Month: March 2014

Bearish On Japan – EWJ As A Play

Forex Kong 12 Comments

Looking at the Nikkei “pump job” this morning, as well JPY getting hammered,coupled with the sales tax implementation and latest string of “terrible data” out of Japan I’m about as bearish on Japan as one could be.

It doesn’t look like Japan is going to be able to do much more “stimulus wise” until maybe even July.

Get this……the government is also now telling residents previously living a short 20 km from the Fukushima Plant that it’s SAFE to go back home. SAFE?!

Unreal.

For those into stocks one could consider short plays on “EWJ” or even a couple ( tiny tiny! ) longer dated put options “short” late tomorrow or even mid-week.

As for us currency guys..the Japanese Yen continues to wallow, as the BOJ continues to do all it can to keep this boat afloat. I’m still waiting for a more substancial signal / move before trying “yet again” to get long JPY ( short of a few trades already initiated ).

Look for continued news / headlines and likely larger moves DOWN in the Nikkei Japanese Stock Market up around 15,000.

 

The Japanese Yen Death Spiral Continues

The Bank of Japan has painted itself into a corner with nowhere left to turn. Every policy tool in their arsenal has been deployed, abused, and rendered ineffective. The yield curve control mechanism is cracking under pressure, and the yen continues its relentless slide into oblivion. This isn’t just monetary policy failure—it’s economic suicide wrapped in bureaucratic double-speak.

What we’re witnessing is the slow-motion collapse of a currency that once commanded respect on the global stage. The BOJ’s desperate attempts to stimulate growth through endless money printing have created a zombie economy propped up by artificial life support. When central bankers start telling displaced nuclear disaster victims it’s “safe” to return home, you know desperation has reached new heights.

The Nikkei Pump Charade

This morning’s Nikkei rally is nothing more than lipstick on a pig. The Japanese stock market has become a casino where the house always wins—until it doesn’t. These manufactured pumps are designed to create the illusion of economic vitality while the underlying fundamentals continue to rot. Smart money isn’t buying this performance; they’re positioning for the inevitable crash.

The 15,000 level on the Nikkei represents a critical resistance point where reality meets fantasy. Every push higher becomes more artificial, more desperate, and ultimately more unsustainable. The sales tax implementation has created a consumption cliff that no amount of stock market manipulation can overcome.

Currency Debasement Strategy Backfires

The BOJ’s currency debasement strategy was supposed to boost exports and reinflate the economy. Instead, it’s created import inflation that’s crushing Japanese consumers while doing little to stimulate genuine economic growth. The yen’s weakness isn’t a sign of competitive advantage—it’s a symptom of systemic economic decay.

This is where the USD weakness narrative becomes interesting. While the dollar faces its own structural challenges, the yen’s problems run far deeper. We’re looking at a race to the bottom where the yen might actually win by losing the most.

Trading the Breakdown

The technical setup for shorting Japanese assets couldn’t be clearer. The EWJ presents an excellent vehicle for those looking to profit from Japan’s economic mismanagement without dealing with currency conversion complexities. Put options on the Nikkei offer leveraged exposure to what appears to be an inevitable correction.

For currency traders, the waiting game continues. The yen has been so oversold for so long that any meaningful bounce will likely be met with fresh selling pressure. The key is patience—waiting for that substancial signal that confirms the next major move rather than getting chopped up in the noise.

The Bigger Picture

Japan’s situation represents a cautionary tale for other developed economies flirting with similar monetary extremes. When you’ve exhausted conventional policy tools and moved into experimental territory, the exit strategy becomes increasingly complex and potentially catastrophic.

The Fukushima situation adds another layer of surreal desperation to the mix. When governments start rewriting radiation safety standards to fit their narrative, you know the situation has moved beyond normal economic policy failure into something far more sinister.

This isn’t just about one currency or one stock market—it’s about the endgame of modern monetary policy taken to its logical extreme. Japan is the canary in the coal mine for what happens when central banks lose control of the narrative and reality starts asserting itself.

The market rally elsewhere might provide temporary cover, but Japan’s structural problems can’t be papered over indefinitely. The reckoning is coming, and when it arrives, it’s going to be spectacular in its brutality.

Japan To Raise Sales Tax – Consumers To Slow

Forex Kong 11 Comments

Brilliance out of Japan as we see the country’s standard “sales tax” raised from 5% to a staggering 8% here for the beginning of April.

This is very likely going to cause a considerable downturn in consumer spending for the coming quarter as the BOJ finds itself “ounce again” in a very precarious position.

In April 1997, when the government last raised the sales tax, to 5% from 3%, consumption took a dive and along with the effects of the Asian financial crisis, pushed Japan into deflation and a recession that lasted more than 18 months.

Now after 16 months of printing money like there’s no tomorrow, an increase in sales tax hardly sounds like part of a “cohesive plan” but this is not at all uncommon in Japanese central planning.

It’s one step forward ( if you consider rampant currency devaluation a step forward ) and two steps back as consumers tighten their belts and plan to cut back on spending.

We’ll keep a watchful eye on the Nikkei as always, along with those pesky JPY pairs that still refuse to budge.

