And now………..Iiiiiiiiiiiiiiiiiiiit’s Time!
Clear the deck traders. Do the unthinkable! I’m taking a shot here this morning.
Yes as much as it pains me to do so ( he he….not really ) there are certain dynamics of the currency market that simply cannot be overlooked / overshadowed by one’s own “feelings” or “preferences”.
We’ve been wondering for some time now “if indeed” the U.S Dollar would take its usual “safe haven flows” ( although these days I wouldn’t really call it that but… ) when risk aversion takes hold, and sure enough it looks like we’re there.
I am initiating several trades long both USD as well long JPY, as money comes out of equities in both the U.S as well Japan ( Nikkei indeed rejected at the double top as suggested ), and in turn is repatriated to “cash” in each of these given currencies.
Makes pretty good sense doesn’t it?
I’ve listed the trades I am entering ( at various levels ) based on the fundamental shift from “risk on” ( where safe havens are sold ) to “risk off” ( where safe haven currencies are repatriated / bought ).
Short EUR/USD as well GBP/USD
Short AUD/USD as well NZD/USD.
Short EUR/JPY as well GBP/JPY, AUD/JPY and NZD/JPY.
Short USD/JPY.
Short CHF/JPY
Short CAD/JPY
Long USD/CHF
I sincerely hope this will be enough to keep you busy for the next couple days ( and perhaps even weeks ). With so many trades taking shape, there will be alot of management / jumping around to do, so we’ll do our best to stay on top of things day to day.
Reading the Risk-Off Playbook Like a Pro
This isn’t your grandfather’s safe haven trade. The market dynamics we’re witnessing represent a fundamental shift in global capital flows that most retail traders completely miss. When equities start bleeding and volatility spikes, money doesn’t just disappear—it flows somewhere. Understanding where that somewhere is gives you the edge you need to capitalize on these massive currency moves.
The JPY Repatriation Machine Kicks Into Gear
Japanese institutions have been sitting on massive overseas positions for months, waiting for exactly this moment. When the Nikkei gets rejected at major resistance levels, those carry trades that everyone thought were free money suddenly become toxic. The unwinding process is mechanical—Japanese insurance companies and pension funds don’t mess around when risk parameters get breached. They repatriate yen faster than most traders can blink, creating the kind of momentum that can run for weeks.
This is why every JPY cross becomes a prime shorting opportunity. EUR/JPY, GBP/JPY, AUD/JPY—they all follow the same script when the repatriation machine kicks in. The beauty of this setup is that it’s self-reinforcing. As JPY strengthens, more carry positions get stopped out, creating even more buying pressure for the yen.
USD Strength Through Default, Not Dominance
Let’s be clear about something—USD weakness has been the dominant theme for months. But when global uncertainty spikes, the dollar gets bought not because it’s strong, but because everything else looks worse. This is strength through default, and it creates some of the most reliable trading setups you’ll ever see.
EUR/USD and GBP/USD shorts become no-brainers when European markets are getting hammered and the ECB is stuck in neutral. The pound especially becomes toxic when UK gilt yields start spiking and inflation concerns resurface. These aren’t trades you need to overthink—when risk-off sentiment takes hold, these major pairs follow gravity straight down.
The Commodity Currency Massacre
AUD and NZD are about to get absolutely demolished, and here’s why: China’s economic data keeps disappointing, commodity prices are rolling over, and both Australia and New Zealand are dealing with housing bubbles that make 2008 look quaint. When global growth concerns spike, these currencies get sold first and asked questions later.
The market bottom we saw recently was just a temporary reprieve. AUD/USD and NZD/USD are heading back toward major support levels, and when those break, the next leg down will be swift and brutal. These currencies have no defense against a coordinated risk-off move.
Managing Multiple Positions Like a Professional
With this many trades running simultaneously, position sizing becomes critical. You can’t treat each trade like it’s independent—they’re all part of the same macro theme. When risk-off accelerates, all these positions will move in your favor at once. That’s when discipline separates the professionals from the amateurs.
Scale out of winners methodically, but let the core positions run. These macro moves can persist for weeks once they gain momentum. The key is maintaining proper risk management while maximizing exposure to what could be one of the most profitable currency moves of the year.
The setup is clear, the fundamentals are aligned, and the technicals are confirming. When everything lines up like this, you don’t hesitate—you execute. The market is handing us a roadmap to profits, and all we have to do is follow it.
Hmmmm Hey Dr. Kong…. .interesting…… very interesting……
Seeing that I only have on pair Aud/Usd Long out of you selection & of the opposite direction – has me thinking too say the least!!
I have a daily squeeze running in the pair & very close to firing off positive here…… so this would have to pull a U-Turn to prevent a positive fire taking off today…. Will be interesting to see where the majority of MF goes over the next few day or ” Who or which sector will get the Loins share”
Still holding long the pair & PM’s respectively…..
Thanks for the post – Cheers Schmed….
Keep on it here Schmed as…….USD has been giving us some problems with direction.
