August seventeenth, two thousand twenty-five (250811-250817)
Starting with 250720, the weekly review will try further align our understanding of the logic behind global assets, including the core guiding frameworks for different assets, the reasoning process, and the preferred direction of price movements.All content does not constitute investment advice. Price direction is provided for reference only; this is not a market forecast, but an analysis of risk-reward ratios under different possible probabilities.We’ll continue to fill out this framework week by week; it’s a bit too much to finish all at once… including adding asset classes and refining and updating the logic within each asset.
What would count as being familiar with the material?
Our basic requirements for our traders are: 1) be able to sketch from memory the weekly chart of the assets discussed in the text—in other words, when shown an unmarked price chart, immediately identify the asset and the period during which that price action occurred; 2) be able to write down from memory the key prices for all assets discussed—in other words, when given any numerical price level (without looking at charts or news, just hearing the number), immediately identify the asset’s latest price and its corresponding position; 3) when reviewing relevant materials and content, immediately connect them to the guiding framework and logic—in other words, when seeing any incremental event, news item, or analysis, identify its place in the chain of logic, complete the additions, replacements, and updates, and assess how replacing the content at that node would affect the outcome..
I.U.S. Dollar Index
Chart: As expected, it broke above the downtrend line and shifted to sideways movement
This week’s commentary update: Next week’s events affecting dollar pricing include the 8.20’s FOMC Minutes and 8.22’s Powell’s speech at Jackson Hole, The basic assessment is unchanged. If it really breaks down, it will still take at least until 10 or 11 for that to happen; the downtrend is not about to begin yet, so don’t rush.
In fact, the real what continues to dominate the dollar’s trend structure is global capital’s preference for U.S. assets:
Chart: The reductions in U.S. exposure sold in April continue to be bought back
6 TIC data show that overseas investors increased their U.S. equity holdings again, reversing the large-scale reductions earlier this year, while foreign holdings of U.S. Treasuries also rose to a record high.If the sell-America narrative does not continue, the claim that the dollar is entering a structural decline will remain a joke and will never become reality.
The only basis for selling America is the real data logic from 10 through year-end. At that point, the dollar will shift from sideways movement back to a trend, whether upward or downward.We still maintain a bearish view, But, if none of the expected bad outcomes actually occur, once we move out of the weak-employment window, it is not impossible that the dollar will strengthen again next year, A low-probability event is not an impossible event.
Chart: Expected path ahead (daily chart)
Chart: FX volatility is undergoing an exceptionally sharp contraction
The Fed is still likely to cut rates in 9 by 25 basis points, but it is unlikely to cut 50bp all at once. After all, historically, the Fed has tended to be cautious at the outset of turning points in the labor market.If inflation continues to rise, it may skip the 10 meeting, as in the rate-cutting cycle of 1990.But if the labor market continues to deteriorate, the Fed will make successive rate cuts starting in 12, even if inflation remains stubborn, because history shows that when employment continues to decline, the Fed is more inclined to prioritize protecting jobs over curbing inflation.
Since we closed our euro-funded short position in the U.S. Dollar Index at the low, the dollar has moved sideways as expected… Relatively speaking, several potential catalysts that could be expected to lead to further dollar depreciation include: a) FOMC signaling a rate cut in 9; b) U.S.-China negotiations, see Notes 250725, “The Great Reversal”; and c) potentially weaker U.S. labor-market data, discussed in more detail in our previous series of discussions on U.S. employment data.
1) this part’s Guiding framework Yes, the Fed’s room for repricing * (the intensity of U.S. policy uncertainty * the difficulty of deficit financing * the pace at which growth slows relative to other economies), determines short-term fluctuations in the dollar’s trajectory under long-term structural pressure.
2) The latter three factors will be reflected directly in U.S. equity prices (for supplementary reading, see the earlier Notes on the K-shaped economy).
3) Before tariff effects show up in the data from 10 to 11, short-term rates (the front end) are the main driver; in other words,, the FX market’s response to inflation still depends primarily on the path of the monetary-policy response.
