Institutional FX Insights: JPMorgan Trading Desk Views 16/1/26
Macro backdrop (why FX feels “harder” again)
US data is re-accelerating at the margin (examples cited: Philly Fed, Empire, claims), which makes it tougher to stay structurally USD-bearish.
- If growth is “fine everywhere” and noise weren’t so loud, there’d be less pressure on the 🇺🇸 Fed to cut.
- Market’s preferred expression: high-yielding / growth FX (higher beta), with ongoing rotation of funding across G10.
- They don’t want to chase USD strength too aggressively because they believe some risk premium is embedded around:
- 🇺🇸 Fed Chair political pressure / credibility
- the upcoming Lisa Cook case (Fed governance risk)
## Current positioning (what were’re actually running)
A quick snapshot of the book as described:
### ✅ Working / sticking with
- 🇿🇦 Long ZAR (working)
- 🇸🇪 Long SEK (working)
- 🇨🇦 Short CAD (working)
- 🇮🇱 Small ILS hedge against ZAR longs (kept into weekend)
### 🔄 Rotations / adjustments
- 🇦🇺 AUD long exited/trimmed (bored with price action)
- 🇳🇿 Rotated into NZD long after manufacturing PMI beat; seeing momentum inconsistent with FX underperformance
### ❌ Not working / managed down
- 🇪🇺 EUR long reduced (“chopped in half” post US CPI), still holding some
- 🇬🇧 GBP shorts cut after GDP (regret), now waiting for next week’s employment/CPI before re-engaging
---
## 🇪🇺 EUR: “funder/hedge” flow is rising; chart at a junction
The note flags euro being used increasingly as a funding currency / hedge, which changes the microstructure (EUR rallies get sold).
### Key technical markers (as stated)
- First break of the 200-day would “look poor” (bearish signal).
- But trend structure still intact until November lows at 1.1470 break:
- Above 1.1470 = still a series of higher lows since Q1 last year
- Below 1.1470 = trend breaks; basing thesis weakens materially
### What could save EUR near-term
- If the “US credibility angle” stabilises, the only real shot at EUR basing is:
- strong PMIs next week
- plus supportive real-money / franchise flows, which are “absent at present”
---
## 🇬🇧 GBP: tough session; positioning and levels mapped
Sterling sold off with EUR, while higher-beta FX outperformed.
### Flow color (desk-level)
- Heavy selling from short-term hedge funds (SHFs), partially offset by discretionary HF buying.
### Political noise
- Jenrick defection to Reform (after Zahawi move): not instantly tradable, but a trend of Reform momentum could be GBP-negative over time.
### Their preference
- Long EUR/GBP into UK data catalysts.
### Levels (explicit)
- EUR/GBP
- 200d: 0.86445
- Risk point: 0.86
- Resistance: 0.87
- GBP/USD (Cable)
- Broke 1.3390/1.3410 support pivot; closed below 200d (**1.34045**)
- 100d: 1.3366
- 50d: 1.33305
- 3-month pivot zone: 1.3275–1.3290
---
## 🇯🇵 JPY: jawboning slows the move; key intraday bands
JPY had a better session on aggressive rhetoric (Katayama) referencing alignment with US Treasury including intervention language.
- BoJ headlines suggest more FX focus; April pricing mentioned moving 14 → 16bp (small but notable).
- They still think USD/JPY can weaken the JPY further (“test the action”), but officials are successfully slowing the market.
### Levels (explicit)
- Support: 157.30/40
- Resistance: 158.75/90
- 160 framed as the next big figure above
They’re sticking with JPY longs and plan to trade gamma more actively.
---
## 🇨🇭 CHF: losing faith in USD/CHF short; prefers CHF/JPY long
With strong 🇺🇸 data keeping USD bid, they’re “less enamoured” with USD/CHF shorts.
- CHF longs still make sense as a hedge vs EM longs (geopolitics), but USD down vs low yielders is hard to justify if US data stays firm.
- Plan: convert some USD/CHF shorts into CHF/JPY longs.
### Levels / markers
- CHF/JPY near 196 handle (area of interest)
- USD/CHF near 200d at 0.8057
Flow note:
- Systematics turned CHF buyers after 3 days selling; real money small net buyers on week; HF small sellers.
---
## 🇦🇺 AUD & 🇳🇿 NZD: NZ data strengthens long bias; AUD rangey
### 🇳🇿 NZD
NZ manufacturing PMI highest since 2021; RBNZ nowcast lifted:
- GDP nowcast: 0.9% Q4, 1.4% Q1
Other supportive signs: filled jobs at 8-month high; building permits up.
They were early, disappointed by price action, but now giving NZD more time.
### 🇦🇺 AUD
No change: gyrating around 0.6700.
- Keeps AUD/CAD longs
- Reduced AUD/USD, but holds a constructive stance above 0.6650/60 (near-term line in the sand)
---
## 🇨🇦 CAD: remains bearish; short CAD vs EM longs
A 🇨🇳–🇨🇦 joint statement is seen as potentially raising US–Canada tensions medium-term.
- Continues running short CAD, mainly versus MXN and ZAR longs.
- Positioning “close to flat” → room for CAD to weaken further.
(Note: this is a more bearish CAD take than many “commodity = support” heuristics; it’s framed around macro/geo/policy risk and relative beta.)
---
## 🇸🇪 SEK & 🇳🇴 NOK: still like downside EUR/SEK; watching EURNOK DMAs
### 🇸🇪 SEK (EUR/SEK lower bias)
EUR/SEK briefly dipped below 10.70, bounced to ~10.72.
Drivers for lower EUR/SEK:
- better Swedish growth outlook
- rising real wages
- more govt issuance + fiscal differentiation
Tactics:
- Keep core shorts
- Would add on risk-off pop toward 10.82/85
- A break of 10.6650 is the “pay attention” level (last year’s low region)
### 🇳🇴 NOK (EURNOK downside bias)
EURNOK consolidating; they retain downside.
Technical encouragement would be:
- 2-day close below both 100 & 200 DMAs:
- ~**11.7330** and 11.7440
---
## 💡 What this note is really “saying” (in one screen)
- 🇺🇸 Data strength is the swing factor: if it continues, USD up becomes harder to fade.
- They prefer beta/growth FX expressions (NZD, SEK, ZAR) and are cautious on chasing USD because of Fed credibility/political premium.
- They’re actively managing around major technical pivots (EUR 1.1470; cable 200d; USDJPY 157–160; EURSEK 10.6650/10.85; USDCHF 0.8057).
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!