After the strong finish last week the start of February has brought a little bit of a pause as the old concerns of falling oil prices and a slowing Chinese economy returned to the fore once more, with European markets looking to start a little weaker this morning, after a disappointing session yesterday. Another weak manufacturing number which fell to a three year low would appear to show that for at least this part of the Chinese economy, economic activity continues to cool, and while the services sector continues to grow it was still a little weaker than the 14 month high seen in the December number. If the latest Caixin measure for services doesn’t show a significant improvement when it is released tomorrow, then it is safe to assume that we can expect to see further easing measures from Chinese authorities in the coming weeks, in either the form of rate cuts or further weakness in the currency basket, especially given that the Yuan is no longer that much weaker than it was at the turn of the year. Oil prices also saw their recent rebound run into a wall, stalling out at $35, as hopes faded for any form of significant action to cut production output, by either OPEC or non OPEC members. This slide in oil prices was all the more surprising given that the US dollar also slipped back after weaker than expected ISM manufacturing numbers for January showed a sharp drop in the employment component to 45.9 from 48, which if translated into Friday’s payrolls numbers could well see the numbers come up short of expectations. The latest US spending data continued to show a US consumer still reluctant to spend any extra cash from the gasoline premium. The slide in the greenback was also helped by a less than ringing endorsement of the US economy by Fed vice chairman Stanley Fischer. A few weeks ago he made some well publicised comments suggesting that the prospect of 3-4 rate rises this year was “in the ball-park”. He was much less effusive yesterday evening, saying that he had no idea what the Fed would do at its next meeting, and would continue to monitor the effects of recent market volatility. He also reinforced the tone of last weeks Fed statement by stating that he expected it would take much longer for inflation to move back to target. Attention turns back to the UK this morning as well as the latest European unemployment data. The latest manufacturing PMI numbers out of the UK showed a modest pickup in economic activity in January, while December was also revised higher, which helped give the pound a modest boost. Today’s construction numbers for January are expected to remain steady at 57.6, down slightly from 57.8 in December. In Europe it has been notable in recent months that headline unemployment has been falling quite sharply, and it is hoped that today’s latest numbers reinforce that direction of travel. The latest Italian unemployment numbers for December are expected to show a modest decline to 11.2% from 11.3%, however youth unemployment still remains eye wateringly high, just below 40%, and it is here that the crisis in Europe continues to play out, with Greece and Spain having even higher rates. EU Unemployment is expected to remain steady at 10.5%, while Germany continues to outperform at with an unemployment rate set to remain at 6.3% in January, with another reduction of 7k in the underlying numbers. EURUSD – the euro continues to struggle above the 1.0900 area with major resistance at the 1.1000 area where we have the 100 and 200 day MA’s. Key support remains between 1.0775 and 1.0800, with a break retargeting the 1.0600 area. GBPUSD – yesterday’s break through the highs of last week is an encouraging sign that we might have seen a short term base, and potentially see a return towards 1.4800. We still need to hold above the 1.4220/30 area or run the risk of a move towards the recent lows at 1.4085. EURGBP – yesterday’s drop through the lows of last week suggests we could well head back towards the 0.7480 area. As long as we hold above 0.7480 the risk remains for a return to the 200 week MA at the 0.7900 level. USDJPY – last week’s break above 120.00 saw a sharp move towards the 200 day MA which has so far held. A move back through 121 60 has the potential to retargets a move back towards 123.00. CMC Markets is an execution only service 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.