April twenty-first, two thousand twenty-five to April twenty-fourth, two thousand twenty-five

I. Foundation

resistance to change and hence greater dependability for the results shown in the past.

An introduction to dollar demand: four types of holders and their structural shifts

To understand the dollar, we must first truly understand demand for the dollar, which is also the foundation for all the discussions that follow.

The first key group of dollar holders is traditionally energy exporters, or petrodollar holders.This portion These dollars are held by resource-rich countries, earned from selling energy priced in dollars, and recycled through investment in U.S. assets.

There are two structural changes here, First, the United States is continually expanding domestic capacity and has become a major energy exporter, with net energy exports rising year after year, which is why the trading relationship among the dollar, natural gas, and oil has undergone a paradigm shift, from this perspective, dollar recycling will show a clear downward trend, Former energy exporters have less incentive to recycle their dollar revenues into the U.S. Treasury system, particularly in a context where “customers become competitors.”Here we are discussing structural trends, not shocks.Second, sanctions risk, for example, the Iran issue from the third and fourth quarters of last year through the first quarter of this year, Sanction risk raises the political cost of being tied to the dollar, which is also a structural factor leading energy exporters to reduce their dollar holdings.

The second key group of dollar holders is trade-related dollar holders, who reinvest dollars after exporting goods to the United States. The recycling mechanism for trade dollars is also breaking down: on one hand, the tariff structure has changed the income structure of U.S. trading partners outside the United States income structure, and on the other, some dollar revenue is converted into tax payments to the U.S. Treasury, leaving non-U.S. countries have a smaller base of dollars available for recycling。

The third key group of holders comes from third-country trade settlements in the international trading system, held to facilitate settlement, with most funds sitting in dollar pools. Systems such as mBridge and BRICS Pay are increasingly cost-effective at improving certainty and avoiding sanctions risk, overtaking USD channels.

The fourth key group of holders consists of foreign central banks, which mainly accumulate dollars as foreign-exchange reserves; sanctions risks and expectations of dollar depreciation are prompting central banks around the world to diversify reserves, a topic we have discussed extensively, such as gold.

2025.04.23

Reserve currency cycle: the dollar in 1970

Historically, the complete adjustment mechanism for a hegemonic currency can be divided into roughly six stages:1) strong reserve currency; 2) persistent trade deficits; 3) declining relative wealth; 4) wavering confidence in the currency; 5) deliberate policy devaluation; 6) rebalancing

The dollar’s current entry into the cycle is very similar to the fourth stage of a typical reserve-currency cycle, The pattern closely matches the situation before the Bretton Woods system unraveled in the 1970s:

After the Second World War, the United States held more than half of the world’s official gold reserves (5.74 hundred million ounces). Countries agreed to the Bretton Woods system, settling international accounts in dollars, with the dollar pegged to gold at 35 dollars per ounce, ushering in the peak of the strong reserve currency.

Under the Marshall Plan, Japan and Europe rebuilt after the Second World War, and countries outside the United States needed dollars to buy U.S.-made goods such as cars, steel, and machinery. The U.S. current-account surplus peaked in 1964 and turned into a deficit by 1970, The second stage of the reserve-currency cycle arrived.

The U.S. GDP share was 40% in 1960, falling to 36% by 1970. In 1966, non-U.S. central banks held 140 hundred million dollars, while U.S. gold reserves had dwindled to just 130 hundred million; relative wealth declined year after year. Later, the Vietnam War widened the U.S. fiscal deficit, and in 1965 France announced it would exchange dollars for gold, By 1968, the United States could no longer uphold its commitment to the London Gold Pool, and confidence in the currency was shaken.

In 1971, Nixon announced the end of dollar convertibility into gold. From 1971 to 73, USDJPY fell from 358 to 255, and USDDEM fell from 3.63 to 2.33.In 1972, the U.S. current-account deficit was 0.45% of GDP; in 1974 it turned to a surplus of 0.58%.In 1974, the United States signed the “petrodollar agreement” with Saudi Arabia, restoring confidence in the dollar as the world’s reserve currency and rebuilding its status.

