JPMorgan EUR Trader:

Two days of consistent price action proved too much to hope for. I fell for the idea that patience would finally be rewarded—more fool me! I admit I’m struggling to pinpoint what drives the market from one day to the next. For now, I’m stepping back to observe. There are still uncertainties about the Greenback’s direction, especially as the US economy continues to hold steady while skepticism about improvement elsewhere lingers. Despite the frustration of the past six weeks, we’re still not far from the lows. While there have been sharp pullbacks, it suggests a slow unraveling of the US exceptionalism theme over a longer timeframe. Unless persistent dollar strength proves me wrong, I’ll stick to this view. Payrolls data will be a good test, especially after yesterday’s JOLTS reaction.

I remain biased towards shorting the dollar, primarily through the euro and CAD. I expect the Bank of Canada to hold rates today and still see evidence of home bias in our flows. I’ve reduced my yen exposure, given the repeated rejection of the 142 level. Unless US data delivers a major surprise, there seem to be better ways to express dollar weakness; I’ll revisit this on Friday. In emerging markets, I’ve added to CZK longs this morning on the back of strong economic data (retail sales). I believe the political noise yesterday is a minor issue with elections already on the horizon. I’m maintaining zloty shorts and a smaller HUF long position.

While the price action remains frustrating, I still believe the euro has a chance to move higher soon, provided US data isn’t overwhelmingly strong. I think the ECB’s messaging could cast doubt on the likelihood of rate cuts beyond this week (nearly two cuts are priced in). Despite trade uncertainty weighing on growth, I am favouring the German side for the time being, particularly given the widespread pessimism about the effectiveness of the corporate relief package announced this week. Additionally, reports that China is considering purchasing a significant number of Airbus jets highlight efforts to reduce reliance on American goods.

I’m staying bullish via cash positions and have added some short-dated topside options to complement my medium-term holdings. I’ll let the price action guide me. If we remain at current levels or lower in the next week or so, I’ll concede that the process may be less explosive and harder to navigate, sticking to the medium-term approach alone.