4) The tariffs were postponed until 8, which means actual data will not be available to assess the inflationary effects of tariffs and a weaker dollar until 10/11. In the meantime, goods that were rushed in will remain in the supply chain longer… Our view is that rate cuts will not come before 9, so The dollar Sideways movement is currently expected to continue at least until 9。
5) The tail risk to Powell and Fed independence is extremely low, shock trades may be limited.
6）97 This is one of the key control points for the spot U.S. Dollar Index over the past 20 years (that is, a high-volume node). The significance of a high-volume area is that, at this price, counterparties who are not sensitive to short-term shocks are willing to absorb trades in any quantity. The long and short trends around this price also represent the views of the market’s current deployable capital more clearly.....
And looking at the situation now, People still don’t seem willing to let the dollar fall smoothly all the way, even though dollar shorts will indeed remain a core conviction in macro trading for a long time.
7）When returning to shorting the dollar, there are four possible approaches, a) re-establish positions in European currencies, b) trade EM currencies, c) trade commodity indices or the currencies/assets of commodity exporters
II.Yen, Japanese government bonds, and Nikkei futures
Chart: USD/JPY rebounded as expected (daily chart) but is approaching the trendline
Weekly commentary update:One thing that must be noted is that the yen trade may take place earlier than expected (as with the Nikkei), and once it starts there will be no significant retracement!
One comment in the Bank of Japan’s 7 Opinion Summary this week is especially noteworthy,“We are at a stage where the core of our communications should be adjusted: we should shift from emphasizing ‘underlying inflation’ to emphasizing actual price trends, the outlook for future prices, the output gap, and inflation expectations.”For a long time, this vague and opaque measure of “underlying inflation” has been a major obstacle to the Bank of Japan’s continued reluctance to raise rates. So if the central bank is willing to reduce its weight, that would signal a significant policy shift.
Meanwhile, in the middle of the week, media reports that Bessent criticized the Bank of Japan“behind the curve” (though Japanese officials later played it down), was enough to make the market reassess the Bank of Japan’s stance and the resulting pricing of the yen and Japanese government bonds.
Politically, the latest NHK poll shows that the public may be starting to view Prime Minister Shigeru Ishiba remaining in office as the best option for now. This further lowers the probability of a scenario in which Ishiba resigns and Takaishi takes over (see the third item below under long-term fundamentals). The market is concerned that the latter supports MMT theory, and that her coming to power could have a more destructive negative impact on Japanese government bonds and the yen.
All these factors combined, make a 10-month BoJ payer, or positioning for some tactical USDJPY downside ahead of the Jackson Hole meeting, worthwhile.
The expected large-scale shift to a USDJPY downside trade is expected to happen in October.
Chart: Nikkei futures continue to set new highs
Weekly commentary update:Nikkei futures continue to powerfully set new highs; this long position is a very typical upside breakout with a favorable risk structure，It is also an excellent example, comparable to gold, of how to make different risk-management choices for different types of trades in a “risk-on” environment.
After the 40500 we had been following closely in the group was triggered, although the breakout came several weeks earlier than expected, the pullback did not breach the stop below, You can review the previous weekly Wraps yourself; we shared this trade in full in the group.
Keep holding profitable positions tightly.
Our long Nikkei position has continued upward after its volatile twists and turns. Confirmation on the weekly timeframe has further strengthened our confidence in this trade, and we will continue to hold this portion firmly.
As noted last week, during periods of macroeconomic turbulence, breakout trades tend to have a significantly higher failure rate because external factors interfere with chart patterns and frequently generate destructive stop-out signals, causing even patterns that have traditionally been considered highly reliable to fail repeatedly.
This is happening simultaneously across timeframes in many markets, whether in broad asset classes or individual stocks within particular markets. This means: 1) either choose to give up some profit and delay acting on the signal in exchange for greater certainty; 2) or choose to take on greater risk by allowing more holding tolerance horizontally (time) or vertically (volatility), so as not to miss sudden volatile moves.
Chart: TOPIX
This week’s commentary update: TOPIX is also continuing to set strong new highs..
As for the Nikkei, Unlike gold, given the safer backdrop, it is appropriate to choose the second approach, which also means establishing a baseline allocation to ETF positions to some extent. Beyond the Nikkei, the TOPIX has greater exposure to Japanese technology stocks and can also be considered for a small baseline allocation.
