Debt, bonds, gold, oil, bitcoin: it’s all connected this week
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Investing in currencies can be very profitable. Currencies fluctuate, generally, when the US dollar is strong , most other currencies are weaker. Countries like Canada and Australia are heavy commodity based economies. This means that those currencies do well when commodities are rising.
Investing in currency involves buying the currency of one country while selling that of another. This is done through the foreign exchange market, or ‘forex.’
Forex trading always happens in pairs. For a transaction to be complete, one currency has to be exchanged for another. For example, you might buy US dollars and sell Euros or vice versa. While you could technically exchange any foreign currency that’s traded on the market exchange for another, it’s more common to trade using pre-establishing pairings.
Forex trading attempts to capitalize on fluctuations in currency values. It’s similar to trading stocks. You want the currency you buy to increase in value so you can sell it at a profit. Your profit tied to the currency’s exchange rate, which is the ratio of one currency’s value against another.
Using Exchange Traded Funds (ETFs) to trade currencies
While any investor can trade currencies through a Forex brokerage, they can also use Exchange Traded Funds to easily trade currencies; as easy as trading any stock. With currency ETFs, you can invest in foreign currencies just like you do in stocks or bonds. These instruments replicate the movements of the currency in the exchange market by either holding currency cash deposits in the currency being tracked or using futures contracts on the underlying currency.
Either way, these methods should give a highly correlated return to the actual movements of the currency over time. These funds typically have low management fees as there is little management involved in the funds, but it is always good to keep an eye on the fees before purchasing.
Here are a few some samples of ETFs that trade global currencies. Note there is an ETF for most global currencies.
US Dollar – UUP.NYSE
Euro – FXE.NYSE
Japanese Yen – FXY.NYSE
British Pound – FXB.NYSE
Canadian Dollar – FXC.NYSE
Swiss Franc – FXF.NYSE
Chinese Yuan – CYB.NYSE
It is also possible to trade leveraged currency ETFs. For example, our subscribers have profited greatly by using the EUO ETF which is a 2X short Euro ETF.
Note that with the US dollar being the world reserve currency, we typically see an inverse relationship between the US dollar and other currencies. For example, when the US Dollar is strong, most currencies underperform.
The Trend Letter covered global currencies in each of its weekly reports.
What is the Yen Carry Trade?
What is the Yen Carry Trade?
The Yen carry trade is when big investors borrow money in Japanese Yen (because Japan has very low interest rates), then convert that money into US dollars and invest it in things that pay much higher returns, like:
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US government bonds
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Stocks (especially big US tech stocks)
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Emerging-market bonds and currencies
They make money from the gap between Japan’s low rates and America’s higher rates — plus any currency gains if the yen gets weaker.
A Simple Example
Imagine a hedge fund:
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Borrows ¥100 million in Japan at about 0% interest
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Converts it to about $650,000 USD
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Invests it in US bonds earning 4–5%
That 4–5% difference is their profit.
If the Yen stays weak or falls, they make even more.
Because this looks so safe, many funds borrow 5–10 times more using leverage — which makes profits bigger… and so are losses.
Why It Works So Well (When It Does)
The trade works best when:
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Japan keeps rates near zero
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US rates stay high
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The Yen stays weak
That combination lets investors quietly collect profits for months or years.
Why It Can Suddenly Blow Up
The problem is that investors must repay their loans in Yen.
Two things can cause disaster:
1) Japan raises rates
If Japanese rates rise, borrowing Yen becomes more expensive.
2) The Yen gets stronger
If the Yen suddenly rises, investors need more dollars to buy yen to repay their loans — meaning they take losses.
What Happens During a “Carry Trade Unwind”
When the Yen jumps:
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Investors rush to sell stocks and bonds
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They convert dollars back into Yen to repay loans
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Falling asset prices trigger margin calls
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More forced selling follows
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Markets around the world drop
This is how a currency move in Japan can cause stock market crashes in the US and elsewhere.
A Real Example: 2024
In 2024:
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Japan started raising interest rates
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The US hinted at rate cuts
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The Yen jumped about 15% in weeks
That caused a massive sell-off in global stocks and bonds as the carry trade was unwound.
