Psychology for major markets Jan 7
AUD firm, USD otherwise edging up
EUR/USD – We still favour the downside near term with the US data remaining strong and EUR data soft, but there is good technical support in the 1.16-1.1650 area.
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 has broken below the 0.87 level helped by stronger UK money data and positive risk sentment. 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.
Equities – S&P 500 made a new all time highs on January 6 and remains well supported by solid US data despite overextended valuations and heightened geopolitical risk.