I’m looking for a little feedback here today.
I’m hoping to see / hear from some of you / possibly frustrated Forex traders, who’ve been following closely this week.
I hope you’ve taken some time to follow along, and seriously consider some of the concepts/ideas thrown around here at the blog. Last nights “tweet” as to the weakness in Japan, as well all of yesterday’s conversation “should” have made for some pretty happy traders here this morning.
In particular a valued reader suggesting the information here was “useless banter” “should” be up 150 pips over night on a single trade suggestion alone.
This stuff doesn’t turn on a dime, as we’ve worked this trade since Tuesday – but the profits as of this morning “should” make a few days effort well worth it.
I plan to sit tight and let this trade develop further, as we are “now” hearing suggestion that “the Fed may not taper”.
Didn’t I say that like a couple of months ago?
When the Market Finally Catches Up to Reality
This is exactly what separates profitable traders from the noise traders who jump from strategy to strategy every week. While everyone else was getting whipsawed by daily volatility, we’ve been building a position based on fundamental realities that don’t change overnight. The Japanese yen weakness I’ve been hammering home isn’t some flash-in-the-pan technical setup – it’s a structural shift that smart money has been positioning for while retail traders chase every shiny object that crosses their screens.
The beauty of this trade lies in its inevitability. When you understand the underlying monetary dynamics driving currency movements, individual daily candles become irrelevant background noise. Japan’s commitment to their ultra-loose monetary policy stance, combined with the diverging paths of global central banks, creates the kind of one-way momentum that can fund your trading account for months if you have the discipline to stick with the bigger picture.
Reading Between the Fed’s Lines
Here’s what kills me about most forex analysis – traders get so caught up in parsing every single word from Fed officials that they miss the forest for the trees. The tapering debate has been a perfect example of this myopic thinking. While everyone was obsessing over meeting minutes and press conference soundbites, the real story was always about economic data and inflation dynamics. You don’t need a crystal ball to see that premature tightening would kneecap any recovery momentum.
The dollar’s recent strength against the yen isn’t just about Fed policy expectations – it’s about relative economic positioning and the simple fact that Japan has painted itself into a monetary corner. The Bank of Japan can’t tighten even if they wanted to, which they don’t. This creates the kind of interest rate differential that drives sustained currency trends, not the choppy back-and-forth that destroys most retail accounts.
Why Patience Pays in Currency Markets
Every frustrated email I get follows the same pattern – traders want immediate gratification from every trade idea. They’ll risk proper position sizing for the chance to double their account in a week, then wonder why they’re constantly starting over. Real money in forex comes from identifying major themes early and riding them through the inevitable noise that shakes out weak hands.
This USD/JPY move we’ve been tracking didn’t materialize because of some magical technical indicator or secret signal service. It developed because we recognized a fundamental imbalance and had the conviction to stay positioned while others jumped in and out based on hourly chart patterns. The 150 pips overnight represents just the beginning of what could be a much larger structural move if global monetary policy continues diverging as expected.
The key is understanding that currency markets move in waves, not straight lines. Even the strongest trends will have pullbacks that test your resolve. The difference between profitable traders and everyone else isn’t prediction accuracy – it’s the ability to maintain positions through temporary adversity when the underlying thesis remains intact.
Macro Themes That Actually Matter
While technical analysts debate support and resistance levels, profitable traders focus on the macro forces that drive sustained currency movements. Japan’s demographic challenges, debt-to-GDP ratios, and export dependency create structural pressures that no amount of intervention can permanently offset. These aren’t short-term trading themes – they’re multi-year trends that reward patient positioning.
The current environment reminds me of the early stages of previous major currency cycles. You get these extended periods where fundamentals slowly build pressure beneath the surface, followed by rapid repricing as markets finally acknowledge reality. We’re likely in the early innings of yen weakness that could persist far longer than most traders imagine.
Building on This Foundation
Moving forward, the focus should be on identifying other currency pairs where similar fundamental imbalances exist. The principles that guided this Japan trade – monetary policy divergence, economic growth differentials, and structural positioning – apply across all major currency relationships. The goal isn’t to hit home runs on every swing, but to consistently identify and capitalize on high-probability setups based on economic reality rather than chart patterns.
This trade represents validation of an approach that prioritizes substance over style. While others chase daily volatility and complicate simple concepts, we stick to what works: identifying major themes early, positioning appropriately, and maintaining discipline through inevitable market noise. That’s how you build lasting success in currency markets.
Kong, when I used the term useless banter I was referring to the majority of the syria news reports in general. Was not saying that in reference to your blog, which I do believe is high quality content.
Right on man – any way ya cut it….it makes for some creat copy!
He he he…no thing here, and I DO hope you made a couple bucks!
Unfortunately not. This is one of the worst weeks I’ve had all year. What is your take on AUD with the elections right around the corner? I’m heavily underwater and have been slowly reducing my large position, but it’s still not enough.
Damn.
If you’re long AUD I feel you’ve got a relatively “small window” to take advantage of a simply oversold bounce in a well established downtrend.
Coupled with risk off ahead…I see AUD “maybe” making a larger correction upward here (only based in further USD weakness) but even at that….gees – it’s at the top of range on 4h now, and stuck at 92.
