Psychology for major markets Feb 6

EUR/USD – EUR still on the back foot as US yields continue to rise following the strong employment report on Friday. While European yields are, at the moment, also rising, it is harder to justify higher European yields, so EUR/USD still has downside risks.

USD/JPY – USD/JPY stabilising after the sharp gains on Friday, with spreads still suggesting it is a bit stretched despite the recovery in US yields. But Japanese cash earnings data still soft, suggesting limited scope for BoJ tightening and undermining JPY sentiment.

EUR/GBP – Underlying sentiment GBP positive as UK inflation is perceived to be more persistent than elsewhere, and UK PMIs continue to outperform, but positioning may be becoming a little extended.

AUD/USD – AUD under pressure as US yields rise, but finding some support on the crosses from better Chinese equity performance while a more hawkish RBA has also helped halt losses.

USD/CHF – CHF benefiting from Middle East unrest, but a retest of the lows below 0.93 would likely require something that significantly undermined confidence and growth expectations.

Equities – US market remaining close to all time highs but may be vulnerable to any further decline in easing expectations.