JPM G10 FX Daily

EUR / USD: Yields at Post-CPI Lows Undercut the USD Trade

Another night of attacks in Iran has not really moved oil much.

But risk is softer as tech suffers.

That has dragged US 2yr yields to fresh post-CPI lows.

After a week of spread paying, it is hard to have much conviction in USD at this juncture.

GBP: Coronation Nears, Not All Headlines Rosy

The Burnham coronation drifts closer and draws all the media focus in the UK.

Not all headlines are rosy:

  • Reports of left-wing revolts over Mahmood (Times)

  • Growing expectations of a raft of policy announcements on the immediate horizon, including North Sea and nationalisation

I saw a decent relaxation in GBP yesterday:

  • SHFs finally broke their buy streak

  • RM were also modest net sellers

Taking a step back, the technicals do not look good for GBP:

  • Cable has rejected 1.3500

  • EUR/GBP RSI has flipped back into neutral territory, a decent mean-reversion signal

I admittedly started fading GBP too early.

Now I find myself flat and wondering.

I still think it is worth seeing what Andy says next week before getting more involved.

Until then, I am keeping it tactical.

Key levels:

  • EUR/GBP: 0.8470/0.8600

  • Cable resistance turns to 1.3490/00

  • Cable support: 1.3325

EUR/USD: Range Persists, SHF Streak at 17

There is nothing really to add in EUR/USD.

Levels to watch remain 1.1340–1.1480.

The SHF EUR selling streak continues, now at 17 sessions.

Trade bias: EUR/USD neutral/range; GBP tactical/flat.
EUR/USD range: 1.1340–1.1480.
EUR/GBP range: 0.8470/0.8600.
Cable: Support 1.3325, resistance 1.3490/00.
Catalyst: Burnham policy detail next week.
Flow: SHF EUR sell streak now 17 sessions.

JPY: Takaichi Backs GPIF Shift — When, Not If

The GPIF story is gathering pace and remains underappreciated:

TAKAICHI: GPIF INVESTING IN JAPAN ASSETS IS KEY INITIATIVE

Now that the PM has thrown her weight behind the shift, it becomes a matter of when, not if.

As I wrote yesterday, this remains the key consideration for JPY bulls.

By extension, this underscores the shortened patience on JPY and JGB weakness.

That could bring the MoF in during the interim, unless the market starts respecting the signal.

I am keeping USD/JPY shorts here.

Trade bias: Short USD/JPY.
Signal: PM backing makes GPIF shift a “when, not if.”
Interim risk: MoF may act if the market ignores the signal.
Risk: Slow implementation and USD resilience delay JPY strength.

CHF: Added USD/CHF, But Conviction Is Low

There was nothing surprising in the SNB minutes yesterday.

Despite upside risk to inflation, they state it is unlikely they will hike.

Focus remains elevated around any CHF strength.

Attention really remains elsewhere, namely on US/Iran, as the softer USD from US CPI has quickly evaporated.

I have added a bit to USD/CHF longs here.

The rationale is mainly as a hedge to higher-beta longs that are struggling.

Conviction is not that high, though:

  • Short CHF is well subscribed in the short term

  • If US/Iran gets worse, CHF may go back to its roots and receive a safe-haven bid

Trade bias: Small USD/CHF longs as a hedge; low conviction.
Driver: Hedge to struggling high-beta longs.
SNB: Unlikely to hike; watching CHF strength.
Risk: Escalation revives CHF safe-haven demand.

AUD / NZD: Sticking With the AUD Recovery Play

Yesterday, Iran threatened to close Bab-el-Mandeb should the US target energy infrastructure.

Equities faced continued drawdowns overnight.

This complicates the USD outlook.

Risk sentiment and the recent softening in US data (NFP, CPI, PPI) are at odds with each other.

That has taken AUD/USD back onto a 0.69 handle.

It is hard to have much conviction in the current environment.

But I am sticking with the AUD recovery play for now.

On the flow side:

  • Systematics actually turned NZD sellers, marking a pause in their recent buy streak

  • RM were also better NZD suppliers

Trade bias: Long AUD recovery play; low conviction.
AUD/USD: Back on a 0.69 handle.
Tension: Softer US data versus weaker risk sentiment.
Risk: Further risk-off drags high beta lower.

CAD: Waiting for a Dip Below 1.40

There is little to add in CAD currently.

I am still waiting for a dip below 1.4000 to re-enter USD/CAD longs.

However, with oil bid and short CAD well subscribed, I would like to see some position reduction first.

Trade bias: Waiting to re-enter USD/CAD longs below 1.4000.
Concern: Oil bid and crowded short CAD.
Preference: Some position clear-out before re-engaging.
Risk: Oil rally keeps CAD supported and prevents the dip.

SEK / NOK: Staying Long NOK; NOK/SEK May Be Cleaner

EUR/NOK has been gyrating in a 11.05/11.10 range over the last two days.

Flow remains mixed:

  • Systematics are on a 7-day NOK buying streak

  • RM and HFs have generally been NOK sellers

I sold some EUR/NOK around 11.10 after the spike on soft CPI, given the bid to oil.

But we are struggling to make much new ground.

Perhaps NOK/SEK is the better expression.

I struggle to see EUR/SEK break below 11.00 in this environment.

Regardless, I am struggling to see an immediate off-ramp for US/Iran in the near future.

So I am happy to stay long NOK.

Trade bias: Long NOK; consider NOK/SEK expression.
EUR/NOK range: 11.05/11.10.
EUR/SEK floor: Struggling to break 11.00.
Driver: No near-term US/Iran off-ramp.
Risk: Oil reversal or sudden de-escalation weighs on NOK.