The greater the storm of long-end Japanese government bond selling, the sooner the yen will strengthen after weakening; take note.
1) this part’s Guiding framework Yes, under political volatility, fiscal dominance is determining the direction of Japanese government bonds and the yen.
2) Structurally, yen trades along the short-dollar path have lost their appeal. On the one hand, Japanese institutions have yet to deliver the capital repatriation expected by the market in April and May (a rotation from U.S. Treasuries to Japanese government bonds), making the re-trading of domestic assets a joke. On the other hand, the interest-rate differential structure also makes shorting USDJPY very costly.
3) The greater the governing authorities’ seat-loss margin in Japan’s election, the more likely they are to introduce fiscal stimulus, triggering sell-offs in long-dated Japanese government bonds and further yen weakness—that is, USD/JPY will rise further。This is the direction the market currently expects, namely a loss for the governing party.
4) However, If the sell-off in Japanese government bond yields becomes disorderly, the trend in long-end yields will spread to global yields, once this trading pattern takes hold, USD/JPY will instead move lower, meaning the yen will strengthen after weakening.The greater the storm of long-end Japanese government bond selling, the sooner the yen will strengthen after weakening.
Chart: The bond and FX market logic under fiscal dominance also applies to the dollar
5）After the fiscal event is delivered, macro fundamentals will once again become the main driver of pricing leading, that is, after 9 and through 10, 11, the yen itself will have a greater chance of strengthening on a relative basis and will return to the long-term path of shorting the dollar.
6) The trading range for a weak yen is at 140-162，The strong-yen trade must wait for the price to break below 140; we’ll discuss it then.
Chart: The yen is expected to weaken first and then strengthen (weekly chart), but it must be said that the probability of an earlier break below the level is increasing
Chart: Notes250714 “From Fiscal Policy to the Bond Market: A Reassessment of Value”
7）The Nikkei’s directionless trading range is between 38800 and 40500; a breakout would be the corresponding entry point，Relatively speaking, an upside breakout has a higher probability of occurring.
8) For Japan, the only thing we can confirm is that the balance of power between the governing and opposition parties is changing (see Notes250723 “Japan in Turmoil: From the Trade Deal to Ishiba”),The shift means a contest for influence over economic policy, and it also means Fiscal policy is bound to be pushed in a more expansionary direction...
Three. Commodity indices
Chart: BCI, continue waiting for an upside breakout
This week’s commentary update: it’s not there yet, Be patient...
The monthly trade mentioned in Notes250805, “Viable Trades on Daily, Weekly, and Monthly Timeframes,” is also highly relevant to this, is has not yet taken shape the reason.
Everyone can also use this price level to serve as a benchmark for validating all trading views related to stagflation.
For early positioning, viable proxies from the basket below can also be used..
Chart: the corresponding trading basket is available on U.S. Stocks Planet
The basket is here:https://www.meridianresearch.app/home?product=us-strategies
1) this part’s Guiding framework is:Tariff pass-through + fiscal expansion = clear inflation risk
2) Inflation risk and rate-cut bets are two key factors in commodity markets, producing different price reactions in different scenarios. In general, rising inflation expectations lift the central tendency of commodity prices (This means the breakout in BCI may also be delayed until year-end), while bets on the interest-rate path are a strong catalyst for directional opportunities.
3) Different price reactions are often reflected in the composition of commodity markets. A simple distinction is to divide commodities into precious metals and industrial commodities:This section also connects to the silver, platinum, gold, oil, and copper discussed below...
Precious metals are generally more sensitive to real interest rates. Gold and white precious metals are the trading proxies for this group, which means that moderate-inflation trades and rate-path bets that do not imply higher rates will both be favorable triggers.
Industrial commodities such as copper, oil, and iron are more sensitive to growth expectations, in inflation trades involving a demand-driven growth slowdown, cyclical commodities are often held back except in inflation trades driven by rising costs, because in those trades industrial commodities themselves are often what is rising.
4) Commodity indices have been hovering in a low range, and As of today, a potential breakout may be taking shape..
