This won’t come as a surprise…coming from me but – USD is headed much lower.
I think it’s about time – we’ve had enough of this “mucking around” at these levels, having more or less “danced around” the past few months. It’s time for the next leg down.
I don’t have time here this morning but if you want to pull up a general chart of the $dxy or in some platform (like stockcharts) $USD, I’d get your sights set on a serious of long red candles taking us down into that area around 75 – 72 in coming months.
If this “doesn’t” correspond to an “inverse move” in the price of gold and silver ( looking at is as such a dramatic decrease in USD value ) I will be forced to take on “the Habanero challenge” as I have offered several times in the past.
Up 3% overnight alone with the majority “still coming” from trades entered in GBP vs Commods in the weeks past. I suspect the Nikkei will “attempt” a solid double / retest top at 16,000 ( the high from May ) as JPY futures inversely “double bottom” shortly.
Enjoy:
The Dollar’s Date with Destiny: Why 75-72 Isn’t Just a Target—It’s Inevitable
Look, I’ve been tracking this dollar weakness for months now, and what we’re seeing isn’t some temporary blip or market noise. This is structural deterioration playing out exactly as anticipated. The $DXY has been painting a textbook descending triangle pattern, and anyone still clinging to dollar strength at these levels is about to get schooled by the market in a very expensive way.
The fundamentals are screaming dollar weakness from every angle. Real interest rates remain deeply negative, the Fed’s balance sheet expansion continues to debase the currency, and global central banks are quietly diversifying away from dollar reserves. When you combine this with persistent current account deficits and mounting fiscal pressures, the 75-72 target zone becomes not just probable—it becomes mathematically inevitable.
JPY Futures and the Nikkei Double-Top Setup
The Nikkei attempting that retest at 16,000 while JPY futures carve out a double bottom is textbook inverse correlation mechanics. This isn’t coincidence—it’s monetary physics. As the yen strengthens from these oversold levels, Japanese equities will face the inevitable headwinds of reduced export competitiveness. The Bank of Japan’s intervention rhetoric has become increasingly hollow, and the market knows it.
What makes this setup particularly compelling is the timing. We’re seeing classic end-of-cycle behavior where correlations that held for months suddenly snap. The JPY carry trade unwind that’s been simmering beneath the surface is about to explode into full view. When EUR/JPY and GBP/JPY start their inevitable descent from these elevated levels, the Nikkei’s 16,000 resistance will prove as solid as a brick wall.
Watch for the yen to break above 108 against the dollar as the first confirmation signal. From there, 105 becomes the next logical target, with panic buying likely to push it even higher as overleveraged carry positions get squeezed mercilessly.
GBP vs Commodities: The Trade That Keeps Delivering
Those GBP versus commodity currency positions I’ve been hammering for weeks are finally showing their true colors. GBP/AUD, GBP/NZD, and GBP/CAD have been absolute money machines, and we’re still in the early innings of this move. The Bank of England’s hawkish pivot caught the market completely off-guard, while commodity central banks remain trapped in dovish rhetoric despite inflationary pressures.
The beauty of these trades lies in their multi-dimensional nature. You’re not just betting on sterling strength—you’re positioning for a fundamental shift in global growth expectations. As the UK economy shows surprising resilience post-Brexit, commodity currencies are beginning to reflect the harsh reality that China’s growth story isn’t the perpetual motion machine everyone assumed it was.
GBP/CAD above 1.75 is where things get really interesting. The next major resistance sits at 1.78, but given the momentum we’re seeing, a run to 1.82 is entirely within reach. The oil-correlated weakness in CAD combined with sterling’s unexpected strength creates a perfect storm scenario that could last months, not weeks.
Gold and Silver: The Ultimate Dollar Hedge Awakening
Here’s where my Habanero challenge comes into play—and why I’m supremely confident I won’t be eating any spicy peppers anytime soon. Gold and silver are coiled springs ready to explode higher as dollar weakness accelerates. The precious metals have been consolidating for months, building the foundation for what could be the most spectacular breakout we’ve seen in years.
