Psychology for major markets 29 Jan

EUR/USD – EUR still showing a weak tone in early trading, with the unrest in the Middle East adding to the perceptions of a less hawkish ECB. But resilience of equities and lack of movement in yield spreads suggests limited downside.

USD/JPY – USD/JPY coming off new highs for the year and looking all the more stretched as yields fall in the US and Europe after the drone strike in Jordan. But real expectations of BoJ tightening may be necessary to turn the trend clearly bearish.

EUR/GBP – Underlying sentiment GBP positive as UK inflation is perceived to be more persistent than elsewhere, and UK PMIs continue to outperform, but positioning may be becoming a little extended.

AUD/USD – Better global equity performance helping the AUD to recover after recent weakness due to China concerns. Gains continue to depend on improving global and regional risk appetite.

USD/CHF – CHF benefiting from Middle East unrest, but a retest of the lows below 0.93 would likely require something that significantly undermined confidence and growth expectations.

Equities – US market remaining close to all time highs but may be vulnerable to any decline in easing expectations.