 Hello and welcome to CMC Markets on Tuesday the 25th of November and the weekly market update. And once again we're talking about record highs on US markets and we're also talking about a surprise cut in interest rates by the Chinese central bank on Friday which really helped put a bit of a rocket underneath equity markets on both sides of the Atlantic certainly here in Europe as well as over in the US. Now the US continues to make record highs the DAX is within a whisker of 9,900 and who would have predicted that a few weeks ago when we were trading down at well below 9,000 but here we are. And I think a large part of that is obviously down to an increased perception maybe or an increased belief that the European central bank may be on the verge I think of the potential game changer and potential sovereign bond buying. Mario Draghi last week in a speech to a banking conference in Germany was or outlined I think a significant concern on the part of himself I think probably more than some of the members of the governing council about continued declining price pressures in Europe. He mentioned the word inflation in his text around about 45 times so I think there is certainly a definite theme there with respect to what Mr Draghi's concerns are and I think that's got the markets in a little bit of a lather with respect to the prospects for next week's European central bank rate meeting on Thursday but let's wind things back a bit shall we because for all the talk of quantitative easing sovereign bond buying and pushing the euro lower let's really look at what could happen and what probably will happen there's quite a big gap between the two and in that context I'll be looking at euro dollar I'll be looking at euro yen and I'll also be having a quick look at the pound against the dollar as well in the context of this significant dollar rally that we've seen over the past few months and which in my opinion is now starting to look a little bit tired and we'll look at some of the key levels on euro dollar sterling dollar and euro yen so let's start with euro dollar now we've we found a significant area of support around about one twenty three fifty now if we were going to get a significant onslaught of European central bank intervention in December you would have thought that the euro would have actually pushed below that key support level but let's put Mr Draghi's comments in the context of what Mr Weidman at the Bundesbank has said and he said there are significant legal hurdles to ECB sovereign bond buying Mr Novotny of the Austrian central bank wants to see much more data from December and the outcome of the December TLTRO and Mr Knot from the Dutch central bank has also expressed similar reservations more importantly than that I think it's unlikely that the ECB will undertake something that is legally questionable in Germany when the European Court of Justice hasn't as yet ruled on the OMT program and they're due to rule on that in January and the OMT program which is a conditional bond buying program has been ruled ultra varies and unconstitutional by the German constitutional court so if the German constitutional court of ruled OMT illegal what do you think they'll make a foreblown sovereign QE I think that is a step too far at this point for the European central bank and in that context this key support of 123.50 on euro-dollar is very very important now the four hour chart that you've got in front of you right now shows a break out of the support line that we saw from the November lows at the end of last week and obviously that was on the back of Mr Draghi's comments on Friday we've now rebounded back towards that we need to get back through 124.70 and 125 to that upper trend line from the October highs that I've drawn in pink on the chart if we can break back through that line and the highs that we saw last week at 126 then we could well see a short squeeze in euro-dollar now before I move on to euro yen I want to just have a quick continue the dollar theme a little bit further because we've also got a similar trading pattern unfolding in the pound against the dollar and that can be borne out by this four hour chart here and I've basically drawn a rectangular support and resistance line through the highs and through the lows now we can see quite clearly there's significant support around 155.90 on the downside and on the top side we have significant resistance of 157.35 so basically you project that distance either side of the breakout point and it should give you around about 140 and 150 point move either to the upside if we break to the upside or to the downside if we break to the downside now the moment the US dollar trade is a one-way trade everyone thinks the dollar is going to go up I'm thinking it's a little bit tired those GDP numbers earlier today US GDP came in at 3.9% now ordinarily the dollar should have really rocketed higher on those numbers it didn't do that and if it won't do that on a very good set of numbers that suggests to me that the market could well be a little bit long of dollars so keep an eye on those key supports and those key resistance levels on the euro dollar and the pound against the dollar okay so we'll finally wrap up with euro yen the battle of the central banks the battle for the bankage between the bank of Japan and the European Central Bank and if we look at this daily chart on euro yen we can see how that battle is currently unfolding at the moment the bank of Japan is winning by quite some distance we can see the move higher in euro yen over the course of the last month or so but are we seeing evidence of a potential top in euro yen is that a potential gravestone doji on the daily chart is that strong down candle the first indication that maybe we're in the process of getting a downward correction in euro yen now how on that unfold will unfold in the form of a correction lower in dollar yen or will unfold in the one in the manner of a correction lower in euro dollar given what I've just said about euro dollar I think it's unlikely that it's going to be euro dollar that drags euro yen down which leaves dollar yen so certainly keep an eye on that pair that key level at 148 is very very key in the context of the resistance level in euro yen if we break below the lows of the past couple of days in euro yen we could well see a further set off in euro yen and a correction lower okay so that's pretty much it for this week once again thanks very much for listening sorry about my absence last week that was down to technical problems until next week this is Michael Houston talking to you from CMC markets