Psychology for major markets Apr 29

EUR/USD – Holding above 1.07 as optimism about a relative Eurozone recovery builds after the PMIs. Firm equities help underpin positive sentiment, but yield spreads don’t suggest any major advance is likely.

USD/JPY – Sharp reversal on presumed BoJ intervention after a test above 160. Market will no doubt test BoJ resolve, but intervention may well mark the high. Further downside momentum still likely depends on lower US yields.

EUR/GBP- Risk positive trading has seen EUR/GBP drop back to 0.8550. Still hard to see a break below 0.85 unless BoE proves more hawkish than expected on May 9.

AUD/USD – AUD boosted by stronger than expected Q1 CPI with RBA now not priced to cut rates this year, and generally risk positive sentiment. But softer US yields still required if AUD is to test up to 0.66.

EUR/CHF – Retreated from the 0.9849 high but stronger than expected EUR PMIs have restored a mildly positive tone. Very large short CHF positioning in the CFTC data underlines negative CHF sentiment but may also suggest positioning overdone.

Equities – Higher US yields have sent indices lower, but risk premia are still low and growth numbers solid, so a renewed decline in yields could see a retest of the highs.