Trading The Months Ahead – A Plan In Place

I can feel it in my fingertips.

We’ve worked very hard to not only stay “reasonably safe” these past few weeks, but also make a couple winning trades as well. I can assure – that’s a lot more than one can say for the many who’ve likely been “torn to bits” during this difficult time.

It’s time to put together a medium term plan that “should” have us nail the next “two moves ( taking us out as far as early September ) – where we will then find ourselves in an even better position. I plan on nailing “the third move” then.

I’m going to use the SP 500 ( and it’s correlation to USD ) as a “risk barometer” first…then move to the specifics of which currency pairs we will use to execute the plan.

I’m very confident that SP 1950 ( or so ) and Dow 16,950 ( with Nikkei here at 15,000 ) will mark our “top”, and see one important “turn” for us to be very well aware of coming only a few short weeks ahead. You’ll want to be prepared, and you’ll want to be ready as….I plan on nailing this big time.

The chart and the arrows say it all, as there is really no point debating the “fundamental reasons”. It’s simple. We are headed lower for all the reasons sighted here over the past few months, but “even at that” these next few months will likely leave both bulls and bears scratching their heads looking for the answers. It will still appear “flat” until the larger “sustained move lower” comes in early Sept.

I believe the global macro fundamentals will “finally” match up with the technicals “after” we get this “final rinse” over with this summer. I believe the U.S is already back in ( in fact never left ) recession, and that whatever other “explination” is found in the media over the coming weeks – it really won’t make a difference. Blame it on E.U. Blame it on slowing China. Blame it on war in Ukraine. It doesn’t matter. What matters is trading it effectively.

Short and sweet here.

If you want to get a look at the trades we’re putting on in order to best take advantage over the coming weeks and months – please come join us at Forex Trading With Kong !

The Currency Plays That Will Define September

While the SP 500 gives us our roadmap, the real money gets made in the currency markets. The correlation between equities and the dollar isn’t just a trading tool – it’s our crystal ball for the next two months. When that final equity top hits around SP 1950, we’re going to see a violent USD reversal that catches most traders completely off guard.

EUR/USD: The European Recovery Trade

The euro has been beaten down like a rented mule, but that’s exactly where we want to be positioning. As U.S. equities roll over and the dollar loses its artificial strength, EUR/USD becomes our primary vehicle for the September move. I’m looking for initial resistance around 1.3650, but the real target sits closer to 1.4200 by early fall. The ECB’s dovish stance has already been priced in, while the Federal Reserve’s tightening cycle is about to hit a brick wall called reality.

Here’s what most analysts are missing: European economic data has been quietly stabilizing while everyone obsesses over U.S. manufacturing numbers. When the correlation trade reverses, EUR/USD won’t just climb – it’ll rocket higher as hedge funds scramble to cover massive short positions.

GBP/USD: Sterling’s Hidden Strength

Cable offers us the most explosive upside potential through this transition. The pound has been unfairly punished by Scotland referendum fears and BOE dovishness, but those concerns become irrelevant when global risk appetite shifts. GBP/USD should easily clear 1.7000 on the initial USD weakness, with extensions toward 1.7450 very much in play.

The Bank of England’s neutral stance actually becomes a strength here. While other central banks scramble to react to deteriorating conditions, the BOE’s patience will be rewarded with relative currency stability that attracts international capital flows.

JPY: The Safe Haven Rotation

USD/JPY presents our most reliable short opportunity. The yen has been artificially weakened by BOJ intervention and carry trade flows, but when equity markets turn south, these positions unwind fast and ugly. I’m targeting USD/JPY below 100.00 by September, with potential extensions toward 95.50 if the equity selloff accelerates.

Japanese exporters have been loving this weak yen environment, but they’re about to get a harsh reminder that currency weakness cuts both ways. When global trade volumes contract and risk appetite disappears, yen strength becomes unstoppable.

The Commodity Currency Collapse

While we’re positioning long in EUR and GBP, the commodity currencies offer excellent short opportunities. AUD/USD and NZD/USD will get absolutely demolished when China’s slowdown becomes undeniable and commodity prices crater. These currencies have been living on borrowed time, supported by nothing more than central bank jawboning and false hope about global recovery.

CAD faces a double whammy from both oil weakness and U.S. economic deterioration. USD/CAD could easily push above 1.1200 despite overall dollar weakness, making it one of our few long USD plays in the portfolio.

The beauty of this setup is its simplicity. We’re not trying to pick exact tops or bottoms – we’re positioning for the inevitable mean reversion that occurs when reality finally catches up to market valuations. The technical patterns are screaming, the fundamentals are deteriorating, and the positioning data shows extreme complacency.

Most importantly, we’re not fighting the tape here. We’re waiting for confirmation that the equity market turn has begun, then executing our currency trades with surgical precision. This isn’t about being right immediately – it’s about being positioned correctly when the big moves finally arrive.

By early September, these currency positions should be printing money while most traders are still trying to figure out what hit them. The setup is there, the plan is clear, and the execution window is rapidly approaching.