From April twenty-first, two thousand twenty-five to April twenty-third, 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 dollars which is also the foundation for all the discussions that follow.

The first key holders of dollars are traditionally energy-exporting countries, also known as petrodollar holders.This portion These dollars are held by resource-rich countries, which sell energy priced in dollars and recycle the dollars by investing in U.S. assets.

There are two structural shifts taking place here:First, the U.S. is continually expanding domestic production capacity and has become a major energy exporter with net energy exports rising year after year, which is also why the trading relationship among the dollar, natural gas, and oil prices has undergone a paradigm shift From this perspective, dollar recycling will show a clearly declining trend, Former energy exporters no longer have an incentive to recycle their dollar revenues into the U.S. Treasury system, especially against the backdrop of “customers becoming competitors.”We are discussing structural trends here, not shocks.Second, there is the risk of sanctions 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 that will lead energy-exporting countries to reduce their dollar holdings.

The second key group of dollar holders is the trade-dollar holders who reinvest dollars after exporting goods to the U.S. The recycling mechanism for trade dollars is also breaking down. On one hand, the tariff structure is changing the income structure of non-U.S. trading partners income structure while, on the other hand, some dollar income is converted into tax revenue flowing to the U.S. Treasury, leaving non-U.S. countries a smaller base of dollars available for recycling。

The third key group of holders comes from third-country trade settlements within the international trading system These holdings facilitate settlement, with most funds sitting in dollar pools. Systems such as mBridge, BRICS Pay, and others are becoming more cost-effective than USD channels at improving settlement certainty and the ability to avoid sanctions risk.

The fourth key group of holders consists of foreign central banks which accumulate dollars mainly as foreign exchange reserves. Sanctions risk and expectations of dollar depreciation are prompting central banks around the world to diversify their reserves This is a topic we have already discussed at length, with gold as one example.

2025.04.23

II. Insights

Our Viewpoints and ideas on market.

Returning to the FX market and filling in the key question of what drives FX trading (a brief answer to why technical analysis also requires understanding macro: charts aren’t drawn randomly)

Doubts about the dollar’s dominance as the global reserve currency are becoming one of the central topics of current market discussion. Although the dollar’s use still exceeds that of all other major reserve currenciescombined (including the Australian dollar, Canadian dollar, renminbi, euro, pound sterling, yen, and Swiss franc),alternative options represented by gold or baskets of multiple currencies are rising significantly.

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

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

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

Chart: Peter’s prediction from a week ago is becoming reality

Related reading: Weekly Wrap 250420

Finally, just to briefly add, FX trading’s another key is understanding which currency in a pair is the dominant pricing currency This is the essential starting point for analysis and is useful not only for judgments about macro strategies, it can also help community members who are relatively skilled at using technical and chart analysis This is also something we often explain: why Even if you are a pure tech boy, you should understand some basic macro concepts before making a move..

Here is an example that I hope will help everyone:

The New Zealand dollar has just completed a classic but relatively rare broadening reversal pattern, This pattern almost always appears at tops rather than bottoms (a simple, conventional technical-analysis theory: the same pattern has different meanings and probabilities in different trading ranges or positions; this is added here for readers who do not use technical analysis).

What needs to be noted here is that In this currency pair, the U.S. dollar is the dominant currency, so if it is expressed and charted in the form USD/NZD, it actually corresponds to the top...which also means greater certainty...At times like this, charting is not a matter of forming a view first and then using patterns to “prove yourself right.” Where the lines belong is fixed!

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

if you want to draw a chart, you first need to know which board to draw it on.

Only then should you discuss supposed patterns and probabilities by location.

2025.04.21

Why the decline in U.S. stocks is far from over

First, at least for now, the U.S. stock market is nowhere near a true bottom，Neither of the two key features—1) flush-out capitulation plus 2) extreme excess buy flow—is present at all. It is clearly too early to say the decline is over.Within the medium-term trading horizon, we will continue to maintain a structurally short position (specific live U.S. index-futures trades will also be posted in the in-depth community, traded by Sean/https://www.meridianresearch.app/home?product=vega-trading), anyone willing to take the other side against us, please step forward.

This U.S. stock market pullback is the fourth major correction of more than 15% since 2018, SPX, The first three occurred on 2018年12月24日, 2020年3月23日, and 2022年10月11日, and those three bottoms (along with all previous market bottoms) shared the same trading characteristics:

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

Chart: a positioning brief we previously published in the U.S. stocks community (https://www.meridianresearch.app/home?product=us-strategies）

It was stated very clearly, The market is at its pain threshold, and so-called U.S. politicians are at theirs too, meaning every piece of news is bound to lean bullish so, there is no need to wait for the details of the news, because the outcome and the way it is presented are predictable; once prices reach a certain range, the corresponding news result will naturally follow。

Either go long before the news and stay in until it is announced, or go short after the news has been absorbed. Every swing since this round of selling began has played out this way, without exception; you can review the market action yourself.

If we want to quantify a bottom, we should look at how the market behaved at previous bottoms:1) a major selloff, 2) an intraday rebound of at least +5% after the selloff, and 3) the rebound accompanied by extreme excess net inflows (2018年12月26日+840亿美元, 2020年3月24日+1450亿美元, 2022年10月13日+1440亿美元).

To reiterate: a washout selloff plus extreme net buying.

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

The 4月9日 buying of 5370 hundred million dollars was essentially low-quality capital briefly lured into the market by the “tariff delay” news, not value buying after a “panic flush-out.”In fact, the news artificially drew in speculative longs with little conviction and squeezed shorts, making the current market structure more fragile. This is another reason we have greater confidence in our view of a larger medium-term decline.

