USD: J.P. Morgan On USD Post US Payrolls Print
The global bank notes the payrolls report has reinforced the case for dollar shorts. See below for more details, see its updated trade recommendations below.
J.P. Morgan: "Pre-payroll price action was deeper than we had anticipated and well in excess of the usual FX fundamental drivers, leaving positioning unwinds as the likely explanatory driver. The moves in the dollar suggest that a large overhang of dollar shorts has been unwound. US payrolls have reinforced the case for dollar shorts amid a US moderation, worsening US real yields, asymmetric risks around the Fed and a more active fiscal policy elsewhere. A rising tariff trajectory should keep the US catch-down to RoW as a credible driver for the dollar which has more to run. Treasury refunding doesn’t change the outlook on US term premium and hence on USD.
Macro Trade Recommendations: Maintain USD shorts vs. EUR, CAD. Re-initiate USD shorts that stopped out, i.e. AUD and NZD (stopped out at profit) and JPY (at a loss). Increase short GBP exposure pre-BoE via long EUR/GBP. Keep short GBP vs SEK, NOK, CHF. Maintain short EUR/Scandis. Stay short CAD/NOK.
Emerging Markets FX: MW FX after taking profits on OW FX in early July. We stay sidelined amid weak August seasonality. Our structural bias is bullish, supported by diminishing US exceptionalism, and we will look to re-engage.
FX Derivatives: Macro vol is low but our ML gamma models advocate caution against complacency. AUD/USD FVAs and CAD/JPY inverse put ratios are asymmetric risk off hedges. Euro-risk premia is a sale as the EUR washout is mature; sell EUR/ZAR ranges, EUR/LatAm skews and EUR/AUD - EUR/GBP corr swaps.
Technicals: EUR/USD slides from the 1.1743-1.1881 medium-term resistance zone. Cable reached our initial targets following a top pattern breakdown. USD/JPY has a clouded technical setup after this week’s whipsaw of the 200-day moving average."
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
USDCAD TECHS: Trend Outlook Remains Bearish
- RES 4: 1.4111 High Apr 4
- RES 3: 1.4016 High May 12 and 13 and a key resistance
- RES 2: 1.3920 High May 21
- RES 1: 1.3674/3776 20- and 50-day EMA values
- PRICE: 1.3607 @ 16:12 BST Jul 4
- SUP 1: 1.3557 Low Jul 03
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
The trend needle in USDCAD points south and this week’s move down reinforces current conditions. S/T gains between Jun 16 - 23 appear to have been corrective. Key support and the bear trigger is 1.3540, Jun 16 low. Clearance of this level would resume the downtrend and open 1.3503, a Fibonacci projection. Pivot resistance is at the 50-day EMA, at 1.3776. A clear break of this average would signal scope for a stronger recovery.
AUDUSD TECHS: Bull Cycle Remains In Play
- RES 4: 0.6700 76.4% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6688 High Nov 7 ‘24
- RES 2: 0.6603 High Nov 11 ‘24
- RES 1: 0.6590 High Jul 01
- PRICE: 0.6548 @ 16:05 BST Jul 04
- SUP 1: 0.6521 20-day EMA
- SUP 2: 0.6468/6373 50-day EMA / Low Jun 23 and a reversal trigger
- SUP 3: 0.6357 Low May 12
- SUP 4: 0.6275 Low Apr 14
The trend set-up in AUDUSD remains bullish and the pair is holding on to its recent gains. The latest break higher maintains the bullish price sequence of higher highs and higher lows, the definition of an uptrend. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 0.6603 next, the Nov 11 2024 high. Key short-term support has been defined at 0.6373, the Jun 23 low.
EURJPY TECHS: Northbound
- RES 4: 171.88 High Jul 19 ‘24
- RES 3: 171.28 1.382 proj of the Feb 28 - Mar 18 - Apr 7 price swing
- RES 2: 171.09 High Jul 23 ‘24
- RES 1: 170.61 High Jul 03
- PRICE: 170.22 @ 16:04 BST Jul 04
- SUP 1: 169.04 Low Jul 02
- SUP 2: 167.87 20-day EMA
- SUP 3: 167.13 Low Jun 20
- SUP 4: 165.66 50-day EMA
EURJPY traded higher on Thursday resulting in a print above 170.47, the 76.4% retracement of the Jul 11 - Aug 5 sell-off. A clear break of this price point would strengthen bullish conditions and signal scope for extension. This would open 170.28 next, a Fibonacci projection. The trend is overbought, a pullback would unwind this condition. Support to watch lies at 167.87, the 20-day EMA.
