Psychology for major markets May 21

EUR/USD – The Euro is close to unchanged after early session volatility. The haven bids of USD have faded on optimism that a deal is close. We are wary such headlines implicating more than the facts. While a relief rally cannot be ruled out with a deal, it will likely be a choppy trading session ahead.

USD/JPY –  The moderation of JGB yields have put a lid on USD/JPY. Still the extra debt has raised market participants' concern on Japanese fiscal picture and will drag the JPY in a medium run. Market participants will also be looking at the BoJ's view regarding rising yields. In a short run, USD/JPY may still challenge the 160 figure.

AUD/USD – The Aussie stay depressed by poor precious metal performance and choppy risk performance. The latest labor report is of no help as it is one of the worst in recent years. With little likelihood of RBA further raising rates, the AUD/USD's easiest path seems to be south.

Equities & Others – Market participants are frontrunning a potential deal again as we see bids in equity rise on a subtle headline. Always with a grain of salt, we don't think such is sustainable until we see the deal agreed by both sides.