I’ve sat , as well tweaked / passed on my original signals in these pairs / trade concept / idea – and will be keeping this on a very short leash.
I can’t rule out a news conference, and the FED announcing “taper off the table” and “more QE to come” ( which I expect at some point anyway ) to obviously “de rail” the entire list of trade ideas in a heartbeat.
I can’t see getting long AUD regardless so…..let’s keep our eyes peeled.
Adding short EUR/CAD as well.
Now entering “short AUD/CAD”.
Thanks Kong,
…and oil still long or giving up?
Was a quick pop there the other day, and now with consideration of getting long USD you’d have to consider it flat / scratch.
I flip an option here and there for beer money so…..I’m already out.
Ya oil could easily bang around for another 2 to 3 weeks. There is plenty of time to re enter oil long. You’d have to think that if a risk correction comes due to poor US data oil is still at risk for a little more downside. Will make a nice long very soon though
Bang on JSkogs….
Didn’t see oil “burst” higher so…..hey – flat is a trade too.
Agree with everything & have practically the same positions except the short AUD/NZD vs USD. Expecting a marginal retracement in the short term but I believe that the bias should be long on these pairs for a while yet. NZD is a better tell than AUD & if we fail to reach 85ish in coming weeks then perhaps the move has ended
I also smell something fishy with CHF. Can’t quite put my finger on it yet (aside the fact that another move down in gold will further hurt the currency) but there appears to be something else going on here.
I’ve been sceptical of a strong move upward in USD over these first weeks of January, but am taking a “closely watched” shot here.
JPY strength a given, and I for one can’t see what’s keeping AUD and NZD “floating”.
It’s still a pretty tough call out there, as “now I realize” U.S banks report earnings tomorrow.
What are the chances “they” disapoint? Great timing on “looking short risk” but……we’ll play it as it comes.
Kong, I keep telling you 😉 …Gold’s the key to Aussie strength right now, at least until a real panic in equities begins pulling gold down as well in a total risk-off rout. Basically, I would let the Aussie run a bit longer before pouncing on a short. I prefer shorting the euro & pound against the dollar along with both against the yen (as you have done) in the initial stage of this risk-off move. CAD…iffy. I still think we’ll see a sizable correction after its recent collapse. Also, I’m not so sure that the sizable divergence between the aussie and loonie will last much longer here. Also, I have a quick question for you: how large of a move in the JPY are you expecting? I, for one, think we’ll see a complete reversal in JPY shorts during this reversal which I envision as being quite sizable. It’s about time for retail JPY shorts to question their ‘easy’ short trade.
AUD shorts looking great here as per today’s entries, and fair enough – “whatver” it is keeping AUD bid…gold “maybe” – won’t be lasting very long so…I’m fine to continue to monitor / add as I always do.
I too expect ” at some point” the move in Yen will be literally “catastrophic” to the shorts, although can’t rule out a bumpy ride / couple of high volatility squiggles in the days to come.
You’ve got it – the trade short Yen is so one sided, and it’s screaming out “hard reversal”.
As it stands….I’m watching literally minute to minute over the next few days as…I’d like to step on the gas a bit here but….have visions of the Fed confirming my med term views and cutting me off at the knees.
It’s certainly a “dip” but will we get the “extended correction” here? or perhaps after “one more whipsaw”?
I’m very pleased with entry here today, as from a purely “short term technical perspective” my tweaks / Kongdicator has improved..
Let’s stay on top of it…..and stay EXTREMELY NIMBLE!
Hi Kong I am taking the ride with you. I wonder if you have any target in mind for the AUD.USD and for the EUR.USD just to have a bench mark what you are thinking and where you are heading.
WW HongKong Member
This year has been quite a grind so far, but I’m with you on that EUR/CAD short play.
I have Silver closing above the 50ma today – has been bouncing there for about 5-6 days * Along with a daily squeeze which has been running some 21 days here…. A positive fire is where I am leaning currently & once this does break I think the larger % move will be in Silver & Diggers while gold follows….. I’ll post the confirmation on the daily fire once it plays out – should not be long now…. would be surprised if it hold the entire week….. the break should come in the $20.60 price target here….. with PMs positioned to rise here I would have to assume that commod currencies would have to follow… I could also see the DXY & stock falling together as confidence in the USD is weakening away – this should be the early signs or tell if I am correct….
Cheers Schmed,
Nice call on that Schmed……20.594 at this moment
Also think the Aussie could come up & test the 97 res level over the next couple months here riding the PM’s wave…:)
Aussie looks like it might just be working on the right shoulder of a very large inverse H&S pattern….. if 97 gives then 105 would confirm the completion of the right shoulder unless I am seeing things in charts lately…… not sure how these patterns play out in currencies vs. stocks so I’ll leave the currencies pro’s to have a look…… weekly TF….
Ya Schmed….about that…
97? 105? Wow…..
If AUD reaches 92 I’d be shocked but sure…..something to watch.