Teacher Cheng Jun, a senior professional trader and analyst in the field of futures and financial derivatives, has more than 15 years of real-money margin trading experience and has been deeply engaged in financial markets since 2007. He specializes in trading and research on high-leverage instruments such as foreign exchange, gold, and futures, and has a distinctive approach to technical analysis.
With the new U.S.–Iran situation continuing to unfold, the market has remained in a stalemate. Last week, major assets such as stocks, crude oil, and gold saw limited volatility. The negotiation process has yet to reach a clear outcome, and whether the final direction is a comprehensive agreement, military action, or a combination of fighting and talking, the eventual path still remains unclear. Teacher Cheng recently analyzed this situation and shared his strategy.
This session focuses on the market conditions under the new U.S.–Iran situation, with an emphasis on the performance and trend of dollar assets and oil prices, along with trading strategies and responses to investors’ questions. Through technical, fundamental, and market-logic analysis, Cheng Jun stresses a long-term bearish view on the dollar and combines the current tug-of-war in negotiations to project asset performance under different scenarios.
Will the fog of war make Waller more hawkish, and will a policy of shrinking the balance sheet in exchange for rate cuts trigger a turning point in the dollar? (Class link)
Let’s now review this session.
Discussion of dollar assets and medium- to long-term positioning under the U.S.–Iran situation
This session is built around the new U.S.–Iran situation and takes a deep dive into the current market environment, especially the performance of dollar assets. Last week, stocks, crude oil, gold, and other assets barely changed, and negotiations remain in a tug-of-war with no sign of a final resolution in the near term. Cheng Jun pointed out that this week’s key focus is the risk in foreign exchange, especially the dollar, describing dollar assets as being in a situation of “besieged on all sides,” which is worth approaching from a medium- to long-term positioning perspective.
Dollar assets mainly include the Dollar Index, U.S. Treasuries, and U.S. equities, with U.S. stocks serving as the last fortress. Treasury yields, when viewed inversely, reflect the market’s level of acceptance. Cheng Jun held a pessimistic view and laid out the logic for being long non-U.S. currencies from three angles: technical weakness, fundamental instability, and market logic, all working together to push the dollar lower.
Cheng Jun first outlined the overall framework of dollar assets. The Dollar Index represents traditional foreign exchange; Treasuries, through their yields, indicate market acceptance in reverse; and U.S. equities are the core pillar supporting dollar assets. Last week, he had already emphasized the importance of U.S. stocks, but this week the discussion shifted to the overall risk facing the dollar. Whether the talks continue, war breaks out, or the situation remains one of fighting while talking, the final result will determine the market direction. However, the current tug-of-war has kept the market stable, while signs of dollar weakness have already emerged. This creates an opportunity for medium- to long-term positioning, especially for going long non-U.S. currencies such as the RMB and the euro. Cheng Jun emphasized that the long-term bearish logic on the dollar is obvious, driven by multiple pressures rather than any single factor.
This session begins with the macro backdrop and points out that the dollar’s performance in the first round of the U.S.–Iran conflict exceeded expectations, but subsequent uncertainty has increased. Trump’s policies have accelerated the pace of the market and eroded the premium support for the dollar and U.S. Treasuries. The U.S. strikes on Iran did not achieve the expected effect, the overwhelming advantage has been called into question, and the petrodollar concept has been shaken. The domestic debt-issuance problem is severe, and once this support fades, the dollar will face downward pressure. These factors together form a bearish framework, and investors need to assess it from a medium- to long-term perspective, avoiding short-term volatility from distorting their judgment.
Long-term Bearish View on the U.S. Dollar, and the Logic Behind RMB Appreciation
The dollar is weak against most non-U.S. currencies, especially the RMB, which has appreciated noticeably, rebounding from near historic lows to below 7 and staying firmly there. This reflects the dollar’s weakness against the RMB. Aside from the yen, which has collapsed broadly, the dollar is also under pressure against the Australian dollar, Canadian dollar, euro, pound, and other counterpart currencies. The euro has the largest weight in the Dollar Index and is currently approaching the threshold of a long-term breakout on a ten-year chart. If it breaks out to the upside, the dollar’s downside room will expand significantly. Technical weakness has already become a consensus.
