JPM G10 FX Daily

EUR: Month-End Surprise, Payrolls Now the Real Test

I have to laugh.

All the analysis and anticipation into month-end, and it rarely ends as predicted.

The dollar came for sale yesterday afternoon in reasonably aggressive price action, contrary to most opinion.

Anyway, the next 24 hours should be interesting ahead of the US holiday on Friday.

Warsh speaks on the Sintra panel this afternoon, then payrolls land tomorrow.

Anticipation is high.

My take is that Warsh will not say too much, in line with his distaste for guidance.

There is some suspicion he could sound a bit more dovish because he is voicing his own views rather than speaking for the committee.

But I do not think he will be too market-moving.

Payrolls will matter more.

A solid number will keep pressure alive into CPI and the July FOMC.

There is clearly plenty of excitement around the Fed-hike narrative. But after corrections and some position reduction in the last few sessions, it will not take much for the market to continue running with the recent story.

Risk: Replenishing USD Length

I used yesterday afternoon’s dollar selloff to replenish USD longs further.

Actions:

• Added back some USD/CHF cash.

• Exited the rest of tactical cable longs.

• Now leaning slightly short cable, as the Burnham bounce may not last.

• Still hold some short EUR.

• Retain USD/ZAR and EUR/HUF on the EM side.

EUR/HUF continues to squeeze more positions out.

After having loved the trade, the market is starting to wonder whether this is as good as it gets.

I still think these are good medium-term levels to fade up to 360.

The story remains intact, and there is no need for the forint to sell off unless the world goes full risk-off.

EUR/USD: Re-Sold the Rally, But Don’t Overstay at New Lows

Most ECB speak seems hawkish, but centred on September for any hike if needed.

Lagarde speaks again this afternoon and is unlikely to deviate much from that message.

Given the USD dynamic, I used this EUR/USD rally to re-sell.

That said, I do wonder whether oil at current levels and a less aggressive ECB gives the Eurozone growth story a chance at some stage.

So while I err short EUR, and while people will get excited if payrolls comes in strong tomorrow, I think any new lows for the move should be used to reduce a bit again.

Preference would be to hold USD exposure elsewhere, like CHF.

Key levels:

• Closing break below 1.1340 matters.
  This is the 38.2% retracement of the move from 2025 lows to 2026 highs.

• Back above 1.1500, we should see squaring and more talk about summer ranges.

Trade bias: Short EUR/USD on rallies, but reduce into new lows.
Key downside close: Below 1.1340.
Topside squaring trigger: Back above 1.1500.
Preferred USD expression: USD/CHF over pressing EUR at lows.
Catalyst: Payrolls tomorrow.

GBP: Burnham Bounce May Fade, But Crosses Still Look Better

Month-end was more relaxed than recent iterations.

It was also much more USD-negative than whispers and expectations suggested.

Pretty random stuff.

But having taken off a fair bit of USD length last week, it was a good opportunity to top up cores into NFP.

I still think Warsh will hide behind task forces and his new no-guidance mantra this afternoon.

Sterling: Mildly Positive, But Less Risk

I still do not have much sterling risk.

But I can see how GBP trades well going forward.

Bailey was a little dovish yesterday.

However, monetary policy remains very dependent on the Middle East situation, so I am not sure how quickly or easily the next, and last, hike comes out of pricing.

Local news is focused on the new £5bn defence hole Starmer is leaving Burnham and how it will be financed.

It is interesting to see O’Neill, a key Burnham adviser, pushing back forcefully on tax rises, especially for businesses and banks.

That is market-friendly.

I keep a mildly positive attitude toward GBP.

Strategy:

• Sell EUR/GBP closer to 0.8640

• Or sell on a break of 0.8600

• Buy GBP/CHF dips

GBP/CHF first support is 1.0660/70.

Trade bias: Mildly constructive GBP, but tactical.
EUR/GBP sell zone: Around 0.8640.
Break trigger: Below 0.8600.
GBP/CHF: Buy dips; first support 1.0660/70.
Cable: Tactical longs exited; leaning slightly short.
Risk: Burnham bounce fades or fiscal concerns return.

JPY: MoF Is the Only Game in Town

JPY remained dreadfully weak into the rebalancing window.

Cross-JPY made handsome gains, and we remain firmly in the red zone.

Could NFP be holding MoF back?

Certainly possible.

That is why any JPY length needs to be crossed up going into the print.

Tankan was stronger for Q2, but nobody really cares at this point.

The MoF reaction function remains the only game in town.

Mimura Finally Speaks

We finally heard from Mimura, and he kept his cards close to his chest.

He spoke mostly about prior intervention.

Given how communicative he was around that episode, the market is scouring his rhetoric even more closely than usual.

