JP Morgan cut its long position when EUR/USD dropped to the mid 1.16s last week but have now reinstated it, and FX options have also regained a bullish lean.
JPM had been looking for deeper declines toward 1.15 before re-entering a core long, but realise that opportunity was unlikely.
The bank recognises concerns about a delay to the EU recovery fund and potential U.S. job cuts, but their medium-term view was always a constructive one on the single currency.
Encouraging price action around risk prompted their decision to re-enter longs.
FX options had been wary of a setback since EUR/USD topped out above 1.2000 in early September, but they struggled to turn more bearish when spot hit last week's lows.
After showing a brief bid for EUR puts over calls, one-month-expiry risk reversals have regained a EUR call (topside) premium, although a lack of demand for implied volatility generally is more consistent with a range-trading view for now nL1N2GS065.
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