Psychology for major markets May 2nd
USD tone softening as yields drop post-FOMC. JPY firm on BoJ intervention
EUR/USD – Holding near 1.07 after rallying when US yields dipped following FOMC. Upside now favoured especially if recent evidence of European recovery gets further support.
USD/JPY – Downside risks increasing after BoJ intervention in NZ time further squeezing shorts, but organic decline still likely to require lower US yields.
EUR/GBP- EUR/GBP holding close to 0.8550 despite brief blip higher after OECD announced reduced UK growth forecasts. But risks still look weighted to the upside with BoE still having potential for more aggressive easing than is currently priced in.
AUD/USD – AUD bouncing again from support in the 0.64-0.6450 area as US yields drop post-FOMC. Upside favoured but more US yields declines required to trigger gains.
EUR/CHF – Retreated from the 0.9849 high and stronger Swiss CPI has knocked it lower after a retest above 0.98. Stronger EUR/USD and positive Eurozone sentiment required to take it towards parity.
Equities – Higher US yields have sent indices lower, but risk premia are still low and growth numbers solid, so a renewed decline in yields could see a retest of the highs.