Psychology for major markets Jan 2
Most pairs confinded to ranges since mid-December, AUD firm
EUR/USD – EUR/USD has been holding a 1.17-1.18 range since December 11. We favour the downside near term with the US data remaining strong.
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 slipped lower as the BoE only voted 5-4 to cut rates with some mildly hawkish comments, and has put pressure on the 0.87 level but held above there so far. Upside still favoured longer term with more BoE easing likely.
AUD/USD – AUD remains well supported by yield spreads and can continue to press higher after seeing a new 2025 high on December 29 provided risk sentiment doesn’t dip significantly.
Equities – S&P 500 made new all time highs on December 26 and remains well supported by solid US data despite overextended valuations.