Why Forex still sets the macro “price tag”
Axel Fabela Iturbe frames Forex as the market that forces every macro argument to show its work—because currencies are where growth, inflation, policy credibility, and geopolitics get compressed into one number.
The scale alone explains why. The BIS reported $9.6 trillion per day in global FX trading (April 2025), up from 2022, with the U.S. dollar on one side of 89% of all FX trades (euro 28.9%, yen 16.8%).
That dominance matters in 2026 for a simple reason: when uncertainty rises, traders don’t just “buy safety”—they buy the funding system.
The 2026 setup in one sentence
Axel’s baseline: the dollar’s direction is less about “strong vs weak” narratives and more about whether policy spreads keep compressing—or snap wider again during risk shocks.
To make that concrete, he uses a three-dial dashboard:
- Policy spread (carry): who pays more to hold currency risk
- Risk spread (safe haven): who gets paid when volatility jumps
- Funding/hedging pressure: who must buy dollars to hedge assets or roll swaps
A quick scoreboard: where policy starts the year
Axel begins with “known prices” before opinions.
- United States (Fed): Target range 3.50%–3.75% after a December 2025 cut.
- Euro area (ECB): Deposit facility 2.00% (effective since June 2025; still 2.00% as of Jan 21, 2026).
- Japan (BOJ): Policy rate 0.75%, with markets watching signals on further hikes.
- Dollar Index (DXY): hovering around ~98.7–99.4 in mid-to-late January 2026.
Interpretation: The Fed still offers more carry than the ECB, and far more than Japan—but the gap is narrower than in the peak-tightening era. In Axel’s playbook, that tends to reduce “one-way USD” behavior and increase two-way volatility (especially around data surprises).
Positioning check: when the crowd leans, the market gets jumpy
Axel doesn’t treat positioning as a forecast; he treats it as fragility.
In the CFTC USD Index futures snapshot (ICE, positions as of Jan 13, 2026), non-commercial traders show more shorts than longs (17,929 long vs 21,659 short), with open interest near 29,868.
What that implies: if USD rallies on a shock, it can rally faster because short-covering becomes fuel. But if USD slides on softer U.S. data, the move can also extend because “already-short” positioning may not be the only seller—asset hedgers can add pressure.
The three FX regimes Axel thinks matter most
Instead of predicting a single EUR/USD or USD/JPY number, Axel uses regime logic:
Regime A: “Soft landing + steady cuts”
If the U.S. slows without breaking, the Fed can cut gradually—and carry compresses. That tends to favor higher-beta FX and reduce USD’s yield edge.
Regime B: “Sticky inflation + delayed easing”
If inflation progress stalls, policy stays restrictive longer. That restores the USD carry advantage, and EUR/USD typically struggles to sustain rallies without a strong euro-growth story.
Regime C: “Risk-off shock”
In a sudden volatility event, the market often buys dollars because USD is still the system’s settlement and collateral language. BIS data on USD’s share underscores why that reflex remains powerful.
Regime D: “Structural diversification”
Axel flags a quieter undercurrent: reserve preferences and hedging choices can evolve even if day-to-day trading still runs through USD. One recent example discussed by major banks is that gold has grown as an alternative reserve asset in some narratives around diversification.
(He treats this as a slow force—not a weekly signal.)
Pair watchlist: where 2026 tension shows up first
Axel’s preference is to watch pairs where macro forces conflict—because conflict produces cleaner levels.
- USD/JPY: A BOJ that is no longer ultra-loose changes the “default” assumption traders used for years. Rate expectations and yen volatility can reprice quickly around BOJ communication.
- EUR/USD: More range-prone when spreads compress; more directional when growth diverges. The ECB’s rate path (deposit facility at 2.00%) anchors the euro’s carry ceiling.
- USD/CAD: Canada sits at the intersection of oil, trade policy, and North American growth. Recent reporting highlighted CAD sensitivity to trade uncertainty even when the currency bounces.
A practical checklist Axel uses before taking FX risk
Axel ends with execution discipline—because in FX, being “right” about the story is useless if the timing is wrong.
- Is the move yield-led or shock-led? (Carry moves fade differently than panic moves.)
- Did DXY break with rates—or against rates? (Divergence often signals positioning/hedging.)
- Where is the policy calendar? The Fed’s next meeting (late January 2026) and BOJ decisions are volatility magnets.
- What’s the pain trade? Use positioning to identify squeeze risk (USD shorts vs longs).
- What’s the invalidation level? Define it before entry, not after.
Bottom line
Axel Fabela Iturbe’s 2026 Forex view is not a single-direction call—it’s a framework: watch policy spreads for trend, risk shocks for convexity, and positioning for speed. In a market that trades trillions daily, the edge often comes from structure, not slogans.
