JPM G10 FX Daily

EUR: Payrolls Was Not the Dollar Confirmation, But No Reversal Either

Thursday’s payrolls print feels like a long time ago — especially after the 2am wake-up last night.

For the recent dollar narrative, it certainly was not the confirmation the market needed to extend.

That said, the lack of price action in the opposite direction was interesting.

The drivers were likely:

• Mixed details in the data did not fully override the weaker headline.

• Some degree of US outperformance remains likely from a flow perspective, assuming debasement fears do not return.

• There is a long wait until next week’s CPI.

• Many investors simply wanted to get to the long weekend unscathed.

Personally, I see this as a bit of a vol killer in the short term.

We have come a long way since Warsh’s first FOMC presser.

So the greenback should consolidate for now.

Risk: Portfolio Neutralised

I have neutralised the portfolio overall.

That said, I still see merit in being funded in CHF versus where I am digging in.

Positioning changes:

• Increased ZAR longs.

• Reduced the cable short.

• Do not mind another shot at long AUD here with a tight stop.

• Keeping a smaller core short EUR/HUF.

EUR/USD: No Trade, Support Still Holding

The EUR rally after payrolls has failed to sustain for the reasons outlined above.

However, I do not really see a trade for now.

EUR/USD is struggling to break through the key technical support zone at:

• 1.1400

• 1.1340

Maybe we need to see next week’s US CPI print for a larger USD move one way or the other.

For Europe itself, our economists upgraded GDP forecasts at the end of last week, driven by lower oil and gas.

They also noted that potential benefits from fiscal reform in Germany still have room to run.

That supports the idea I had been writing about last week: shorts at these levels are not necessarily straightforward.

Topside levels:

• First resistance: 1.1480
  This includes the rebound highs from the week before last and the payrolls high.

• More significant pivot: 1.1530
  This is the short-term downtrend and post-FOMC rebound high.

Trade bias: Neutral EUR/USD.
Support: 1.1400–1.1340.
Resistance: 1.1480, then 1.1530.
Catalyst: US CPI next week.
Risk: CPI validates Fed-hike narrative and breaks support.

AUD / NZD / GBP: Long AUD Back On, GBP Back Neutral

As suggested in Thursday’s commentary, I bought AUD after NFP.

The headline came in weaker, although not alarmingly so.

The unemployment rate fell to 4.2%, but that was due to a 0.3pp fall in participation.

All things considered, the report was positive for:

• High beta

• Carry

After the report, I found myself long AUD against:

• USD

• EUR

• CHF

The bounce in AUD/USD off the 200dma remains encouraging.

With focus now turning to US CPI next week, vol should remain subdued.

That should continue to support the AUD view.

I will write more on the RBNZ and NZD tomorrow.

GBP: Tactical Long Closed

We had been tactically long GBP after Andy Burnham promised to adhere to the government’s fiscal rules, which allayed some market fears.

But we are now neutral.

AUD trade bias: Long AUD, tight stop.
AUD/USD: Bounce off 200dma encouraging.
AUD crosses: Long versus USD, EUR and CHF.
Backdrop: Lower vol supports high beta and carry.
GBP trade bias: Neutral.
Catalyst: US CPI next week; RBNZ for NZD.

JPY: Intervention Risk Still High

USD/JPY moved aggressively higher overnight.

The pair is on its way back toward recent highs after Thursday’s sharp move lower.

Tension around JPY remains elevated.

Last week’s weaker-than-expected payrolls print did little to change the broader trajectory.

We still think intervention risk is high at these levels.

So we have been running long JPY recently.

There is not much to add from Friday’s session.

Desk flows showed:

• JPY supply from hedge funds

• Partially offset by demand from systematic and real-money accounts

Trade bias: Long JPY due to intervention risk.
USD/JPY: Back toward recent highs.
MoF: Intervention risk high.
Flow: HF selling JPY; systematic/RM demand.
Risk: USD/JPY grinds higher before official action.

CHF: Still Bearish, But Positioning Is Crowded

USD/CHF is well off the highs after the softer headline payrolls print.

We still have a bearish CHF view.

Admittedly, we reduced into NFP because USD/CHF had already done a lot.

It is also becoming well subscribed in the hedge-fund community.

That said, with zero yield, CHF should continue to struggle in a world where:

• The Fed is expected to hike.

• The US continues to look strong.

• Investors still need funders for higher-yielding positions.

So buying dips in USD/CHF still makes sense.

Using CHF as a funder for high yield also makes sense.

FX intervention data showed less intervention than expected.

While we have not been short CHF solely because of expected SNB intervention, it does mean CHF rallies could go deeper than one would like.

Trade bias: Bearish CHF; buy USD/CHF dips.
Preferred use: CHF as funding currency.
Concern: HF positioning increasingly crowded.
Risk: Less SNB intervention means CHF rallies can extend.

CAD: Stay Long USD/CAD

USD/CAD is back near recent highs, despite Thursday’s softer-than-expected US payrolls print.

That print caused the greenback to back off from its recent highs, but CAD did not benefit much.

Last week was the deadline for USMCA negotiations.

As expected, the Trump administration formally declined to support Canada and Mexico in extending the agreement, instead pushing for annual reviews.

This was hardly a surprise and had limited immediate CAD impact.

But it should remain a medium-term headwind for CAD due to added:

• Policy uncertainty

• Trade uncertainty

Governor Macklem spoke in Sintra alongside other central-bank heads last week.

He reiterated that Canada has less urgency to tighten policy given its weak growth backdrop.

That aligns with the view I have held for some time.

It is one of the key reasons CAD should remain under pressure over the medium term.

So I remain long USD/CAD.

Trade bias: Long USD/CAD.
Drivers: USMCA uncertainty, weak Canada growth, BoC less urgent to tighten.
Risk: Strong Canadian data or oil rebound supports CAD.

SEK / NOK: Retain EUR/NOK Shorts Below 11.35/38

I retain EUR/NOK shorts while below 11.35/38.

The view is supported by:

• Technical setup.

• Norges Bank increasing NOK purchases.

• Norwegian unemployment falling from 2.1% to 2.0%.

• NFP being supportive for high beta and carry.

• Real-money NOK demand extending to six consecutive days.

• Norway beating Brazil in New York yesterday.

Short-term hedge-fund flow remains a small concern.

SHFs are on a five-day NOK selling streak.

But positioning in that sector is at year-to-date lows, so the turn, when it comes, could be significant.

SEK: Better Data, But Funder Headwind Remains

SEB housing data in Sweden rose for the third consecutive month, adding to recent positive domestic data.

SEK has also benefited from the lower USD.

However, the headwind of being a funding currency remains.

That makes Swedish inflation on Wednesday the important event of the week.

Norwegian inflation on Friday will also matter, especially with 16bp priced for next month’s Norges Bank meeting.

Trade bias: Short EUR/NOK below 11.35/38.
Supportive drivers: Norges purchases, lower unemployment, RM demand, high-beta/carry backdrop.
Concern: SHF still selling NOK.
SEK catalyst: Inflation Wednesday.
NOK catalyst: Norway inflation Friday.