The Kongdicator has obviously taken its signal as I’ve entered like “a million trades here” as of now including to start:
short: CAD/JPY
short: AUD/JPY
short: USD/JPY
long: EUR/USD
long: GBP/USD
long: EUR/NZD
long: EUR/AUD
There is no question that in the immediate “inverse” effect of a tanking U.S Dollar is a rising EUR, so that’s a given. GBP strength along side ( geographically speaking ) makes continued sense, and it’s hard to expect much out of the commod currencies as risk comes off.
USD/CAD still hovering but will likely make it’s move lower here as well.
JPY is a tough nut to crack, and I won’t be surprised to see it put up a larger fight but…..short term trades with a quick hand / ready to jump look to be worth a shot.
Breaking Down the Dollar Collapse Setup
The DXY Death Cross Signal
Look, when the Kongdicator fires off this many signals simultaneously, you know we’re sitting at a major inflection point. The Dollar Index has been telegraphing this move for weeks now, grinding lower against every major resistance level and failing to hold any meaningful bounces. We’re looking at a textbook breakdown scenario where the 50-day moving average is about to slice through the 200-day like a hot knife through butter. This isn’t some minor correction we’re dealing with – this is the kind of systematic dollar weakness that creates generational trading opportunities across multiple currency pairs.
The Fed’s dovish pivot couldn’t be more obvious at this point. Real yields are collapsing faster than a house of cards, and with inflation expectations remaining sticky, we’re looking at a prolonged period of negative real interest rates that’s going to absolutely demolish dollar strength. Smart money has been positioning for this move for months, and now the technical picture is finally catching up to the fundamental reality.
EUR/USD: The Obvious Winner Takes All
EUR/USD above 1.10 was always going to be the cleanest trade in this environment. The ECB’s hawkish stance compared to Fed capitulation creates a yield differential that’s only going to widen from here. We’re not talking about some minor policy divergence – this is a fundamental shift in monetary policy cycles that typically plays out over quarters, not weeks. The Euro’s been coiled like a spring for months, absorbing every bit of dollar strength while building a massive base above parity.
Technical resistance at 1.1050 is already cracking, and once we clear 1.1100 decisively, there’s virtually nothing standing in the way of a run toward 1.1400. The algos are programmed to chase momentum in this pair, and retail traders are still heavily positioned short EUR from the parity days. That’s fuel for a squeeze that could get violent fast. Position sizing needs to reflect the explosive potential here.
Commodity Currencies: The Contrarian Fade
Here’s where most traders get it wrong – they assume a weaker dollar automatically lifts all boats. Wrong. AUD and CAD are getting hit with the double-whammy of risk-off sentiment combining with their own domestic weakness. Australia’s property market is imploding while China’s recovery narrative falls apart, and Canada’s economy is tied to both commodities and an overleveraged consumer base that’s about to get crushed.
The beauty of shorting AUD/JPY and CAD/JPY is you’re getting paid on both sides. Yen strength kicks in when risk appetite dies, and that’s exactly what’s happening as global growth concerns mount. These aren’t momentum trades – they’re structural shifts that align with both technical breakdowns and fundamental deterioration. CAD/JPY below 107.50 opens up a measured move toward 104.00, while AUD/JPY under 96.00 targets the 92.50 region.
JPY: The Ultimate Safe Haven Play
Don’t let anyone fool you about yen intervention threats. The Bank of Japan’s verbal jawboning is becoming less effective by the day, and their actual intervention capacity is limited when you’re fighting both Fed policy shifts and genuine safe-haven flows. USD/JPY breaking below 149.00 was the technical signal that intervention fears are overblown. We’re looking at a move toward 145.00 as the first major target, with 140.00 becoming realistic if this dollar selloff gains real momentum.
The yen carry trade unwind is still in its early stages. Years of accumulated short yen positions across every asset class are going to need unwinding, and that process creates its own momentum. When hedge funds start getting margin calls on their carry positions, they don’t have the luxury of waiting for better levels – they liquidate at market prices. That’s the kind of forced selling that turns technical breaks into waterfall declines.
Risk management remains critical even with high-conviction setups like these. Quick hands and tight stops are non-negotiable when you’re trading multiple correlated positions. The Kongdicator doesn’t stay hot forever, and when these momentum moves exhaust themselves, the reversals can be just as violent as the initial breakouts.