This market is grinding traders to a slow death as every move is retraced / dragged out / ranging etc…
You’ve realy got to take these days one at a time (while keeping your eye on the bigger picture) and be very careful. Reducing your postion a bit at a time is as good as you may be able to do for now.
And as you said Kong.Thank you.I am learning a lot here .
also you saved my ass from long U/cad ;)…Here in Canada banks forecast $1.10 till Jan but now I am flat.
USD/CAD is a tough pair in my eyes, as it sits flat (more or less) for long periods of time….then a lil bump, then back etc.
It’s a tough pair to really nail any solid “trade profits” from – as it tends to range.
I’ve always got my eye on it though, as I too have a vested “personal interest” in the exchange.
Yup! Great profits this am. Good trading Kong and those that scored
Can’t wait to see the reaction if/when the Fed brings out the “no taper” talk. Will be a mess. The market has been willing to be optimistic for now but if there is a sniff of easing not working out as planned it will be freaking mayhem.
It will be hilarious yes…as “taper will never happen” in my view.
Im still considering a time where USD tanks…as well as U.S equities, as “no tapering” means “more money printing” / bad for currency coupled with suggesting that “money printing isnt working” meaning “still shit economy”. Bad for currency.
Further pump in stock prices from here is a complete joke.
Need to be on your toes here daily.
So in your opinion – shit results equals no taper which would then result in obvious currency damage, selling of equities….which I agree with. What about bonds? Lose control due to currency debasement, foreign ownership, etc so rates rip making things worse?
Bonds are the first do go…..then the currency ( or in this case it’s “been going” for years now ) then finally stocks.
Check it out here:
https://forexkong.com/2013/04/20/intermarket-analysis-questions-answered/
At least….this is how I see it.
Holy crap this might be bragging but I don’t really care. I took an ES short last night too. I am going to rage tonight!
Im gonna brag like mad – this looks like the turn I’d been anticipating.
Nikkei now -370 , USD tanking , stocks taking it on the chin.
Exactly as planned.
Yes you have yes you have. Good analysis man. Very impressed. Not easy stuff to parse through. Thanks for the insight. Its appreciated!
Hey Kong, you have any opinion on FX futures vs. spot (ignoring the larger size contract issue)?
It’s funny – I track a number of things via futures in my daily analysis but don’t trade’em.
Jumping around from options / stocks / forex etc…I guess I’ve just stuck with what works for now.
How bout u?
I don’t trade FX futures at the moment, but am investigating the pros and cons of each.
Yikes.. equities up n yen up? One of it is not telling the truth?
You are (again) mistaking volatility (intra day no less) for market direction.
You can’t look for each and every correlation to play out minute to minute, as you’ll just drive yourself crazy.
This is the largest reason why “you need to understand big picture fundamentals” in ordedr to trade with conviction. The intraday correlation shifts will grind your brain / emotions ( and account ) into the dust.
Well… I was short already on GBP/JPY when I saw your post… In my view move down is no where finished yet on this pair. I am looking next week into price hitting bottom line of the Daily channel (currently around 152 area), next week possibly 148.8 area, then Price will have to make a decision.
Now Mr T has some bigger picture view!
You are talking my language MrT.
Great work.
Sold another lot,155.08, will see how it will work out…
Thanks againyou nailed this and I made several dollars. have a good weekend
Right on Kevin.
Feel free to tell as many frickin people as you possibly can as I’m pushing to get this blog rollin!
Ic kong. Thanks for the explanation! Its hard to ignore it..but i will try. Sometimes over reading do that to me.
My hunch is you are still looking at too small a time frame to devise any real “view” of the overall market movement.
When you start looking at weekly charts, and get excited ( like with the candle formations “forming” on JPY pairs now ) you start forming longer term trade ideas.
Consider a full “weekly” candle DOWN – under USD/JPY or EUR/JPY for example.
That’s some serious pips.
Sure looks like the ES shorts got “hooked”
The equities market is not gonna just “roll over” as it’s designed to extract the most cash from the most people , most of the time.
I’ve had a short “bias” since as early as May, and even though we’ve seen lots of “upside since” – I know for a fact TONNES of stock traders have “sucked wind long” here over the summer as well.
I don’t trade stocks in this day n age….short of the miners as my play on gold/silver..which is my play on short dollar….which is my play on long JPY….which is my play on ….u get the picture.
And ya – complete 100% retracement on NAZ DAQ etc today – a complete fleecing.
Roller coaster day but I held my positions and actually added after that bit of short covering. Glad I did but had to sweat a bit. Still waiting for the momentum stage of the selling (equities). Not even close yet. Added to JPY longs late day. Word!
Easy , easy…….we go easy as forex markets move relatively slowly when trading the larger time frames.
An “add here” is not at all far off…as the retracement took place “intraday” and I myself beefed up a couple positions.
I like where you’re at Jskogs – u sound like you’ve got yer head on right.
Another week gone by….and still equities put up their fight. You’d have to be a complete moron to consider making stock purchases here ( short of miners and precious metals)….but those boys in NY will just keep pluggin it. Deep underwater in my view….or at least the smart one’s are reaching for break even.
Can’t wait for the flush I am super happy with my positioning