Where Things Stand Now (Early 2026)
The interest rate gap between the US and Japan is much smaller than it was in 2022–2023, so the Yen carry trade is less attractive right now.
But if that gap widens again, the trade — and its risks — can quickly come back.
Why Retail Investors Should Care
You may never trade the Yen — but big hedge funds do.
When the Yen suddenly moves, it can trigger:
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Stock market drops
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Bond sell-offs
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Tech stock crashes
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Global volatility
So when you hear about the Yen strengthening, it’s a warning sign for risk assets worldwide.
Market Pulse – July 18/25
Equities & Major Indices
- The S&P 500 and Nasdaq set new record highs early in the week, before slipping on profit-taking ahead of key earnings reports.
- The Dow Jones Industrial Average also edged lower in the final sessions.
- Despite Friday’s dip, the Canadian TSX posted a weekly gain of around +1.1%, marking a year-to-date increase of ~11%.
- June retail sales rose +0.6% month-over-month, exceeding forecasts and reinforcing consumer strength and economic momentum.
- Strong earnings from major names like Netflix boosted midweek sentiment.
- Market gains faded late in the week amid renewed tariff concerns as Trump threatened even more tariffs on the EU.
(Click on images for larger view)
The S&P 500 heatmap shows Big Tech continuing to lead market performance.
Technical analysis of S&P 500
The S&P 500 is testing a key resistance convergence zone, with three short-term resistance levels (yellow lines) in play. So far, it hasn’t been able to break through. A clean breakout above this zone would be a bullish “blue sky” signal. However, if the index retreats, watch the green horizontal support line. If support fails, a deeper correction could follow.
Key Support Levels:
• Initial support: 6150
• Secondary support: 5940
Historic ‘Crypto Week’ in Washington
Lawmakers discussed and advanced several industry-defining bills, including the Anti-CBDC Surveillance State Act, the GENIUS Act, and the CLARITY Act, aiming to provide clearer regulation for cryptocurrencies and stablecoins.
The entire cryptocurrency market cap surged past the $4 trillion milestone, reflecting broad optimism and a fresh bull run across digital assets.
Bitcoin touched new all-time highs above $123,000, but dropped on Friday, it dropped over $2,300. Here’s a thought – Are we about to see a classic ‘buy the rumor, sell the fact’ in crypto? We’re seeing a surge of companies trying to copy MicroStrategy’s game—selling you a $5 bill for $10, wrapped in hype and buzzwords, hoping you won’t realize the value gap until it’s too late.
Recent examples, including the underwhelming CEPO debut could be a warning sign. You can now buy crypto assets directly, and at-par, while some stocks are trading at huge premiums to their real crypto holdings, which historically isn’t sustainable.
While 96 of the top 100 coins appreciated over the week, Ethereum (ETH) stole the spotlight with even stronger relative performance.
Profit-taking risk is high as the emotional mood in crypto has flipped from despair to euphoria in just three months. We would not be surprised to see Bitcoin pull back and test $110K level.
Big picture – traders and institutions seem to be loading up on hard, unmanipulable assets ahead of a possible Fed shakeup. If Trump installs an ultra-dove chair and pushes rates down to 1% while unleashing another wave of liquidity, crypto could rip higher—fast.
Currencies
After a steep decline the $US broke through its downtrend line (diagonal red line) in early July. Initial resistance will be 99.60 (red horizontal line).
Precious metals
Gold hasn’t done much this week, meandering sideways. Gold is in a wedge pattern and has been trading sideways, testing the lower rung of that wedge (green diagonal line).
Platinum has pulled back a touch, taking a breather from its amazing rise since April. If we see a continued pullback, watch for support at 1370.
Silver has been acting as the metallic version of Ethereum
Commodities
Copper spiked after Trump announced 50% tariffs last week. This week, it started to pullback, but closed Friday near an all-time high.
Oil has been trading in a range between 68.80 and 64.80 for the last 5 weeks. While we could have another black swan event that would push oil higher, unless we get one, we should see oil pull back.