5) Key levels 22
Four. Oil
Chart: back to fundamentals
This week’s commentary update: likewise, hold steady and short into strength, Don’t chase price gaps caused by unexpected events, but if a good entry level appears, you can act early and then re-enter.This is an ongoing process...
Emphasizing the 8 early-month 65 breakdown that came as expected... For details, see Notes250807 “When a Hedge Position Becomes a Directional Position,”Essential reading!
1) this part’s Guiding framework is: Notes250522 Reasons to Keep Shorting Oil + Notes250527 Reasons to Keep Shorting Oil (Continued) + Notes250620 Rereading The Origins of Oil
2) On oversupply, we have discussed oil fundamentals many times on the Planet; they also formed the basis for our previous short positions (see Notes250523 Reasons to Short Oil + Notes250527 Reasons to Short Oil (Continued)). These fundamentals are “largely unchanged” apart from geopolitical shocks: a) OPEC + ample supply, b) weak demand growth, c) inventories have risen for several months, and, based on what we can see now, inventories will continue to grow over the coming 18 months.
3) However, structurally, A more likely scenario is that conditions first moderate, with volatility declining, before a fundamentals-driven bearish trade resumes.
4）Prices may subsequently form a range between 55-65, with the upper bound as a potentially viable short entry.
5) Given the risk volatility outside the market, 63 is a safer downside target.
Five. White precious metals (silver, platinum)
Chart: silver, exited
This week’s commentary update: found precise support at 37.5
Chart: platinum, exited
White precious metals trade has diverged，is also a warning signal for gold.
Platinum and silver are among the year’s most worthwhile subjects to review, and may turn out to be its biggest regret over the full year.
We positioned for the upside breakout before it happened, and our system correctly calculated the turning point, but exiting too early cost us nearly half the gains. This mistake affected our subsequent judgment to some extent and, in fact, violated our trading rule against repeatedly re-entering soon after closing out a position...
At its core, this was due to our lack of experience trading white precious metals. The previous bout of volatility occurred 17 years ago; countless reviews, scenarios, and deductions on paper still cannot compare with experiencing it once in a career. When the next opportunity comes, we will handle it with greater maturity.
This is something we really need to reflect on. I’ll print this case and put it on my desk as a warning.
1) For another breakout in silver and platinum, we use other trading proxies (ETF + individual-stock basket)re-enter; the reasons are in item four below.
2) For commodities such as silver and platinum, volatility becomes especially high once they break out of their long-term trading ranges. This means their price potential should not be underestimated and that trading them calls for more patience than other categories.
3) In risk management taking smaller positions is more appropriate, because the stop-loss distance associated with large price swings is also far greater than in normal commodity trading。
4) White precious metals are also the category best suited to trading through proxies in other markets; compared with oil and gold, whose prices are constrained by fundamentals, the prices of white precious metals—with their large swings and speculative drivers—are reflected more broadly in other markets (gold and gold-mining stocks do not always move together and sometimes follow opposite price paths, whereas this correlation is stronger for white precious metals).
5) The high volatility and speculative drivers of white metals also mean views may change at any time; a flexible stance is not a bad thing.
Six. Gold
Chart: if gold breaks to a new all-time high again, we will choose to re-enter
This week’s commentary update: the breakout failed
The key sentence is to add a second half to the caption beneath the gold chart, namely:
However, If this new high occurs before 10, we will delay processing the signal to dampen it..
This is a completely different choice of entry from the Nikkei section above. The two trades can be considered together; the difference between them reflects our judgment of the probability differences created by different macro backgrounds in the current market environment.
Price reflects all information, but that does not mean macro fundamentals are irrelevant. Without context, all identical chart patterns would produce the same result... The macroeconomic backdrop affects equally, across monthly, daily, and hourly timeframes, the breakout probability of every candlestick and the size of moves in different directions...
Unless you trade intraday random fluctuations at the minute level, pay attention to the context。
For more on this, see this week’s Notes250808 “Gold’s Breakout to a New High... Failed (for Now)”
1）Volatility is broadly unchanged, macro funds are less involved, and higher-Sharpe trades in the market are gradually eating away at interest in gold. It is currently difficult to see a catalyst for gold to break above its current level, and this may be the condition needed to force many macro funds to close their long positions, especially at this midyear point, when some capital cannot afford to wait.)
