Institutional FX Insights: JPMorgan Trading Desk Views 15/5/26
G10 FX Daily — Trading Desk Views
EUR: Short EUR Finally Has the Break
The move to a long-dollar bias was well timed.
There were plenty of questions yesterday about why now, given US yields had stopped rising post-PPI and there had been little appetite to chase over recent sessions. But the broader picture was more important: long ends remain under pressure globally, US equities kept reinforcing the exceptionalism narrative until late in the session, and technically FX is finally starting to break levels after weeks of lethargy.
There is also a geopolitical angle. Most people likely expected the Iran situation to have at least partially resolved by now. Instead, the continued stasis is starting to weigh on the optimists.
I am sticking with the long USD view given the breaks we have seen. The main risk is obvious: we get some positive Middle East headline over the weekend and the market fades the dollar rally on Monday.
Preferred USD longs are versus:
EUR: breaking lower and closing below the 200dma.
CHF: still the best funder and offers some protection if geopolitics improves.
GBP: political risk is turning genuinely negative.
Against that, I am using the dip in AUD to add to longs on crosses, and I am still hopeful we see 362-ish in EUR/HUF to resell.
EUR has been drifting lower all week. The move was not driven by one fresh headline, but the accumulation of US data strength, concern around Fed pricing, and US equity outperformance finally broke the camel’s back.
Strategists noted that the mood at the Paris macro conference has shifted slightly toward outright USD length, rather than simply using USD as the funder. They also recommended a EUR short last night.
The EUR bearish case is now broader than just cross underperformance:
Energy prices remain high with little end in sight.
Fed pricing may need to reprice the way other central banks already have.
EUR looks rich on quant metrics.
US exceptionalism is regaining traction.
A weekly close below the 200dma would be technically important.
Trade bias: Short EUR/USD.
Stop: Lower to just above 1.1730.
Initial target: 1.1500.
Take-profit bias: Look to take some back around 1.15, as anti-dollar sentiment may re-emerge there.
Risk: Positive Middle East weekend headlines or renewed broad USD selling.
GBP: Burnham Risk Is Now Real
Yesterday’s Streeting resignation looked odd once it became clear he was simply joining others in calling for Starmer to step down, rather than triggering a leadership campaign himself. If that was his best chance of becoming PM, why not take it?
The answer appears to be that he realised the temperature inside the Labour Party has shifted decisively left, and that the Burnham train has real momentum.
That was confirmed as London walked out, with Josh Simmons stepping aside in Makerfield and Burnham confirming he will seek NEC permission to run in the by-election.
The market implications are clear:
Burnham would likely beat Starmer in a leadership contest.
Burnham would not be good for UK assets.
The key question is whether he can actually win Makerfield.
This is far from certain. The general election majority was slender, around 5k, and many local wards were taken by Reform. But this is also Burnham’s manor, next to his home constituency of Leigh.
If Burnham wins, the show of strength against Reform would make him politically bulletproof. If he fails — and the mayoralty also falls to Reform — Labour would be plunged into even deeper crisis. But even then, the direction of the party would still look leftward. Rayner, freshly cleared by HMRC, could then become a more serious option.
There is no good news here for sterling. The party is lurching left, and uncertainty is rising.
I am short GBP versus USD, EUR and JPY and think we could see further additions today.
Flows yesterday were mixed but increasingly notable:
DHF: small GBP buyers.
RM: 1z sellers.
SHF: 0.75z sellers.
Given cable has broken and closed through all the key moving averages, I would expect SHF selling to accelerate.
Key cable levels:
100dma: 1.3481
50dma: 1.3431
200dma: 1.3426
Big pivot: 1.3380/00
Next support below pivot: 1.3160/80
EUR/GBP:
Next resistance: 0.8750
Trade bias: Stay short GBP.
Best expressions: Short GBP versus USD, EUR and JPY.
Risk: Burnham by-election path stalls or Starmer unexpectedly reasserts control.
JPY: Prefer Long JPY on Crosses
It is more of the same in JPY: fixed income everywhere is selling off and the broader USD is bid. That is not a good cocktail for the yen.
But the MoF is still in play.
Yesterday’s price action after USD/JPY extended through 158 looked consistent with another rate check. The speed with which fresh highs were made will be a clear signal to officials that bolder action may be needed, especially as the long end of the JGB market continues to make all the wrong noises.
I am maintaining mild tactical JPY longs, but now crossed up versus EUR, CHF and GBP, rather than expressing it purely through USD/JPY. The USD strength is simply too undeniable, especially after the confirmed 200dma break in EUR/USD.
Look for a more concrete reaction from authorities once 159 is threatened or broken.
US Empire and industrial production are due later.
Trade bias: Mild long JPY, preferably on crosses.
Preferred expressions: Short EUR/JPY, CHF/JPY and GBP/JPY.
USD/JPY trigger: Watch 159 for stronger official reaction.
Risk: If MoF does not act near 159, market may quickly test 160.
CHF: Keep Funding USD Longs With CHF
The wave of strong US data over the past week has finally pushed the dollar and US yields higher. That has put further pressure on CHF.
We continue to favour using CHF to fund USD longs and added back to CHF shorts yesterday as the broader G10 dollar view turns more bullish.
The CHF short case remains clean:
US yields are rising.
US data remains strong.
CHF is low-yielding.
The SNB remains uncomfortable with franc strength.
CHF has not behaved like a reliable safe haven during recent risk wobbles.
Carry demand still supports using CHF as a funder.
Flows were interesting. Hedge funds were large CHF buyers again yesterday, after having sold CHF in eight of the previous ten sessions. Meanwhile, the franchise continues to see real-money CHF outflows.
Trade bias: Short CHF versus USD.
Positioning: Added back to CHF shorts.
Key support: USD/CHF 0.7750/75 remains important.
Risk: A genuine Middle East escalation that revives CHF safe-haven demand.
AUD/NZD/CAD: AUD Is the Exception to the USD Bullish Bias
After another week of strong US data, with inflation also surprising to the upside, US yields and the dollar have finally started to move higher.
The case for being short USD versus G10 has weakened materially, especially against G3. Persistent US outperformance and strong equity markets have pushed investors back toward the US exceptionalism narrative.
That said, AUD remains the main exception.
The AUD macro picture is still constructive, so I prefer to stay long AUD on crosses rather than against USD. The best expressions are versus:
CAD
EUR
GBP
AUD/CAD remains attractive, though parity may offer resistance. AUD should also benefit against EUR and GBP if the USD rally broadens through G3 and UK political risk continues to build.
Flows yesterday:
AUD saw significant supply from systematic accounts.
CAD flows were dominated by hedge-fund selling.
NZD flows remain subdued, underscoring how little attention the currency is getting.
Trade bias: Long AUD on crosses.
Preferred expressions: Long AUD/CAD, AUD/EUR and AUD/GBP.
CAD view: Medium-term bearish.
NZD: Low conviction; remains ignored.
Risk: Broader risk-off that hits high-beta FX and overwhelms AUD’s relative positives.
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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!