FX Markets Weekly Update: Cross-currents dampen USD conviction but keep the case for carry

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FX Markets Weekly Update: Cross-currents dampen USD conviction but keep the case for carry

Meera Chandan AC Global Markets Strategy

(44-20) 7134-2924 17 July 2026 J P M O R G A N

meera.chandan@jpmorgan.com

Bullish USD view getting tested

Positioning unwinds has been a key driver of FX price action this week given

various macro cross-currents including the US CPI surprise and recent resurgence in

energy prices. Our metrics of USD positioning have been rising since May, reaching

+1.5-sigma on average last week (Figure 1USDlengthhassteadilyclimbedsinceMay.). Not surprisingly, the magnitude of the CPI

miss pressured some of those USD long positions, and the price action this week has

largely conformed with ex-ante measures of flow/positioning, indicating a partial

unwind of some of the more consensus trades in the market (long HUF, ZAR; short

NZD, CAD) (Figure 2.leadingtosomedeleveragingandstop-outsthiswek).

Figure 1: USD length has steadily climbed since May... Figure 2: ...leading to some deleveraging and stop-outs this week

Range & avg of USD positioning metrics (futures & options) (full-period z-score) (X): Ex-ante FX positioning (z-score); (Y): 1wk chg in spot FX

Source: J.P. Morgan, DTCC, CFTC, Bloomberg Finance L.P. Positioning is avg of futures, options flow & EM Client Survey, where appropriate

Source: J.P. Morgan, DTCC, CFTC, Bloomberg Finance L.P.

The second pillar of our twin “Bullish beta, bullish dollar” view has been

postponed and admittedly becoming lower conviction, but is not yet cancelled.

Bullish USD was always presumed to be dependent on Fed hikes and hence contingent

on incoming US data. This week wasn’t conducive to the theme, as the below-consensus

payrolls print from two weeks ago was compounded by a surprisingly-benign CPI

release.