To The Moon

In the past one to two weeks, various asset classes have shown slight divergences in their movements. Notably, the U.S. dollar, influenced by Trump's tariff-related discussions, experienced a pronounced spike followed by a pullback, with short-term corrections continuing. Although the market’s broader retracement is not yet over, the U.S. dollar remains one of the strongest currencies in the medium term. Therefore, when prices are favorable, trading the dollar with a focus on wealth management and systematic investment remains a viable option. Comparatively, the dollar is not ideal for speculative trading, as achieving excess returns in this asset class is more challenging.

Advantages of the U.S. Dollar

The dollar holds several notable advantages, as previously discussed. Here, we will briefly revisit and reaffirm these points:

Monetary Policy:

Toward the end of last year, the Federal Reserve signaled a potential shift toward a more hawkish stance. Particularly if deglobalization accelerates and triggers inflationary pressures, the Fed may move from rate cuts to rate hikes. Compared to other G7 currencies, the interest rate or yield differentials created by such a shift could support dollar appreciation.

Resilience and Safe-Haven Status:

The dollar also exhibits certain defensive and safe-haven characteristics in times of potential risk. While the dollar’s safe-haven appeal is not the strongest historically, it has often prompted capital inflows during specific periods. Over the past few years, stability in the broader market has kept forex volatility relatively subdued. However, once trends begin to re-emerge, the odds are high that the dollar will benefit as a long-positioned asset. That said, external news or catalysts need to accompany such movements, as the dollar rarely initiates trends independently.

Foundational Strength of the U.S.:

Lastly, and most importantly from a long-term perspective, the United States remains the dominant country in terms of political, economic, and military power. Until American hegemony diminishes, the dollar’s global standing is unlikely to be fundamentally challenged. A weak dollar does not align with current U.S. needs or the Republican Party's general preferences.

Market Outlook and Trading Strategy

Turning back to the market itself, weekly charts suggest that the current adjustment phase has yet to fully conclude. There is still potential for the dollar to retest previous breakout points or undergo further corrections. The key strategy here is patience—waiting for prices to potentially fall below the 105/104 level to establish relatively low-risk and favorable risk-reward long positions. Structurally, the critical support at the 100 level remains a major defensive line for medium-term dollar bulls. As long as this level is not breached, the general market trend is unlikely to reverse downward.

Given the limitations in potential upward momentum for the dollar before volatility picks up, trading it should adopt a risk-averse approach. If the market transitions into a consolidation phase characterized by time replacing price fluctuations, it may become increasingly difficult to find a suitable entry point for long positions.

However, analyzing the dollar’s weekly corrections since 2022, we observe that such adjustments often involve multi-week pullbacks. Whether this time will see a deviation from past patterns remains to be seen.

Key Focus: USD/JPY Performance

In the forex market, the Japanese yen remains a focal point. The USD/JPY pair is currently testing the 151 level, which serves as the first critical threshold for strength reversal. A break below this level would signal yen appreciation. If the pair drops further and breaches the 139 level, there is a high likelihood of a strengthened "risk-off" sentiment across markets.

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