EUR/USD – USD And Gold – Alien Knowledge

A simple correlation – the price of commodities and the U.S Dollar.

Gold being priced in USD obviously.

As the “value” of The U.S dollar rises – Gold price goes down. When the value of USD falls….one would expect the inverse in gold. Gold moves higher as USD falls. All good?

So you should find it interesting then, that over the past few days ( since giving the green light to buy gold ) The U.S Dollar has remained strong. Suggesting to myself at least…..that “even with a relatively strong dollar” the price of gold and silver related stocks have not only remained buoyant, but have made some pretty sold gains over the past few days.

I bought IMG at 4.68 a couple days ago –  Now sitting at 5.29 – All the while USD has continued to move higher.

So what gives Kong? How can the value of the U.S Dollar keep rising AS WELL as Gold and related names?

Answer: An intermediate bottom in Gold.

I’m not talking about a nice little dip to buy, or a quick little stock tip to make you a couple extra bucks for beer….I’m talking about a large scale “fundamental shift in money flow” where the big boys are already well in position. Fully prepared for the U.S Dollar to fall – just that couple of steps ahead of you as…….you still see relative strength in USD even while the big money keeps scooping up Gold.

These large-scale “intermediate turns” don’t play out in a single day.

This will be short-lived, and here is why:

The Euro only further confirms the move currently in play as……it’s now very VERY close to bottoming as well.

Currencies don’t lie. You can’t have EUR and USD going up at the same time!



So the trade at hand is as follows. Long Gold / Silver and the miners NOW…….and short USD ( long EUR ) here in coming days…once this turn shows itself to the masses.

These “big turns” take weeks and even months for the big boys to build positions, so you don’t always see typical correlations playing out “minute to minute”. It’s my firm belief that the entire year of 2016 has essentially had the big money distributing stock to retail investors….while they quietly and patiently unload USD and scoop up Gold.

Make no mistake. It’s “Dollar Short Time” again here soon, with large gains planned in EUR longs, and a solid investment in Gold.

You think it’s backwards. You don’t think it makes sense but…….haven’t you been reading / lurking here long enough to know better by now? Once you throw currencies into your watch lists, and basket of tools to draw from…you can see things much clearer.

Big moves coming post election.


Invest In Gold Now – Thank Kong Later

A golden opportunity? I should say so.

Let’s look at the technical side of things first……



As far as a “technical set up”goes……it really doesn’t get much better than this. Gold and the entire complex has essentially broken out of the long-term downtrend of the past “years” ( yes I said years ) then pulled back in a “huuuuuuuuge” way – now sitting at the “perfect place” to consider this as an “investment”.

Don’t f^&k around here……these kinda things don’t come about every day of the week. You don’t have to rush into anything but if I was you….I’d be inching into gold and gold/silver miners here pronto ( if not already….as I have ) with consideration of a much longer term trade than I would normally consider.

My goal here is simple. 

Take a fixed amount considered an “investment” – let’s say 25-30k and just start pounding away with small orders over the next couple of weeks. Find the trade at break even / somewhat in profit in coming weeks…..move stops to break even and don’t look at it again forever.

This is “investment talk” not trade so………don’t confuse the two.


Why Are Markets Trading Sideways?

In a general sense……you can’t do shit when markets continue to trade sideways.

It’s very difficult for new traders as……you still feel that you “must keep trading” in order to keep money coming in. Trades go nowhere, you get frustrated…..then you make mistakes. Costly mistakes.

Taking a quick look at the Dow ( going back a few months ) we can see at least the past 8 weeks as virtually “unchanged”. Marketing stuck in the mud a full 8 weeks now.




You can’t “really” trade this, as this small amount of movement leaves little room for profit – and timing entries becomes paramount. You need to recognize it for what it is….and accept it. Then your trades / trading will improve.

I don’t really expect this to change until AFTER the U.S Election / Gong Show finally winds up in November, and will be planning trades accordingly. Smaller orders…lower expectation. More planning for the larger moves expected post elections.

It is what it is…’ve just got to learn to recognize it sooner.





Understanding USD/JPY – You Know You Need To

With Japan now out of the way….we can clearly see that markets don’t dig it. The Yen is powering higher which is the absolute last thing Japan would like to see.

A strong Yen is terrible for Japan ( as a strong currency is for any nation these days ) and suggests that money is actually flowing “out” of markets – back to the place where it was originally borrowed at 0%.



Think about it.

Let’s say you went nuts and borrowed thousands of dollars when the interest rate was 0%, then invested it in U.S Equities hoping you could make a buck. Months later your U.S Equities trades are flat at best, but even more likely sitting at a loss. Then you figure out……hey wait a minute – if we get an interest rate hike here in The States…this market is gonna tank! You sit there thinking… I better get the hell out of here, or I am gonna get killed.

Imagine if they actually DO raise rates in the U.S today? You are hooooooped!

How will I pay back all that Yen I borrowed??

So you unwind your trade. You sell your U.S Equities likely at a loss…..then you have to convert the U.S Dollars “back” to Yen ( at a new rate that also hurts ) and finally pay back your loan. This is the fundamental driver behind movement in the currency pair USD/JPY. This is why it’s been tanking since markets “actually topped” back in late 2015. Everything else has been pure distribution as the big boys and heavy hitters unwind their Yen Carry trade, and it’s taken more than a year to quietly do so.

You can see it on the charts  so clearly, and now that USD/JPY is at parity……things could get pretty ugly.

Clear signs that markets have more or less topped out – and have been distributing to retail “hopefuls” for the past full year.