Chart: an analogy-based projection for the current cycle

Looking back at the 1970s, in 1970–72, Nixon after suspending the gold standard, the dollar plunged, and the yen and Deutsche Mark appreciated against the dollar by 12% and 10%, respectively; the Federal Reserve initially cut rates, gold surged, silver fell, U.S. stocks had mixed performance, dollar depreciation caused losses for foreign holders, and the current account deteriorated further to GDP at -0.45%.

From 1973 to 74, the Arab oil embargo drove oil prices sharply higher, the United States entered a stagflationary recession, gold, silver, and commodities performed strongly, and the S&P 500 fell sharply.Despite the Fed’s aggressive rate hikes, the dollar continued to depreciate. The current account shifted to a surplus in the third quarter of 1973 and continued to improve through the end of 1975.

After the dollar was decoupled from gold, it went through years of high inflation, capital flight, and a widening current-account deficit, until the “petrodollar agreement” with Saudi Arabia in 1974 reanchored the global dollar-circulation mechanism and restored confidence.In the current cycle, the dollar’s decline from the start of DXY accelerated after tariffs were announced on 4 2. This reflects a systematic repricing of US exceptionalism—in other words, the fourth stage of shaken confidence in the currency.

2025.04.24

II. Insights

Our Viewpoints and ideas on market.

Returning to FX and filling in the key, dominant question in FX trading (a brief answer to why technical analysis also requires macro knowledge; charts aren’t drawn at random)

Questions about the dollar’s dominance as the global reserve currency are becoming one of the central topics of market discussion. Although the dollar’s use remains higher than that of all the other major reserve currencies(including the Australian dollar, Canadian dollar, renminbi, euro, pound sterling, yen, and Swiss franc) combined, but alternatives represented by gold or baskets of multiple currencies are rising significantly.

This is another pivotal week, on the one hand, the market is nearing the limit of tolerance for intervention in major currencies, while the upcoming IMF meeting is expected to focus on concerns about US Treasuries, including Fed independence, the debate over fiscal spending and taxes, the dollar’s valuation, and cross-border investors’ willingness to allocate to US assets.

Last week, the market’s focus shifted from fixed income to equities, partly because of Q1’s earnings reports and Q2’s outlook, but As trade negotiations with Japan and other countries coincide with the IMF meeting, attention will return to the dollar and the global FX market itself (gold trading is also FX trading: it is directly matched against global sovereign fiat currencies, a point we have emphasized many times on the Planet) (gold, sovereign fiat currencies/FX, and crypto are essentially in the same trading pair).

Related reading: Notes250421 The divergence between Bitcoin and gold: starting with Zoltan’s view

Chart: Peter’s prediction from a week ago is coming true

Related reading: Weekly Wrap 250420

One final brief addition about FX trading:Another key is understanding which currency is the dominant pricing currency in a pair, which is the primary starting point for analysis and is useful not only for macro strategy judgments, but also for those on the Planet who are relatively skilled at applying technical and chart analysis, which is why we often bring this up: why even if you’re a pure tech boy, you still need to understand some basic macro concepts before taking a position..

Here’s an example that I hope will help everyone:

The New Zealand dollar has just completed a classic but relatively rare broadening reversal pattern, a pattern that almost always appears at tops rather than bottoms (a very basic, textbook technical-analysis principle: the same pattern has different meanings and probabilities at different trading ranges/positions; this is added here for readers who don’t do technical analysis).

What needs attention here is that, in this FX pair, the dollar is the dominant currency, so if it is expressed and charted as USD/NZD, it actually corresponds to a top...which means greater certainty...At times like this, charting is not a matter of forming a view first and then using a pattern to “prove yourself right”; where to draw it is fixed!

This is also where technical analysis often goes wrong: the same setup,

if you’re going to chart it, first you need to know which board to draw it on.

Then you can discuss the so-called pattern and positional probabilities.

