Psychology for major markets Apr 8

EUR/USD – Softened from the highs as risk sentiment weakened on Middle East concerns, but risk has recovered, and difficult to see a break of the big 1.07-1.10 range near term, with 1.08-1.09 likely to contain.

USD/JPY – USD/JPY upside remains restricted by intervention concerns but the decline from the 151.97 34 year high seen last week has been very modest. Yield spreads still suggest significant downside scope, but generally softer USD tone or more risk negative trading will likely be required to turn the trend lower.

EUR/GBP- EUR/GBP showed a more positive tone post-BoE MPC meeting, with the market seeing more chance of a rate cuts as early as May, but latest UK data is strong and suggests the 0.8550-0.86 range will be maintained near term.

AUD/USD – AUD came off the highs on  heightened Middle East concerns but has bounced and now looks to have potential to retest above 0.66.  

EUR/CHF – CHF fell sharply after the SNB cut rates, and has fallen further after soft March CPI. CHF becoming the favourite funding currency as rates fall, with JPY downside more limited by intervention concerns.

Equities – US underlying sentiment still positive and a worse growth/inflation trade-off looks necessary to trigger a bigger correction.