Ukraine tensions continue

The markets have started the week in an orderly fashion as the Dow closed Friday towards record highs despite further tension in Ukraine. Pro-Russian separatists in the eastern region of Ukraine declared victory in a secession referendum yesterday which, if recognised by Russia, could push the country to the point of break up.

France and Germany are now threatening further sanctions on Russia if presidential elections do not take place on May 25th.The technical picture for the euro looks bleak following a close below 1.3770 on Friday. This points to a move to 1.3670 with a break here highlighting the potential for a complete reversal to 1.3380.

EMU CPI data is due for release on Thursday and will likely be scrutinised following ECB President Mario Draghi’s rate cut threat.

In other news, the market ignored the smallest Japanese current account surplus on record ahead of Q1 GDP data due for release on Thursday. The US Treasury has spoken out against the recent depreciation of the Yuan, saying that the currency still remains undervalued and it is important for China to continue moving to a market determined exchange rate.

Ahead of the UK inflation report on Wednesday, the Sunday Times reported that ‘the Bank of England is expected to signal this week that interest rate rises are likely to begin before the general election next year, as it upgrades Britain’s growth prospects yet again.’

It adds that Mark Carney, the Bank’s Governor, ‘is likely to rubber stamp market expectations that the first rate rise will come in the first quarter of 2015, which is three months earlier than the forecast given in February.’

EUR/USD

Supports 1.3740-1.3680-1.3620 | Resistance 1.3790-1.3830-1.3885

USD/JPY

Supports 101.70-101.30-101.10 | Resistance 102.00-102.20-102.50

GBP/USD

Supports 1.6840-1.6800-1.6760 | Resistance 1.6890-1.6920-1.6955