Gold’s technical setup is particularly compelling. We’ve got a massive cup and handle formation on the longer-term charts, with the handle completion targeting $2,100+ on the initial breakout. Silver, as always, will be the volatile cousin—expect it to outperform gold by significant margins once this move gets underway.
The institutional money is already positioning. Central bank buying has been relentless, ETF inflows are accelerating, and the smart money has been accumulating on every dip. When the dollar breaks below 90 on the $DXY—and it will—precious metals will rocket higher with the kind of velocity that catches everyone off guard.
This isn’t just about currency debasement anymore. It’s about portfolio insurance against a monetary system that’s showing increasing signs of stress. The 75-72 dollar target isn’t the end game—it’s just the beginning of a much larger currency reset that’s been building for over a decade.
I’m trying to work out what that guy was eating….. Any clues??
Yes John…it’s the “habanero challenge” I’ve suggested in the post!
If you’ve ever eaten one yourself….oh my – you’ll know what I’m talking about!
Soon japanese can use their yen to wipe their butts…sayonara yen
I have a fridge packed with hot sauces from a large variety of peppers. I absolutely love my food raging hot…..and I will not eat a raw habanero. I once had a little nibble of one and it was well into the zone of discomfort. Eating a whole one of these little bastards would be hilarious. Oh Kong I wish you no pain but would honestly have a chuckle if you have to eat one haha.
I’ve been in training for “quite some time now” as I cook with them / eat them ( not whole ) like…..daily.
It’s still a terrible challenge to take on – so……we’ll hope for the best!
haha awesome! Good luck! Step up to on one of the Trinidadian strains after that. I have a moruga scorpion sauce thats a bit rough on the mouth but still a pretty enjoyable ride. I like the habanero the most for daily eating. But I also really like piri piri…sometimes spelled peri peri or birds eye. Great on meats.
Kong when are you thinking the DX will drop again? I realize there was a nice move overnight that I had absolutely nothing in the game to profit from but right now it looks like the index will rise. I realize the USDJPY might fall very soon but the DX maybe not.
Can you clarify when you are thinking? I am in your camp but I am thinking its further out from today. Thanks man.
Hey ever seen that crazy Indian lady eat 60 or so ghost peppers on YouTube? Now that is completely nuts!
JSkogs…..where did you read / consider me thinking “today”?
Typical counter trend move ALL DAY today during NY session as per usual….AUD still getting absolutely killed, GBP blowing thru the roof…
DXY has Yen as a much smaller % than EUR so…..$DXY has EUR moving higher vs USD, and USD/JPY as a much smaller piece.
I’m talking about USD destruction through the better part of 2014, with very little question ( if any at all ) that the top – like THE TOP is in at 81.50
have a look a weekly chart…..check trendline broken…as well retest type activity.
Ok, I’m completely with you. Thanks for the head up. Pretty good chance gold will be the rager trade in 2014. Was just thinking some of the pairs would go through a little consolidation before a good USD move down again. The only USD trade I’ve made lately is NZDUSD which has been very profitable.
A guys really got to be careful these days with “generalizations” currency wise as….I’ve been short USD but “even shorter” AUD.
So been short AUD/USD for example, since my “waterfall” post may feel a touch counter intuitve for some.
Long gbp/usd’s been a given, as well short USD/CHF.
Set up for a short position in USDCAD looks pretty good
Ok Kong this one’s got me confused. I’m interested in your timeframe as I’m struggling to see short term weakness. The Yen will probably continue to weaken (if 104 breaks imho its off to 110) as will the loonie (1.10 on the horizon). They make up 23% of the index. More importantly, the EUR bank stress test results are due in 2 weeks and the early mail is that most of the banks are zombies, which means the ECB may need to introduce new support measures that will only weaken the Euro. Thats the bulk of the index. No argument about the GBP (which looks like breaking out) or the CHF.
Hope this makes sense – interested in your views.
And if / when U.S doubles QE?