 

 

The BOJ’s Impossible Balancing Act Unravels

This sales tax increase exposes the fundamental contradiction at the heart of Japan’s monetary strategy. The Bank of Japan has been flooding the system with liquidity for over a year, desperately trying to generate inflation and economic momentum. Yet here comes the government, implementing a policy that will immediately choke off consumer demand and push the economy back toward the deflationary spiral they’ve been fighting.

The timing couldn’t be worse. Japanese households were just beginning to show signs of confidence after months of aggressive monetary stimulus. Now they’re facing a 60% jump in sales tax overnight. This isn’t some gradual adjustment – it’s a shock that will ripple through every sector of the economy.

JPY Pairs: The Stubborn Reality

Those JPY pairs aren’t moving because the market sees through the charade. Smart money recognizes that all this quantitative easing becomes meaningless when fiscal policy works directly against monetary policy. The yen should be weakening dramatically with the BOJ’s money printing, but traders know that consumer spending collapse will force the central bank’s hand.

We’re likely looking at a scenario where the BOJ will need to accelerate their stimulus programs just to offset the damage from this tax increase. That’s not currency devaluation – that’s policy desperation. The market is pricing in the reality that Japan’s economic planners have no coherent strategy.

Echoes of 1997: History Doesn’t Lie

The parallels to 1997 are impossible to ignore. Back then, Japan made the exact same mistake – raising the sales tax in the middle of a fragile recovery. The result was an 18-month recession and a deflationary death spiral that took decades to escape. Now they’re doing it again, apparently learning nothing from their own recent history.

Consumer confidence is about to crater. When people know prices are jumping 3% overnight on everything they buy, they postpone purchases. They cut back. They save more and spend less. This creates the exact opposite economic dynamic that the BOJ has been trying to engineer with their printing press.

Nikkei Under Pressure

The Nikkei is going to feel this immediately. Japanese corporations depend heavily on domestic consumption, and that’s about to fall off a cliff. Export-oriented companies might see some benefit if the yen finally weakens, but that won’t offset the domestic demand destruction.

We’re watching for the Nikkei to break key support levels as earnings expectations get slashed across the board. Retail, automotive, electronics – every sector that depends on Japanese consumers is going to take a hit. The only winners will be companies with significant overseas revenue that benefit from yen weakness, if that even materializes.

This whole situation exemplifies why centrally planned economies fail. You can’t have one branch of government printing money to stimulate demand while another branch simultaneously implements policies that destroy demand. It’s economic schizophrenia, and the market is starting to price in the inevitable failure of this approach.

The real question now is how long it takes for the BOJ to admit this was a catastrophic mistake. Will they wait for unemployment to spike and GDP to contract, or will they act preemptively to offset the fiscal tightening? Either way, USD weakness globally could provide some relief for Japanese exporters, but that’s a thin reed to lean on when your domestic economy is about to implode.

The BOJ has painted themselves into a corner with this tax increase. They’ll need to print even more aggressively now, which will eventually pressure the yen lower, but not before significant economic damage occurs. Global reckoning in currency markets may finally force Japan’s hand, but the domestic pain is already locked in.

The Psychology Of Trading – Emotions Take Control

Forex Kong 2 Comments

When you consider the “psychology of trading” what we are really looking at is “plain old human emotion” – and one’s ability to control it.

This is without a doubt, the absolute most difficult aspect of trading you’ll need to conquer in order to be successful as without emotional control, fear and greed will wreak havoc on your mind and your account.

New traders often overlook this.

Caught up in the technical aspects of “timing entries” or “learning a new indicator” it’s very normal for new traders to operate on a “hey I think I’ve got this figured out” type basis, scoring a winning trade even, or seeing “another light come on” as another technical aspect falls into place.

This is all well and good, but I can tell you with certainty – there is “no short-term trade strategy” capable of beating the markets consistently without the one element that generally keeps both fear and greed in check.

Proper money management.

If you want to get your emotions under control, get your money management under control.

To start….trade MUCH smaller than you are currently.

Let me ask you……if you had a handful of change….perhaps 5 dollars worth of nickels lets say – would you really be that “emotionally distraught” if you lost one? How bout two?

Let’s say you even lost 3 or 4 – but then during the same week, you found a couple new ones behind the couch or in a pair of jeans? Would you really be that broken up?

There it is. You’ve got to start looking at your total account balance, and the amount you are flat-out “able to lose” in a given trade / trade plan without crying about it, essentially “removing” fear from the equation.

Consider you’ve already lost the money “before you even enter the trade” as another great way to put fear on its ear. Done. I’m in with a 100 pip stop, If I’m wrong I’m wrong….and I will lose $200.00. Ok mom! Good night. See you in the morning. Done.

Now….if you get this far and then find out that you are consistently losing on your trades, you’ll have to get back to the drawing board on your actual strategy as….it’s not “fear” that’s got the best of you. If you’ve been caught offside, and am now deep underwater well….I’ll bet you where trading to large right?

And….. if you can honestly sit back in your chair any given day and say “I have no freakin idea what the hell is going on out there!” – you stop trading until you do know.

