Psychology for major markets May 18

EUR/USD – The Euro found a bid after a catastrophic beginning of the week. Broad government yields initially jumped but have since moderated. It triggered the bids in USD pausing and a partial reversal as we head into the London session. If the recovery continues, the first resistance will be around 1.17 area.

USD/JPY –  Rally is gathering steam with JGB yields rising to historical level in a far end. The lack of joint intervention between U.S. and Japan suggest any intervention will be quite restrained. 10yr and 30yr JGB have jumped by more than to 10% since the beginning of last week. We expect the BoJ to announce special purchase operation to keep volatility down soon as it is clearly disruption in their eyes. USD/JPY is also heading to 160 figure.

AUD/USD – The Aussie has erased all Monday Asia losses but failed to gain traction on further recovery. It will be hard to see a sustained recovery without support from the broader sentiment.

Equities & Others –  Broader risk atmosphere is poor as U.S.-China meeting yield little fruit and geopolitical tension sees no sign of easing soon. Market participants are left disappointed and is being reflected in risk asset price action.