There is plenty of oil available—enough in storage to last 50 days—and more supply from OPEC, the US, and Canada is on the way. European sanctions on Russian oil aren’t very effective, since Russia can sell at a discount elsewhere. If US policy pushes prices lower, it could trigger another oil price crash – in the short term. Long -term, we are bullish.
That’s a wrap!
Martin
When Governments Forget Who They Serve
Civilizations rarely collapse in a single moment -they erode gradually, often in full view. One of the most telling signs? People leaving. Not for better weather, but for better opportunity, greater freedom, and fiscal sanity.
Time and again, excessive taxation, bloated bureaucracy, and anti-productivity policies have pushed citizens to vote with their feet. When governments punish innovation and reward dependency, they chip away at the engines of growth: entrepreneurship, self-reliance, and personal responsibility.
No state can sustainably support its people by consuming more than it creates. When incentives shift from contribution to entitlement, stagnation takes root—and resentment between the taxed and the subsidized grows.
This isn’t theory. It’s history. And the pattern is clear: when governments prioritize control over service, decline isn’t just possible—it’s inevitable. The signs are all around us. The only question is: will we listen, or repeat the cycle once again?
Cheers!
Martin
Trump’s Victory Fuels Market Frenzy: Today’s Charts
The S&P 500 soars: The stock market skyrocketed with Trump’s victory and the Republicans securing the Senate and poised to claim the House.
Bitcoin soars to new high: Bitcoin surged past $75,000, driven by Trump’s pledge to establish the US as a leading crypto hub. This rally reflects heightened investor optimism around a potential crypto-friendly regulatory environment under the new administration.
US Dollar blasts higher: The dollar marked its strongest day since 2022 on a strong stock market and rising yields.
Bank stocks rally: Bank stocks soared as investors anticipated deregulation and economic growth under the new administration. Major institutions saw substantial gains, with JPMorgan Chase leading the way, up 13% today.
Gold falls: With a huge rally in the US dollar, gold got clobbered, down 73.00 for the day.
Bond market turmoil: While Trump’s policies are welcomed by the stock market, the bond market is reacting less favorably. Expectations of lower tax revenues and higher government spending point to rising deficits and ballooning debt. As inflation expectations climb, the value of fixed-income investments erodes, pushing investors to demand higher yields, which drives bond prices down. This dynamic reflects concerns over inflation and fiscal imbalances under the new administration.
Green stocks get hammered: Companies in the green energy sector saw sharp declines, with solar stocks such as Sunnova Energy plummeting—Sunnova dropped a staggering 51% today. This sell-off underscores investor concerns about reduced environmental policy support under Trump’s administration, casting uncertainty over the future of renewable energy initiatives.
Market insights: This political landscape gives Trump significant leeway to implement his pro-business agenda—lower taxes and reduced regulations—which investors see as fuel for market growth and economic expansion. The rally reflects Wall Street’s optimism about a policy environment favoring corporate earnings and business-friendly reforms.
This Week’s Key Market Highlights:
October 25, 2024:
The S&P 500 dip: The first weekly decline after six gains suggests a potential bounce next week, though election volatility could bring market jitters, especially if results are delayed.
US Election Countdown: With just 10 days until the election, markets leaning toward a Trump victory due to his pro-deregulation stance, seen as favorable for business.
Rising Bond Yields: Concerns about persistent inflation are pushing bond yields higher, limiting room for Fed rate cuts. The Bank of Canada cut rates by 50 bps to 3.75%, and the ECB by 25 bps to 3.4%, contrasting with the Fed’s 5%.
Rising Mortgage Rates: Contrary to expectations, mortgage rates are rising, tracking higher bond yields despite the Fed’s September rate cut.
US Dollar Surge: Up 4% since late September, the dollar’s strength reflects robust US economic data, solidifying it as the “least ugly” currency in uncertain times.
Canadian Dollar Weakness: As the Bank of Canada cuts more aggressively, the loonie falters amid Canada’s weaker economic outlook.
Homebuilder Setbacks: Rising mortgage rates weigh on homebuilder stocks.