I’ve got a million of these, and could likely write on “forever” but will keep this short enough to stomach in one sitting.

The number one way to get your emotions under control…..is trade smaller, lower expectations of “hitting home runs” and then concentrate on consistency. Small wins, small losses = more time in the game, and more time to observe and further hone your skills.

It’s a long road my friends, but the key is to still have a couple of those nickels left, when you’ve finally put all the puzzle pieces in place.

Then you can start building spaceships.

The Hidden Cost of Emotional Trading: Why Your Account Balance Reflects Your Mental State

Here’s what most traders won’t admit: every blown account started with the same fundamental mistake. It wasn’t a bad strategy, a missed news event, or even terrible timing. It was the complete inability to separate their ego from their money. When you’re trading with scared money, or worse, trading to prove something, you’ve already lost before you hit the buy button.

Position Sizing: The Ultimate Emotion Killer

Let’s get brutally honest about position sizing. If you’re checking your P&L every five minutes, sweating over a 20-pip move, or losing sleep over an open trade, you’re trading too big. Period. The math doesn’t lie – proper position sizing should make individual trades feel like background noise, not life-or-death decisions.

Calculate your risk per trade as a percentage of your total account, not as a dollar amount. Two percent maximum risk per trade isn’t just conservative advice – it’s the difference between surviving long enough to actually learn something and joining the 90% who blow up their accounts within six months. When you’re risking amounts that don’t trigger your fight-or-flight response, you can actually think clearly about market structure, price action, and timing.

The Confidence-Capital Relationship

Every successful trader eventually discovers this truth: confidence comes from capital preservation, not from hitting home runs. The traders making consistent profits aren’t the ones posting massive gain screenshots on social media. They’re the ones grinding out consistent 1-2% monthly gains while everyone else chases the lottery ticket.

This is especially critical in forex where USD weakness can create sudden, violent moves that destroy overleveraged accounts in minutes. When major currency shifts happen, proper position sizing is what separates the survivors from the casualties.

Building Your Emotional Foundation

Start with demo trading, but not for the reasons most people think. Demo isn’t about learning indicators or testing strategies – it’s about building the psychological muscle memory of following your rules when there’s no money on the line. Practice entering trades with predetermined stops and targets. Practice walking away from setups that don’t meet your criteria, even when they look “obvious.”

Then, when you switch to live trading, start ridiculously small. If you have a $10,000 account, trade like you have $1,000. If you can’t make money with small size, you definitely can’t make money with large size. But if you can consistently follow your process with small positions, you can gradually scale up while maintaining that same emotional equilibrium.

The Reality Check System

Implement a daily reality check. Before each trading session, ask yourself: “Am I trading to make money, or am I trading to feel something?” If you’re bored, frustrated, trying to make up for yesterday’s losses, or feeling invincible after a winning streak, don’t trade. The market will be there tomorrow, but your account might not be if you trade from an emotional state.

Keep a trading journal, but focus less on technical setups and more on your mental state before, during, and after each trade. Note when you felt fear, greed, excitement, or frustration. Look for patterns. Most traders discover they make their worst decisions during predictable emotional states.

The market doesn’t care about your mortgage payment, your ego, or your need to be right. It’s a cold, mathematical environment that rewards discipline and punishes emotion. The sooner you accept this reality and structure your trading around emotional neutrality rather than technical perfection, the sooner you’ll join the small percentage of traders who actually make money consistently.

Remember: the goal isn’t to eliminate emotions – that’s impossible. The goal is to trade in a way where your emotions become irrelevant to your results. When you achieve that state, you’ll understand why the most successful traders often describe their work as boring. That’s not a bug in the system – market bottoms are made in that boredom, and so are fortunes.

The Psychology Of Trading – Reader Response #2

Forex Kong 1 Comment

Rob,

I saw fundamental changes / shifts in the market that tipped me off, as well factored in a number of other “broad stroke” indicators – suggesting that markets might stall / move sideways / remain “trendless”.

1. The economic cycle “in general” has become about as stretched as it can stretch (now pushing on to be one of the longest economic cycles in the history of markets!). This has solely been “fueled” by funny money out of Washington.

The Economic Cycle – A Simple Explanation

2. Earnings ( and even more importantly ) “guidance” has been pretty much flat / bad to even “horrible” as U.S companies have done everything they can to show profit, when in reality it’s really about cost cutting / down sizing etc…..( your bottom line might look a bit better too after cutting 300 workers etc….this doesn’t mean “more profits/growth”.

Caterpillar Earnings – What It Means To Me

3. Emerging Markets continue to but up against resistance, and even worse – in the face of a rising dollar ( as suggested via tapering, and now “higher rates” ) will likely “collapse” as they’ve grown so used to the flow of “funny money” coming out of Washington.

Emerging Markets – Update 

4. Proposed reforms in China.

Reflections On China – Where To Next?

Gees…..and the list goes on, with continued unemployment in the U.S, housing going nowhere, Obamacare ( my god ) and continued tensions in the Middle East etc…

All of this most certainly contributed to my “extended holiday” through February and March as these factors ( and many others ) fly in direct opposition to the current mandate from the Fed.

