If investors had been hoping that the latest FOMC meeting and the result of the German elections would help bring much needed clarity to the uncertainty that has bedevilled markets for weeks now, the events of the last few days have soon dispelled that notion with the result that the current state of affairs is becoming quickly like the proverbial itch that you just can’t scratch. This has inevitably meant that investors have become much less inclined to take on risk and has seen them start to once again err on the side of caution, pulling stocks down from recent all-time highs, and will ensure that Europe’s shares open lower once again this morning. US markets finished lower for the third day in succession as Fed policymakers lined up to take differing positions on last week’s events, with New York Fed Bill Dudley reinforcing the data dependant message, while Dallas Fed Richard Fisher took the opposite view, saying that the Fed was at risk of losing its credibility with its ambiguous messaging. While Germany continues to wrestle with the prospect of finding itself a new government the problems in Greece continue to dominate the headlines as a new series of strikes begins as the troika visit the country to assess the progress of the country’s latest bailout package where the small matter of a €10bn budget hole will need to be discussed. With Portugal’s finances also under scrutiny the last thing Europe needs is several weeks of uncertainty as German politicians negotiate over the terms of a “grand coalition” Yesterday’s September PMI data for manufacturing and services showed that the German economy was continuing to perform fairly well, though manufacturing did come in slightly below forecasts, while the main focus of attention is likely to be the latest IFO business climate data which is expected to come in at 108.4, up from 107.50. Last week the ZEW survey showed that investor expectations were the highest they’d been since April 2010 for the German economy, the month before the first Greek bailout, however this survey tends to fluctuate much more than it should and like consumer confidence numbers can sometimes be extremely unreliable due to some degree of irrational exuberance. Business surveys tend to be more accurate and the expectation is for a reading back near April 2012 levels. Speaking of flaky confidence numbers the latest US consumer confidence numbers for September are expected to show a small drop from 81.5 to 80, despite the fact that US retail sales remain extremely subdued. If US consumers are so confident why aren’t they spending any money? We also have two more Fed members have their say on the taper debate after the contributions of Dudley, Lockhart and Fisher yesterday as George and Pianalto will likely field questions on where they stand on last week’s policy decision. Despite last week’s softer than expected UK retail sales numbers the pound appears to be finding some level of support just below the 1.6000 level in what is expected to be a fairly light week of data. Later this week the latest GDP revisions are expected for Q2, while attention should be paid to various policy speeches from MPC members, Tucker, Miles and Bean for any comments that could be construed as dovish. Any comments with respect to the recent rise in house prices could well be instructive. EURUSD – last week’s break above the 1.3400 area opens up the possibility of a return to the high this year at 1.3710, however the lack of follow through higher suggest the greater risk is for a pullback towards the 1.3420 area on a break below 1.3480. Only below the 1.3420 area, argues for a retest of the lows last week at 1.3320. GBPUSD – while the support at 1.5980 holds then the possibility of a retest of the highs this year at 1.6370 remains. The risk is that a break below 1.5980 could suggest a move towards the lows last week at 1.5880 and the medium up trend support now comes in at 1.5730 from the 1.4815 lows. EURGBP – the failure at the 0.8470 area so far keeps the bias towards the downside despite last week’s strongly bullish daily candle. To stabilise we need to see a move above the 0.8500 area and the 200 day MA. The downtrend still remains intact but we may have to wait awhile for the move towards 0.8280, the 50% retracement of the 0 7755/0.8815 up move. USDJPY – the US dollar appears to be having trouble recovering the 100 level and as such the risk remains for a retest of the trend line support at 97.70 from the June lows at 93.85, as well as the daily Ichimoku cloud support last week. Only a move below this trend line suggests further losses towards the 94.00 area. We need to see a move above the highs two weeks ago at 100.60 to retarget the 103.70 area. 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. 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