Psychology for major markets 21 Dec

EUR/USD – 1.10 looks likely to be toppy near term despite the attempts by the ECB to maintain a hawkish stance, but 1.09 level is likely to hold as long as equities remain firm.

USD/JPY – USD/JPY gained after the BoJ left policy and guidance unchanged at the December meeting. Yield spreads still don’t support the gains, however, and 145 likely to prove toppy.

EUR/GBP – EUR/GBP higher after weak UK CPI, support now seen at .86 though selling expected ahead of .87. 

AUD/USD – AUD still has scope for gains if risk appetite continues to hold up, with the RBA less likely to turn dovish than the Fed or European central banks.

Equities – Fed speakers suggesting markets over-reacted to FOMC though downside risks to equities are modest without a change in the data tone or a sharp spike in UST yields.