Temple 8 Research
AI Buildout, Macro & Energy Infrastructure Research
The dollar looks set to sell off into CPI, with Treasury Secretary Bessent likely to step in again on a cool or in-line print. @Barchart notes the dollar has already wiped out the July 31 Treasury intervention. Follow-through intervention, selling into a weak tape, is well documented back to the 1998 Asian currency crisis, and with it hovering close enough to 160, further intervention makes sense. x.com x.comÂ
The US dollar looks set for a multi-year bear cycle because a multipolar world needs fewer dollars. Reserve managers are diversifying, trade settles in more currencies and central banks accumulate gold instead. Against an equally weighted basket, the dollar's half-century sequence of lower secular highs is topping again on its 7-to-10-year cycle. Every major commodity bull of the past century ran alongside a falling dollar, which could also bring a second inflation wave. x.comÂ
The dollar cycle has likely peaked because the Fed's next move is going to be a cut. Supply-shock demand destruction is doing the Fed's job and a strong dollar is doing the rest, so rates should fall, the dollar weaken, and duration assets, commodities and emerging markets reprice. A soon-ish end to the war should work against this view, but even if it drags on much longer, the rates curve has priced it in through the end of 2026. x.comÂ
The dollar should catch a monster bid before any structural weakness, because fiat is a menu of bad choices and in a deleveraging no one reaches for euros or renminbi. If the US concludes it will not win in AI, there is a high probability the next step is to tank everything, and the dollar and US bonds would then be bid; the yen could also rise as carry trades unwind. Dollar strength comes first and leads to structural dollar weakness on the other side. x.com x.comÂ
The US dollar should top once the Fed stops pricing more hikes, which makes shorting it the right long-term trade. In the near term, though, record short positioning into risk-off is exactly what gets squeezed first if oil spikes again; per The Kobeissi Letter, Japanese retail net dollar shorts hit $17.2 billion, the highest since 2008. x.comÂ
The yen looks set to keep strengthening against the dollar, because Treasury Secretary Scott Bessent appears determined to push USD/JPY lower. Bessent said in an interview that as "the house" he knows exactly what Japan, the Bank of Japan and its policymakers will do when the US intervenes in the yen, and dared markets to bet against him. As a former fund manager who helped successfully attack the pound and the Thai baht, he holds a real information advantage. x.comÂ
The US dollar should go higher because the Fed will have to hike and oil is rising, keeping a 105 DXY target intact. Long-end yields rose by the equivalent of a rate hike even as the short end fell. Recent weakness looks like a positioning unwind plus a suspected Bank of Japan yen intervention, a 3.5% move in two hours. The 100 range on DXY needs to hold. x.com x.comÂ
The US dollar is unlikely to break out in the short term without a catalyst. An in-line PCE print pulled down 2-year and 10-year Treasury yields, the dollar index sits at major resistance at its May 2025 high, USD/JPY at 162 is a critical level for the Bank of Japan to defend, and currencies move slower than bonds. A reopened Strait of Hormuz would also help Europe and the euro recover, adding pressure; that favors short-term longs in gold and emerging markets. x.com x.comÂ
Early Treasury buying is mostly domestic, so falling rates can coincide with a falling US dollar. Foreign buying is expected later in the bust, when the dollar should reverse sharply higher; this does not bring the previously forecast dollar rebound forward. x.comÂ
The dollar's uptrend against the yen should continue because the interest rate gap still favors the dollar; intervention can slow the move but not stop it. USD/JPY jumped back to 159.43, its August high, recovering more than half its drop after the joint US-Japan intervention two weeks ago. x.comÂ
The US dollar index may extend a little further to 105.8 before heading down to 93-95, following the same playbook as before Trump's election, when it was searching for macro exit liquidity and then fell after he took office. As in late 2024, when crypto rallied while the dollar climbed, bitcoin could reach $90,000-100,000 before the midterms with the DXY near 105.8. Longer term, a world moving toward stable peace would reduce safe-haven demand and weaken the dollar. x.comÂ