2) As for gold, A new price high may have to wait until 10 11, that is, after the actual data are released; this is also the gold XAU/SPX we mentioned earlier the expected timing for the upside move in the gold/USD index pair trade (the long-gold, short-USD-index phase)。
Seven. Crypto markets
Chart: break above the previous high
This week’s commentary update: this spot position finally broke above the previous high, but the overall picture is mediocre. The market structure is unhealthy, and this is not the strong breakout we expected earlier; the potential trading window before 10 is also getting shorter, Although unrealized gains continue to grow, this portion is not safe, The target is set around 125000; we’ll see how things look this week and gradually exit.
1) Inflation risk and rate-cut bets are two key factors in crypto markets, producing different price reactions in different scenarios.Relatively speaking, a moderate-inflation and accommodative-policy environment is most favorable for crypto markets, whereas rate tightening in response to extreme inflation is unfavorable; the market is more inclined to use real interest rates as its trading benchmark..
2) A bias toward softer growth, along with softer data before 10 and 11, gives us the idea of trying to bet further on a new high after 9 weeks, however, This trade will also have a tighter stop-loss, and will use spot positions only.
3) Although ETH saw a short squeeze, Bitco reacted mildly to the passage of stablecoin legislation. As expectations and news on this approach their conclusion, there may be a point-in-time capital flow behavior of buying the rumor and selling the fact, and if this happens, the price may return to around 110500, The worst-case outcome for this trade is breakeven.
Eight. U.S. dollar index
Chart: SPX Daily
This week’s commentary update: if there is a pullback, it will first return to the support band at 6150-6250, There will be no sharp decline.
The major indices are fluctuating near their highs; this consolidation will complete the rotation of capital and the divergence in sentiment.
For specific U.S. equity actions, see this week’s Notes250805 “Viable Trades on Daily, Weekly, and Monthly Timeframes”:
1 U.S. equities will enter a period when hedging trades and thematic trades run in parallel
2 Thematic trades exist, but will be confined to the AI area, insufficient to sustain momentum across a broader range
3 There will be two structures in the market environment: one persistent and one relative
4 Persistence will come from hedging gains on the economic-downturn side; in fact, cyclical valuations on the growth side have already returned to 4.9 highs
point. In the U.S. equity market, hedging will create another persistent sector rotation: the relative outperformance of defensive sectors (assets whose beta to U.S. GDP growth is lower than the overall beta of the S&P 500)
Chart: NDX
It will remain difficult to see a large downside move before 10; take NDX as an example: the key price 22700 marked in Wrap produced a precise rebound, and if prices fall later, they will first return to 22120.
Some subtle changes are also taking place in the microstructure of U.S. equities; I’ll briefly share two of them here:
Micro commentary on the U.S. equity market:https://www.meridianresearch.app/home?product=us-strategies
Overall, there is limited debate about fundamentals; the bigger change comes from price action: good earnings reports bring no broad-based upside returns, while bad reports lack downside support.
1) In an environment of uncertainty about the final decision conditions, micro-level trading will dominate the U.S. equity market: the gap caused by ongoing data delays, combined with the arrival of earnings season, With the burden of macro shocks lifted, the U.S. equity market will linger longer near the top. In the short term, the only remaining path to the smooth decline we expect is for a batch of results “far below expectations” to emerge one after another at the micro level.
2) Before the release of the actual assessment data for 10 and 11, the market will engage in more intense debate and positioning around the rate-cut path for the year and the terminal rate. This means volatility on data-release days will rise again—after nearly half a year of calm.
2）The process of U.S. equities hovering near the top is RTY and other indices catching up the process, DJI is expected to complete a false breakout; this part is already unfolding as expected.
Ten. U.S. Treasuries
Chart: volatility at the bottom
This week’s commentary update: after the U.S. employment report delivered an unexpectedly dovish signal two weeks ago, Rates across developed markets have generally fallen, and the yield curve steepened in the low-liquidity conditions of 8 Continue positioning..
