The USD has formed a “swing high” here as of this early morning / last night – and would be projected to fall over coming days. I’ve been on about this since early this week, and now see further confirmation that indeed – we should make the turn here and expect a lower dollar.
This being said – a number of trade opportunities are now available including long NZD/USD, AUD/USD, EUR/USD as well short USD/CAD and USD/CHF to name a few (a few that I am currently holding).
If you’ve been reading here at all over the past few months you’ll already know that I generally “buy around the horn” with smaller orders throughout a given few days – in order to catch the largest part of the move right at the start. (please research previous articles – this strategy is in there).
This has been a touch tricky here as of late with some real volatility out there – and currencies moving wildly….although as of this morning, I would be far more confident in putting some money to work.
For you equities guys – this “should” translate into higher stock prices (as unreal as this sounds) and for those still struggling with gold and silver (as am I) – likely as good a day for you to catch up on some yard work / house cleaning / snow shovelling etc…as I don’t expect a single things to budge.
…..Hope you all have a good day out there today.
The Dollar Reversal: Strategic Positioning for Maximum Profit
Technical Confirmation and Market Structure
The swing high formation we’re seeing in the USD isn’t just some random price action – it’s a textbook reversal pattern that’s been building for weeks. When you look at the daily charts across major pairs, you’ll notice the dollar has been struggling to make new highs despite multiple attempts. This failure to break through key resistance levels, combined with weakening momentum indicators, tells us everything we need to know about where this market is headed.
The real confirmation comes from watching how the dollar reacts to support levels it previously held with conviction. We’re seeing clean breaks below these levels with no meaningful bounce-back attempts. That’s institutional money moving, not retail traders getting shaken out. When the big players start repositioning against the dollar, you don’t want to be caught on the wrong side of that trade.
Risk-on sentiment is clearly building beneath the surface, and currency markets are always the first to telegraph these shifts. The correlation between dollar weakness and risk asset strength isn’t some academic theory – it’s a fundamental driver that’s been playing out for decades. Smart money recognizes this relationship and positions accordingly.
Commodity Currency Opportunities
The commodity currencies – particularly NZD and AUD – are setting up beautifully here. These pairs have been coiled tight against the dollar for weeks, and when that spring finally releases, the moves tend to be explosive. The Reserve Bank of New Zealand has been more hawkish than most anticipated, and with global growth concerns starting to ease, commodity demand should pick up significantly.
AUD/USD specifically looks primed for a major breakout above the 0.6800 level. Australian employment data has been surprisingly robust, and if China continues its reopening trajectory, Australian exports will benefit tremendously. The technical setup shows a clear cup and handle formation on the daily chart – exactly the kind of pattern that produces sustained moves rather than fake breakouts.
Don’t overlook USD/CAD on the short side either. Oil prices have been quietly building strength, and the Bank of Canada’s hawkish stance provides fundamental support for the loonie. The pair has been rejected multiple times at the 1.3500 resistance zone, suggesting we’re due for a meaningful correction lower.
European Markets and Cross-Currency Dynamics
EUR/USD presents perhaps the most compelling risk-reward setup of the bunch. The European Central Bank’s aggressive tightening cycle is finally starting to show real effects on inflation expectations, while the Federal Reserve is clearly shifting toward a more dovish stance. This divergence in monetary policy creates the perfect storm for euro strength against the dollar.
The technical picture supports this fundamental view completely. We’ve seen multiple false breakdowns below 1.0500 that quickly reversed, indicating strong institutional buying at those levels. When price repeatedly fails to break a significant support level, it’s usually preparing for a move in the opposite direction. Target the 1.1200-1.1300 zone for initial profit-taking, but don’t be surprised if this move extends much further.
USD/CHF offers another high-probability short opportunity, especially given Switzerland’s role as a safe haven during periods of dollar weakness. The Swiss National Bank has been less aggressive with interventions lately, allowing the franc to find its natural level against major currencies. Technical resistance at 0.9200 has held firm, and a break below 0.8900 should accelerate the decline significantly.