Little mining stocks on fire….just getting started in the larger macro trend people so……go grab a couple!



Tomorrow’s Trade – BOJ And Fed On Deck

Blah, blah blah……as once again The U.S Fed and Bank Of Japan keep markets on their toes.

Tomorrow we “should” hear from both, which sets up a pretty tricky scenario if you are thinking about placing any trades prior to the announcements. That’s not how I roll, although…….I am still holding every single trade entered like – 10 days ago.

Conviction is great, as I am 100% certain that The U.S Fed will not be raising interest rates this close to the election but we can never EVER count on The Bank Of Japan to do what we expect. In fact…there have been several times in the past where The BOJ has surprised markets –  big time.

You are aware that the BOJ and The U.S Fed have been working together on this “propped up market” for years now right? Taking turns cranking up the printing presses as to keep these fake dollars / yen rolling into markets? 

BOJ takes the next kick at the can

BOJ takes the next kick at the can

This coordinated effort is widely known….yet poorly understood.

It would not shock me in the slightest to hear Japan “beefing up” its easing and money printing efforts in order to keep the balls in the air a while longer as…..Japan is deep DEEP in The Fed’s pocket.

If Japan pulls the trigger ( allowing The U.S off the hook ) expect markets to rally…..otherwise…we continue flat across the top. Flat across the top until the elections are out of the way…then down.

Further currency trading prior to tomorrow’s announcements is plain stupid.

Sit tight….wait and see what shakes out.


Holding All Trades – Bored As Hell

So the number of people who filed for unemployment assistance in the U.S. last week rose less than expected, remaining in territory associated with a healthy labor market, official data showed on Thursday.

In a report, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending September 10 increased by 1,000 to a seasonally adjusted 260,000 from the previous week’s total of 259,000. Analysts expected jobless claims to rise by 6,000 to 265,000 last week.



I love the media spin, framing this as good news….that the number of people without work is rising “less than expected”. Why is it rising at all? Only another quarter million U.S citizens filing for unemployment benefits last week…………..last week!

Talk about waiting for the other show to drop. That´s what I call a recovery.

I´m so deep in profit on long EUR/AUD ( 400 pips ) I will consider taking profits before the weekend. Unfortunately a number of other trades still remain flat…but stops have been moved to break even so….risk has been eliminated.

I´m holding all trades…just bored as hell.



Amateur Traders vs Pros – What’s The Difference?

Professional traders don’t care if they get stopped out, because their money management rules allow for it. Trades are trades…nothing more. The key is to have more winners than losers at the end of a given month / year.

Amateur traders freak out when a trade moves “even the slightest bit” against them because 9 times out of 10 they’ve traded far to large ( or on margin ) and very quickly realize –  if a single trade goes against them…..they’ve blown up their account and are left with nothing.

Professional traders plan the trade “first”, while amateurs chase news events and headlines, more often than not finding themselves on the wrong side of the trade – cuz they are chasing and idea…and are likely far to late.

Pros look at the “macro “ while amateurs still believe they can `day trade it`with  nothing but a stock chart in front of their faces.

Pro Traders vs Amateur Traders

Pro Traders vs Amateur Traders

Professional traders inevitably find themselves trading far less often ( picking their shots more effectively ) while amateurs tend to over trade…exposing themselves to far greater risk ( in volume of trades alone ) and in the end….far greater losses.

Pros have no emotional attachments to a trade. Amateurs are fully invested “emotionally“ which clouds good judgement, and again leads to over trading and panic.

The list goes on but in a general sense, the largest difference between the two ( go figure eh? ) is really no secret.


So…..if you want to log hours and hours / months and months / years and years of successful trading….what’s the biggest tip I could offer?

Trade smaller. Live longer. Make more money.

Volatility obviously on the rise here these past days……..short USD trades and long Gold / Silver miners good. Just flat as a pancake these last few days. Slug it out….or freak out. You a pro or an amateur?


EUR On The Mover Higher – Don’t Blink!

The EUR ( EUR ) has gained just over 100 pips vs The Australian Dollar ( AUD ) since this morning – as suggested.

When risk comes off ( markets cool or turn lower ) commodity related currencies such as AUD, NZD and CAD generally fall. This you can file away in your tool drawer, for the lifetime of your forex trading career.

Risk on = AUD, NZD and CAD UP! Risk off = DOWN.

When risk comes off…..”funding currencies” such as the Japanese Yen rise…as the money that was borrowed at near 0% interest, comes flooding back to Japan when stocks are sold.  This too you can include in your “basket of trade secrets” for the forseeable future ( or at least until Japan totally implodes ).


We’ve got USD falling, EUR rising…..and in turn can formulate a tonne of trade ideas knowing as well that JPY rises when risk comes off….and the commodity related currencies fall.

EUR Looking To Fly Hgher

EUR Looking To Fly Hgher

There it is! You’ve got this!

Now…..things get a little tricky when you then consider trading pairs such as USD vs AUD where ( in theory ) BOTH should be falling! The trick here is two-fold. One –  don’t trade a pair that you can’t work out where each of the individual currencies “fit” in the grand scheme of things ( based on the above breakdown ). Two – keep these ambiguous pairs “on watch” until you can clearly discern which way they’re going.

Always look for the largest moves to come in currency pairs that pit a funding currency ( cheaply printed JPY ) against a commodity related currency ( AUD ) when risk appetite/aversion shifts.

Getting a “macro view” of how each currency “behaves” during times of “risk on vs risk off” can be very valuable, and will help you simplify your trading. If you can’t reference each of the currencies you are trading, within this general framework – don’t trade’em!