Week of February 10, 2025

As we head into the next week, it becomes increasingly obvious to me that a lot of traders out there are going to be watching the US dollar. This makes sense, because as a general rule, if you get the dollar “correct,” you get the rest of forex “correct.” That being said, we do get the Consumer Price Index numbers on Wednesday, as well as testimony from the Federal Reserve Chairman Jerome Powell in front of the Senate on Tuesday and Wednesday. Thursday, we get the PPI numbers coming out of the United States, followed by Retail Sales on Friday. In other words, this is going to be a very US-centric week.

At this point, I think the most important thing to watch right now is going to be the CPI numbers. The Core CPI month over month is expected to come out at 0.3%, and anything at that level or above could cause upward pressure on the US dollar, which, quite frankly, I think it’s probably only a matter of time before the US dollar takes off again. This past week, on X, I have released a chart of the US Dollar Index against the Euro Currency Index. You would be very hard-pressed to find a more divergent path than the one we are on currently. When you look at the chart below, the green line is the US dollar, while the yellow line is the Euro. While we are at extremes, extremes can get broken, and when they do, things can get very wild.

That being said, the fact that we have so much US-centric information coming out this week could put more upward pressure on the dollar if inflation continues to be sticky. Furthermore, you cannot forget the fact that it’s very likely Donald Trump will do something with tariffs against the European Union, which is something that the Europeans cannot afford right now. With that in mind, the natural inclination would be to short the EUR/USD pair, but I actually am much more interested in the USD/CHF pair.

Swiss franc is a major focus for me.

Keep in mind that the Swiss National Bank has recently cut rates by 50 basis points in a bit of a surprise move. This tells me that the Swiss are extraordinarily concerned about monetary conditions, and with 85% of Switzerland’s exports going into the European Union, this might be a “backdoor way” of shorting the European economy. As far as the chart is concerned, a daily close above the 0.92 level could open up a huge move higher. I would be looking for 0.95, and then after that we could talk about 1.00, given enough time. This would not surprise me at all, due to the fact that the Swiss franc looks vulnerable against most currencies, and at the same time it appears that the bulk of currency movement is into the United States.

If this trade does in fact kick off, you will see the US dollar strengthen against almost everything. That being said, the Swiss National Bank is actively doing what it can to weaken its own currency, so this is going to be an easier fight than perhaps breaking down the euro or the Australian dollar, as an example.

Gold remains very bullish.

There is the possibility that the gold market pulled back a bit, especially when you look at the price action on Friday. That being said, this should end up being a nice buying opportunity, and I am very interested in buying the dip this week. Anywhere near the $2800 level gets me very interested in buying, but I also recognize that we may not get that opportunity. If we turn around and break above the $2900 level, gold takes off to the $3000 level rather quickly, which has been a target of mine for about 5 months now.

The world will continue to look to gold for safety and, quite frankly, as a way to protect from currency devaluation, something that we are seeing around the world. While a lot of traders believe that gold and the US dollar move in the opposite direction, this is not true at all; all you have to do is take a look at the 1980s. This is about safety and liquidity, and nothing more.

Bitcoin remains “meh.”

Right now, it's difficult to find a less fascinating market than Bitcoin. This makes a lot of sense when you think about it, as the markets are simply waiting to determine whether A) risk appetite returns, and B) what the Trump Administration will be doing about crypto overall.

However, this doesn’t mean that I am not paying attention, and it doesn’t mean that I am not buying. However, I am making incremental purchases. In other words, I am essentially using the BTC market as a savings account and will be happy about the gains when they come. Quite frankly, it is likely that the market pulling back will only make me increase my contributions to my “savings account.”

In the next month or two, we may witness some "risk off" behavior, which will continue to exert pressure on the Bitcoin market. However, if we break above the $110,000 level, then I think we enter the “bullish leg up” going forward. This will possibly be a result of an announcement from the US government about crypto. As things stand right now, there just isn’t any real reason for people to buy massive amounts. I remain neutral in the short term and bullish in the long term.

I still favor the USD over most other things, but I also recognize that we are likely to see more choppiness going forward as we are at very low levels. This is a situation that I think still favors “buying dollars on the dip” going forward.

Trade well,

Chris