Gold Near Highs: Gold is nearing new highs with its RSI around 70 (bottom of chart), signaling potential overbought conditions and a possible pullback.
Market Insights: Bullish trends continue, but election uncertainty looms. A clear election outcome may trigger a ‘sell the fact’ reaction.
Special Offer: Upgrade to a full Trend Letter subscription this weekend at 33% off—offer ends Sunday, October 27 at midnight.
This Week in Money Interview
Martin did his monthly interview with Jim Goddard on the This Week in Money show. Topics discussed were:
- Stock market trends
- Gold coming into seasonal strength
- Have geopolitical events been priced into oil?
- Why has the $US been rising, especially given the Fed just made a deep rate cut?
- The Fed says its not worried about inflation anymore, should they be?
- There is a lot of mainstream media talk about a Soft vs Hard landing. What does it mean and how should investors prepare for either scenario?
- The Fed cut rate 50-bps, and now the long bond yields are rising, which seems counterintuitive. Why is that happening?
- The Shanghai stock exchange had wild swings in the past week, what is happening there?
The other guests on the show—Ross Clark, Victor Adair, and Josef Schachter also offer sharp perspectives on the current market landscape. Tune in!
Market Notes – September 1/23
Some investment news for those looking to invest in gold, invest in stocks, or currencies, and commodities.
Each week the Trend Letter, displays weekly heat map of the S&P 500. It is a great visual of the equity market that holds stocks many North Americans own. Each of the 500 stocks is shown in a box, & the size of the box represents its market valuation, and the colour of each box tells you how that stock did, GREENS being gains & REDS being losses.
As we can see, for the week, big tech stocks led the way higher. There was also a lot of green throughout most other sectors, with utilities and healthcare being the main exceptions.
On the daily heatmap a bit of a different story, with some big tech in red.
Looking at the BIG picture, the S&P 500 is still solidly in a long-term uptrend channel, since 2009. If we were to test the initial support level of that long-term uptrend channel, we would see a correction to the 4000 level, which would be a ~11% decline from the current 4500 range
Based on seasonality, September is the weakest month for the S&P 500.
If we do get a decent correction in September, it could provide a good buying opportunity. Sectors that have looked good are oil, uranium, tech, gold, base materials and even cannibals cannabis, what with US health dept urging the DEA to relax restrictions. We will see if these will remain strong after Labour Day, or if the negative September seasonals take over.
What we do at Trend Letter is track those key support & resistance levels, looking for changes in trend, and then and alert subscribers when trends change.
In Martin’s interview with Jim Goddard on This Week in Money on Friday (interview start at 44:39), he promised to show the chart below. If we look at the last number of times the Fed CUT rates recently, so 2000, 2007 and 2020…each time was driven by the economy falling into a recession (grey shaded bars). And when they CUT rates (red arrows) the S&P 500 had sharp declines. In each of those CUTTING phases it was not until the Fed STOPPED cutting rates that the S&P 500 started to recover (green arrows).
For those investing in gold, the key numbers are::
- Near-term resistance is 2000, 2040, then 2070, which was that double top in April-May
- Next key support level is 1915, 1900, 1880, then & really strong support at 1825
- If it does drop to 1825, that would likely trigger several new BUY alerts
In Martin’s interview with Jim Goddard, he explained why he still feels a recession is very possible. He outlined the two key leading indicators, the inverted yield curve and the Conference Board’s Leading Economic Index (LEI). Both of these have an almost perfect record in forecasting recessions. Both are forecasting a recession coming soon.
A yield curve is inverted when short-term yields are higher than long-term yields. An inverted yield curve is a leading indicator of a recession and since 1955 (68 years), there has been only one time where the yield curve inverted without there being a recession.Recently, the yield curve is the most inverted it has been in over 40 years. Recessions don’t start when the yield curve inverts, but rather when it starts to ‘uninvert’ (red arrows).
This chart clearly shows that for each of the last 6 recessions, they all started after the yield started to rise. Today, the yield curve is starting to ’uninvert’ (circle).
The other indicator with a near perfect record of forecasting a recession is the Conference Board’s Leading Economic Index, which looks at 10 components across the US economy. That index, again in its latest report last week, is firmly saying a recession is coming.