2025.04.21

Why the decline in US equities is far from over

First, at least from what we can see now, the US equity market is nowhere near a true bottom，Neither of the two key features is present: 1) flush-out capitulation + 2) extreme excess buy flow. It is indeed far too early to talk about the decline being over., and we will remain structurally short over the medium-term trading horizon (specific real-time US-session futures trades will also be posted on the in-depth Planet, traded by Sean/https://www.meridianresearch.app/home?product=vega-trading), anyone willing to take the other side against us, step forward.

This pullback in US equities is the fourth major correction exceeding 15% since 2018, SPX, The previous three occurred on 2018/12/24, 2020/3/23, and 2022/10/11, respectively, and all three bottoms (as well as all earlier market bottoms) shared the same trading characteristics:

Every true bottom goes through a sharp selloff + extreme net buying (flush-out capitulation + multi-sigma buy flow), rather than a “soft-landing” rally driven by policy news. Everyone must keep this sentence firmly in mind!

Chart: the positioning brief we previously published on the US equities Planet (https://www.meridianresearch.app/home?product=us-strategies）

It’s stated very clearly, The market is at its pain threshold, and so-called US politicians are at theirs too, which means every piece of news is bound to lean upward, so, There’s no need to wait for the contents of the news, because the outcome and its wording are predictable; once prices move into a certain range, the corresponding news outcome will naturally follow。

Either go long before the news and hold until it is released, or go short after the news has been priced in. Since this leg down began, every swing has followed this pattern, without exception; you can review the market action yourself.

To quantify a bottom, refer to how the market behaved at previous bottoms:1) a major selloff, 2) an intraday rebound of at least +5% after the selloff, 3) the rebound accompanied by extreme excess capital inflows (2018-12-26: US$+840 hundred million; 2020-3-24: US$+1450 hundred million; 2022-10-13: US$+1440 hundred million).

To reiterate: a flush-out selloff + extreme net buying.

A bottom is not triggered by a rebound on good news; it is necessarily the result of market participants running out of sellers.

The buying of US$5370 hundred million on 4 9 was essentially low-quality capital briefly lured into the market by the “tariff delay” news, rather than value buying after a “panic-driven capitulation.”The news even artificially induced speculative longs lacking conviction and squeezed shorts, making the current market structure more fragile; this is another reason we have greater confidence in our medium-term view of a larger downside.

Systematic strategy funds (CTA, Risk Parity, Risk Control..) were still the first to sell this time, but the real pain is only just beginning, because the later exit of slow-moving capital is what truly drives valuations down. Unwind frequency and intensity are now clearly below those of previous rounds; the next stage may bring more concentrated passive deleveraging.

Retail investors have not yet reached true “panic” either—at the bottoms on 2018/12/26, 2020/3/24, and 2022/10/13, clear “Sell the Dip” behavior appeared, but For now, this is still mainly dip-buying. As in the previous three rounds, a true bottom will not come when retail investors buy the dip; it will come when they begin concentrated “panic selling.”

Options data also reveal a typical wrong-way structure, reflecting a low-conviction bullish thesis based on “fear of missing out” rather than a “willingness to withstand a drawdown.”On top of that, the dollar index has -8.5% since the start of the year, so foreign capital will flow back into local-currency assets. Most of the funds that bought US equities in size ETF last year are now at a loss—the simultaneous pressure on the dollar and US equities is only just beginning.

Stay patient and wait for a flush-out, but it certainly won’t happen quickly; don’t be in too much of a hurry.

For now, at least, we need a break below 4.7’s News pivot before discussing anything else, A break below is certain; without one the market won’t panic (just like you), so a break below is certain.. If you are Mr. Market himself, then how could you possibly defeat yourself?

Today we’ll discuss only this one point, leaving time for everyone to review and do their homework. When there are no fish, get some rest and spend more time with family.

2025.04.22

Why the de-dollarization theme has nothing to do with the renminbi

De-dollarization is widely discussed, and dollar selling is evident in the trading of many currency pairs (including several FX trades we made), but it needs to be made clear here this theme has nothing to do with trading the renminbi.