Perhaps “mister market” won’t like that too too much.
Imagine a time where USD tanks and the obvious inverse has EUR, GBP and CHF higher, then along side this commod currencies sell hard on risk, JPY rips heads off as safety play – gold bolts higher.
Japan is increasing it’s QE in April – I’m positive of that so…..
I don’t really feel that the “currency war” has really kicked into high gear yet, but as it stands I feel this is inevitable.
Do me a favor as I appreciate your views – flush that out and lets “try” to entertain the opposite? USD higher? How?
As well I don’t think the EU bank tests will be any surprise as “yes” – absolute shambles but…as far as “currency goes” – what can they really do? With the divide with Germany and “I believe” the laws surrounding “actual QE in EU Zone” I’m putting it in the “impossible” category for now.
Hi Kong, imho the US won’t double QE – the next move is a small taper as the Fed is slowly coming to the realisation that QE is having a diminishing impact on the economy as it recovers slowly, and they are can see the looming strangulation point in the bond market. This is USD poitive.
Where I’m struggling is the USD “tanking”. Yes the Japanese will increase their QE – this is USD positive, a hard selloff in the commodity currencies – USD positive. The ECB will need to recapitalise the zombie banks and reduce interest rates further (negative deposit rates are a strong possibility as they can only do QE lite) – USD positive.
Where might the major long term threat to the USD strength come from – the Yuan. Its going to be put into the DXY index at some stage (probably once global Yuan based trade flows reach 5%-10%) and this will upset the balance as the Yuan will inevitably rise as its more freely traded. But this is a few years off. In the meantime its hard for me to see any sustained period of USD weakness, even though the Eur & GBP may rise a little further between now and Christmas,
I just think our time frames may a little different, and if I’ve missed something happy to be put right, cheers.
And yes of course throw in the “Yuan” – and you’ve got “yet another” contributing factor.
You’ve got everyone continuing full steam ahead with easing / QE Deano – with the exception of the U.S??
The only scenario I see that involves a taper – will be an orchestrated “mention” – then markets tanking ( likely just prior to the doubling ) as to make the “doubling” look like an essential – therein having the Fed / Osama “save the day”.
If you’ve the mindset that the U.S will “do anything” that is suggestive of tightening moving forward then……..
Ya….throw my thesis out the window.
Kong! a bullish argument for USD (particularly vs Euro) in 2014 that I am aware of is: US economic growth strengthens, tapering starts in March and is complete by December (QE over), and the higher interest rates as a result do not short circuit the economy’s recovery. The US balance of payments deficit shrinks because of the shale oil ‘revolution’, resurgence in domestic manufacturing, and higher component of services in GDP; and the federal budget deficit continues to improve.
I took a big bite of a habanero once (after too many beers) thinking it was a sweet pepper. I feel for the kid in that video.
Try a full dob of wasabi (after too many wines) thinking it was a Japanese fruit. Shat for a week.
my daughter loves red peppers and banana peppers ( not hot at all ) . Well grandmother came for a visit and brought some peppers that looked like banana peppers. She got them from a neighbors garden. My poor daughter ( 5) took it and started eating it like a carrot. My God she screamed . Once I figured out what was wrong I grabbed it and took a bit to see what we were dealing with. Hottest thing I ever ate. I have had my fair share of habaneros , but this was hot. We had a new gallon of milk and she swished and spit with that till it was gone. Found out later it was some special cross breed to be hot as hell.
Ya those lil habanero’s are deadly!
He he he…I’ve had a lot of practice / exposure as they are in my regular day to day diet but…even still ugh…
For ANYONE unprepared? or unaware? A child??
Oh my…….
And hey!
Anyone reading! Perhaps my ears are burning…..as I see a pile of visitors reffered here this weekend from “Smart Money Premium”
I’d absolutely “looooooove to know” on what premise / reasoning I assume a link was placed there.
Let me know!
roderdale posted the usd going lower link and the china bombshell in the chat side. with no comment
rogerdale posted … not roderdale