Keep the masses calm. There is no problem. Everything is going as planned. Buy stocks. Go to sleep.

You can’t trade in these types of cross winds. You will be ground to pieces with such conflicting forces pushing and pulling on markets.

Ok enough……

Looks like “part 3” will finally get to the “psychology” of it all….and how a trader can maintain an ounce of sanity through all of this.

For starters……tequilla doesn’t hurt a bit!

 

 

The Psychology of Trading in Manipulated Markets

The tequila comment wasn’t a joke, Rob. When you’re staring down a market that’s been artificially propped up for over a decade, you need something to keep you grounded while the financial establishment gaslights every rational trader on the planet.

Recognizing the Fed’s Psychological Warfare

Here’s what every forex trader needs to understand: the Federal Reserve isn’t just manipulating interest rates and money supply—they’re running a full-scale psychological operation on market participants. Every FOMC meeting, every Jackson Hole speech, every “data-dependent” soundbite is designed to keep you second-guessing your analysis and chasing their narrative instead of following the actual economic fundamentals.

The moment you recognize this game for what it is, everything changes. Those conflicting signals I mentioned—the stretched economic cycle, flat earnings guidance, emerging market stress—these aren’t anomalies. They’re the natural consequence of a decade-plus experiment in monetary madness finally hitting reality’s brick wall.

Why Traditional Technical Analysis Fails in Rigged Markets

You can’t trade support and resistance levels when the central bank is the primary market maker. Every time the S&P approaches a meaningful technical breakdown, here comes another intervention, another policy “adjustment,” another reason why this time is different. It’s not different—it’s just more manipulated than any market in human history.

This is precisely why I stepped back during those February and March months. When artificial forces are stronger than natural market mechanics, the smart money waits on the sidelines. The USD weakness we’re seeing now? That’s not technical analysis playing out—that’s the inevitable result of fiscal insanity meeting mathematical reality.

The Emerging Markets Powder Keg

Let’s talk about what happens when the funny money spigot gets turned off. Emerging markets spent the better part of fifteen years gorging themselves on cheap dollars, building infrastructure projects and debt loads that only make sense in a zero-rate environment. Now we’re watching the greatest margin call in developing world history unfold in slow motion.

Turkey, Argentina, Brazil—these aren’t isolated incidents. They’re previews of coming attractions. When the dollar carry trade unwinds, it won’t be orderly. It’ll be a stampede, and every forex trader worth their salt should be positioning for the chaos, not pretending it won’t happen.

Maintaining Sanity in an Insane System

Here’s my practical advice for keeping your psychological edge when the entire financial system is operating on borrowed time and printed money: focus on what’s real, not what’s reported. Corporate earnings may be manipulated through buybacks and cost-cutting, but cash flow doesn’t lie. Employment statistics may be massaged through participation rate adjustments, but people either have jobs that pay living wages or they don’t.

The market rally mentality that dominates mainstream financial media is a psychological trap. Every “buy the dip” mentality reinforces the Fed’s narrative that their intervention can continue indefinitely. It can’t, and smart traders know the difference between a correction and a structural breakdown.

When I see continued unemployment masquerading as recovery, housing markets frozen by affordability crises, and geopolitical tensions escalating across multiple continents, I don’t see reasons to chase risk assets. I see reasons to preserve capital and wait for genuine opportunities.

The cross winds I mentioned aren’t temporary market noise—they’re the sound of a system under extreme stress. The traders who survive the coming unwinding will be those who recognized the manipulation for what it was and positioned accordingly, not those who believed the central banking fairy tale until the very end.

Sometimes the most profitable trade is the one you don’t make. And sometimes, Rob, the smartest thing a trader can do is pour a drink and wait for sanity to return to the markets.

The Psychology Of Trading – Reader Response

Forex Kong 3 Comments

In response to a fantastic line of question from valued reader “Rob” – let’s pull a couple of stops here.

It’s Saturday afternoon…my family and friends have now headed home, and it’s back to business “full-time” for Kong. So what better thing to do than “let loose a bit” after a full two weeks more or less “sitting on the bench”.

After suffering a bit “psychological damage” himself ( alongside the rest of us ), with continued effort actively trading markets these last few months, and in light of one my recent posts “Position Size – When Markets Have No Clue” Rob asks how I may have been able to identify this treacherous market dynamic ( chop ), and manage to keep myself out of harms way.

Excellent question Rob. Absolutely fantastic.

My first tip-off, aside from already having  been very wary of markets going back several months was the complete and total “disregard” markets showed for the taper.

Knowing full well that the fundamental story in the U.S continues to deteriorate , one would have assumed that the “initiation of the taper” would have been the first clue that “the party is over”, and the “free money is ending” right? Apparently not.

Seeing U.S Equities continue to rally in the face of continued negative/poor data “coupled” with the suggestion and “initiation” of tapering told me almost immediately that the puppet still dances and that the Fed was still just as busy behind the curtain.