Oil has had a great week after dropping down to the 80.00 level, it has rallied big time this week, and closed Friday at 85.55. The big bump this week came after a massive 11.5 million barrel drawdown in US crude inventories. Also, we have the Saudi Arabia production falling and they, plus potentially Russia, are expected to extend the production cuts into the end of October.
Stay tuned!
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Market Notes – June 13/22
The S&P 500 dropped back into a bear market within the first 30 minutes of trading today. The index is now down over 20% from its January high, marking the lowest level since March 2021. The Dow plummeted 2.79% while the Nasdaq fell 4.8%. Recession fears are growing amid crippling inflation and people are pulling out of their positions before the situation worsens.
For the last six months we have warned that in bear markets, relief rallies typical fail to make new highs and in fact tend to make new lows. Our Trend Letter and especially our Trend Technical Trader (TTT) services have been using hedging strategies to protect our portfolios from these violent bear markets and even to profit from them.
Bear markets typically have three phases. The first stage is a sharp decline, followed by a rebound, and then a drawn-out fundamental downtrend. This is likely where we are now and we are likely to see some strong relief rallies, followed by deep corrections.
If you have yet to put any hedging strategies in place, we should be due for a rally very soon, which would be an opportunity to put in such a strategy. If you need assistance on how to hedge, seriously think about subscribing to TTT at a 50% discount. Click here to subscribe.
The Nasdaq representing the tech stocks is now down over 32% since its high in November.
The S&P 500 is now officially in a bear market, having dropped over 21% since its high at the start of January.
The Canadian TSX has fared much better thanks to energy sector. The TSX is down ~10% and has not yet hit new lows.
Volatility spiked over 22% today.
The $US continues to be a safe-haven play in this bear market, testing recent high.
On Friday Gold jumped along with the $US as a safe-haven play. Today it fell off – very inconsistent and frustrating!
Stay tuned!
Market Notes – April 28/22
US stocks ended sharply higher Thursday, led by technology shares as markets continued a comeback from steep losses earlier this week. This gain was in spite of the news that the US economy unexpectedly contracted at the start of 2022 for the first time in nearly two years as lingering supply chain imbalances, inflationary pressures, and war in Eastern Europe weighed on growth. First-quarter US gross domestic product (GDP) fell at a 1.4% annualized rate after a 6.9% pace of growth at the end of 2021.
The bad news is good news logic here is that the Fed will be less likely to aggressively raise rates if the economy is heading toward a recession. The other spark for the markets was the anticipation for Apple’s earnings, which came in positive after the close.
As we highlighted in Tuesday’s Today’s Charts, investor sentiment had gotten very negative (bearish) and suggested that we would see a relief rally. Right on schedule, starting Wednesday we saw the markets rally, and then today had a gonzo spike.
The key support for the S&P 500 was the 4173 level which held the previous two times it was tested (green arrows). It held again this week, which triggered this relief rally which should test near-term resistance at 4465 (light red dashed horizontal line). If it can push through that level, then the next resistance is 4630 (next red dashed horizontal line).
The S&P 500 has seen a series of lower highs and lower lows, so until it breaks out of that trend we need to be cautious here. The 4173 remains near-term support and if that level gets taken out, then we are in for a deeper correction, potentially much deeper.
The US dollar has been on a parabolic tear this year. With Exchange Traded Funds (ETFs) it is very easy to trade currencies, just as easy as trading any stock. Unfortunately, most investors miss these opportunities. Trend Letter uses these ETFs and currently has a leveraged short Euro trade that is up over 32% right now.
The Japanese 10-year bond yield has been negative until just recently, and even today only pays 0.21%. The US yield is 2.82% (Canada is 2.78%), so Japanese investors are pouring into US bonds, meaning they are converting Yen for $US. As a result, the Yen is getting hammered, down over 20% this year. A weak Yen drives up import costs, especially energy and food.
After hitting .83 in early June thanks to energy and commodities, the Loonie has not been able to maintain that strength due to the massive strength in the US.
Stay tuned!