To The Moon

The US dollar experienced a rebound last week, prompting us to temporarily exit our previous long positions in the Euro. However, the fundamental factors underlying the dollar have not undergone any substantial changes. Therefore, we expect the magnitude and momentum of this rebound to be limited. We will closely monitor developments this week; if price action is favorable, we may once again seek suitable non-US currencies to go long.

Analyzing the weekly chart of the dollar over the past few weeks reveals signs of a pause in its downward trend. Furthermore, last week's weekly closing price returned above a crucial new long-term trendline, indicating that range-bound consolidation and volatility are likely to unfold in the near term. As long as there is no bearish engulfing pattern this week, we anticipate further upside potential for a rebound in March. Nevertheless, the macro-level downward pressure and broader downside risks remain significant.​

From a fundamental perspective, the expectations set by the new Federal Reserve Chair are relatively more hawkish than previous market assessments. However, it must be acknowledged that the subsequent market pressure facing Donald Trump—and the pressure transferred to the Fed for monetary easing—will far exceed the challenges of pure Fed policy itself.

More importantly, the current political and economic agenda implemented by the Trump administration poses a long-term risk to the US dollar. In this regard, we can draw a comparative reference from the trajectory of the Chinese Yuan over the past few months. The so-called "Rise of the East, Decline of the West" paradigm may not materialize immediately, but under Trump's leadership, the dollar has already lost its aura of absolute dominance. Critical timelines to watch will initially emerge during the month of the official Federal Reserve leadership transition, followed by the period surrounding the midterm elections.​

From a technical standpoint, the long-term support level established since the 2011 European debt crisis has been repeatedly tested by short sellers since the middle of last year. Meanwhile, the bulls' counterattacks have been so lackluster that they have failed to effectively break back above the crucial 100 mark. Although the logic of "prolonged consolidation inevitably leads to a decline" is not always reliable in the foreign exchange market, once a breakdown below support is ultimately confirmed, the ensuing trend-following sell-off will be inevitable. In terms of vertical downside potential, there is still an expected drop of at least 10%, which provides the risk-reward backdrop for continuing to seek dollar shorting opportunities at present.​

For the US dollar, the only potential catalyst that could turn the tide would be safe-haven buying triggered by global panic. Moreover, this safe-haven appeal must be predicated on the market's belief that the US and its dollar can maintain their hegemony. However, the wheels and trajectory of history are rarely altered by human will or individual power. Perhaps at the moment the bullet grazed Trump's ear, history had already made its choice.​

Regarding this week's strategy, our long position established at 1.1615 was closed at 1.1780, securing a total profit of 165 pips. A new pending order has been set: buy limit at 1.1710, with a stop loss placed below 1.1600, and target levels set at 1.2040 and 1.2810 (taking profit on half the position at each target, respectively). The order is Good 'Til Canceled (GTC).​

As for gold, we attempted to buy the dip last week, but the order missed execution by a $20 margin. With gold prices having now hit our primary target of 5085, last week's pending order has been automatically canceled.​

However, our short-term assessment remains that gold and silver will predominantly trade in a sideways, range-bound pattern. Therefore, we will opt to sell at relatively high levels this week: we have established limit sell orders at 5235 and 5365, with a stop loss placed above 5630, and target levels set at 4870 and 4490. These pending orders are valid for the current week.​

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Additionally, investors may want to pay attention to the performance of the cryptocurrency market this week. If it continues to test lower levels this week or next without breaking new lows, there is an opportunity for a solid corrective rebound. Conversely, if it drops to fresh new lows, it will face the issue of lacking deep underlying support.

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