Welcome to Lost In The Exchange - The essential FX newsletter to keep you informed and prepared for the week ahead.

In this weeks copy:

After several weeks of strong bullish runs, USD crosses have finally eased off a little as DXY finds support.

We are heading into a busy few weeks of data, including the all awaited FOMC meeting, September’s NFP release, CPI and so on. The summer tends to offer choppy less volatile movements, therefore I anticipate some cleaner movements in the coming months ahead of US elections.

COT reports show a steady rise into the DXY from non commercials and I still believe the reaction from Powell’s last statement was highly exaggerated, given it was already priced in.

From a technical standpoint, I remain bullish on DXY into September, as we find support, as stated in last week’s newsletter, just below 101 level.

Powell stated at Jackson Hole that policy is ready to change, but the question is, how much? The Fed chairman added that additional softening of the labour market would not be welcomed and that the pace of rate reductions will rely on new data.

The remarkably low NFP reading for July, 114k, raised concerns about a possible recession. The USD has already been negatively impacted by the expectation of a rate reduction, even if August's forecasts are far higher. If the employment market continues to cool, speculators will likely expect a dramatic 50bp drop to initiate policy changes, which will put additional pressure on DXY.

To stay informed with live updates and more on this data as it unfolds, join our community where we will utilise TPO & futures data to find the highest probability setups.

With the bounce in the DXY, we have subsequently seen USD crosses roll over, leaving a rather bearish looking picture for the coming week.

Starting with EURUSD, a heavily bearish week looks set to continue its downward movement, however be careful of pullbacks and consider shorting into them from key zones around 1.1100.

However, as mentioned above, how this week closes will largely depend on NFP numbers and how the market interprets this ahead of the scheduled rate cuts.

GBPUSD nearly took us out at SL overnight however just found enough resistance at the very last point on the monthly TPO to start the bearish correction. Running with two entries on this last week, banking some decent profits.

In correlation with the USD and EURUSD, I believe we have further to run to the downside on this pair, however remaining cautious of any pullbacks.

The weekly time frames remain bullish on both pairs, however we have significant room for a few weeks worth of corrections before the FOMC announcement.

If we look to the end of 2024, with policy adjustments and US elections, we have the potential for some large moves in the market, in my opinion, bullish moves on these pairs, but it may proceed some hard dips depending on how the elections play out, and who comes out on top.

The USD has performed substantially better under Democratic leadership over the past 6 terms, however initial market reactions can offer differ from the medium term outlook.

For the time being, and the coming weeks, I remain bearish whilst monitoring for some fundamental and technical signals to suggest the start of another leg higher.

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Have a great week everyone.