Chinese Fire Sale – U.S Dollar Up In Smoke

Make no mistake…China “will” take the hit on those warehouses filled with “useless dollar bills”, or at least what’s left of them by the time they’ve used all they can to buy gold.

As the “macro plans” continue to take shape, the Chinese will soon look back on the “massive fires that raged through the warehouse district” as a passing story in the news – in the context of a “time of change”.

Consider trading hockey cards with a couple of the other kids on your street. All of the same set and series, until a month or two later a new set is introduced and you start trading those. More kids are buying and trading these “new cards” until finally – all you’re left with is a tiny box of the “old ones” eating up precious storage space under your bed.

Eventually you forget all about them, as the trade of these “new cards” now has you buying and trading with little concern for the “few dollars lost” on the inventory of “old cards” gathering mold underneath your bed.

I think that sums it up.

As China continues to grow its domestic economy, and promote trade in Yuan as opposed to the U.S Dollar, it’s really only a matter of time until both China as well “a large portion of the industrialized world” separates completely from any dependence on a U.S imposed system of trade in U.S Dollars.

We good here?

No terrorism here. No “bash America” / China to rule the world type thing no.

Just a simple outline of how a couple of countries on this planet have grown to be less “export dependent” and more “domestically driven” and far less interested in the purchase and hold of U.S “funny money”- with the unfortunate result leaving The United States and it’s continued devaluation of the U.S Dollar  – out in the cold.

As the Fed continues to “mask” the true devaluation of the U.S Dollar by shorting the gold paper market and driving prices down, China gladly scoops up every ounce she can – demanding “actual delivery of the physical gold”.

China will continue to not only produce more gold, but as well purchase more gold “on the cheap” with every single “Fed raid in the paper market” to soon present the Yuan as a completely convertible currency on the global stage.

Complete with stockpiles of “real gold” sitting in vast warehouses behind it…..somewhere on the other side of the tracks.

So what does this mean for the future of the U.S Dollar and it’s use as the worlds reserve currency? What does this mean for the massive amounts of money previously gained by the U.S via the “use” of USD in trade world wide – soon to be lost?



43 Responses

  1. schmederling April 1, 2014 / 10:34 pm

    Excellent Post Dr. Kong…… you hit the nail on the head…. so very true….. sad but so true….. a waterfall of pain is very close to falling on the US & their currency…. could happen here at any moment in the middle of the night which is the reality of things these days… Where one walks up one morning & life takes a drastic 360 U-Turn & most are left wondering what just happened here!!

    Cheers Schmed,

    • Forex Kong April 2, 2014 / 6:52 am


      The domestic growth in China looks very similar to that of the U.S back “just before” it became a massive “monster consuming” economy so…anyone still harboring thoughts of “communism” needs to have their head examined.

      Individuals aren’t allowed to “get rich” and “realize their dreams” in a communist situation, and we now see Chinese “millionaires” popping up daily! The move has been slow and methodical as the Chinese economy is soon to “support itself” with no real reliance on the West at all.

      I can only hope that the U.S has “some trick up their sleeve” to control their own “hard landing” as….otherwise I can only envision “war” as the most immediate plan.

      • schmederling April 3, 2014 / 7:38 pm

        I think that WAR will be avoided by Russia & China along with others supporting a move outside of the Petro-Dollar….. this WAR will play out in the Financial domain. They All know the US is still vastly superior in this department however again I think this WAR will be played out on a different field we are all accustomed to. R/C understand this & will use other more strategic moves to obtain the position they are after or have been after for decades now – the move to a gold back trade note will be the shot fire sending massive ripples across the globe that’s where the real power is – not on a military perspective.

        Cheers Schmed,

  2. Careydina April 1, 2014 / 10:42 pm


    This is impressive, china will be taking over the US soon? I heard about this from one of my banker last year, may takes some time tho.

    • Forex Kong April 2, 2014 / 6:59 am

      I don’t really think it’s a matter of “taking over the U.S” as much as it is a matter of “economic independence” Carey.

      From what I understand China doesn’t really “want” the worlds reserve currency, but looks to develop a system with little or no dependence on the western imposed system of trade.

      If China and a group of countries want to buy and sell goods and services to each other “without exchange to U.S Dollars”, and without importing the inflation created therein – I think it’s most certainly their right, as well just good ol common sense.

      It’s the terrorists in Washington we need to be concerned about as……they can’t afford to see this “chunk of their plan” go by the wayside.

