A “go slow” approach to raising interest rates by the Federal Reserve, from their final meeting of 2014 last week has served to push US markets back towards their highest levels this year, and surprisingly also turbo charged the US dollar, in spite of a rise in interest rates potentially coming later into 2015 than most had originally expected. This “patient” approach to policy normalisation as well as a belated realisation that lower oil prices aren’t necessarily such a bad thing, particularly in terms of their potential impact on global GDP and consumer sentiment, has seen a significant rebound in the last four days, though as we start this week Europe’s markets look set to start a very short week slightly higher, as oil prices gain a firmer footing. This stabilisation in the oil price has, raised the expectation that we may well have found a short term base, and mitigating concerns that further declines could well prompt large scale losses on highly leveraged oil producers and governments. As we head towards the Christmas break and a short week, the main focus going forward is likely to remain on the recent volatility in the oil price, particularly if we get a fresh bout of selling pressure, amidst concerns further declines could prompt instability in oil producing countries like Venezuela, Angola, Nigeria and Ecuador, and of course not forgetting Russia, as these countries struggle to balance their books, against a weakening currency, and a much weaker oil price. The biggest worry remains the weakness of the rouble, which continues to remain under pressure despite a punishing 650 basis point rise in rates last week, and with President Putin remaining in belligerent mood, any likelihood of an easing of sanctions disappeared as further tightening measures were approved last week by the US Congress, along with $350m of military aid for Ukraine. On the economic data front this week’s final UK and US Q3 GDP numbers are expected to confirm that both economies remain at the forefront of the recovery in developed markets, well ahead of the sclerotic economies in Europe, which continue to give cause for concern, with the probable exception of Germany which appears to be showing signs of a pickup in domestic demand. Last week’s data showed that German consumer confidence was at an eight year high, along with some evidence of a rebound in economic data, which could well make for an interesting discussion at next month’s ECB rate meeting, as markets continue to expect that the ECB will undertake some form of QE stimulus. This remains an optimistic view given that there remains a tug of war of views between German officials who remain opposed to QE and some on the council who affirm that QE is legal. Whatever happens next month any measures that are taken are unlikely to be sufficiently large enough to make a difference. EURUSD – the current move lower in the euro is coming up against long term support at 1.2225 which is trend line support from the 2010 lows as well as the 200 month MA which has kept a floor under every euro decline since 2005. A sustained break here could well open up a move below the 2010 lows at 1.2040 and a move towards 1.1500. We need a rebound back through 1.2500 to stabilise. GBPUSD – this month’s low at 1.5540 remains the key obstacle to a move towards 1.5245, which is trend line support from the January 2009 lows at 1.3500. While above this key support the risk of a rebound back towards 1.5800 remains the more probable outcome. EURGBP – the current euro weakness looks set to move back towards the lows earlier this year at 0.7765, but there is also interim support at 0.7799, which is the November lows. To stabilise the euro needs to get back through the 0.7930 area. USDJPY – after being rebuffed at 122 earlier this month the US dollar has slipped back, but now appears to be rebounding strongly from lows at 115.60. We need to push back through the 120.00 level to suggest a retest of the highs. The risk remains to the downside after the bearish engulfing week a couple of weeks ago. A move back below 117.80 argues for move back towards the lows this month at 115.60. 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.