On the fundamental side, the petrodollar concept is facing a turning point. The U.S. strikes on Iran did not achieve the expected effect, and the market is questioning the U.S.’s overwhelming advantage. If the conflict drags on like the Russia–Ukraine war, confidence will be further eroded. The support for core assets is weakening, and the U.S.’s problem of issuing debt to sustain itself is acute. Previously, the dollar premium depended on military strength and safe-haven status; once that filter disappears, the dollar will face heavy pressure as fundamentals reassert themselves. Cheng Jun stressed that this is fundamentally devastating in the long term.
Market logic is also accelerating the pressure on the dollar. Trump has become an accelerator of market moves, pushing the market toward topping out faster and eroding the premium support for the dollar and Treasuries more quickly. Taken together, technical, fundamental, and market logic all point to a clear long-term bearish view on the dollar.
The RMB appreciation logic has solid support. As a challenger to the U.S. position, China has benefited, and its economic resilience remains strong, with real economic performance outpacing what U.S. equity indexes imply. Trump’s policies are helping the external environment as well. The RMB’s rise from last year to now has been well supported by fundamentals, and its stable position below 7 is solid.
Cheng Jun used charts to illustrate this, noting that the practical experience of exchanging RMB clearly reflects the strength of its appreciation. Non-U.S. currencies such as the Australian dollar have already broken out, while the euro’s monthly chart shows that it is nearing a breakout after being under pressure for years since 2017. The euro tried to rise in the first quarter but failed to hold, though the opportunity remains. At high levels, and combined with macroeconomic and financial fundamentals, the probability of further dollar weakness is greater, even if the decline has not yet accelerated.
Breakouts in non-U.S. currencies and the dollar’s long-term downside risk
Some non-U.S. currencies have already broken out, including commodity currencies such as the Australian dollar, while the euro is at a key juncture. The dollar remains visibly weak against counterpart currencies, and a breakout in the euro would significantly widen the dollar’s potential collapse space.
The technical picture has already entered a dangerous zone, and the test of the ten-year cycle downtrend line must be watched carefully. The euro’s first-quarter attempt did not hold, but the opportunity still exists. Cheng Jun reminded viewers that the dollar has not yet truly accelerated lower, and the next phase depends on how the situation unfolds.
From the perspective of macro and financial fundamentals, the probability of dollar weakness remains the dominant view. In the U.S.–Iran conflict, the dollar initially rose more than expected, but compared with non-U.S. assets and the U.S. domestic situation, the long-term downside risk remains large. The market needs a breakout confirmation, such as the euro moving above its ten-year trend channel. That would greatly boost traders’ confidence.
Under the current structural setup, the dollar is in a dangerous position but has not yet collapsed. It still needs event-driven momentum to break away from its oil-price linkage.
Cheng Jun analyzed that in the first round of the U.S.–Iran conflict, the dollar and oil prices were highly positively correlated: when tensions increased, both rose; when tensions eased, both fell. But from a longer historical perspective, since the 2008 financial crisis, oil has become more independent and volatile, with no lasting positive or negative correlation with the dollar. In the short term, over the span of half a year to a year, they may still move together, but over the long term they often decouple. Recent market moves show a clearer divergence: oil is rebounding, while other assets are splitting off, with U.S. stocks strong, cryptocurrencies rising, and gold weak. This changing pattern of linkage suggests that the dollar’s current relationship may not last.
First-quarter positive correlation between the dollar and oil, and how the pattern may change
This year’s first quarter unexpectedly saw a high degree of positive correlation between the dollar and oil. The market viewed this as tensions rising, both moving up together, and tensions easing, both moving down together. But from a historical perspective, since the 2008 financial crisis, oil has experienced wild ups and downs independently of the dollar, with no clear long-term positive or negative correlation.
In the short term, the two may remain tied together, but over the long term decoupling is common. Cheng Jun warned that the current logic does not necessarily have to continue; oil rising does not mean the dollar must also rise.
