Psychology for major markets June 5th

EUR/USD – 1.08-1.09 range trading seen ahead of ECB meeting. Focus will be on prospects for future rate cuts with June cut fully priced.

USD/JPY – Sharp decline as yields drop and equities soften, but once again a strong rebound. Risks of a more substantial fall if risk sentiment weakens further, with yield spreads pointing sub-150.

EUR/GBP – Holding just above 0.85 with optimism on the European economy supporting the EUR. June UK rate cut prospects now priced out so limited upside for GBP unless ECB meeting increases EUR rate cuts expectations.

AUD/USD – Weaker risk sentiment undermining support. US yield declines likely to be required for a break above 0.67.

EUR/CHF – Shying away from a test of parity and dipping lower on strong Swiss GDP data, with risk negative tone exacerbating decline. Heavy short positions suggests downside risk.

Equities – Starting to look more fragile but still likely to gain support from lower yields on any significant dip.