Psychology for major markets Jan 5
USD firmer on Venezuela
EUR/USD – EUR/USD held a 1.17-1.18 range since December 11 but has broken lower as the USD gained on the Venezuela news. We still favour the downside near term with the US data remaining strong.
USD/JPY – Since the BoJ rate hike on December 19 USD/JPY has remained within the 155.50-157.80 range seen on that day. We favour a break lower but BoJ intervention may be required to achieve it.
EUR/GBP – EUR/GBP slipped lower as the BoE only voted 5-4 to cut rates with some mildly hawkish comments, and has broken below the 0.87 level helped by stronger UK money data. But GBP upside still looks very limited given soft UK real sector data.
AUD/USD – AUD remains well supported by yield spreads and can continue to press higher after seeing a new 2025 high on December 29 provided risk sentiment doesn’t dip significantly.
Equities – S&P 500 made new all time highs on December 26 and remains well supported by solid US data despite overextended valuations and heightened geopolitical risk.