Psychology for major markets Jan 9
Mildly firmer USD ahead of employment report
EUR/USD – We still favour the downside near term with the US data remaining strong but there is good technical support in the 1.16-1.1650 area and the near term outlook will depend on the US employment report and the US Supreme Court decision on tariffs.
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 pressure is currently on the top end, helped by general USD strength and positive equity sentiment.
EUR/GBP – EUR/GBP has broken below the 0.87 level helped by stronger UK money data and positive risk sentiment. 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.