I never believed they would taper. I still “know” they have done nothing more but generate a media campaign, and if anything are even harder at work propping this ponzi up.

Recognizing this had me immediately trim positions, get to cash , scrap trade plans, get out-of-the-way as…..if I thought the Fed was controlling things when QE was “hip” how do you think I felt seeing things continue to push higher as QE was “supposedly” being cut back.

Bullshit. Total 100% bullshit.

Nothing has changed ( short of a couple of entries / zeros / ones in a couple of computers ) as QE will continue until a scapegoat is found, and an excuse can be made for the bubble bursting – period. Then QE will be doubled.

As well keep in mind that “I too” got caught” getting long the dollar, posting a loss of a % or two regardless of how many times I second guessed / knew in my gut that nothing had really changed.

I too – took the bait.

Then looking at things from a technical perspective, I didn’t get a decent signal from the Kongdictator on even as small a time fram as a 4 H, looking at pairs like USD/JPY trading flat as a pancake for now the entire last 2 months there’s been no question.

Markets have no clue.

I’ll break this into two post….and touch on another point Rob touched on – how this all plays out with traders “psychologically”:

The Psychology Of Trading – Reader Response #2

 

 

 

 

 

The Fed’s Shell Game and What It Means for Currency Traders

Look, Rob asked the right question at the right time, and here’s where this whole charade gets really interesting. The Fed’s “taper” was never about actually reducing stimulus – it was about maintaining the illusion of normalcy while keeping the printing presses running at full speed. Any trader worth their salt should have seen through this smoke screen immediately.

Reading Between the Lines of Market Manipulation

When fundamental analysis completely breaks down, when economic data means nothing, when traditional correlations go out the window – that’s your signal to step back. The USD/JPY trading flat as roadkill for two months straight? That’s not normal price action. That’s artificial market control at its finest.

I’ve been watching currency markets long enough to know when something stinks. The fact that the dollar didn’t collapse immediately after taper talks began told me everything I needed to know. Real tapering would have sent USD tumbling against every major currency pair. Instead, we got this manufactured sideways grind that’s designed to trap both bulls and bears.

The Kongdictator staying quiet for weeks on end isn’t coincidence – it’s recognition that when central banks are this deep in manipulation mode, technical signals become meaningless. You don’t fight a rigged game; you wait for the riggers to show their hand.

Position Sizing in a Manipulated Market

Here’s what most traders don’t understand about position sizing during Fed intervention periods: traditional risk management rules don’t apply. When markets can gap 200 pips overnight on a single Fed speech that says absolutely nothing new, your normal 2% risk per trade becomes suicide.

I cut my position sizes to almost nothing during this period because I recognized we weren’t trading fundamentals or technicals – we were trading Fed psychology. And Fed psychology is completely unpredictable when they’re this deep into propping up a failing system.

The smart money wasn’t playing this game either. Look at volume patterns during those flat trading periods – institutional participation was at multi-year lows. Even the big boys stepped aside and waited for cleaner signals.

The Coming Dollar Reckoning

But here’s the kicker, Rob – this manipulation game has an expiration date. The Fed can’t keep juggling these balls forever, and when they drop, the dollar collapse is going to be spectacular.

Every month they extend this charade, every fake taper announcement, every manufactured data point – it all adds fuel to the eventual fire. The longer they suppress natural market forces, the more violent the snapback will be.

And when that snapback comes, we won’t be trading traditional forex pairs anymore. We’ll be trading the collapse of the world’s reserve currency. That’s not hyperbole – that’s mathematical inevitability when you print money at the rate the Fed has been printing.

Preparing for the Next Phase

So how do we position for what’s coming next? First, stop believing anything the Fed says. Their words and actions haven’t aligned for years, and they’re not going to start aligning now. Second, watch what other central banks are actually doing, not what they’re saying.

The real signals will come from unexpected places – gold accumulation by major economies, bilateral trade agreements that bypass the dollar, changes in reserve currency allocations by sovereign wealth funds.

When those dominoes start falling, the forex market will transform overnight. The pairs we’ve been trading for decades will become relics, and entirely new currency dynamics will emerge. The traders who recognize this shift early will make fortunes. The ones who keep fighting the last war will get obliterated.

This isn’t about being bearish or bullish anymore, Rob. This is about recognizing that we’re living through the end of an era, and the next era is going to require completely different trading strategies. The manipulation phase we’re in now? It’s just the calm before the storm.

Forex Trade Entries – The Wait Is Over

Forex Kong 17 Comments

Call me crazy, as I’ve not really had much to say “forex wise” over the past few weeks but….we’ve finally got a  couple trades shaping up!

I know, I know…its been a long and painful March for anyone not watching their money management like a hawk, as many currencies have done all but what you would have expected. But again….I fell the “shake out” has about run its course.

You’d have to be looking at GBP/AUD as bottoming out here at 1.79 / 1.80 along side all AUD pairs finally exhausting “whatever buying interest” there’s been over the past few weeks.

As “100% backwards” as it may have appeared with all the tough news coming out of China and potential war stirring in The Ukraine, the near term fundamentals in Australia pulled a “temporary trump card” with both AUD as well NZD continuing to push higher.

