JP Morgan

EUR:

Something in Friday’s labour market report for everyone, a strong headline number coupled with a move up in the unemployment rate and strong, but steady earnings. I guess none of those factors are enough to meaningfully change narratives at this point, not pointing to a hurried need to reduce stimulus nor to question whether the Fed’s slightly hawkish shift was a mistake.

Overall, I sense that whilst the usd has moved over the course of the second half of June, people are only socially engaged in FX, the drift towards normalisation not fast enough to spur genuine surprise, and growth surprises plateauing somewhat but stabilising at levels that shouldn’t overly concern. So having cut most of our dollar longs in the moves last week, it leaves us comfortable with lower conviction levels for now, keeping a bias to be long usd’s against the low yielders in particular but looking for dips to buy rather than chasing higher, and with a preference for chf over the euro and jpy.

GBP:

Good figures from the US but they were very much expected (whispered to be better) and this left newly minted USD longs struggling as the DXY put in a key day reversal along with flipping back into neutral from overbought on the RSIs – a pair of signals that leaves me comfortable that we may see good opportunities to rebuild the USD longs we cut last week at better levels over the coming sessions. Sterling is trading mildly well this morning, maybe it is because it is coming home or maybe it has something to do with Boris announcing the final reopening step later today, we are out of most of our EURGBP but keep a short bias – we hope that better opportunities present themselves to get short ahead of the August MPR but EURGBP has been stuck around 86p now for a few months. Should be quiet today given Independence Day holiday; 1.3810/20 is interim support in cable with 1.3650/70 the big level below (0.8565/70, 0.8530/40 EURGBP) while 1.3875/80 is next resistance with 1.3925/35 above (0.8625/30, 0.8670 EURGBP), final PM Services later.

JPY:

Payrolls disappointed the elevated levels of excitement/anticipation on Friday, despite a beat in the data supporting the previously strong price action for the USD. It’s fair to say it’s a decent number for risk and equities, but given the peculiar correlation of higher equities, higher FI, higher USD last week, I also think it’s fair to say it’s not exactly clear what that means for FX. We’ve been trading from the long USD side of late but I have to concede that I can’t see the USD continuing to trade so firm across the board as it did last week if equities remain unflinched. I guess the most obvious USD to be long in this environment is USDJPY and it does feel like the market has a bit of FOMO above 111, having stopped out of long xJPY positions post Fed so I do think that is a USD pair that can continue to trade ok. 111.70 is the next resistance to watch ahead of the major 112.20 level, a break through the latter would start to look very bullish. Dips on the day to 111.00 then 110.50 should be well supported.