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

Retail investors are not yet in a true state of “panic”—at the bottoms of 2018年12月26日, 2020年3月24日, and 2022年10月13日, there was clear Sell the Dip behavior, but For now, this is still mainly dip-buying. As in the previous three rounds, a true bottom does not appear while retail investors are buying the dip; it will come when they begin concentrated “panic selling.”

Options data also reveal a classic faulty structure, reflecting a low-conviction bullish thesis based on “fear of missing out” rather than “willingness to bear a drawdown.”In addition, 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 U.S. stocks heavily last year, ETF, are now sitting at a loss—the simultaneous pressure on the dollar and U.S. stocks is only just beginning.

Stay patient and wait for a flush-out, but it will not happen quickly; do not be too eager.

For now, we need at least a break below 4.7’s News pivot before discussing anything else, A break below is inevitable; if there is no break, the market will not panic (just like you), so there will definitely be a break If you are Mr. Market himself, how could you possibly defeat yourself?

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

2025.04.22

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

De-dollarization is widely discussed, and selling the dollar works in many currency-pair trades (such as several FX trades we have made), but it is important to make clear here that this theme has nothing to do with trading the renminbi.

This is also one of the reasons we Notes250417 How to fully escape deflation: A discussion of this cycle’s Chinese government bonds and gold priced in renminbi, the PBOC’s real operational agenda, and another possible explanation for gold’s rise (including a forecast target price)This is another reason for the point made in that article: “The key is not the renminbi’s exchange rate against the U.S. dollar, but the change in the renminbi’s value relative to real assets, which is what we need to watch.”

The de-dollarization theme in FX pairs primarily depends on three transmission channels:

1）Buyers reduce their allocation to foreign assets, causing foreign-exchange demand to fall suddenly(Not applicable to China, since it has not been consistently increasing its U.S. Treasury holdings); 2)Increase dollar hedging and sell dollars forward(This may already be happening, driven mainly by hedging from state-owned banks and companies, but the impact is limited); 3)A broad shift from U.S. assets to non-U.S. assets, DXY declines, indirectly applying pressure through FX correlations(Of the three, this is actually the most applicable at present)

To elaborate, China’s wave of reductions in U.S. assets actually began in 15. 15-19 were years of foreign-exchange intervention to hedge against renminbi depreciation. After 22, although the size of foreign-exchange reserves stabilized, holdings continued to decline. Today, breaking down those reductions, they mainly involve U.S. stocks and U.S. agency bonds, rather than U.S. Treasuries, reflecting strategic avoidance of risk assets. This is why the first, shock-driven reduction channel does not apply, because China had not been consistently increasing its U.S. Treasury holdings over the past several years, so there is no “sudden change” path for a decline in the first place Other countries acted more slowly than we did before, so this can happen.

Second, dollar hedging is indeed happening, but it is more a matter of passive hedging demand from liquidity management by companies and certain policy-related entities, rather than active dollar short-selling; so it does not apply to the renminbi-dollar pair and is not a core shock factor.

Finally, the global allocation of capital is shifting from U.S. assets to non-U.S. assets, causing DXY to fall and indirectly “weighing on” the renminbi exchange rate through correlation. This is actually the most applicable explanation at present and is clearly the overall trading logic so far this year.

This also helps explain why, despite mounting fundamental pressures, USD/CNY’s gain year to date has remained limited and the renminbi-dollar trade has not actually decoupled. Instead, depreciation pressure has been expressed through relative weakness against the euro and yen, with clear weakness versus both currencies, while the CFETS renminbi index has also continued to decline recently.

2025.04.23

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 everyone at the start of this week. They may offer a useful perspective, to some extent, for understanding the current divergence between BTC and gold.

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 attracting the bond market’s attention.In other words, legislation related to Bitcoin (such as bringing BTC into the reserve system, tax exemptions, pricing and settlement, and so on),On the surface, this is meant to support crypto assets; in reality, it may be quietly creating legitimacy for a rise in gold prices.

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

This would disrupt overall financial stability, especially making little sense for a highly indebted government.

Gold is an anchor for long-term real interest rates and a boundary for the credit system. When a government has overextended its credit and inflationary pressures are difficult to control, gold often becomes the anchor for the monetary system’s repricing.But if the market realizes that gold is being officially “repriced”: 1) the bond market will anticipate more monetary easing or a weakening of confidence in the dollar; 2) it will sell Treasuries in advance, pushing yields higher; 3) ultimately, this will undermine the government’s financing capacity.

In a nutshell, Zoltan’s core point is: don’t be misled by appearances.Whether it is presented as “Trump supporters like BTC” or as politicians chasing votes, the actual policy consequence is to pave the way for legitimizing gold and revaluing it.

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 Treasury market. It is a “structural strategic tool” for bypassing the traditional financial market reaction mechanism.

This is also why, as discussion of the bill intensified, the two assets instead showed an unusual divergence in pricing.

Chart: The day gold broke upward was exactly the day BTC broke downward(The bill debate in fact shorted BTC and went long gold)

Viewed from this angle, Then a confirmed rebound in BTC could coincide with a top in gold Likewise, a surge in gold could also bring a relatively sharp short-term downside risk for BTC These two developments are consistent with each other.

This is just one perspective to watch. Keep an eye on this chart going forward; it could be quite interesting. Be careful if the two converge.