With some of our favorite candle formations now taking the stage ( hammers and shooting stars ) I’ve got trades setting up “for you” in several currency pairs. ( I’ve been in / adding to these the entire month )

  • Long GBP/AUD “above” current price action ( say 50 pips ) and let price come to you.
  • Short AUD/USD “under” current price action ( say 50 pips ) and let price come to you.
  • Short AUD/JPY “under” current price action ( say even 80 pips ) and let price come to you.

Otherwise it looks to me that the US Dollar is “again” rolling over here, and as we’ve seen most often over the past few months…she falls “along side” risk so…..AUD down, NZD down as well USD down with JPY up, as well EUR and GBP up – as flat out wacky as that may appear to some of you.

Get it on your screen, watch the pairs into next week and see if this doesn’t set up for a trade with some legs.

 

 

Citi Group Fails Stress Tests – Banks Turn Down

Forex Kong Got something to say?

As a general rule of thumb it’s pretty standard procedure to keep your eyes on a given countries financial sector and specifically its banks, as a measure of economic health and stability.

Considering the massive amounts of “funny money” that has been printed and then passed on to the major banks in the United States, one would assume these institutions are literally “stuffed to the nines” and in fantastic shape.

Well…….CITI Group has now “failed” the latest set of stress tests along with 4 other large American banks, apparently not looking “very prepared” for any potential economic fallout / downturn.

I watch the symbol $BKX that lined up “to the minute” with the last 10 day drop in the SP 500 back in late January so……it’s not looking very healthy here after today’s news.

Something for “punch bowl drinkers” to keep an eye on.

I don’t touch the stuff.

 

Rising Interest Rates – Falling Gorillas

Forex Kong 7 Comments

Ya….falling on the ground laughing my ass off.

Gimme a break.

If anyone actually believes that the fed will “raise interest rates” on its own accord – you’ll now need to turn off your computer, head into the bedroom, pack yourself a nice little “overnight bag”, grab your favorite stuffed animal ( a gorilla I can only hope ), call a friend to come pick you up….and head straight down to your local mental institution.

There’s a bed waiting for you there….and I bet you’ll see a number of your friends have already checked in.

This is NEVER going to happen! Let alone “earlier” than what markets have currently been sold.

You’d have to imagine something like a wounded American soldier, shot up, beat down and near death, miles from medical attention with little hope for survival, then taking out his revolver  – and shooting both feet.

That’s Janet Yellen raising interest rates.

Gimme a break.

I suppose you’re trading with “hopes of more stimulus from China” to eh?

Gimme a break.

The “hose job” continues, as the puppet just keeps on dancing.

The Fed will NEVER raise rates on its own accord, and “once again” the media / money transfer machines have got you tied up in knots wondering which way to turn.

Yes yes….things are getting better. Taper on track…..rates to rise sooner than expected….all is going according to plan. Good lord.

Maybe I’ve been on holidays too long as this sounds even “more” ridiculous daily.

 

I’m 6″2 – but getting shorter by the minute.

 

 

 

The Federal Reserve’s Impossible Position

Let me spell this out for anyone still clinging to fairy tales about monetary policy. The Fed is trapped in a corner so tight they can barely breathe, let alone make bold moves like raising rates. They’ve painted themselves into this mess with over a decade of cheap money, and now they’re staring at a debt mountain that makes Everest look like a speed bump.

Think about it logically. The U.S. government is sitting on over $30 trillion in debt. Every quarter-point rate hike translates to billions more in interest payments. You really think they’re going to voluntarily strangle themselves? This isn’t about economic theory anymore—it’s about basic survival math.

Currency Markets See Through The Charade

The smart money has already figured this out. Look at what’s happening with USD weakness across major pairs. The dollar’s strength was built on the illusion that America had room to maneuver. That illusion is cracking faster than ice in a microwave.

EUR/USD, GBP/USD, AUD/USD—they’re all showing the same pattern. The market is pricing in what the talking heads refuse to acknowledge: the Fed’s hawkish rhetoric is nothing but theater. When push comes to shove, they’ll choose more accommodation every single time.

The Real Game Behind The Curtain

Here’s what’s actually happening while everyone’s distracted by rate hike fantasies. Central banks worldwide are coordinating the biggest wealth transfer in human history. They’ll keep printing, keep suppressing yields, and keep inflating away the debt burden. It’s not a bug in the system—it’s the entire point.

The puppet masters pulling the strings understand that higher rates would collapse the everything bubble they’ve spent years inflating. Real estate, stocks, bonds—the whole house of cards depends on cheap money flowing like a river. Turn off that tap, and watch the financial system implode faster than you can say “systemic risk.”

Trading The Reality, Not The Headlines

Smart traders position themselves based on what central banks will actually do, not what they say they’ll do. The Fed will continue finding excuses to delay, postpone, and ultimately reverse course on any meaningful tightening. Count on it.

Every time they hint at hawkishness, watch for the inevitable backtrack when markets throw their tantrum. It’s the same script, different act. They’ll cite “unexpected economic headwinds” or “evolving global conditions” or whatever buzzwords focus groups tell them sound responsible.

