Forex Market Analysis Summary

USD at Tipping Point, JPY Bulls on Defensive

Author: John J. Hardy, Global Head of Macro Strategy

Date: February 19, 2026

Key Insights

• The market sentiment towards the USD is currently very bearish, with pivotal price action in key currency pairs indicating a potential squeeze if the USD continues to strengthen.
• Newly bullish JPY traders are facing disappointment, but there is potential for the JPY to regain strength soon.

Market Overview

The USD is at a critical juncture as the EURUSD pair tests levels below 1.1800. Recent FOMC minutes suggest a reluctance to signal further rate cuts, as the labor market shows signs of stabilization. Despite this, the USD has struggled to decline, with bearish sentiment at its highest since 2014 according to a Bank of America survey. A significant break in USD strength would require EURUSD to close below 1.1766 and GBPUSD below 1.3500.

JPY Market Dynamics

JPY bulls are feeling the pressure as strong global risk sentiment and rising US treasury yields have stalled the JPY's recent recovery. However, there is an expectation of a support level for the JPY that could extend to non-USDJPY currency pairs. The EURJPY and GBPJPY pairs are highlighted as potentially mispriced opportunities.

AUDNZD Performance

The AUDNZD has reached its highest level since 2013, driven by strong employment data from Australia. The economy added 50.5k jobs in January, maintaining an unemployment rate of 4.1%. This has led to a rise in short Australian rates and strengthened market predictions for a potential RBA rate hike in May.

ECB Leadership Changes

There are speculations regarding ECB President Christine Lagarde's early departure, which could allow for the appointment of her successor before the upcoming French elections. The potential candidates, including hawkish Dutch official Klaas Knot, could influence market dynamics depending on their profiles.

Chart Focus: EURUSD

The EURUSD has faced renewed pressure, probing below the 1.1800 level. A solid close below 1.1766 could trigger a rapid expansion of bearish sentiment towards the USD.

Conclusion

The current market conditions suggest a complex interplay of factors affecting the USD, JPY, and other major currency pairs. Traders should remain vigilant for potential shifts in sentiment and price action, particularly in light of upcoming economic data and geopolitical developments.