The Dollar on the cliff — Will NFP be the push or the lifeline?

Sell the Dollar?

Major pairs are flatlining as DXY claws for life, trying to shake off the recent wreckage. After a brutal four-week beatdown that flushed out dollar longs to 97.92, last week’s short squeeze pushed it back to 100.00 — but let’s be honest: this wasn’t dollar strength, it was pure positioning whiplash wrapped in duct tape and false hope.

Trump stepping off the Powell-firing ledge and floating tariff thaw gave risk just enough oxygen to rip. The S&P torched most of its “Liberation Day” crater, bond yields rolled over, and suddenly the doom trade hit pause. But don’t confuse tactical relief with a real trend — tariffs are still choking trade, and US consumer confidence just flash-crashed back to Carter-era lows. Beneath the bounce? The rot’s getting louder.

The Fed sets the stage. Waller practically spray-painted it: if jobs crack, cuts are coming. He's still trying to slow-walk it to September, but the clock’s ticking. Friday’s NFP is the kill switch. One ugly headline print — think sub-100k — and the whole rate complex will detonate. Fed cut pricing will rip deeper, and the dollar’s legs will fold.

Meanwhile, USDJPY has been drifting lazily back to 144 — classic risk-on flows, a weak yen, and so forth. But the Boj is coming. They'll cut growth forecasts and lower inflation expectations to justify not hiking in June but the message is clear: once the tariff smoke clears, normalization is still on the table.

It’s always a mug's game to predict the exact pivot for USDJPY lower when risk is starting to pick up. However, Tokyo CPI came in strong — Ueda’s not hiking tomorrow, but he’s not backing down either. Rate hike bets have been pushed out to Q4, but smart money is already front-running the eventual test of 140: global slowdown + Fed cuts = JPY strength.

EURUSD is coiled and loaded, just waiting for a spark. Hovering in the 1.1300–1.1400 chop zone, the euro’s itching to rip if the dollar trips — even with the ECB whispering dovish sweet-nothings. Inflation pressures are fading across Europe, but let’s not kid ourselves: EURUSD isn’t trading a euro story right now. It’s 100% a dollar tape.

One soft NFP and 1.1500 comes flying into view — fast and ugly. A hot NFP print might squeeze it back toward 1.1250, but make no mistake: the EURUSD squeeze lower is cumulative, not a one-day event.

Big picture? The dollar's convexity is buried right now — suffocated under tactical short-covering — but it’s there, pulsing under the tape. If Friday’s NFP misses hard, the mask comes off. The dollar melts. EURUSD rips through 1.1400 like tissue paper. JPY flexes like it’s 2020 all over again. Real money is still bleeding dollars. Hedge funds trimmed, but the buy-side isn’t buying the risk on game.

Tape’s jumpy.. Tape’s desperate for a catalyst — and it's staring us down in four days.

Gold’s reality check

We finally got a reality check on gold after last week’s blow-off top. The metal slid as much as 1.6%, bottoming out at $3,268, and is off more than 5% from Wednesday’s peak above $3,500. What changed? Risk appetite is creeping back in as trade talks show signs of thawing—and bulls who piled in on the “no-tariff” narrative are stepping aside.

Trump’s latest signals—that he’s unlikely to push out his next wave of “reciprocal” tariffs—have traders eyeing interim deals in Asia to dodge levies before July’s deadline. That nervous calm is enough to flip the script: if headline traders sniff relief, gold’s safe-haven premium takes a hit.

Meanwhile, leveraged funds are slashing longs. CFTC data show hedge-fund net positions in gold futures and options at their leanest in 14 months. Options flows in the SPDR Gold Shares ETF exploded to a record 1.3 million contracts last week—classic froth that often precedes profit-taking when fundamentals don’t catch up.

That said, let’s not kid ourselves: gold remains up roughly 25% this year, trouncing almost every other major asset class. You’ve still got central banks on a buying spree, ETF inflows grinding higher, and speculative demand in China holding firm even as local consumption slips. Real rates are still negative, hardly enough to derail the metal’s power run.

Intraday, spot gold in London is trading around $3,283. The takeaway? This pullback looks more like profit-taking than a structural top—yet the rally’s pace was unsustainable. If you’re looking to fade, patience could pay—because in every bubble there’s a cooldown before the next leg up.

If you were watching the Asia session for the past few weeks, you’d have noticed gold ripping higher onshore only to be yanked around offshore with barely a net change in positions. As spot gold flirted with $3,500/oz on April 22, three major Chinese brokers churned through roughly 212,000 CME-equivalent lots—nearly matching the 240,000-lot YTD average on CME—yet their net positions barely budged. That tells you this isn’t a directional squeeze so much as short-term algo chatter exploiting thin offshore liquidity.

This onshore/offshore tug-of-war is written large in the SHFE/CME volume-to-open-interest ratio, which just smashed its prior highs. When Chinese CTAs ramp up volume without altering net exposure, every bid and offer in Shanghai gets transmitted directly into London and New York, amplifying volatility and handing the tape to flow-driven traders rather than fundamental buyers.

Remember: gold is a pure “flow commodity”—there’s no warehouse balance sheet to anchor price like in oil or copper. What moves the needle is central-bank offtake, PBOC import quotas, speculative program flows, and genuine physical demand. On that front, keep your eye glued to SGE physical turnover, now at a ten-year high. When SGE volumes surge, it signals real Chinese demand—your best cue that this isn’t just paper-driven noise.

Trading the tech tape?

We’re barreling into the heart of tech‐earnings season, and the tape is flashing mixed signals. On the bright side, the Nasdaq just ripped 6.5% last week and is up 1% in April on a cocktail of stronger beats, a relaxed volatility backdrop (VIX back in the mid-20s), stable 10-year yields (~4.25%), info-tech exposures at multi-year lows, and policy uncertainty rolling back to March levels. In other words, corporate results and risk sentiment moved faster to the upside than the survey data would have you believe.

Early reporters have crushed numbers across the board—SAP, ServiceNow, Netflix, Google and TSMC all delivered above expectations—proving that investor pessimism ran ahead of actual consumer and corporate behavior. Software and semis are still humming (GenAI names just logged their best week in two years), and the barbell strategy—lean into oversold secular cyclicals while keeping a defensive sleeve—has paid off so far.

But don’t mistake last week’s sunshine for the “all clear.” Beats are coming under-rewarded: median stocks are only outperforming by ~50bps on T+1 (vs. a historic 101bps), and misses are punished more harshly than usual. Google’s clean beat only sparked a 1.5% pop, signalling that expectations have already been front-run. As we head into marquee prints from Apple, Amazon, Microsoft and Meta, remember that the early high‐quality cohort will give way to a broader, more uneven roster—where margin pressure, survey softness and trade-talk headwinds will bite.

Cloud watchers, take note: Google Cloud’s 29% y/y growth and $92.4 billion RPO backlog were solid, but management’s talk of “tight supply/demand” and delayed capacity deployment underscores lingering doubts about a 2H re-acceleration. AWS and Azure updates this week will be the real test of whether the “pull-forward” narrative holds or fades into a macro-driven slow lane.

Buckle up—the eye of this hurricane may be calm, but the storm’s still swirling. With Friday’s NFP report looming, the next shock wave could come from data, not just corporate headlines. Stay long your best ideas, hedge where you need to, and be ready to rotate at the first sign that the “all clear” crowd is getting complacent.