After the euphoria of last week’s stellar US jobs report equity markets suffered a post report hangover yesterday, as the prospect of a strengthening US dollar combined with continued weakness in Chinese economic data, helped put a lid on some of the gains of recent weeks. Having come off the back of five weeks of gains we’ve been overdue a bit of a pullback and we certainly got one yesterday, as speculation moved on from the timing of a single rise in rates, to how quickly the next one would follow. Another OECD downgrade of global growth didn’t exactly help the tone either, as the organisation dropped its forecast again for this year from 3% to 2.9%, and down from 3.7% a year ago, citing a slowdown in emerging markets, though they nudged their forecast for Chinese growth slightly higher. Yesterday’s profit taking was also given a helping hand by comments from Chicago Fed President Charles Evans, an avowed dove on the FOMC. Throughout most of this year he has maintained that the Fed should err on the side of caution when it comes to raising rates citing early 2016 at the earliest for potential action. Yesterday he softened this tone somewhat by saying that he wouldn’t dissent to a rise in rates in December in the event of a majority consensus, which suggests that the barriers for inaction next month appear to be peeling away by the day. The “elephant in the room” remains concerns about the Chinese economy, particularly given another weak October trade number over the weekend, as well as continued weakness in commodity prices which yesterday saw the Bloomberg Commodity Index hit another 16 year low. Given another sharp drop in the imports number at the weekend it is no surprise that the latest Chinese inflation numbers have continued to underscore this concern with October factory gate prices declining for the 44th month in succession by 5.9%, while CPI rose 1.3%, missing expectations of 1.5%, as the recent surge in pork prices starts to drop out of the numbers. If tomorrow’s October industrial production and retail sales numbers are similarly weak, then it wouldn’t be too much of a surprise to see further easing measures between now and the end of the year, particularly since the yuan is now back at the levels it was against both the euro and the Japanese yen prior to August's surprise devaluation. Back in Europe the OECD also reduced its growth forecast for the EU as a whole to 1.5% this year, and 1.8% next year. With concerns about growth in Europe starting to level out, this morning’s September industrial production data from Italy and France could well have a large bearing on the latest Q3 GDP numbers which are due out on Friday this week. The French numbers are expected to come in weak at -0.5%, but Italy’s numbers are expected to improve by 0.6%. EURUSD – Friday’s sharp fall below the May and July lows at 1 0820 now opens up the prospect of a retest of the 1.0460 lows of earlier this year. For this to unfold we need to stay below 1.0830 and the 1.0980 area. GBPUSD – the fall below the May lows at 1.5085 opens up the real possibility of a move below the 1.5000 level towards the lows this year at 1.4565. We need a recovery back above 1.5220 to stabilise and avoid this potential scenario. EURGBP – last week’s key day reversal from 0.7041 suggests a return to the 0.7300 area in the short term. For this to unfold we need to hold above the 0.7075 area, and move above the 0.7160 area, and the highs last week. USDJPY – last week’s push through 122.00 now opens up the prospect of a move towards the 124.00 area and August highs at 125.30. Only a move below the 121.80 area would delay the prospect of this scenario unfolding 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.