JPM G10 FX Market regime

  • The dominant driver is deleveraging, leading to a reduction in popular trades across the FX market.

  • US labor indicators surprised weaker; US rates rallied hard (bullish duration impulse).

  • Despite weaker US data, the USD still held up at times, consistent with stress/liquidity dynamics.

  • Volatility has made it difficult to run concentrated spot exposure; options are preferred in some cases.

Implemented changes

  • GBP: Took profit on shorts after a strong session; sterling sell-offs have been short-lived without fresh catalysts. Plan is to resell rallies in the 1.3620–1.3650 area.

  • EURHUF: Reduced half the short ahead of Feb 14 (Orban event risk) and because EURHUF looked dislocated versus broader risk-off behavior.

  • EUR: Initiated a tactical long EUR cash position. Rationale: ECB did not push back on EUR strength and remains firmly on hold; heavy real money and corporate EUR selling suggests capitulation from long-term sellers and absorption at current levels; first signs of softer US data after repeated upside surprises. Tight risk control with a stop below 1.1750.

Core positioning and rationale

JPY (short USDJPY; shifting risk into options)

  • Thesis: Weakening US labor impulse, tech under pressure, and a sharp rally in US rates should weigh on USDJPY; weekend election risk is seen as the main reason spot is not lower.

  • Expectation: Potential for a meaningful move lower in the weeks after the election, contingent on post-election policy tone and domestic flow dynamics.

  • Implementation: Reduce spot vulnerability by transferring exposure into options; spot described as difficult to hold in this tape.

  • Levels referenced: 157.00–157.30 as near-term resistance/pivot; downside references include 156.19/156.32 (50d area) and 154.71/154.35 (100d area).

CAD (long USDCAD; add on weak payrolls)

  • Focus is Canada payrolls (notoriously volatile): consensus around +5k jobs and 6.8% unemployment.

  • Plan is to add to longs on signs of labor weakness.

  • Flow described as mixed: hedge fund CAD supply offset by real money demand.

AUD (long AUD; respect key technical level)

  • Risk-off deleveraging hit AUD; hedge funds notable sellers; AUDUSD tested ~0.6897.

  • Medium-term rationale unchanged (relative yield support; hedging demand expected to support dips), but higher vol argues for smaller sizing and more cross-hedging.

  • A close below 0.6900 is flagged as a near-term concern.

SEK (short EURSEK; event risk front and center)

  • Structural view remains tied to domestic/regional growth and fiscal differentiation, but positioning reduction has pressured SEK and improved entry points.

  • Near-term direction hinges on Swedish inflation after dovish Riksbank minutes.

  • Scenarios: a very weak core print likely drives further SEK unwinds; an in-line print should calm nerves and allow EURSEK to move back below ~10.6000. Flexibility is emphasized.

GBP detail and levels

  • Political leadership noise remains difficult to trade tactically given timing into local elections and binary leadership outcomes.

  • BoE was more dovish than expected; internal voting dynamics shifted and pay indicators have eased, making March a “live” meeting depending on incoming UK data.

  • Levels: EURGBP interest near the 200-day (~0.8653) with resistance 0.8720/30; cable support 1.3490/00 and resistance/containment around 1.3630.

Key takeaways for execution

  • This is a positioning-led tape: prioritize sizing discipline, staged execution, and options where convexity is needed.

  • Use upcoming event risk (US data next week, Canada payrolls, Sweden inflation, weekend Japan election, Feb 14 Hungary event) to manage exposure rather than forcing directional conviction in spot.