Psychology for major markets Apr 5

EUR/USD – Softening from the highs as risk sentiment weakens on Middle East concerns, Difficult to see a break of the big 1.07-1.10 range near term, with 1.08-1.09 likely to contain.

USD/JPY – USD/JPY upside remains restricted by intervention concerns but the decline from the 151.97 34 year high seen last week has been very modest. Yield spreads still suggests significant downside scope, but generally softer USD tone or more risk negative trading will likely be required to turn the trend lower.

EUR/GBP- EUR/GBP showed a more positive tone post-BoE MPC meeting, with the market seeing more chance of a rate cuts as early as May, but latest UK data is strong and suggests the 0.8550-0.86 range will be maintained near term.

AUD/USD – AUD benefited from the generally risk positive market tone, trading above 0.66 for the first time since mid-March as carry trades were favoured, but heightened Middle East concerns have ensured it has come off its highs. And looks contained in a 0.6450-0.6650 range.

EUR/CHF – CHF fell sharply after the SNB cut rates, and has fallen further after soft March CPI. CHF becoming the favourite funding currency as rates fall, with JPY downside more limited by intervention concerns, but has scope for recovery if Middle East tension continues to undermine risk appetite.

Equities – US markets off the highs on rising Middle East tension, but underlying sentiment still positive and a worse growth/inflation trade-off looks necessary to trigger a bigger correction.