Welcome to Lost in the Exchange - The only FX newsletter you need to read to stay up to date in FX markets.

In this weeks copy:

Coming into a new quarter, we have a considerable amount of red folder news this week, starting today the manufacturing PMI already coming out weak for the USD. Tomorrow, we have Fed chair Powell speaking, where traders will be paying close attention the tone of his speech. With any dovish comments, the DXY will likely roll over, sending GBP & EUR crosses higher.

We remain with a tight US labour market by all accords, which still carries an inflationary theme. It would be reckless to start the the cutting cycle too early, therefore I expect the FOMC minutes on Wednesday won’t come with any major shocks.

Of course the main event this week is NFP on Friday. Forecasted figures quite low this month at just 196k.

We witnessed quite significant gaps up on EURUSD & GBPUSD overnight on Sunday, as it appears the result of the US Debate was not favoured by DXY bulls. For those who watched it, you may have noticed President Biden struggling to find his words, putting the favour with former President Trump.

In addition to this, French right wing took the lead in early stages of their elections. Euro reacted positively to this however gains could be quickly lost with Flash CPI estimates tomorrow.

As the potential for DXY to have a another leg lower before retaking 107, this gives way to another potential drive higher for EURUSD.

Ultimately I remain bearish on GBPUSD & EURUSD however, this early in the week, I suspect it may be a little too early for the sharp move lower I am waiting for.

GBPUSD already taken the previous week’s high today, however the possibility of further range bound price action remains. Alternatively if we break lower in the London session tomorrow, I will be looking for shallower, internal swing lows to grab a short position.

It comes as quite a surprise that the Bank of Japan has not intervened in the markets as of yet, as the risk of importing inflation remains incredibly high.

I believe it to be highly likely that during this month’s meeting, we may finally get intervention from the BOJ, tightening their monetary policy in order to control accelerating inflation.

By all metrics, Japan’s inflation figures are rising faster than expected, analysts state. Governor Ueada, has already stated rates will rise if inflation is to accelerate anymore towards the preferred 2% target.

We could see hard selling on JPY crosses if this comes into fruition this month, the type of flash crashes we have seen in the past. I get the feeling the market is just squeezing higher and higher for the time being.

GBPJPY could be back below 200 before long. The type of sell off that comes hard and fast and traders must stay vigilant.

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