A late rally on Wall Street after Europe had closed saw US markets close the week just about in positive territory on reports that a Russian official had said that they wanted to de-escalate the crisis and that troops that had been amassing on the Ukraine border had started to pull back after finishing their military manoeuvres. As such this late pullback is likely to see Europe’s markets start the week on a positive note, after the declines seen in the last two weeks, particularly in the German DAX. Markets reaction to reports of a Russian pullback was eminently predictable but it remains far too early to celebrate any de-escalation between Russia and Ukraine. Only at the weekend Ukraine claimed it had thwarted a covert attempt by Russian soldiers to enter the east of the country under the guise of a humanitarian mission with the Red Cross. While Russia dismissed the claims as a “fairy tale”, they nonetheless speak to the concerns that Kiev has with respect to Russia’s next move. Meanwhile in Iraq, US aircraft appear to be succeeding in their mission to stem the tide of the Islamic jihadists in their quest to extend their reach towards the economic assets in Irbil. Nonetheless it seems likely that these airstrikes and aid drops to the Yazidis could continue for months. While we could well get some respite this week from the recent selling, what hasn’t changed is the economic temperature in Europe, and the likelihood that the fallout from the Russia sanctions will crimp growth prospects for the next few months. This at a time when Italy is back in recession and Europe’s banking system remains flat on its back as the problems in Portugal with Espirito Santo and Italy in the shape of Monte De Paschi will testify, means that the economic outlook is likely to remain difficult, with some evidence that even Germany is suffering. As far as this week is concerned the focus will be on the latest Chinese data after last week’s rather surprising trade data which saw exports to the beleaguered euro area jump 14% in July. The data would appear to suggest the Chinese economy is back on course for its 7.5% growth target. The latest industrial production and retail sales data for July are expected to come in pretty much in line with the previous month of June. There will also be a great deal of focus on the UK this week with the release of the latest unemployment data as well as average earnings data. We also have the Bank of England’s latest inflation report as speculation grows about the timing of a rate hike, in the face of an improving economy and disappointing wage growth. Markets have got themselves into a frenzy about the prospects of a rate hike this year, and while we might see some dissent when the minutes of last week’s Bank of England meeting are published next week, this week’s average earnings data could well make any decision about the prospect of that extremely problematic EURUSD – after the hammer on the daily candle chart last week we’ve seen a pullback, but we still remain below the resistance at 1.3475, which we need to overcome to target a stronger pullback. We need to see a move back through 1.3500 to retarget the 1.3570 level and then on to 1.3640. Support at last week’s lows at 1.3333 GBPUSD – the pound slipped below the 1.6820 area and could well slide even further but would need to slide below the May and June lows at 1.6700 to cause concern. Any rebound now needs to get above 1.6820 to retarget a move back towards 1.6920 and then 1.7000. EURGBP – the euro appears to have found a short term base for now but needs to get through 0.8000 to target a move towards 0.8030 initially and then 0.8085 the May lows. Downside support comes in at 0.7920 and the lows last month at 0.7874. USDJPY – continues to remain susceptible to US yields after last week’s failure at 103.00/10 the US dollar has slipped back but found support in the mid 101’s. There is nothing to suggest though that we won't continue to trade within the broad range that we've been in over the last six months. We have resistance at 103.00, and support at 101.20. 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.