      For The U.S having the ability to print and export fake money has been great for as long as it’s lasted – but unfortunately, that time will soon pass, with the inevitable outcome – likely being war.

  3. Rob April 2, 2014 / 10:30 am

    Yen looks so toppy at this point across the board. In my view, and to not be too correlated for risk management sake, it’s probably best to pick the best set-ups for one’s own strategy (2 or 3) and execute. How do you feel about taking Yen on some strength, say 20-30 pips below today’s lows, Kong?

    • Forex Kong April 2, 2014 / 12:15 pm

      Yen is everything here as the entire market essentially hangs on the Carry trade currently in play.

      As Yen goes “so goes the market” here in my view so…..I have to wait until a clear and substantial move is made.

      NZD taking a hit as the highest flying currency well over last several months is interesting as perhaps the wheels are starting to “losen”.

      I see the last 5 days in Nikkei as last ditch type activity to put everything BOJ has into smashing Yen and pumping stocks.

      15,000 is the number boys…..I want to see a solid rejection here as soon as tommorrow / Fri.

      THIS IS TAKING FOREVER!!!!!!!!!!!!!!!

  4. Farhan Nasir (@FaniNasir) April 2, 2014 / 1:11 pm

    any one here wanna talk about AUD ,, as it has a bad news day ,, n still managed to stay up ,, but i remember stevens saying that they are gonna leave AUD exchange rate on the news to decide ,, n still it remains high on bad news ,, market is crazy ,, nothing makes sense ,,

    • Forex Kong April 2, 2014 / 1:44 pm

      Hey Farhan…I didnt see anything in FB from you.

      In any case….yes yes…its now hanging at the highs and driving people crazy – yes.

      Market IS crazy and NOTHING makes sense so……..stay cool, as this latest push “up” looks pretty exhausted here.

      We can’t really look at fundamentals in Aussie land as being any real indication of direction as……its either “risk on” or “risk off” in currency land…..and as it stands…’s STILL pushing risk on.

      You’d have to admit…the last 11 days “straight up ” in AUD looks pretty suspect no? Right around the same time Japan is sucking wind, U.S data continues to tank, and the world sits questioning war / further conflict in Ukraine?

      A real rinse for sure…..all the while gold smashing lower so….there’s another correlation people need to ditch.

      AUD and gold have “zero” correlation now.

      • Farhan Nasir (@FaniNasir) April 3, 2014 / 12:24 am

        well i sent you a message on your FB profile ,,yet again Aussie surprises me with the bad news this little move is nothing should be a big fat drop ,,n i dont see no real improvement in the Aussie economy than what are they always talking about that economy is getting better n bla bla , and Stevens today said in his speech that that housing price can drop also people should remember than ,, what i think is he is trying to tell everyone that rise in housing prices is nothing more than a bubble ready to burst at any given moment ,, and that will also show the true face of their economy ,,
        and yeah no correlation between gold and aussie as gold has come a long way down and aussie nothing ,, i remember you saying that commodity related curries almost move together , then why is that NZD dropped almost 200 pips and aussie only 50 60 pips ,, ?

        • Forex Kong April 3, 2014 / 6:38 am

          Pick a pair everyone….EVERYTHING has more or less traded flat for an entire 2 months.

          Some……JPY pairs…..down 200- 400 pips thu early March…then ALL THE WAY BACK now here in first week of April so…..

          This is very difficult for beginners and a tough environment all around.

          There is no real point debating “day to day” movement as……it’s still sideways.

    • Forex Kong April 2, 2014 / 1:48 pm

      as well its not further AUD strength driving AUD/JPY… AUD/USD has already spent 3 – 4 days out of steam.

      It’s MASSIVE JPY weakness in last ditch effort in my view. No new stimulus until JULY!

      Watch 15,000 area in Nikkei. If this thing “blows thru” here – I may have to eat a habanero.

      • Careydina April 2, 2014 / 3:21 pm

        Wah July? Shall i cut loss on my AUD/JPY kong? Yen weaken in a row.

        • Forex Kong April 2, 2014 / 3:56 pm

          I can’t really say Carey as I don’t know your position size / commitment so…..

          If it’s not a big deal to you ….ALWAYS cut your losses when you are in doubt.

          Me?….I’ve averaged in and am currently only about -60 pips in the red, and this after 11 straight days with AUD up up up.

          Tonight we get more “speak” from Aussie land , and AUD/USD has already stalled so….

          NZD/JPY also made the turn lower as well so……

          Lots of AUD data out tonight and hard for me to “imagine” AUD shooting higher in this current environment but hey…..that’s just me.