Recent market action has become more divergent: oil has moved up, while U.S. stocks and cryptocurrencies have rallied and gold has come under pressure. The dollar’s current situation is not as ideal as it was in the first quarter, and the linkage is gradually changing. Broadly speaking, if the event fails to break out of the cycle, the market will likely remain range-bound. Under normal logic, a prolonged range will eventually give way to a decline. Based on the euro’s non-U.S. currency trend and U.S. national strength, a conservative estimate puts the Dollar Index at 90 to 88, while a more bearish estimate is 82 to 80.
A dollar reversal would require the market to believe once again in America’s absolute advantage, supported by fundamentals. The available paths are limited: either a swift ground advance that delivers a quick victory, or a major win through negotiations. Ground operations are highly variable, with difficult terrain and deep population structure making control hard. In negotiations, Iran holds leverage through the Strait of Hormuz and the nuclear issue, so a decisive win is unlikely. Waiting until the fourth quarter, after the midterm elections, to act is possible, but the uncertainty is high.
Dollar trend analysis and scenario-based predictions
The dollar is likely to fall in the long run, but it first needs to break away from the positive oil-price cycle through event-driven momentum. The current trading range is 100 to 97, with upside targets of 104 to 105 and downside support below 96. A breakout requires major news.
The euro’s ten-year trendline is also a key reference. If the dollar breaks down while the euro does not break out, that may be a false breakout; if the euro confirms the breakout, the downside path for the dollar becomes much broader.
Three scenarios were laid out in detail:
Agreement reached (low probability): the dollar falls in the short term because the oil linkage has not yet been broken. If both sides frame the outcome as neutral and mutually beneficial, the 96 to 100 area would still take time to break lower. If Iran agrees to open the Strait and gives up uranium enrichment, the dollar could rebound to at least 100, and in theory to 104 to 105, though the upside would be limited. A large U.S. concession is unlikely, as it would amount to political self-harm ahead of the midterm elections.
A new war begins: the dollar and oil rise together in the short term. If ground operations go smoothly, similar to Iraq being exposed as a paper tiger, the dollar could rebound strongly above 100. If the conflict becomes a stalemate and turns into a quagmire, the dollar would fall faster, while oil stays elevated and the two assets diverge. If long-range strikes and ground operations both fail, the premium cannot be sustained.
No progress by May: from summer through the fourth quarter, wide-range consolidation becomes the most likely outcome, with tactical high-selling and low-buying opportunities, and a final direction eventually emerging. It will not drag on like the Russia–Ukraine war, because Trump’s term imposes a time limit.
Cheng Jun reviewed last week’s path and emphasized the key variables: a swift victory leads to a rebound, while a prolonged and messy conflict leads to punishment. The dollar is currently in a delicate phase and may need to drift lower within a low-volatility range before breaking down. Long-term investors need to be able to withstand two quarters of back-and-forth pressure.
Treasury trends and dollar asset impact
Treasuries are facing a directional choice. The chart may be able to extend until year-end, but a directional move must still occur. Treasury yield direction clearly reflects market views: selling off or rising yields are negative for the dollar. The 10-year Treasury yield at 5% is a key level; a breakout above it would be a major drag on dollar assets, while a move back below 3.5% would improve attractiveness.
From the perspective of dollar assets, both higher yields and selling pressure on Treasuries are unfavorable. Among the three pillars of the dollar, developments in U.S. Treasuries will clarify market sentiment. Once Treasury direction is confirmed, market sentiment will become clearer. Cheng Jun suggested watching this indicator and using it alongside the dollar and euro to verify whether a breakout is real. In a stable market, Trump is accelerating the pace of topping out, and the erosion of the premium is also accelerating.
U.S. equities
U.S. stocks are the strongest pillar of dollar assets, and with market control in place they can maintain a slow bull market or a sideways rise. It is risky to short them. The strength of the Nasdaq comes from the fact that U.S. equities are tied to votes and the stability of financial confidence. The market cannot allow them to fall.