I would be amazed if they followed a similar pattern this time, because that gives JPY shorts a chance to reduce and fade in greater size.

I think they will want to inflict more pain this time.

I am keeping JPY longs modest and crossed up.

Short-term gamma around NFP and the US holiday makes sense to me.

Price levels above 162 are now much less sustainable.

Trade bias: Modest JPY longs, crossed up.
USD/JPY: Above 162 is unsustainable.
MoF: Red zone; action risk very high.
Tactic: Use short-term gamma around NFP/US holiday.
Risk: Strong NFP delays MoF and extends USD/JPY upside.

CHF: Back Long USD/CHF Into NFP

CHF strengthened again over month-end.

I used the dip in USD/CHF to get back into longs.

Short CHF still makes a lot of sense, especially in a portfolio where I am long higher-yielders elsewhere.

I am also happy to sit long USD/CHF into NFP tomorrow.

Unless payrolls comes in significantly below expectations, it is hard to look past:

• US exceptionalism

• Hawkish Fed

• Low-yielding CHF underperformance

Flows remain mixed.

It is interesting to see systematics back to a more neutral stance in CHF after selling CHF at the start of June.

Trade bias: Long USD/CHF.
Catalyst: NFP tomorrow.
Rationale: US exceptionalism + hawkish Fed + low-yielding CHF.
Risk: Significantly weak NFP supports CHF and hurts USD.

AUD / NZD: Sidelined, Waiting for NFP

My long-USD view, which I express elsewhere, is weighing against my better cyclical outlook.

That makes the AUD and NZD outlook slightly confusing.

Mixed domestic data overnight from Australia did little to clarify the situation.

The month-end-induced rally quickly faded on the back of weaker CNH and gold.

AUD is underperforming on crosses again.

Warsh’s first appearance as Fed Chair at Sintra today will be closely watched before tomorrow’s all-important NFP print.

I am not sure we get much from him today.

AUD/NZD: Bias Long AUD Crosses, But Technicals Are Poor

The bias remains to be long AUD on crosses.

However, AUD has broken below moving averages in several pairs over the past month.

NZD technicals are even more bearish.

So I am sidelined.

Technically, the AUD/USD 200dma is around 0.6860 and worth watching.

For now, I have my tactical trading hat on and am waiting for tomorrow’s data to reassess.

Trade bias: Flat AUD/NZD; tactical only.
AUD/USD key level: 0.6860 200dma.
Bias: Long AUD crosses in principle, but technicals poor.
Catalyst: Warsh today, NFP tomorrow.
Risk: Strong USD move overwhelms cyclical support.

CAD: Added USD/CAD on the Month-End Dip

Canadian GDP grew 0.5% m/m and 1.1% YoY, beating estimates.

That said, growth is still below 2%, and oil prices are off the highs.

I still think CAD will underperform on crosses.

So I am staying short CAD.

Month-end was random as ever, with the USD heavily offered into 4pm.

That move has since partially reversed.

I used yesterday’s USD/CAD selloff to add to USD longs.

Flows showed better USD/CAD demand, mainly from:

• Real money

• Corporate accounts

Trade bias: Long USD/CAD / short CAD.
Canada GDP: 0.5% m/m, 1.1% YoY.
Action: Added USD/CAD on month-end dip.
Flow: RM and corporate USD/CAD demand.
Risk: Oil rebound or sustained Canada data improvement.

SEK / NOK: Norges Supports Short EUR/NOK

In Monday’s commentary, I highlighted Norges FX purchases as something to watch, given the recent fall in energy prices.

It was no surprise to me that Norges increased the daily NOK purchase amount.

But the degree of increase was more than expected.

Regular readers know I have recently sold EUR/NOK, based on:

• Oil prices stabilising

• RSI in overbought territory

Yesterday’s announcement supports that view further.

A two-day close above the 200dma around 11.3800 would be disappointing.

Hedging Hot NFP Risk

The next hurdle is likely tomorrow’s US NFP report.

If it comes in hot, we should see USD/NOK demand.

But USD/SEK would likely see the biggest reaction.

So I will entertain buying some EUR/SEK as a partial hedge to insulate against that move.

Maybe I should just buy EUR/NOK downside instead.

This morning, Swedish manufacturing PMI rose from 57.4 to 58.3, helped by new orders.

However:

• Employment fell

• Prices remained steady

• EUR/SEK did not react

Trade bias: Short EUR/NOK.
Supportive factor: Norges increased NOK purchases more than expected.
Reassessment: Two-day close above 11.3800.
Hedge idea: Buy EUR/SEK into hot NFP risk.
Risk: Hot NFP lifts USD/NOK or oil resumes lower.