This is also why, in Notes250417 How to fully emerge from deflation: a discussion of this cycle’s Chinese government bonds and renminbi-priced gold, the PBOC’s true operating agenda, and another possible explanation for gold’s rise (including a forecast target price)This is another reason why that article argued that “the key is not the renminbi-dollar exchange rate, but the change in the renminbi’s value relative to real assets.”

The de-dollarization theme relies mainly on three transmission channels in FX pairs:

1）Buyers reduce their allocation to foreign assets, causing FX demand to fall abruptly(not applicable to China, since it has not been continuously increasing its Treasury holdings); 2)Increase dollar hedging and sell dollars forward(this may be happening, driven mainly by hedging from state-owned banks and companies, but its impact is limited); 3)Shift broadly from US assets to non-US assets, causing DXY to fall and exerting indirect pressure through FX correlations(of the three, this is actually the most applicable at present)

To elaborate, China’s wave of reductions in US assets actually began in 15. 15-19 was the year of FX intervention to hedge against renminbi depreciation. After 22, although foreign-exchange reserves stabilized, holdings continued to be reduced. Today, looking at the breakdown, the reductions have mainly involved US equities and US agency debt, rather than Treasuries, reflecting strategic avoidance of risk assets. This is also why the first, shock-driven reduction channel does not apply, Because China has not been continuously increasing its Treasury holdings over the past several years, there is no “sudden shift” downward path in the first place. Other countries acted more slowly than we did before, so this effect will occur.

Second, dollar hedging is indeed taking place, but it is more a matter of passive hedging demand, arising from liquidity management by companies and some policy-related entities rather than active dollar shorting; therefore, it does not apply to the renminbi-dollar pair and is not a core shock factor.

Finally, global capital allocation is shifting from US assets to non-US assets, causing DXY to fall and, through correlations, “pushing down” the renminbi exchange rate. This is currently the most applicable channel and is clearly the overall trading logic this year.

This also helps explain why, despite rising fundamental pressures, USD/CNY gains year to date remain limited and the renminbi-dollar pair has not become unanchored. Instead, depreciation pressure has been released through relative weakness against the euro and yen, with marked declines versus both, while the CFETS renminbi index has also continued to fall recently.

2025.04.23

If gold starts correcting: how we anticipated this week’s failed push higher in gold, an immediate application of Zoltan’s perspective, and a discussion of correction-trading patterns (how to hunt algorithms)

We, in Notes250417 How to fully emerge from deflation: a discussion of this cycle’s Chinese government bonds and renminbi-priced gold, the PBOC’s true operating agenda, and another possible explanation for gold’s rise (including a forecast target price)In it, we estimated the target price for this gold rally. In that day’s Notes, we gave two main conclusions:

1）The topping zone will be between 3438 and -3727 points

2) Before formally entering the topping zone, there will first be a pullback, followed by a climactic push higher

Rather coincidentally, during trading over the past two days, anomalies did indeed appear after entering 3438 points...

Note: we did not sell at this level, We don’t have a crystal ball, and we certainly can’t manipulate a gold market with such enormous trading liquidity! We simply made calculations based on basic logic + simple triangular conversions within the main macro-pricing framework; we can also be wrong.

This also means that, if the estimate is accurate, we will formally confirm the start of the pullback correction...

Chart: around 3438, within our estimated topping zone, gold made a failed breakout attempt involving an unusual long squeeze (according to our calculations, it should indeed have failed, and it did）

After that, gold turned lower

Chart: some readers may prefer candlestick charts, our estimate corresponds exactly to the candle body after the failed breakout

Behind the candlesticks, let’s take a close look at the trading flows in gold during this attempt to break through the topping zone.

