Psychology for major markets Jan 12
USD slips a little on Fed independence concerns.
EUR/USD – Recovering slightly on concerns about Fed independence after recent dip, with good support still seen in the 1.16-1.1650 area. A potential Supreme Court decision on tariffs and US CPI along with geopolitics are focuses this week.
USD/JPY – USD/JPY broke above 158 on concerns about a potential Japanese election being called in February. There are still risks of intervention but pressure remains on JPY downside.
EUR/GBP – EUR/GBP has broken below the 0.87 level but GBP upside still looks very limited given soft UK real sector data, with the latest construction data the weakest since May 2020.
AUD/USD – AUD remains well supported by yield spreads and can continue to press higher after seeing a new 1 year high following the latest CPI data, but remains dependent on good equity sentiment.
Equities – S&P 500 made a new all time highs on January 7 and remains well supported by solid US data despite overextended valuations and heightened geopolitical risk.