Hmmm…Took me an hour or so here to reflect on your trade set ups and scan my charts! I am short Commod currencies vs. Yen as well, have been since yesterday morning, holding EUR/AUD (My favourite pair) from way way back (1.38 ish) which in itself is worth about 18% of my total capital, but looking at adding now that we crossed over 1.50. GBP/USD I scaled out a bit but left 25% of my position open for a longer term outlook, but I am still hesitant on the EUR/USD, as I personally just hate this pair, especially in recent weeks…If tomorrows NFP shrugs off any “Good US numbers” I will look to get long as well.
Also, took a small position in Oil yesterday at 96.28, and have to thank you for that one as I re – read your previous post on Oil which made me look for an entry, and yeah your levels were pretty bang on Kong, so keep it up 🙂
Love your blog man, you talk reality and its a nice break from a lot of junk you find on forums, etc, these days.
Cheers
P.S what are your thoughts on NFP for tomorrow? Are you looking to stay open through the numbers or looking to go cash before or at least a portion before?
CB
I’m quick like a rabbit these days and bagged 4% on the day.
Tomorrow’s data means “diddly squat” to me as the U.S Dollar has crossed into “dead man’s land” so……nothing outta the U.S is gonna sway what I see/know in currency markets.
Wrapped up with a bow for X mas – USD is toast.
Shit….here I go again…..
The action in USD “specifically” isn’t really even the issue here.
It’s moreso “what it suggests”.
We are clearly seeing “risk off” and without question USD selling off “along with risk” as the “prior prophecy” finally comes to fruition.
US bonds down, US currency down, US stocks (always the last to go) down.
I usually make more cash in the JPY pairs, and as the commods are selling off “along side USD” the USD pair trades aren’t as straight forward for newcomers.
You’re in great shape man. Great trading…and all power to you.
So….you see a correction in Equities finally happening in December? Just curious.
Without question this next dip (all be it the last) will most certainly be bought by the most intelligent of retail investors.
We’ll give u.s equities one more pop to new highs regardless of the now confirmed death slide in the dollar and bonds.
You don’t think the boys on Wall Street are just gonna roll over right?
They’ll get the last of those arm chair investors to dump in….before taking all.
Hi Kong,
Yep, got the EUR/AUD as well (long).
What is your exit strategy on the USD/JPY short? I was long couple of days ago but got stopped out, for a small profit.
Long EUR/USD, yep, I can see why you took that, nice bullish candle on the daily. Did you get in after that move, or did you anticipate? What is your worse-point exit, a drop below 1.3543?
EUR/NZD had a nice doji 2 days ago – was that your entry long?
How long do you expect these to ride Kong, do you have a price point exit, or a time exit? MA exit?
Thanks
Hey Kong – yeah I am chomping at the bit for a short USD/CAD position here but waiting on the sidelines currently but have layered positions here to try & catch the move….. long WTI for a could day now along with the PM’s which I have been trading in & out of….. but this there will be a BURST run very shorty as soon as later this morning & into the jobs announcement….. now only time will tell…..
Best of luck to all –
Ooo and the futures have erased all losses of yesterday..guess nfp was leaked since yesterday setting up a trap..
I doubt that – and really don’t care about the silly U.S numbers here this morning either, as they will be as phony baloney as the rest.
Even at that I have a hard time imagining any major “surprise to the upside”.
I’m just eyeing my current trades / positions / plan – and everything looks good to me.
wow crazy madness.. seems like yesterday was really just a bear trap
Its been 5 straight days down in equities Robert so….I’m not sure what you’re expecting.
I look at my trades with profits in JPY’s overnight….as well EUR/USD rockin, GBP/USD rockin , with small squiggles in a few commod related ( as AUD caught a bid this a.m – which Ill be shorting “shortly” ) and all is fine!
We “expect” this to drag on and squiggle right? We already “know” its a struggle, and in turn trade smaller…..build positions over time etc….
I’ll let the dust settle here this a.m – and imagine the ol USD will be red again in no time.
hi kong, hmm i thought the jpy crosses are going up atm?
They most certainly are so…….
1. Are you “selling around the horn” and picking off this spike?
2. Did you book profits on the few trades you had last night, and now see this as another opportunity?
3. Are you hanging on for dear life in a completely over leveraged position huddled in the fetal position under your desk?
I’m #2
yup. I sold yesterday when i saw signs of it turning up for UJ, just that I thought the good data will be bad for the mkts, seems that it is the opposite lol