Meanwhile, real assets continue their march higher. Gold, silver, Bitcoin, commodities—anything that can’t be printed into oblivion. The debasement trade isn’t just alive; it’s the only game that matters. When you see the market rally picking up steam, that’s not optimism about the economy. That’s inflation expectations finally waking up.

The Endgame Is Already Written

This whole charade ends one of two ways: controlled demolition or uncontrolled collapse. Either the Fed orchestrates a managed decline of the dollar’s purchasing power, or market forces do it for them in spectacular fashion. Neither scenario involves them voluntarily raising rates into a recession.

The math is simple, even if the politics are messy. They’ll choose currency debasement over debt default every single time. They’ll choose asset bubbles over deflationary collapse. They’ll choose to kick the can down the road until there’s no more road left.

So while the financial media keeps spinning tales about the Fed’s next move, the real money is positioning for the only outcome that makes sense: more of the same, with extra helpings of monetary accommodation dressed up as “emergency measures” when the next crisis hits.

Stop listening to what they say. Start watching what they do. The pattern is clear for anyone willing to see it.

Pipelines And State Lines – Russia Has Gas

Forex Kong 13 Comments

So the G-8 has now become the G-7 with Russia getting the cold shoulder, and the proposed G-8 meeting for June – cancelled.

Leaders of the so-called Group of Eight announced on Monday they would cancel their planned June meeting in Sochi, Russia, and suspend their participation in the international group, following Russia’s annexation of the Crimean Peninsula from Ukraine and threats toward eastern Ukraine.

Blah,blah,blah…..here’s what this is “really” all about. ( I’m sure you already know this ).

Check out the location of those pipelines, and the amount of gas exported from Russia to a number of European countries, as well take note of the “cultural boundaries” outlined in the smaller graphic in the bottom left corner. Hmmmmm…….

Ukraine_Gas_Pipeline_Forex_Kong

Ukraine_Gas_Pipeline_Forex_Kong

There appears to be a whole lot of land/people there in the states of Eastern Ukraine that could just as easily “swing” Russian no?

Market wise what can be said? Another day grinding away…..short of GBP finding support and AUD looking to top out.

Trades continue to develop, as paint continues to dry.

 

 

 

 

The Real Currency War Behind the Headlines

While the media spins tales of democracy versus authoritarianism, the smart money knows this is about energy dominance and currency control. Russia supplies roughly 40% of Europe’s natural gas, and those pipelines running through Ukraine aren’t just infrastructure—they’re economic lifelines that can be turned off like a faucet. When you control the energy, you control the currency flows, and when you control the currency flows, you dictate terms.

The suspension of Russia from the G-8 isn’t diplomatic theater. It’s the opening move in a currency realignment that’s been brewing for years. Every sanction package, every pipeline discussion, every territorial dispute feeds back into one central question: who gets to determine global reserve currency status moving forward?

EUR/USD Under Pressure From Energy Reality

The Euro is caught in an impossible position. European leaders can posture all they want about Russian aggression, but their heating bills don’t care about moral victories. Germany gets 55% of its natural gas from Russia. Italy pulls in 38%. These aren’t numbers you can sanction away without economic suicide.

This energy dependency translates directly into EUR weakness against the dollar. Every escalation in Ukraine tensions sends European industrial costs higher while making the continent more dependent on expensive LNG imports priced in USD. The math is brutal and unavoidable—Europe’s currency is hostage to Russian energy policy whether Brussels admits it or not.

Smart traders are positioning for sustained EUR/USD weakness, not because of any technical breakdown, but because the fundamental energy equation has Europe over a barrel. Literally.

GBP and AUD: Commodity Currency Divergence

The GBP finding support isn’t surprising when you dig past the surface. Britain’s geographic separation from continental Europe’s energy crisis gives sterling breathing room that the Euro doesn’t have. Plus, London’s financial sector benefits from any flight to quality that bypasses European assets.

But here’s where it gets interesting—the AUD topping out signals something bigger. Australia is a commodity powerhouse, and in normal circumstances, global energy crunches should boost all commodity currencies. The fact that AUD is hitting resistance while energy prices spike suggests traders are pricing in global economic slowdown, not just regional European problems.

This divergence between energy-exposed EUR weakness and commodity-backed AUD weakness tells you the market expects this crisis to crater global growth, not just redistribute energy flows. That’s a much darker scenario than most analysts are pricing in.

The Pipeline Map Reveals Tomorrow’s Battles

Look at that pipeline map again, but this time think currencies, not territories. Every major gas line that runs through Ukraine represents billions in annual revenue that could be redirected, shut off, or weaponized. The proposed South Stream and Turkish Stream pipelines aren’t just infrastructure projects—they’re attempts to bypass Ukrainian leverage entirely.

When those alternative routes come online, Ukraine’s strategic value drops to near zero, and Europe’s energy security becomes entirely dependent on direct Russian goodwill. That’s when the real USD strength emerges as European capital flees to dollar-denominated safe havens.