      • Careydina April 2, 2014 / 4:08 pm

        Yep there are many uncertainty. As Yen is weakening so worried if AUD/JPY shoot up further. I will hold for until tonight and see how. Thanks kong!

      • JSkogs April 2, 2014 / 4:40 pm

        Ya the straight to the moon AUD rally wreaks of shorts getting wrecked. And we all know what happens when shorts get wrecked…..well time to short. I see tonight being the turnaround.

        Interesting for me is that I’m in Chicago right now for business. Incredible to see what POOR condition the city is in as soon as you leave the downtown core. Rusted out bridges…broken up concrete on overpasses…streets in embarrassing shape. I’m actually shocked. The municipality has to be broke. I’m seeing first hand what a joke the recovery is. There is so much work to do. I do however feel terrible for those that aren’t in the game because man did I see signs of despair today. I’ve seen roads in better shape in 3rd world countries.

        Anyway I’m 25 pips offside on audjpy and on my initial position still. Hoping to add and make this one count big time. Good luck!

        Hey how come when people complain about holding US bonds and the dollar eroding they never mention the fact that bond prices went up like crazy when QE kicked in? Would love to know China’s average price/yield relationship. So ya buying bonds today would blow because you would be forced to carry to maturity probably as prices drop and yields widen and inflation hurts you. BUT if you were in the game before QE and owned bonds outright or better yet levered up futures you would have done alright on price even after currency devaluation.

        • Forex Kong April 2, 2014 / 5:22 pm

          There is nothing like having someone with their boots on the ground!Awesome J!

          That’s “Jskogs” on the spot reporter reporting “live” from Chicago!

          • Forex Kong April 2, 2014 / 6:57 pm

            AUD followers.

            A miss in retail sales as well China data on the way here in 5 minutes…then RBA Gov Stevens speaks in an hour.

            What can he say to “further boost” AUD after 11 day short squeeze??

            Zip. We may see the turn here pronto.

      • Careydina April 2, 2014 / 8:59 pm

        I can’t tell the stevens speaks is hawkish or dovish for aud? Anyone can share?

        • Forex Kong April 2, 2014 / 9:10 pm

          I can’t see the small inner workings of a given country related to risk such as AUD, NZD and CAD really having much to do with “much” right now Carey.

          A good report here…..a bad data point there….it’s not really about that right now.

          You are either positioning for risk “off” – or you are of the belief that “things will just go up forever” more or less.

          You need to separate the safe havens from the “risk currencies” …then understand that……if the party is going to keep on rockin – the only option is to PRINT MORE MONEY.

      • Careydina April 2, 2014 / 9:14 pm

        Ok got it kong. Thank you for your explanation. I will keep my short here. Aud/Jpy waiting for it.

      • Careydina April 2, 2014 / 9:24 pm

        Kong, you are still looking AUD/JPY as well as AUD/USD will down to 88 from the current price?

        • Forex Kong April 2, 2014 / 9:34 pm


          I’ve averaged in over the past month ( with several small orders over time remember??) so now…..I’m just a few short pips from break even.

          88 will certainly come….but it may take some time.

  5. Careydina April 2, 2014 / 8:50 pm

    Now market has a lot of buyer for aud.

    • Forex Kong April 2, 2014 / 8:59 pm

      I don’t see that at all Carey.

      I’m short….and will stay short.


    • Forex Kong April 2, 2014 / 9:01 pm

      PLease take a look at GBP/AUD long as well….

      If you dont want to add to your existing AUD/JPY.

      A small order “long here” looks extremely low risk with a stop under 1.79

  6. slimpickens April 2, 2014 / 9:22 pm

    Thanks for the AUD updates Kong…….Gimmie my money back Aussie!

    • Forex Kong April 2, 2014 / 9:36 pm

      I know a number of you have followed me short AUD so….this is likely a great example / means to learn.

      Did you scale in? Small orders over time?

      Or did “a few of you” take too large a position “too soon”???

      Forex is a bitch.

      You must keep gasoline in the tank in order to survive.

      • Careydina April 2, 2014 / 10:03 pm

        Of course if AJ can back to 93 is already thanks godness. Haha… kind of frustrated to nearly cut all AUD positions yesterday.

      • Careydina April 2, 2014 / 10:06 pm

        Hey Kong,

        I realized when is UJ up, AJ is up too. Does both pairs correlation?

