Institutional FX Insights: JPMorgan Trading Desk Views 18/2/26
Overall Market Context
Market caught between conviction and consolidation. The broader dollar-weakness narrative remains intact, but price action has turned choppy—shifting from a trend to a trading environment. Thin liquidity (holidays, half-term) and erratic equity moves are amplifying noise. The desk's posture is patient and tactical, trimming positions rather than pressing bets.
Key macro crosscurrents:
Hedging/rotation theme has lost momentum after peaking ~2 weeks ago — echoing a similar pattern from 2025 where excitement didn't translate into sustained flow.
European data is pivotal this week — soft ZEW already flagged; PMIs on Friday could determine whether EUR consolidates lower.
JPY conviction remains high despite range-bound trading, supported by structural Japan-side catalysts.
Currency-by-Currency Breakdown
EUR — Cautiously Constructive, but Watching for Cracks
The desk has reduced long EUR exposure and is watching for dips. The first downside target is 1.1770/80 if PMIs disappoint on Friday. The broader concern is that if Q1 European data underwhelms, real money — which has already been reluctant to chase the currency toward 1.20 — may simply sit on its hands, especially if the dollar story gets muddier.
The Lagarde departure story is more politically interesting than market-moving. The inference that she wants Merz and Macron to pick her successor quickly hints at concerns about Macron's 2027 re-election prospects — a "get it done before it's too late" dynamic.
GBP — Back to Flat; Range-Bound
CPI ticked down but not enough to shift MPC swing voters. Services inflation came in a tenth firmer than expected. EURGBP made a robust attempt at the 0.8730/50 resistance zone — driven by corporate and real money buying — but the desk expects it to settle back into the 0.8650–0.8750 range. Notable GBP selling for SHF at 1.75z, though flow trends have been elusive since the "Mandelson-induced wobble." Next catalyst is PMIs on Friday.
JPY — High Conviction, Patient Execution
This is the desk's highest-conviction trade, and the thesis is multi-layered:
JGB market trading well — possibly domestic buying, which would represent a structural shift.
FX reserves utilization stories — interpreted as a de facto signal on the currency. "No smoke without fire."
USDJPY is sticky around 152 but hasn't broken higher despite USD strength elsewhere — cross-yen is absorbing the strain.
The trading approach is a healthy core in options while tactically trading cash within the 152.50–154.50 range in USDJPY and 181–183 in EURJPY. Key supports remain at 152.00/20 in USDJPY and 180.60/90 in EURJPY. The desk wants USDJPY to stay below last week's payrolls spike high for the cash portion.
Cross-yen shorts are active, particularly CADJPY, which was reinforced after the soft Canadian inflation print.
Overnight Katayama comments sparked a mini JPY sell-off, but the desk sees little substance — her remarks about respecting the IMF's view on avoiding a consumption tax cut don't change the picture, since tapping the FEFSA would satisfy that constraint anyway.
CHF — Neutral, No Edge
An interesting dynamic: CHF is actually selling off during risk-off episodes, which the desk attributes to crowded USD shorts / CHF longs unwinding when the dollar catches a bid. Beyond that, CHF is chopping in familiar ranges with no clear direction. The desk is flat and struggling to form a view given the push-pull factors.
AUD / NZD — Long AUDNZD on Central Bank Divergence
The RBNZ held rates as expected, and new Governor Anna Breman delivered a dovish outcome. With the rates market pricing 36bps of hikes in 2026, the bar for a hawkish surprise was high — yet the rate path was raised by just one tenth, inflation is forecast to fall back into the 1–3% target band this quarter, and Breman explicitly said "We are not planning on hiking the OCR until we see more inflationary pressures and a stronger economy."
The desk bought AUDNZD after the decision, playing the divergent central bank outlooks. Short-term support sits at 1.1680, and a break of recent highs at 1.1807 would accelerate the move. Tonight's Australian employment data is the first hurdle.
A notable observation: AUD has been the second-most-sold currency on the desk over the past 7 sessions, yet sits just 1% off its highs versus the USD and is stronger on crosses — remarkable resilience that supports the long AUD view.
CAD — Bought USDCAD, but Frustrated
Canadian CPI missed to the downside at 2.3% vs 2.4% expected, with core measures now undershooting for four consecutive months. USDCAD spiked to 1.3691 as risk sold off, but the move was entirely short-lived — the pair finished the session unchanged. The desk bought some USDCAD after the print but is "extremely disappointed" by the complete lack of follow-through. Flows were flat despite the miss, suggesting very little appetite to trade CAD right now.
NOK / SEK — NOKSEK Longs Retained, Adding EURNOK Downside
NOK initially outperformed during the brief risk-off, with NOKSEK trading as high as 0.9456. However, positive Iran nuclear deal headlines pushed Brent crude down 2.5%, dragging NOK lower. The desk notes the Iran situation remains fragile — military posturing on both sides, actual proposals not due for two weeks, and significant red lines remaining.
The medium-term thesis is unchanged: rate differentials and diverging central bank policies should position NOK as an outperformer once volatility settles. NOKSEK longs are retained, with a 2-day close below the 200 DMA at approximately 0.9363 as the reassessment trigger.
EURNOK tested and held resistance at 11.34/11.37, prompting the desk to add more downside exposure. EURSEK topped out at trendline resistance around 10.6650/10.6700 — flagged as worth watching.
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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!