highlights

Waiting to time the USD turn

Getting closer to a USD peak, but not quite there yet

June 23, 2026

Goats have rectangular pupils

Current Views

Sell USDJPY at 161.84
with a stop at 163.17

Lurking

Funny how a hawkish ECB responding to an oil shock was bearish EURUSD and a dovish ECB responding less to the same oil shock that is pretty much over is… Bearish. The market continues to add to USD length and as I mentioned yesterday, positioning is getting close to extreme. I am waiting for the right tactical moment to get short dollars, but we are not quite there yet as corporate month end approaches and gold continues to plummet. It is worth noting that short positioning in US 2-year notes is also at an extreme, and so the market is well positioned for a hawkish Fed at this point. But you don’t just randomly take the other side for no reason, of course.

Friday is corporate month end, but we might see a fair bit of USD buying before that as the strong USD momentum lures nervous corporations into early hedging. We also have Core PCE on Thursday, and given I think that number is backward-looking and meaningless as oil swoons, that could offer a perfect opportunity to go short dollars. Or not. Let’s see. For now, I remain flat, twitchy, and excited, like a Fortnite bush camper in the final three.

While the USD’s kneejerk reaction to equity selling is always a higher USD, the bigger picture impact of a slump in MAG7, falling confidence in the frontier model company and hyperscalers’ ability to make money, and less capital flowing into U.S. tech is not clearly a USD positive when you zoom out. Somewhat related, Lisa Abramowicz X’d a cool chart that shows how the hyperscalers appear to be moving in tandem with token prices. I recreated her chart, which shows the UBS Hyperscaler Index (equal weighted basket of META MSFT AMZN ORCL GOOG) vs. the Silicon Data LLM Token Expenditure Index (cost per million tokens).

It seems fairly obvious that the cure for high token prices and high memory prices will be their high prices. Companies will figure out ways to crank up model efficiency as users balk at high costs. The race was to build the smartest models, and they are all super smart now. To the point where they are often indistinguishable. LLMs are converging towards commodity status, and this will bring prices down as commodity producers inevitably find cheaper production methods and Malthus is always wrong. This is not a reason to be short DRAM etc. on any particular day but it’s probably a reason to rebalance out of cyclical semis as they fly to the moon, out of the Milky Way and are now approaching SWEEPS-11.

Anyway, I digress. My point is really just that a high-vol tech selloff triggers kneejerk USD buying, but it’s not necessarily USD-bullish over time, especially for USDCHF, USDJPY, and non-cyclical currency pairs.

Speaking of USDJPY

There was some excitement in USDJPY yesterday as a reputable Japanese media source said that Bessent is talking to Japan about the yen again. I would caution that this is a dog that has barked many times but refuses to bite. Bessent has talked down USDJPY and USDKRW on multiple occasions, including the dramatic but eventually pointless rate check from the NY Fed. Still, coordinated intervention would be a huge deal and so it can’t be dismissed.

This chart shows all the JPY interventions since 1985. Red is when MOF went solo and blue is when the G7 or USA got involved. You can see the red ones don’t work as well as the blue ones. If we got coordinated intervention, I think USDJPY would make a more durable top and probably fall 5%-6% in 48 hours vs. the normal 3.0%-3.5%.

It’s a pretty obvious trade but sell USDJPY at 161.84 with a stop at 163.17 is the best way to capture intervention because options are pricing so much skew due to the MOF risk. I am putting the USDJPY in the sidebar as a limit order in case we get up there over the next few days. Corporate USD buyers could easily take us up there and force the MOF’s hand. And if it’s coordinated, it’s a home run.

One headline risk to keep in mind: BOJ Governor Ueda was in the hospital last week and if his health were to worsen, it would be extremely bullish USDJPY as the market will speculate that reflationista Wakatabe might be named as a replacement. Simon Flint wrote last night about his conversation with one of his preferred BOJ watchers and the suggestion from that source was a) October hike is underpriced and b) if Ueda departs (he’s 74 years old), Wakatabe-san would be his preplacement. This would be a massive dovish surprise out of nowhere. It’s probably sub-10 delta because Uchida would be the natural replacement plus Ueda is probably fine. But it would be a humdinger, so it’s worth understanding the risk.

AUDNZD

AUDNZD looks to be forming a double top and interest rate differentials, gold, and positioning all suggest it can go lower from here. Lower oil benefits NZ more than Australia, too. RBNZ pricing continues to look absurd to me with four hikes priced over the next 12 months, so I suppose the ideal trade is a combination of receiving NZ rates (1-year) and short AUDNZD. It’s a bit convoluted, I admit, but I would think if you hold both for three months, you will make money on both sides of the trade, and you won’t have to white knuckle antipodean data releases.

I am not putting this in the sidebar because it’s not directional macro, but I do think it’s a five-star RV trade.

Seasonal Signals

The seasonal signals from the Spectra Trader Handbook and Almanac have been outstanding so far this year with a 62% win rate, total return of 180% and vol-adjusted return of 138%. Here are the upcoming signals. Note Mexico is a standout with EWW and USDMXN both showing up at the same time. Silver, wheat, and Google turn bullish next week, too.

MXN Curncy is USDMXN so the signal is red and means short USDMXN

The MXN signal is tricky with USMCA noise guaranteed to pick up as July 1 approaches, but maybe the market has priced some of that risk in at this point. If I am looking for USD shorts late this week or early next week, and I feel like stocks have stabilized, I will consider short USDMXN.

Final Thought

This is an excellent article:

https://ofdollarsanddata.com/why-poorer-students-earn-less-even-with-the-same-degree/

The Spectra FX Positioning and Momentum Report

Hi. Welcome to this week’s report. (To read about how I use and trade this report, see here.) You can see that things are heating up as short CAD and short CHF are becoming large positions out there. This is consistent with the idea that the market is close to all-in on hawkish Fed bets. An overall USD positioning score of +5 or higher (or -5 or lower) has historically had a near 100% hit rate as a timing device to go the other way. We’re close.