GLD trading was exceptionally active, making it the market’s third-highest volume ETF that day (extremely rare for GLD), and also the third-largest day by notional trading volume since 2004 was established。

Some foreign trading desks observed GLD and gold-mining companies ETF (GDX, GDXJ)Institutional flows were skewed toward selling, mainly “long sales” (profit-taking on longs), selling pressure accelerated in the second half. In the primary market,, GLD saw a one-day outflow of US$13 hundred million, the largest single-day outflow since 2011；GDX also recorded redemptions of US$2 hundred million, a high for the past 12 months.

Apart from Notes250417 How to fully emerge from deflation: a discussion of this cycle’s Chinese government bonds and renminbi-priced gold, the PBOC’s true operating agenda, and another possible explanation for gold’s rise (including a forecast target price)that article, I think everyone should remember the other perspective on gold we offered at the start of this week (which actually came from Zoltan)...The breakout failed (according to our calculations, it should indeed have failed, and it did）

After that, gold turned lower

A natural question follows, From this perspective, what was happening in the crypto market when gold failed to break out within our estimated range...?

Chart: Bitcoin overlaid on gold’s intraday chart

Chart: another, clearer view

“Then a confirmed rebound in BTC may bring a simultaneous top in gold... be careful once they converge.”

This is what we wrote in Notes250421 The divergence between Bitcoin and gold: starting with Zoltan’s view the original wording in that piece, and on the very day the Notes were published, Bitcoin completed a small breakout, formally confirming its alignment with gold...

The very next day, gold began testing the topping zone we had estimated and, as expected, the push higher failed...

To reiterate, The Notes publication date is never chosen casually, we were already watching BTC before publishing. Likewise, beyond the candlestick chart, 21The market’s ETF allocation to spot crypto assets also picked up markedly, while crypto-related ETF saw total net inflows exceeding 10 hundred million U.S. dollars, the largest single-day increase in several months.

That’s how the market works.

Why cross-market asset logic matters (this is also why the Planet is named Cross-Market Asset Strategy; behind every one of our highly profitable trades there are cross-asset traces),because within a single market, you have no pricing anchor.

Source: WeeklyWrap250420 Putting macro trading into practice

Last weekend, we were discussing with Planet members how macro trading is actually put into practice... Rather than getting the narrative right, we prefer to validate our conclusions through actual market performance... Rather than being storytellers, we would rather be people who truly make money in the market (and successfully realize profits and withdraw them)... Using our first-quarter trades (long gold, long USD/CHF, long USD/JPY, etc.) as examples, it covered many practical details of execution.

If you haven’t read it, go take a look—another weekend is almost here.

The next question is, If a correction begins, how will it unfold from there?

There are two kinds of trend changes: one is a trend pause, when the slope levels off; the other is a trend reversal (or, in other words, a formal corrective pullback).If it is the former, the gold market may be heading into a fairly long period of choppy trading, A choppy period is unpredictable; the best approach is to exit positions and wait for it to end, no one has a crystal ball that can predict the market, and neither do we.

If it is the latter, that is actually better, because at least a corrective pullback has a logic to it in the market. Compared with a choppy period, it offers macro traders greater certainty. How does algorithmic trading on Wall Street work?? Most systematic trading systems still buy breakouts from a range (at least, that was still what they were doing when I was 24); once a breakout is confirmed, they place an order automatically. The system's decision-making at the point of entry is not complicated; the real complexity lies in the sell decision.

Many sell algorithms have now shifted to pattern-based machine learning, which means their behavior can be traced. That is also why a genuine downside correction is more suitable for macro traders than a choppy period: you can choose either to follow the dominant algorithms or to make money from these systematic trading institutions, If there are “moves,” there will naturally be ways to counter them. We need not fear their moves; what matters is whether they act.

Let’s revisit a basic principle: 1) everyone knows gold previously went through a parabolic rally; 2) based on our calculations, it is about to enter a corrective phase; 3) the correction will not end until investors who chased prices higher have been completely washed out.

At the end of a major bull market, those who enter long last are often the ones most convinced that a correction is impossible.Investors who chased prices higher will start clinging to their positions, convinced that their judgment is right. But whether prices plunge all at once or, more likely, grind lower slowly, they will eventually lose confidence and surrender voluntarily.