The cultural boundaries shown in eastern Ukraine aren’t just ethnic considerations—they’re economic zones that could flip allegiance and take their industrial capacity with them. Losing eastern Ukraine means losing steel production, coal mining, and heavy industry that props up the hryvnia.

Trading the Long Game

While paint dries and ranges persist, the structural shifts are building beneath the surface. This isn’t about swing trading headlines—it’s about positioning for a fundamental realignment of global energy flows and the currency implications that follow.

The grinding sideways action we’re seeing now? That’s markets trying to price in outcomes that haven’t materialized yet. But when they do, the moves will be swift and decisive. Europe either solves its energy dependency or watches its currency reflect that weakness permanently.

The G-7 can exclude Russia from their meetings, but they can’t exclude Russian gas from European power grids. Until that changes, the real money will keep flowing where the energy security lies, and currencies will follow that reality regardless of diplomatic posturing.

Time And Price – Something Else You Don't Know

Forex Kong 7 Comments

Can you imagine if a single Central Bank decided to buy or sell a single currency in “vast quantity” in a single hour of a single day….what that would do to the price?

Now consider if 5 Central Banks at once “all jumped on board” in a single hour to buy or sell a specific currency. Wow. talk about a huge spike no?

Currency markets don’t work that way as…..it takes weeks if not months for a single Central Bank to move “into a position” or “out of a position” without completely turning the market on its head by the sheer volume / impact of a trade of such size.

Take a look at AUD/USD:

aud_usd_forex_kong_2014-03-24

aud_usd_forex_kong_2014-03-24

While small time retail investors figure “they’ve got things licked” buying AUD up from 88 area back in Feb, we can only assume that the big boys have been quietly selling / building short positions as we now near the wonderful “red line” – the 200 Day Simple Moving Average.

If the past is any indication of the future in “this specific example” ( as I’m not so much about the past ) I encourage you to keep your eyes peeled over the next few days.

Could it be that you are learning to trade like the big boys?

Oh….I thought not.

 

The Mathematics of Central Bank Movement

When you’re watching AUD/USD dance around that 200 Day Simple Moving Average, you’re not just watching price action—you’re watching the culmination of months of institutional positioning. The retail crowd sees a bounce from the 88 level and thinks they’ve caught lightning in a bottle. Meanwhile, the real money has been methodically building positions that would crush your account if executed in a single day.

Why Volume Matters More Than Price

Here’s what separates the professionals from the weekend warriors: understanding that meaningful currency moves aren’t about dramatic spikes—they’re about sustained, coordinated pressure applied over time. When Australia’s central bank wants to influence AUD positioning, they don’t slam the market with a billion-dollar order at 3 PM Sydney time. They work through trusted intermediaries across multiple sessions, spreading their influence like water finding every crack in the foundation.

This is precisely why that red line matters so much. The 200 Day Moving Average isn’t just a technical level—it’s a psychological battlefield where institutional patience meets retail impatience. Every bounce off this level represents thousands of smaller players convinced they’ve found the bottom, while the big money continues their methodical accumulation or distribution.

Reading Between the Lines of Market Structure

The beauty of this AUD/USD setup lies in its predictability. Not because markets repeat exactly, but because human nature and institutional behavior follow patterns. When you see price approaching a major moving average after a significant move, you’re witnessing the intersection of technical analysis and institutional flow.

Smart money doesn’t fight these levels—they use them. They understand that retail traders will pile in at obvious support and resistance, providing the perfect liquidity for their larger objectives. This creates the kind of USD weakness scenarios that unfold over weeks, not minutes.

The Coordination Game

Think about the logistics involved when multiple central banks want to influence currency markets simultaneously. They can’t coordinate directly—that would be market manipulation on a scale that would trigger regulatory scrutiny. Instead, they work through market mechanisms, timing their operations to coincide with natural market flows and technical levels.

This coordination happens through understanding, not communication. When the Reserve Bank of Australia sees USD strength becoming problematic for their export economy, they don’t call the Federal Reserve. They position themselves anticipating where market sentiment will naturally flow, then add their weight to that movement.

Trading Like the Institutions

The question isn’t whether you can trade like the big boys—it’s whether you’re willing to adopt their timeframe and patience. Institutional success comes from understanding that currency markets are aircraft carriers, not speedboats. They turn slowly, deliberately, with momentum that builds over time.

When you’re watching AUD/USD approach that 200 Day Moving Average, you’re not looking for a scalping opportunity. You’re positioning for a move that could unfold over the next several weeks. This means managing risk differently, thinking in terms of campaigns rather than battles, and understanding that the most profitable trades often feel wrong in the beginning.

The retail crowd will continue buying obvious bounces and selling obvious breaks. Meanwhile, the institutional players will continue building positions that account for these predictable reactions. The difference between these approaches isn’t just capital—it’s philosophy. One group trades what they see; the other trades what they know is coming.

As we watch this market setup develop, remember that the most important moves in currency markets happen in slow motion. The dramatic spikes get the headlines, but the methodical institutional positioning generates the real returns. Keep your eyes on that red line—not for the bounce, but for what happens after the bounce fails.