Chart: the spread between U.S. 2-year and 30-year Treasury yields has steepened to its widest level in three years
More specifically, greater disagreement over FOMC will keep volatility and the term premium elevated. However, domestic data are likely to remain strong for some time, recession risk is declining, and there is opposition to deep easing, front-end rates face a short-term mean-reversion risk, so short-term tactical trades lean toward taking the opposite side.
1）If the market reaches an extreme, bonds will offer very attractive value
2) Someone may be buying aggressively and building a position; judging by the performance of U.S. equities, this possibility is growing
Nine. Chinese assets
Chart: pull back to around 2760
This week’s commentary update: unrealized gains on our long China positions continue to expand, but a strong bullish candle confirming the move is still lacking. A long weekly bullish candle would reverse market sentiment and move the index away from the boundary area at 2760 points.
Likewise, some micro-market trading baskets will be placed in their corresponding Planets:https://www.meridianresearch.app/home?product=asia-strategies
For a period, the price trends of major indices will create the trading backdrop for individual assets in the market. A strong index breakout means a higher probability of success for right-side trades in that market.
1) As noted in Notes250710 “From Brazil to China: A Market Tour,” the price of the Shanghai Composite 50 matters more to us than other indices in the market, A stable weekly close above 2760 is the primary condition for entering later。Once it holds firmly, Chinese assets may see a catch-up rally over the coming weeks.
2) Although it is not strong, it is tradable. We are starting to go long Chinese assets, and domestic coverage will increase starting next week.
Ten. Emerging markets and the Brazilian equity index
Chart: EEM
This week’s commentary update: testing the upper boundary. If it breaks above 50, the emerging-market uptrend will resume; if it fails to break 50, it will continue moving sideways within the range.
The key judgment has been validated; continue with hypothesis b under the add-on dilemma
It is possible to continue accumulating at the lower boundary of the trading range.
1) Previously, we assumed only one path: continually making new highs. However, the add-on dilemma has now emerged (see Notes250724 “EM’s Re-Entry Dilemma”), so there are actually two possibilities... a) a strong breakout above 50, continuing our previous expectation that emerging markets remain a core source of relative outperformance; b) consolidation at the index level, with prices moving back and forth between 50 and 47.
2) Overall, this year we are more focused on emerging markets.Since the global asset lows of 20, emerging-market indices have underperformed on a relative basis, but At this stage, going long EM offers greater return potential. The upper rail of the EEM trend channel is near 50 and could be the next upside target. If risk-asset appetite persists, the uptrend could accelerate and outperform on a relative basis.
3) Slower-moving institutional mandate capital faces a difficult dilemma about adding to positions. On one hand, market prices have already largely priced in the expectation that they may buy, so entering now means missing out on cheaper holdings. On the other hand, at present, EM assets do seem to be a relatively good allocation choice in the beauty contest.The add-on dilemma means EM assets may enter an index-level consolidation phase, but further gains remain the expected path.
Chart: Brazilian equity index
This week’s commentary update: continue holding
Precise support at a key level; likewise, buy at the lower boundary.
1) A longer trading cycle, with the expected path unchanged, there is a lot here and the background may be unfamiliar to most readers, so it is best to read the full text; see Notes250710 “From Brazil to China.”
A quick plug: we ask traders in our own trading room to produce a single-market note roughly every 2 days, covering U.S. equities, A-shares and Hong Kong, and commodities. We select the better ones and post them in the corresponding small Planets,
Interested readers can subscribe as needed (only subscribe if you need it; don’t waste your money):
U.S. equities:https://www.meridianresearch.app/home?product=us-strategies(Xingzhi)
A-shares and Hong Kong:https://www.meridianresearch.app/home?product=asia-strategies(Ganglong)
Commodities:https://www.meridianresearch.app/home?product=commodity-strategies(Dixin)
As for the level of detail, we’ll probably get down to industries. In mainland China, we’ll try to avoid crowded trades; too much detail could let others get in ahead of us. U.S. equities can perhaps be covered in more detail, though readers will still need to think through and fill in the rest themselves.
The overall win rate has been pretty good lately...
Note: All content herein is for reference only and does not constitute investment advice or serve as a basis for any laws, regulations, or regulatory policies. Investors should not use or rely on this information as a basis for their decisions.