a move towards the 100.00 level and 200 day MA. 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.