Mid-Week Update 2: Time for a Major Change

Rates and the Dollar — LOCKED AND LOADED.

We’ll start this update with a discussion on what I think are (by far) the two most important pieces on the board right now — with implications for all global markets over the next 6-12 months:

#1 Rates — and #2 the Dollar.

In the last Global Markets Review, I wrote: “The Dollar is beginning to threaten a Weekly turn down, similar to what Bond Yields did a few weeks ago. IF confirmed, we would consider the Dollar to be forming a Major Top. After rising in tandem for the last few years, could the Dollar and Bond Yields decline in synch?”

With this week’s price moves, the Dollar and Bond Yields are increasingly “locked and loaded”.

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ON RATES

A month ago, Bond Yields triggered the first signals showing they were finally ready to decline significantly — after a historic three-year rise.

I’ve flagged this shift in every report since then, and in the podcast I did on June 22.

The key was to stay flexible that something had changed, and allow “time to catch up”—

Even the last-gasp-bounce on Yields played out as it should:

Looking back, the June turn down in Yields, followed by the bounce failure, was a clean sequence that the big three-year trend had finally turned down. (*Remember this sequence, as it was seen in many markets throughout history at big turning points.)

Now Bond Yields are “catching down” — they plunged after today’s CPI data, and I think it’s only the beginning…

The message from the market is increasingly clear: the U.S. economy is on a disinflationary trajectory — with significant “negative surprises” still to come.

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ON THE DOLLAR

Based on the cumulative and strong evidence that Bond Yields may be in the early stages of a major downtrend, I think it’s time to finally stalk what could be the biggest FX opportunity in years…

My plan is to build a core position and stay with the Trend, which in my view could easily last 12 months or maybe even longer.

**This is a major shift in my thinking:**

I’ve been largely Long Dollar —via USDJPY— for over a year (Q2 2023), adding exposure along the way.

Last week I closed this core position and stepped aside as it finally reached my long-standing targets — both PRICE and TIME were achieved in perfect symmetry:

WHAT’S THE NEXT BIG MOVE?

Plain and simple: this could be the “whale”.

• We’ll discuss how I’ll be managing the risk and size of this position.

• I don’t say this lightly — this could be the best FX opportunity we’ve seen in years, and therefore my goal is to watch it closely for optimal entry conditions.

• Like all things worth pursuing, it will take time and reward only the patient.

• On top of this, we’ll also discuss the implications for liquidity and Volatility more broadly.

• And we’ll update some important comments on Equities as well — ahead of a new Special Report I’m working on, which will be published tomorrow (Friday July 12).

So let’s get started — first, looking to history for some lessons: