Welcome to Lost In the Exchange - The only FX newsletter you need to read to stay informed for the week ahead.

In todays copy:

Wednesday past we had CPI and FOMC in the same day, causing some USD bear traps to be set before reversing.

As CPI continues to drop, albeit nothing out of the stable range, USD bears took hold and sent EURUSD & GBPUSD higher.

Gains were swiftly reversed as the FOMC press conference confirmed a neutral stance and with a sticky job market, will need more evidence inflation has cooled before considering additional cuts. For now, we remain with the higher for longer narrative, fuelling USD bulls.

Looking forward into this week we remain bullish on DXY, therefore will look to trade pullbacks in EURUSD short.

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Following on from a volatile week, GBPUSD has cleared a range build up during CPI, which was quickly reversed. Similarly to EURUSD above.

Given the expectation for further DXY strength, we are looking for key levels to get short on GBPUSD this week.

Note we have UK CPI on Wednesday therefore we may just get some consolidation leading up to this, distributing volume and building liquidity.

This is the general idea right now, however we will take the market as it comes with time and price in mind. However, I expect with strong DXY, there is the possibility cable moves below 1.2600 this week.

Gold

The sudden drop on Gold last week came from a pause in Chinas rapid buying, the first time since October 2022. This caused some heavy selling on Gold that I believe will follow through further this week.

Firstly, I would like to see another push higher to create a high of the week before considering shorts. It would appear low probability that the market will roll over from below the CPI high now given the sharp rally on Friday.

$2275 remains an initial target then potentially down towards $2235. Any longs will be considered counter trend and short lived.

For the time being this didn’t come as a shock, however, the longer JPY remains at these levels, the less competitive Japan becomes in International markets, and putting pressure on imported inflation amid a weak currency.

BOJ’s Ueda confirms they are keeping a close eye on rates and will adjust if inflation is to pick up. This was likely cause a sharp downturn in. JPY crosses.

With UK CPI & JPY bulls entering the picture, it makes sense to be monitoring GJ for potential shorts.

Personally I was stopped out twice last week at BE trying to jump on shorts, too soon it appears.

With that being said, my biases have not changed and as long as the peak is in at 201.6, I will be monitoring for short positions.

A steady pullback would come as a nice opportunity to take advantage of a potential large swing lower.

That wraps up this week’s letter. If you like what I write in here, consider checking out my community here where I share more detailed insights into Macro policy and trade ideas, utilising futures data and footprint charts.

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