 Hello and welcome to CMC Markets on Tuesday the 8th of December and the weekly market update. Now last week I warned about the possibility that the European Central Bank could disappoint at its Thursday rate meeting and I was right to be cautious because sure enough Mr Draghi wasn't able to deliver what he promised in November and that really has brought about a significant reversal in the euro against the dollar and it's also brought about a significant reversal in the German bond market. Going to have a look at euro-dollar, going to have a look at the German bond market but more importantly I think there's a distinct possibility we could have seen the peaks in the US dollar and the dollar index in particular and I think in that context that could have significant ramifications for next week's Federal Reserve rate meeting. It's pretty much nailed on certainty at the moment as much as it can be that we're going to get a rate rise next week but and this is a bit of an outlier bed at the moment there is a distinct possibility that the route that we're seeing in the commodity price sector could actually give the Fed pause and the reason for that is the Fed need to be reasonably confident that inflation will return to target, it's 2% target within the next 18 months to two years but with oil prices below $40 a barrel with iron ore prices at record lows as well below $40 a tonne can they reasonably make the argument that inflation is set to return to target of 2% that could actually potentially derail a potential Fed rate rise at next week's meeting. So let's make a start with this chart up here it's the German two-year chart and we've been in a significant uptrend for quite some time last week this is a weekly chart that we're looking at right now last week we posted a significant weekly reversal not only that we took out the entire previous month's lows of November so we took out the previous four weeks lows so that's a significantly bearish signal all by itself it does however need confirmation and that's what really I think makes me a little bit cautious about it the support line that comes in from the 2014 lows but also the previous peaks at around about 111.30 so what I'm looking for here is a break of that support but also I'm going to be looking at this chart in conjunction with my next chart so this my next chart is the dollar index a weekly chart not an awful lot of price action there but look at the significance of the bearish weekly reversal that is significant that 100 level on the dollar index has acted as a significant resistance level and I did touch upon it last week in my video when I was talking about euro dollar posted a significant reversal again requires confirmation so certainly in the context of where we are on euro dollar I think we need to reference euro dollar the euro dollar chart to get some indication of the level that we shouldn't really go above to keep this reversal pattern intact last chart here on the currency is euro dollar this is the daily chart but if you also look at the weekly chart we have a similar reversal a bullish bullish weekly reversal and we've managed to move back above that 108 level that supported the market throughout May June and July so we've managed to regain our foothold above that we need to get back above the 50 100 200 day moving average but as long as we hold above 108 then I think the likelihood of a potential reversal towards 110 and on to 112 remains a distinct possibility I'm going to finish up with Brent Crude because this ties in to the commodity story and we've broken a very key support level on Brent Crude we've broken 42 dollars a barrel it was the August lows this is the daily chart that we're looking at here we can see the downtrend from the October highs we can see the support running across from the August lows we're below that which brings us to our significant next target it's on the monthly chart and we can see it right here it's 37 and a half dollars a barrel and we can see that it's a 2008 lows and if we close below 40 dollars a barrel this month this will be the lowest monthly close for Brent Crude since December 2004 that's 11 years ago so it's going to be significant it's going to be increasingly significant certainly given the fact that we are also well below the 200 month moving average so we're pretty light on data this week yes we've got Chinese economic data I think the most important data that we've got at the back end of this week is going to be retail sales and industrial production but overall I think the main focus this week is going to be on commodity prices and on next week's Fed meeting and I think further declines in commodity prices could have a bearing on next week's meeting so in that context that's it for this week until next week this is Michael Houston talking to you from CMC Markets