There can have been no better example of how fickle stock markets can be than the price action over the last two US trading sessions. With Janet Yellen having caught the market off-guard on Wednesday with those three little words “around six months” with respect to a prospective tightening in rates, stock markets recouped all their losses yesterday, helped by better than expected US economic data, raising expectations that with the onset of spring the US economy will slip out of low gear and shift up a notch. Investors took heart from weekly jobless claims which came in better than expected and manufacturing activity in Philadelphia in March that posted a strong recovery from February’s poor number. Despite the strong finish yesterday markets are likely to remain cautious, despite a slightly more positive week, as Russia and the US embark on tit for tat sanctions, with the EU also set to follow suit as the standoff continues over Crimea, amidst concern over what Russia might do next. Even allowing for a potential normalisation here, which seems unlikely, concerns remain about what is going on in China which is being reflected in the decline of the copper price, as well as the yuan with both continuing to come under pressure as markets fret about a series of minor loan defaults, from a variety of smallish Chinese companies. The wider concern revolves around the property and real estate market with some concern that further defaults could trigger a “ripple out effect” as nervous investors pull funds from vulnerable sectors. This concern has had a notable effect on the FTSE100 which has struggled for gains all week, unlike its European peers who have had a much more positive week thus far. As such we could well see a flat to slightly higher European open as we head into the weekend with the only data of note being the latest UK public finances data for February. Having seen disappointing receipts in January of only £6.4bn the deficit is expected to return to the tune of £7.9bn. Back in the US while Wednesday’s comments from Janet Yellen caused a little consternation a series of speeches by Fed policymakers later today could well add some extra colour to her remarks, and the opportunity to soften the tone somewhat with Dallas Fed President Richard Fisher due to speak in London later this evening, followed soon after in Washington by dissenter Minneapolis Fed President Naryan Kocherlakota as well as Jeremy Stein, also both voting members of the FOMC. EURUSD – yesterday’s move below 1.3810 opens up the possibility of further weakness towards 1.3680 with the prospect that we could well have seen the highs in the short term. The euro needs to move back above 1.3850 to stabilise and suggest a retest of the recent highs at 1.3970. The 1.4000 level remains a key psychological barrier to a move towards 1.4200. GBPUSD – yesterday’s decline found support at 1.6480 with the potential for further declines towards 1.6300 The pound needs to get back above the 1.6570 area to suggest a retest of the highs earlier this week at 1.6650. Only above these levels suggests a retest of the 1.6820 level. EURGBP – the bearish engulfing candle seen earlier this week suggests that we may well have seen the highs in the short term. The resistance at the 200 day MA at 0.8425 remains a key obstacle to further gains. Only a move below 0.8320 retargets the 0.8270/80 area. USDJPY – the rebound seen over the last two days needs to get back above the 102.70/80 area or run the risk of a revist of the 101.20 area which has acted as strong support for the whole of March. As such the risk remains on the downside while below the 103.00 area. The focus still remains on the February lows at the 100.70/80 level. The 200 day MA is also a key level at 100.35. 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.