Institutional FX Insights: JPMorgan Trading Desk Views 14/7/26
JPM G10 FX Daily
EUR / USD: Waller Raises the Stakes for CPI
Things in Iran are really heating up again.
We are certainly starting to question the underlying TACO assumption that has underpinned recent market comfort.
I have zero edge here, and I am sure the Truths will continue to flow.
The other big update was a pretty hawkish Waller after London left yesterday.
That has moved July to around 50/50.
His comments point to today’s CPI being pivotal for the decision, so needless to say, the hype has increased.
We added more USD to the portfolio yesterday via the CHF leg to insulate USD/JPY shorts over CPI.
EUR/USD: 1.1340 Is the CPI Pivot
Rhine droughts are taking the oxygen in EUR news flow this morning.
This can be pretty burdensome for German GDP.
Flow-wise:
SHFs continued their EUR selling streak, now at 14 sessions
This was offset by corporate demand in our franchise yesterday
The key downside level remains 1.1340, the Fibonacci level, especially over today’s data.
If cooler CPI triggers a squeeze, I would not have much interest in fading EUR before the 1.15 handle.
Trade bias: Bearish bias, but do not chase lows.
Key support: 1.1340.
Fade zone on squeeze: 1.15 handle.
Catalyst: US CPI today.
EUR flow: SHF sell streak now 14 sessions.
Risk: Cool CPI squeezes EUR/USD higher before better sell levels.
GBP: Burnham Confirmed; Long EUR/GBP
For sterling, Andy Burnham has now been mathematically confirmed as PM with support from 349 MPs.
The coronation will proceed on 20 July.
From there, we should get more colour on:
Policy
Personnel
Cabinet picks
As I have been writing, risk/reward for GBP looks more negative from here after the “not so bad” relief rally enjoyed by UK assets.
Bailey speaks at Mansion House later.
He has been more dovish recently, focusing on the softer labour market.
I remain long EUR/GBP.
Key levels:
EUR/GBP: 0.8470/0.8600
Cable: 1.3325/1.3500
Flows:
SHF GBP buy streak extended to 13 sessions
DHF GBP sell streak extended to 7 sessions
RM were also 2z GBP buyers yesterday
Trade bias: Long EUR/GBP.
EUR/GBP range: 0.8470/0.8600.
Cable range: 1.3325/1.3500.
Catalyst: Bailey at Mansion House; Burnham cabinet/policy detail.
Risk: Persistent GBP buying pressure squeezes EUR/GBP lower.
JPY: GPIF Pressure Is Not Going Away
GPIF commentary is becoming a daily occurrence.
It is not going away.
Katayama pushed back on yesterday’s source story with:
GPIF portfolio adjustments to be made if needed
This was followed by similar comments from Ueno at the Ministry of Health, Labour and Welfare.
Of course, they are falling short of saying it will happen and when.
They need to be careful given the scale of the sums involved.
One argument is that they are just trying to stop JPY from selling off.
But by playing these cards, the change in sentiment and expectation of structural flow will become unavoidable.
Katayama also floated NISA regulatory changes, including JGBs.
They mean business here.
It is easy to understand why JGBs have flown overnight, helped by a strong 20yr auction.
Trade Expression: Prefer CHF/JPY Over USD/JPY Into CPI
JPY remains disappointing by comparison for now.
That is mostly due to the USD leg.
We shifted most cash exposure into CHF/JPY yesterday to reflect hawkish Trump/Fed risks.
Flows yesterday:
DHF were good JPY sellers, around 1z
SHF were also good JPY sellers, around 1z
Key levels over CPI and Warsh today:
USD/JPY: 160.50
USD/JPY: 163.00
CHF/JPY 200dma: 198.65
Trade bias: JPY upside, preferably through CHF/JPY into CPI.
Driver: GPIF/NISA/JGB policy signal.
USD/JPY levels: 160.50/163.00.
CHF/JPY level: 198.65 200dma.
Risk: Hot CPI keeps USD leg dominant and delays USD/JPY downside.
CHF: Break Higher in USD/CHF Supports Core Longs
CHF weakness was broad-based yesterday, against:
USD
EUR
The crosses
There was no obvious driver for the outsized sell-off.
But readers know we have been bearish CHF for a while.
We also continue to see real-money CHF selling.
The break of 0.8120/40 in USD/CHF has added us back to the core longs we already had.
We are running this into US CPI as a hedge to EMFX longs elsewhere.
Trade bias: Long USD/CHF / short CHF.
Break level: 0.8120/40.
Role: Hedge to EMFX longs.
Catalyst: US CPI today.
Risk: Soft CPI reverses USD/CHF breakout.
AUD / NZD: Rotate AUD/USD Into AUD/NZD
RBNZ Chief Economist Conway spoke overnight.
He did not push back on market pricing for this year and said he sees:
“Upside risk to 3Q inflation forecast”
But he also said:
“Near-term price pressures appear to have eased for now”
The market focused on the more hawkish parts of the speech.
Year-end RBNZ pricing moved toward +60bp.
NZD was pushed toward key technical levels:
NZD/USD: 0.5800
AUD/NZD: 1.1940/00
The NZD move is starting to feel overdone.
With geopolitical risks rising, Waller sounding hawkish yesterday, and NZD nearing big resistance levels, it makes sense to rotate token AUD/USD longs into AUD/NZD ahead of US CPI.
Flows:
Franchise were better AUD sellers
Systematic NZD demand continued, with their buy streak now 6 of the last 7 sessions
This was offset by RM and HF NZD supply
Trade bias: Rotate from token AUD/USD longs into AUD/NZD.
AUD/NZD key zone: 1.1940/00.
NZD/USD resistance: 0.5800.
Driver: NZD rally looks stretched.
Risk: Hawkish RBNZ repricing continues and AUD/NZD breaks lower.
CAD: Edging Into USD/CAD Longs
CAD is performing relatively well against USD, helped by the recent oil bid.
We get the BoC tomorrow.
But the first hurdle is today’s US CPI.
I have used this dip to start edging into USD/CAD longs.
The rationale remains:
Bearish CAD view
Weak Canada economic prospects
A hot US CPI could lift Fed-hike odds
USD/CAD can push back above 1.4200 on a decent inflation beat
The main headwinds for CAD shorts are:
Positioning
Higher oil
But rising Fed-hike odds should outweigh both if CPI beats.
Trade bias: Building USD/CAD longs on dips.
Upside trigger: Hot CPI, move back above 1.4200.
Catalyst: US CPI today; BoC tomorrow.
Risk: Oil rally and positioning keep CAD supported.
SEK / NOK: NOK Strong, But Do Not Chase Here
We saw decent NOK selling from the real-money community in the London morning yesterday.
With EUR/NOK pushing back toward 11.18, we were patting ourselves on the back for taking profit on EUR/NOK shorts.
That was short-lived.
With the blockade coming back in and oil sharply higher, EUR/NOK pushed back lower and is now trying to break below 11.10.
NOK/SEK is above 0.9950.
It is hard to see a short-term solution between the US and Iran.
But I am hesitant to chase NOK here given levels.
There is not much to add in Sweden.
I would buy a dip in NOK/SEK toward 0.9875 if seen.
Trade bias: Do not chase NOK here; buy NOK/SEK dips.
EUR/NOK: Testing below 11.10.
NOK/SEK: Above 0.9950.
Preferred NOK/SEK buy level: 0.9875.
Risk: Oil escalation keeps NOK bid and leaves no dip.
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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!