While US blue chips continue to develop a bullish life of their own, once again making new record highs yesterday, European markets have continued to underperform, though we did get a broadly positive session yesterday, largely driven by some positive earnings announcements, and while economic data continued to disappoint, this merely served to reinforce the expectation that the European Central Bank would ultimately be forced to do more to support the economy in Europe in the coming months. If any reminder were needed about the challenges facing policymakers in Europe it was provided by yesterday’s September industrial production data from Italy and Greece which dropped sharply by 0.9% and 5.1% respectively, much worse than had been forecast. This is probably why most investors continue to hang their hats on the ECB ultimately being forced into full blown sovereign bond buying, after Draghi’s comments last week. This remains by no means certain and given recent comments from other ECB policymakers since last week’s meeting, doesn’t sound in any way imminent. Comments last night from ECB board member Yves Mersch reinforced this narrative by insisting that structural reforms by European governments were a necessary requirement to help the recovery on its way, though he was careful not to rule out the possibility of buying state bonds, saying that it was “theoretically possible”. In light of these comments and the apparent smoothing over of differences between ECB President Draghi and Bundesbank President Jens Weidmann the bar is still likely to remain high for any further interventions this year, regardless of this week’s Q3 GDP and monthly inflation data, which is due out on Friday, with inflation in particular set to stay low for some time, given recent declines in commodity prices, with oil prices once again sliding sharply yesterday. With French and US markets commemorating Remembrance Day, trading volumes could well be lighter than usual with European markets set to open fairly close to their closing levels last night. EURUSD – having made a new 2 year low last week at 1.2358 the euro snapped back sharply late on Friday to close well above 1.2400. This might delay the move towards 1.2040 and the 2012 lows. With short interest at its highest levels since 2012 the risk of a short squeeze towards the 1.2570 area remains. Any rebound would need to overcome the 1.2570 area to argue for a move back towards 1.2800. GBPUSD – while below 1.5930 the risk remains for a move through last week’s low at 1.5795 towards 1.5720. The current rebound needs to get beyond 1.5930 to suggest a move back towards 1.6070. EURGBP – finding selling interest just above 0.7870 and support at the 0.7800 level a break either side should determine the next move. We need to get through the 0.7940 level to stabilise. A break below the 2012 lows at 0.7754 is the main obstacle to further declines towards 0.7690, the October 2008 lows. USDJPY – while below the tweezer top on the daily charts at 115.55 and Fridays bearish reversal the risk remains for a pullback towards 112.60 in the short term. Given the recent strength of the up move its not unreasonable to expect a pull back before a move higher to 120.00. Only a break back below 110.00 would have the potential to derail a higher US dollar scenario, towards 120.00 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.