        • Forex Kong April 3, 2014 / 6:31 am

          To a certain extent yes Carey…as both generally trade higher with “risk on”.

          • Forex Kong April 3, 2014 / 6:33 am

            I know this is very frustrating….but it’s not just AUD!

            The entire currency market is more or less “grinding sideways”, short of the JPY “still” under constant pressure.

            All you can do during times like these is try to stay calm, and be patient.

            We can’t “make the market” move….we need to just accept these frustrating times and learn to push through.

  7. David April 2, 2014 / 11:28 pm

    Been slowly adding AUD short as I’ve learned the hard way years ago to “not pile in” even when things seem lofty. Very happy with my AUD position and planned to add short positions on the way up to 0.95 if need be. This is taking a while to go down though as it won’t even dip below 0.92 (but it’s close and could very well tonight), at least NZD is starting to pay off good though.

    • Forex Kong April 3, 2014 / 6:35 am

      AUD still hanging, and hanging , and hanging as markets achieve exactly what they hope to do here.

      FRUSTRATE everyone! And encourage people to make “emotional” decisions.

      NZD as the high flyer has certainly fallen off…..if that’s any indication of things to come…let’s hang in there.

      • Careydina April 3, 2014 / 7:32 am

        Unfortunately AUD/JPY is shooting higher now. Sad to see my floating loss lately. And Yen is weakening.

        Kong, do we really need to wait until July for Yen strengthen? Expected UJ will go higher. Which mean my AUD/JPY positions will go under the water. 🙁

        • Forex Kong April 3, 2014 / 7:40 am

          I’ve been saying for days that I am currently watching the 15,000 level area on Nikkei.

          It’s been a full 2weeks now that Nikkei has only moved from around 14,800 to 15,200 so…..what can I say?? Its flat flat flat.

          Nearly every other currency ( nzd, chf, gbp , cad ) are now stalling vs JPY – EXCEPT AUD!

          AUD is a high yielder ( not so high anymore but… ) not surprising that it’s being the most stubborn.

          I can’t say “when” exactly Carey….only that things have certainly “stalled” here around 15,000 Nikkei and that the correlation to JPY is very, very high.

          Please understand as well this is a “bearish trade” while U.S as well Japan continue to pump pump pump. If you think stocks will go up forever, and that risk “on” will remain for an indefinate period of time well…….this might not be for you.

          I have lots of gas in the tank…and can work this position for “months” if need be so…I’m not as concerned about where we are at “today”.

        • Forex Kong April 3, 2014 / 7:43 am

          And Carey…..if BOJ isn’t planning more stimulus “until” July…..then it’s my thinking that JPY should GAIN strength up INTO JULY.

          I don’t plan to wait UNTIL JULY NO.

          I expect things to correct, and that JULY will be when JPY gets hammered AGAIN u see?

      • Careydina April 3, 2014 / 7:50 am

        Ok. Let’s wait and see on tomorrow. My gas is running out soon, 60% used! Lolz
        As long as AUD/JPY no more further up, I will be safe. I don’t mind waiting to another month. Just… sigh

  8. schmederling April 3, 2014 / 7:44 pm

    I trimmed 25% of my Aud/Usd long positions – currently running set-ups in the 1hr, 2hr, 4hr & 8hr TF’s again. We are holding that 200-day so with these fires we should get an idea if this becomes a support level. Or should these fire Neg then a test or break of that 200-day is just around the corner…. I’ll look to take profits on the remaining 75% of this position should the earlier TF’s start firing off Neg – mainly the 1hr & 2hr….. been a good trade don’t want to get greedy & leave those profits to the house…. no thanks.

    Cheers Schmed,

    • JSkogs April 3, 2014 / 11:34 pm

      Good job man well managed trade in my opinion

      • JSkogs April 3, 2014 / 11:36 pm

        Wasn’t a trade I was willing to take buy I know you’ve done well off it

  9. schmederling April 3, 2014 / 9:24 pm

    Usd/Cad running MM set-ups in the 2hr,4 & 8hr…. Neg fires here would help drive us closer to a par trade… weekly has completely run out of steam here with MM now turning neg here… won’t get to excited yet as this pair is a beast to trade….
    Just calling out what is setting up in real-time – the fires in the mentioned TF will provide the direction expected with the 2hr leading the charge!

    Cheers Schmed,

    • Careydina April 4, 2014 / 8:29 am

      Hey schmederling,

      Well done! I’ve closed my long AJ too early. And now left all short positions. When AUD get weaken? Is AJ reached the top?

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