Institutional FX Insights: JPMorgan Trading Desk Views 18/3/26
JPM G10 FX is a bit less aggressively bearish on risk than yesterday, but the overall stance is still cautious rather than constructive. The key change is that with oil drifting lower and markets staging a relief rally, the desk acknowledges that a decent amount of deleveraging and dollar buying has already happened. Because of that, they have trimmed some USD-positive and EUR-negative exposure, not because the macro story is suddenly good, but because positioning has become cleaner and conviction is lower than it was at the height of last week’s stress.
The central message is that the market may be acting calmer than fundamentals justify. The strategist repeatedly notes surprise at how strong the risk rebound has been given the ongoing uncertainty around the Middle East, the Strait of Hormuz, and the lack of a truly durable resolution. So while they are no longer pushing the same degree of defensive urgency, they are also not willing to chase the relief rally without more concrete evidence of de-escalation.
Portfolio-wise, the desk has moved toward a lighter, more selective expression. They have cut USDZAR shorts and reduced the tactical EUR short, while maintaining longs in JPY and HUF against shorts in CAD and GBP. In crosses, the commodity and terms-of-trade theme remains important, so they continue to like long NOKSEK and long AUDNZD, though both have become somewhat stretched and have been trimmed modestly.
## Actionable Takeaways
The most important practical point is that this is now a lower-conviction tactical environment, not a high-conviction one-way macro trade. The desk still leans toward caution, but since positioning has already adjusted significantly, they are reducing size and becoming more selective rather than simply doubling down on the earlier stress trades.
On EUR, the stance has softened from a more active tactical short to a small core short. The reason is that the euro rally has been stronger and more persistent than expected, and client flow suggests meaningful derisking has already taken place, especially from real money and systematics. The implication is that there is still no strong bullish euro thesis, but the easy downside may already have happened for now. The key upcoming catalyst is the ECB. The desk does not think a hawkish ECB message will materially support EUR in this backdrop, because if the Middle East situation remains unresolved, Europe’s growth outlook will likely deteriorate. So the trade takeaway is: keep EUR shorts smaller and more tactical, and do not assume hawkish rhetoric automatically translates into currency strength.
On GBP, the strategist remains comfortable staying short. Sterling has held up better than expected, but that relative resilience is itself part of the bearish case because it creates room to sell strength. They want to keep a core long EURGBP while above 0.86, and they still think rallies in GBPUSD toward 1.34 should be sold. The main near-term catalyst is UK labor-market data. If labor data weaken, the GBP short likely gains more traction. So this remains one of the cleaner tactical shorts in the book, though still not at maximum conviction.
On JPY, the tone is steady: still a small long bias, but with realism about the limitations of the trade. The BOJ meeting matters less for immediate policy action and more for how Ueda frames the outlook. The market remains focused on the risk of another test of Japanese official tolerance for yen weakness. The desk highlights 158 to 160 in USDJPY and 182 to 184.50 in EURJPY as the key ranges. The takeaway is that yen longs still make sense as a hedge or cautious macro expression, but size should remain modest because conviction in effective intervention support is not particularly high.
On CHF, the desk stays neutral. EURCHF has continued drifting higher as risk appetite improves and both real money and hedge funds have been selling CHF. There is a clear bullish CHF reversal trade only if there is a genuine ceasefire and full reopening of the Strait, in which case EURCHF would likely be a better buy from low levels. But they explicitly do not believe the market is there yet. So the practical stance is to stay flat CHF until there is a cleaner geopolitical signal.
On AUD and NZD, the strategist maintains a constructive view on AUDNZD, tied to the terms-of-trade and policy narrative. However, the recent move has made the cross look overbought, so they have trimmed some exposure. The practical message is to buy dips rather than chase highs. Near-term data including New Zealand GDP and Australian employment could influence timing, but the medium-term bias remains for AUD to outperform NZD.
On NOK and SEK, the core view also remains intact: long NOKSEK. The reasoning is unchanged, with Norway still better supported by the energy backdrop and relative macro fundamentals. But again, the cross is also seen as somewhat stretched, so the recommendation is caution at current levels and preference for adding on pullbacks rather than extending aggressively after the move.
On CAD, the bearish view remains one of the strongest in the note. The desk expects the Bank of Canada to hold rates steady but sound somewhat dovish in light of recent softer labor-market and inflation data, as well as uncertainty tied to USMCA and the Middle East. They do not agree with market pricing that still implies a mid-year hike. The preferred expression is still AUDCAD higher, and the note says they added to AUDCAD longs. Supporting this view, real money accounts were reportedly significant sellers of CAD. So among the shorts, CAD remains one of the more actionable ones.
## Bottom Line
Compared with the previous note, the tactical stance is a little less aggressively defensive because the market has already repriced a lot and positioning has been cleaned up. But the core framework is unchanged: do not trust the relief rally too easily, keep conviction moderate, and prefer selective expressions rather than broad risk-on trades.
The cleanest current preferences are still short CAD, short GBP, small long JPY, small short EUR, and on crosses long AUDNZD and long NOKSEK, though both cross trades should ideally be added on dips rather than chased at current levels. The macro risk remains that markets are pricing more calm than the geopolitical backdrop actually warrants.
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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!