The correction will truly end only when the last “bull who chased the rally” admits defeat and sells.

This means the first expected support level where systematic traders are likely to liquidate will probably appear around 3200 dollars (The probability that the expected support level will break is greater than the probability that support will hold; a universal stop-loss level is bound to be one at which 100% will be stopped out.) nearby (if the market follows a downside correction, a correction through a choppy period cannot be traded because there are no clues to follow).

Finally, this is for informational purposes only and does not constitute trading advice—please make your own judgments; you are responsible for your gains and losses:

We have fully closed and exited our core long positions in recent days. Over the past year, we maintained long exposure through several swing phases and earned solid returns in our accounts, which is satisfaction enough.

If we speak only of our “view,” we still believe that gold’s long-term thesis has not run its course and that significant upside remains. But in terms of trading timing, the current price is already close to the upper end of our logical target range, and market sentiment is showing clear signs of irrationality. A clear correction or consolidation from here is the higher-probability path.

So we will not try to catch a falling knife during a decline or correction. Most people who try to catch one end up losing fingers.

Every attempt to form a top signals entry into an irrational period in the market: people who have made money become euphoric, and those who chase in become even more frenzied... During irrational periods, the certainty of holding positions inevitably falls sharply,

No one knows what Mr.Market will do tomorrow.

Taking cash off the table, holding cash and waiting, or turning to other markets is a better choice, at least for us.

2025.04.24

III. Market Pulse

Our latest Comments on the economic and market environment

The divergence between Bitco and gold: starting with Zoltan’s view

Zoltan Pozsar’s latest views are quite interesting, so I’m sharing them with you at the start of this week. They may offer a way to help you understand, to some extent, the divergence between BTC and gold this time.

He believes that the Bitcoin legislation Trump had repeatedly raised before was actually a clever, indirect way to push up the price of gold without drawing the bond market’s attention.In other words, legislation related to Bitcoin (such as allowing BTC into the reserve system, tax exemptions, and pricing and settlement in it),On the surface, it is meant to support crypto assets; in reality, it may be quietly creating legitimacy for a rise in gold prices.

Why say “quietly”? Because if the government openly bought gold or pushed up its price, the bond market would react immediately—meaning: 1) inflation expectations would rise; 2) real interest rates would fall; 3) US Treasury prices would come under pressure and financing costs would rise;

This would disrupt overall financial stability and would be uneconomical, especially for a highly indebted government.

Gold is an anchor for long-term real interest rates and the boundary of the credit system. When government credit is overextended and inflationary pressures are hard to control, gold often becomes an anchor for repricing the monetary system.But if the market realizes that gold is being “repriced” by the authorities: 1) the bond market will anticipate more monetary expansion or a weakening of confidence in the dollar; 2) it will sell US Treasuries preemptively, driving yields higher; 3) ultimately, this will undermine the government’s ability to finance itself.

In a sentence, Zoltan’s central point is: don’t be misled by appearances.Whether it is packaged as “Trump supporters like BTC” or as politicians courting votes, its real policy consequence is to pave the way for legitimizing and repricing gold.

Bitcoin legislation is not simply about supporting BTC; it uses Bitcoin to pave the way for repricing gold—and doing so will not alert the US Treasury market. It is a “structural strategic tool” for bypassing the traditional financial market reaction mechanism.

This is also why, even as discussions of the bill intensify, the two have instead followed an unusually divergent pricing path.

Chart: Gold’s upside breakout day coincided exactly with BTC’s downside breakout day(The bill discussions actually made BTC bearish and gold bullish)

Viewed from this angle, then a confirmed rebound in BTC could bring a simultaneous top in gold, likewise, a surge to a new high in gold could also bring a fairly sharp short-term downside risk for BTC, and these two are consistent with each other.

This is simply one perspective to observe; you can keep an eye on this chart going forward—it could be quite interesting. Be careful once the two converge.