Psychology for major markets Mar 28
USD firm into Easter, JPY weakness stretched
EUR/USD – Breaking below 1.08 ahead of the Easter weekend helped by some more hawkish Fed commentary. Mild negative tone likely to persist while the risk of a less dovish Fed exceeds the risk of a less dovish ECB.
USD/JPY – USD/JPY reversed after making a new 34 year high at 151.97, and upside remains restricted by intervention concerns. Yield spreads still suggests significant downside scope, but generally softer USD tone 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 has rejected the initial test of 0.86, and continues to be attracted to 0.8550.
AUD/USD – AUD softening into the Easter weekend as yields rise in the US and Europe. But 0.6450 area remains strong support provided regional equities don’t show renewed weakness.
EUR/CHF – CHF fell sharply after the SNB cut rates and has continued to soften. Risks remain on the CHF downside, although downside now more limited as other central banks are likely to follow suit in the coming months.
Equities – US markets holding close to all time highs helped by strong corporate earnings and the more dovish than expected Fed. Sentiment remains positive despite extreme valuations