Psychology for major markets May 22nd

EUR/USD – Holding in the mid-1.08s with the USD tone generally softer as US yields edge lower. Upside now favoured especially if recent evidence of European recovery gets further support, but some downside risks on the FOMC minutes.

USD/JPY – Downside risks persist on declining yield spread and threat of BoJ intervention, but JPY still soft in quiet markets as carry trades remain favoured. Move into the 140s possible if US yields hold at lower levels and volatility picks up.

EUR/GBP - EUR/GBP dropping back to test 0.85 after the stronger than expected UK April CPI, with the chance of June rate cut reduced to just 15%. Sentiment likely to stay GBP positive at least until the PMIs on Thursday.

AUD/USD – Moved above .66 supported by better China sentiment, and tested resistance at 0.67, but knocked back by weaker regional sentiment. More US yield declines may be required for a break higher.

EUR/CHF – New 1 year high reached at 0.9915, and further upside still possible if expectations of Eurozone growth continue to improve. PMIs will be a focus.

Equities – Regaining momentum after FOMC and payrolls. Risk premia are still low and growth numbers solid despite some softer data, so a further decline in yields could see a break of the highs.