Institutional FX Insights: JPMorgan trading Desk Views 1/5/26
JPM G10 FX
Big Picture
FX price action was livelier than expected, with yen intervention, month-end flows and equity strength driving most of the move. The bigger puzzle was the softer tone in oil after the overnight panic highs, especially given Iranian rhetoric remained far from conciliatory. The geopolitical backdrop is still opaque, and it is too early to say we are “out of the woods.” Outside the Middle East, however, the macro signal remains resilient: US equities are making new highs, earnings are holding up, and initial claims are making new lows. The risk is that the longer the energy shock persists, the market eventually hits a tipping point where inflation, margins and central bank reaction functions become harder to ignore.
The dollar still does not trade as well as it should given the combination of US equity outperformance, a stubborn Fed and Brent still near elevated levels. That keeps the tactical bias modestly bearish USD, but after sizable month-end moves distorted by USD/JPY intervention, this feels like a place to reset rather than press. Cable and AUD outperformed EUR cleanly, while yen shorts worked as a hit-and-run trade. For now, the cleanest residual position is a small short EUR/HUF, with optionality retained via medium-term low-delta EUR topside in case the anti-dollar trade returns aggressively.
EUR — Stuck Between Stagflation and Month-End USD Selling
The ECB delivered largely as expected: no panic, but clearly on high alert. Lagarde avoided a firm pre-commitment to June, but the message was that if energy prices remain elevated, the ECB will likely have to act. The macro framing is classic stagflation: growth risks lower, inflation risks higher.
EUR underperformed for much of the session, which fit the bearish tactical view, but it recovered during the month-end window as broad dollar selling emerged. The currency still feels rangebound and hard to press directionally.
Trading Takeaway
EUR remains a poor standalone long while Europe absorbs the energy shock.
But broad USD selling can still lift it mechanically.
Better to express EUR weakness via crosses than outright EUR/USD shorts.
Keep some low-delta medium-term topside in case the anti-dollar trade reasserts.
Preferred bias: tactical EUR underperformance versus higher-beta or higher-yielding G10, rather than aggressive outright EUR/USD shorts.
GBP — BoE Less Hawkish, But Sterling Still Has Dip-Buying Appeal
The BoE was less hawkish than expected. The statement was more balanced than in March, and there was only one dissent from Pill. Bailey continued to emphasize limited pricing power, despite recent data looking firmer. The MPC appears more willing than the ECB to wait for evidence of second-round effects from the energy shock before tightening again.
Hike pricing faded across the curve, though the size of the move was difficult to separate from month-end flow and oil volatility. Sterling still rallied hard on month-end dynamics, and the recent data pulse remains supportive. Political risk around Starmer looks bad, but arguably much of that is now priced in near term.
Trading Takeaway
Sterling remains a buy-on-dips currency, but the rally was worth reducing into.
BoE pricing is less supportive than ECB pricing near term.
The better entry is lower, not here.
Levels to watch:
Cable: look to reload closer to 1.3550
EUR/GBP: look to fade strength toward 0.8660
The King’s tariff relief on whisky is a small positive, though not enough to change the broader UK macro story.
JPY — Intervention Changes the Near-Term Rules
There is little doubt the move was official intervention. What matters now is not whether the MoF acted, but how persistent they are willing to be.
The move had some familiar features: a roughly five-big-figure initial USD/JPY drop, followed by apparent follow-up action. But this episode also differed from prior interventions because of the overt rhetoric immediately beforehand. Katayama and Mimura effectively signaled that action was close, and the latest comments are important:
“Upcoming holidays are only a beginning.”
“Still seeing speculative moves.”
That points to a much more active MoF during Golden Week. It also suggests the trigger may be more level-based around 160 than based on the classic Kanda-style criteria around speed, disorderly moves or one-way speculation. USD/JPY had been trapped in a 158–160 range for weeks, so the fact that officials stepped in on a relatively modest breakout is a meaningful signal.
Oil weakness helped the MoF, though the move in crude may have also reflected contract-roll dynamics. Either way, the intervention has reset near-term market psychology.
Trading Takeaway
Expect more official action during Golden Week.
Verbal intervention now carries more weight.
Rallies should be sold while USD/JPY remains below the intervention zone.
The MoF has likely drawn a line near 160.
Preferred trade: sell USD/JPY rallies toward 157.00/50.
A return to 159 looks unlikely in the immediate term unless US yields and oil both reaccelerate.
Flow color: domestic hedge funds, offshore real money and corporates faded the yen rally, while short-term hedge funds were buyers. Official MoF data will only be visible at month-end due to value-date timing.
CHF — Fade Strength; Franc Looks Better as a Funder
The franc had another volatile month-end session, amplified by the yen move. Both USD/CHF and EUR/CHF dropped close to 100 points. But the strategic view has turned more bearish CHF.
The franc is increasingly attractive as a funding currency: it no longer rallies cleanly on risk-off, CHF strength should be capped by the SNB, and systematic accounts remain long CHF. That creates room to fade franc strength, especially when rallies are driven by month-end or cross-market spillover rather than genuine safe-haven demand.
Trading Takeaway
CHF strength should be faded.
SNB tolerance for further franc appreciation is limited.
CHF is a cleaner funder than a safe-haven long in this environment.
Preferred expressions: long AUD/CHF and long USD/CHF on dips.
Hedge funds were also notable faders of CHF strength, while real money was the main source of franc demand.
AUD/NZD — AUD Still the Preferred G10 Long
Risk concerns faded quickly after strong MAG7 earnings, suspected USD/JPY intervention and month-end rebalancing supported equities and higher-beta FX. AUD and NZD both rallied, but AUD remains the cleaner long.
The key event is next week’s RBA meeting. The base case is a 25bp hike to 4.35%, with the market pricing only around 18bp, so a hike is not fully priced. Recent data strengthen the case: consumer inflation expectations and PMI pricing intentions both rose sharply, which should keep the RBA focused on preventing inflation expectations from becoming unanchored.
The risk is that Governor Bullock previously suggested the discussion was about the timing of the next hike, not necessarily the direction, which leaves room for a pause. But even if the RBA pauses, the statement is likely to remain hawkish.
Trading Takeaway
AUD remains a buy-on-dips currency.
RBA pricing is not fully hawkish enough.
Domestic yield support and flow dynamics remain constructive.
EUR/AUD weakness back below 1.6300 confirms the reversal from Wednesday’s spike toward 1.6430.
Preferred bias: long AUD on dips, especially versus EUR and CHF.
A pause from the RBA should be bought if the statement remains hawkish.
CAD — Short Conviction Fading
Conviction in CAD shorts has diminished. AUD/CAD has struggled to break above 0.98, which argues for reducing risk rather than forcing the trade. Geopolitics and oil remain the key drivers, but CAD flow has become more mixed.
Month-end saw strong USD demand, while CAD activity was two-way. Hedge funds were meaningful sellers of CAD, but systematic accounts continued to buy the loonie, marking their 13th buying session in the last 14.
Trading Takeaway
CAD shorts are no longer as clean.
AUD/CAD needs to break 0.98 to restore upside momentum.
Better to wait for fresh geopolitical or oil confirmation before re-adding risk.
Preferred stance: reduced CAD short exposure; wait for better entry or clearer oil/geopolitical signal.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% and 74% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
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!