The planned visit of US House Speaker Nancy Pelosi to Taiwan has the potential to exacerbate relations between the US and China, which in the foreign exchange market will be expressed in the strengthening of the dollar, increased demand for safe havens, weakening of the CNY and currencies that get clues from the moves of the Chinese currency (AUD, NZD). The AUDUSD upward momentum is under additional threat as the RBA signaled that inflation peak is finally in sight. The EURUSD may slide towards 1.02.Rumors that the Fed will slow down the pace of tightening after a series of weak US reports since last week (in particular, the downbeat GDP figure in 2Q) kept dollar pressured at the start of the week. However, betting on the continuation of the long squeeze becomes risky, as by correcting expectations for tightening, the markets are unlikely to drift away much from the Fed’s guidance, risking making a mistake. Geopolitical and economic uncertainty outside the US persists, so the idea that the dollar will be in demand as a defensive asset for some time remains justified.Reports that the speaker of the lower house of Congress, Nancy Pelosi, will visit Taiwan and the sharp reaction of the Chinese authorities, who promised a military response, keep investors in suspense; risk assets are in the red and the dollar attempts to gain a foothold on Tuesday, pricing in escalation. Among the G10 currencies, the most vulnerable to the escalation are the AUD and NZD, which have already lost 1.3% and 0.6%, following growing Renminbi weakness.This week is full of US labor market reports, the significance of which has grown in light of the fact that the Fed shifted to a meeting-by-meeting approach, hinting that policy actions will depend more on incoming data. In addition, signs that US inflation is easing, increase the importance of other macroeconomic parameters, including labor market parameters. This week will see the JOLTS report on new vacancies, the ADP on Thursday and the NFP report on Friday. The focus will also be on speeches by Fed officials such as Charles Evans, Loretta Mester and James Bullard. In my opinion, the risk of upside correction in the DXY to the level of 106 increases, given that the bearish pullback from yearly high pushed prices to the edge of the medium-term channel. Ιn addition, another technical level, the 50-day moving average, has acted as a support:Reports on the European economy are not expected today and events in geopolitics are likely to be the main drivers of the EURUSD. Any unfavorable development in relations between China and the United States will most likely have a negative impact on the European currency, firstly, due to the growth in demand for the dollar as a defensive asset, and also due to the fact that trade risks will increase, because EU exports rely heavily on Chinese demand.Even if the situation with Nancy Pelosi’s visit to Taiwan takes a de-escalation course, the EURUSD strength is highly doubtful, as EU growth prospects are vague due to the risks of an energy crisis, while potential recovery in risk demand may increase the tendency to use the euro as a funding currency, which will lead to increased supply of the common currency.The pair in the short term may resume movement to 1.02 and test support levels below.The RBA raised the rate by 50 bp today, as expected, but the signal that further policy action will increasingly depend on incoming data, increased the risk of a pause in tightening in case of downside surprises in the data. Increased tensions in US-China relations have intensified the fall of the AUDUSD, and in case of an escalation, there is a risk that the pair will test 0.69. The meeting report will be out on Friday and due to the shift in priorities regarding what to focus on, the report will likely contain some market-moving information that will cause volatility in the AUD.