Position Management and Risk Considerations
The “buying around the horn” strategy becomes even more critical during these major trend changes. Rather than trying to time the exact bottom or top, you’re building positions gradually as the new trend establishes itself. This approach protects you from the inevitable whipsaws that occur during transition periods while ensuring you capture the meat of the eventual move.
Keep position sizes manageable during this initial phase. Even with high conviction setups, market volatility can produce unexpected price spikes that test your resolve. The goal is staying in the game long enough to profit from the larger directional move, not getting knocked out by short-term noise.
Monitor central bank communications closely over the coming sessions. Any hints of policy shifts from major banks could either accelerate these trends or cause temporary reversals. The key is distinguishing between genuine policy changes and routine jawboning designed to manage expectations.
Good call on USD weakness, I’m also in short EUR as fundamentally it is the strongest currency as the ECB balance sheet is the only one in contraction right now. USD has the largest ballooning balance sheet. Thus I’m pairing the weakest with the strongest.
I with you have added a small short EUR/USD with plans to add more if we close above the psychologically important 1.35 level toady.
On a separate note I believe that the JPY is going to correct here very soon as their central bank has done nothing but speak/plan to devalue without actually doing anything yet. Because of this I think short term the JPY short trade is played out and will be looking for a break of 92.50 on USD/JPY to short it. As there is a trendline that has been acting as support since the beginning of February.
Thanks for the great blog posts and daily Twitter updates.
Warren
Hi Warren – thanx for stopping in and commenting – I’m hoping to get this “community” kick started.
Your trades are a touch confusing to me as – USD weakness = EUR strength right? – perhaps I’ve misunderstood. You want to be long EUR here.
Otherwise….the damn JPY pairs have indeed been a blast. I tried yesterday….and have looked again here this morning but….a correction MUST be due soon. Although – I dont expect much in USD/JPY as I will look for in the commods correcting.
In any case….we will hit those “when we do”! – For today at least…lets see if we can get some follow through on this damn USD – and not another day of squiggles.
Yep long EUR is a winner here! Looks like it was a day of wiggles, I added some more EUR/USD long at 1.3430. Stop on both positions is 1.3410, average price 1.3452. I’m thinking that initial jobless claims tomorrow could be the thing we need to get the dollar to start rolling over hard.
Warren!
Lookin good ma man…..and yes….another day of “squiggles” – sigh……they sure don’t make this easy do they?
Thursday’s appear to be the new “pivot” as I might as well spent the last 3 days on the beach. Regardless….positioned…and patient.
GBP/USD looks like it’s still in a down trend so I guess that’s not one of your nine USD shorts Kong ?
Damn Rolo….Ive been watching it like a hawk – and see it is so completely “ripe” for a buy long GBP – I still can’t do it.
We’ve got another reader here ( or I hope she is still here ) werking GBP hard – I’d love to recommend a buy here long GBP vs USD but man….just can’t see the traction short of some of my short term signal ringing some bells.
Lets see in a day or two – as I would jump on it like a fat kid on a smartie! ooops….ahh….screw it…..funny enough.
Hi Forex, been reading your blog a few days. I have a small long AUD and NZD position so glad to hear your thoughts. I am confused by your comments on metals. With $ down you don’t expect gold to go up? If you don’t expect it to go up when the $ is falling why are you holding it? When do you expect it to go up?
thanks Man
Hi Brad…thanks for commenting – we need more intelligent comments/opinions here.
In a perfect world yes of course – we would all expect a weak dollar to translate into higher prices for the metals – unfortunately this isn’t happening for reason we’ve been over (not sure where you are reading me….here….or at the various blogs I frequent).
I have been 100% complete honest in that yes I bought gold miner options in Nov – and more or less washed my hands of them a week later – grand total loss $1500.00
I make and or float/laugh/joke the same amount any given hour of the day Brad – in that……options are a complete and total gamble.
