Psychology for major markets 19 Dec

EUR/USD – EUR/USD slipped back from 1.10 after a softer than expected preliminary December PMI. 1.10 looks likely to be toppy near term despite the attempts by the ECB to maintain a hawkish stance, but 1.09 level may hold as long as equities remain steady
USD/JPY – USD/JPY well bid into the BoJ meeting, likely reflecting a short squeeze. Risks on the meeting should be to the JPY upside, with some indication of the intention of future tightening likely to be enough to turn USD/JPY lower.
EUR/GBP – EUR/GBP edged lower as UK PMIs outperformed the Eurozone. But there is limited scope for further rises in yield spreads, so the move below 0.86 has proved short-lived
AUD/USD – AUD was strongly higher on the back of more dovish Fed expectations, and 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.