AUSSIE 3-YEAR TECHS: (U5) Trading Above Support

• RES 3: 97.190 - High May 5 2023
• RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg 
• RES 1: 96.860 - High Apr 07
• PRICE: 96.655 @ 17:10 BST Aug 01
• SUP 1: 95.900 - Low Jan 14  
• SUP 2: 95.760 - Low 14 Nov ‘24
• SUP 3: 95.480 - Low Jan 11 2023 and a major support 

Aussie 3-yr futures gapped sharply higher Monday, clearing the weekly high on soft US NFP data. This narrows the gap with resistance at 96.730, the Sep 17 ‘24 high, leaving 96.860 as the next key level. Instead, a continuation lower would strengthen a bearish theme. This would refocus attention on 95.760, the 14 Nov ‘24 low. Conversely, a reversal higher would refocus attention on 96.860, the Apr 7 high.

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."