I haven’t come across your thoughts on why gold is down. I don’t know if you believe it is being manipulated as I read elsewhere. I work in hedge funds (not as a trader) and asked a metals trader I know who at one stage was the largest gold trader in the world. He dismissed manipulation so my thoughts are if he doesn’t believe in it neither should I.
Then I ask of you and your friend the same Brad…..with (obviously) much more experience and knowledge than I….why won’t it go up?
I’ve written about it here on numerous occasions – and have been called a “wack” for the most part. Regardless – what’s important to me ( and my readers) is making money so….we continue on!
A friend who was at one time was the largest gold trader in the world? – please tell more! What nationality was he/she?
He’s not well known (I have never heard of him), European guy, I was surprised when another trader told me that when he was at one of the big (non US) banks he was biggest gold trader in the world at the time. He just thinks pre December it was normal profit taking, I haven’t asked him since, though he did say he didn’t expect it to last too long. I am an amateur so not trying to be a smart ass or suggest you are wrong, I didn’t know if you bought into the manipulation theory, I want to believe it as am heavily long gold, but when a hedge fund trader tells me otherwise I worry there may be another reason. Still even a hedge fund traders get it wrong sometimes (as I have seen first hand!).
Anyway enjoy your FX trades, only read a couple of days but you seem to be spot on.
There you go Brad – always best to formulate your own thesis / trade ideas.
It’s as likely you’ll here an equal number of ideas on both sides of the fence – bull or bear…..hence what makes a market right?
I don’t read/follow others – perhaps for a bead on “sentiment” but most certainly not as I would place my own money at risk. It takes time for sure, and many many hours reading, researching etc.In all, I don’t imagine alot of people have the time or the energy…or perhaps the interest to see it through to formulate their own ideas. The “get quick rich gang” will learn their own lessons – I’m more of the mindset that “slow and steady wins the race”.
Thanks for the support and please….please…..keep “chiming in” here whenever it strikes you!
looks like we stop at 79.80 – 79.60……. from there who know’s but it’s a long way down from that point….
Oh Schmed….If you can manage to hang on a couple more hours – I imagine you’ll be pleasantly surprised.
I’m jumpy at times…this isn’t one of them – as I’ve got enough info to keep close to the gas peddle. Thursday’s are always a ride……and my “blow off top” is still in the making. No sleep for the wicked!
lol….. I can get jumpy… .LOL but I am not going anywhere…. still holding my audusd longs from Monday…. nice post today…
He he….Schmed – you are a warrior for sure – mucho respeto!
As well…..your opinion is greatly appreciated so tell me – what would you just as much value / enjoy hearing from me day to day here at the blog?
My personal rants…exactly that…..the technical stuff….exactly that…my trades….that too.
Gimme whatcha got man – I’m trying to get this right.
Just keep doing your stuff Kong. They will come.
A bit more detail on your trades maybe?
Really enjoying the the blog.
The more posts/rants in the comments here and on twitter the better.
Hey Kong….. yeah… I basically honkerd- myself into this position for a longer haul… Missed the bottom by 26hrs… but I am not complaining. I am not moving but will lighten the load tomorrow… that was my target…. the remainder will ride. I am still waiting for the weekly squeeze set-up to unfold…. If I am right… well… it will be time for a break… vacation for sure….
As for the blog…. I would not change a thing… not anything which stands out… but when it does I’ll let you know for sure…
Again Schmed – you are inspirational! Go man go!
I love it…..you make sure to let me know!
Adding to position here AUD/USD @ 1.0348.
Multi-orders hit – range 103.352 all the way down to 1.03445…. will have these run until 2:45am…. needs a nap…. cheers
Anyone seeing the big H&S on the daily UDX?
I mean its too big to miss but I havent seen it mentioned on any site.
Thanks John….”any and all” input more than welcome.
Another bullseye call from the Kong… Bravo.