A pullback may come in the fourth quarter, and even then, if the ground war does not collapse quickly, the transmission period will be long, and the market may only form a top after a post-midterm political split. The pattern is one of advancing three steps and retreating two, so do not challenge a bull market that has lasted nearly 20 years.
Hong Kong stocks are not greatly affected by a weaker dollar. The linkage between foreign exchange and stocks is low, and if U.S. stocks do not fall, Hong Kong stocks should remain stable. Treasuries have only a modest impact; it is a fall in U.S. stocks that would constitute a major global reversal. The dollar tends to lead equities by one to two quarters, so the focus should be on U.S. stocks in the fourth quarter.
Oil outlook and trading strategy
The oil price center is moving higher, as U.S. control is no longer effective and inflationary pressure is gradually increasing. A prolonged stay at medium to high levels is possible, but extreme highs cannot be sustained indefinitely. The key support zone is 70 to 80, the middle range is near 100, and the upper range is around 120, which was a prior high. The lower boundary should not break the year’s early low.
Restoring supply capacity takes time, and the return to supply-demand balance will be gradual. Extreme levels are where the best entries appear: buy low when prices are extremely depressed, and be cautious when they are extremely high.
Unreasonably high oil prices force the market to surrender, and then that pressure transmits into politics, bringing prices back to a normal level. This is the idea that “water can carry a boat, but it can also capsize it.” Historically, highs do not last because demand eventually breaks down and prices retreat. The longer prices stay elevated, the bigger the problem becomes. This year’s oil center of gravity is 15 to 20 dollars higher than last year’s.
Brent is more sensitive and carries a 10% geopolitical premium. During both rises and declines, Brent typically trades at a 5% to 10% premium over WTI, though at extremes the spread can narrow. Its lows are more resilient. Going forward, the premium should gradually converge, creating arbitrage opportunities. If the spread exceeds 10%, short Brent and go long WTI, though the market is difficult to control, so this is mainly a trading concept.
This week’s strategy: FX, precious metals, oil, and spread arbitrage
The direction remains consistent: bearish on the dollar, with long GBP positions held while waiting for acceleration lower in the dollar. In precious metals, silver is viewed as likely to stage a strong rebound and can be sold into strength; gold still has upside potential, but after falling into the long-term 3,500 to 2,800 range, it becomes a battleground. At present, the rebound is relatively high, so there has been an attempt to sell into strength, though no order has been filled.
For oil, buy extreme dips. If there is no progress by mid-to-late May, the 80 lower band and 100 midline may define a short- to medium-term trading range. For spread arbitrage, if the Brent premium exceeds 10%, short Brent and long WTI; if a deal is reached, Brent may fall while WTI may recover.
Nasdaq strength, pullback timing, and equity trading approach
The Nasdaq is strong because U.S. equities are the core of dollar assets, and the market can be controlled, allowing for either a slow bull trend or a steady upward grind. A 1% to 2% pullback may reverse quickly next week, so follow the trend rather than trying to short a nearly 20-year bull market.
Hong Kong stocks and fourth-quarter U.S. equities
A weaker dollar has little direct impact on Hong Kong stocks because the linkage is low. As long as U.S. stocks do not collapse, Hong Kong stocks remain stable. Mainland A-shares may still wobble, but Hong Kong stocks should be fine. Treasuries have only a modest effect; what matters is whether U.S. stocks fall, since that would signal a major shift. Bonds and FX usually lead equities by one to two quarters, so U.S. stocks in the fourth quarter deserve close attention.
Key decisions
The long-term view is to remain bearish on the dollar and hold a long GBP position, waiting for the dollar to weaken further. The reasoning is the weakness of non-U.S. currencies, the wavering of the petrodollar concept, weak U.S. fundamentals, and declining market confidence. The historical link between oil and the dollar is not stable enough to rely on.
In precious metals, sell silver into strength, and for gold, look for opportunities at lower levels rather than chasing the rebound. For oil, buy when prices are extremely low. If there is no progress and the market remains range-bound in May, the 80 lower band and 100 midline will be the main short- to medium-term trading range. If the Brent premium exceeds 10%, short Brent and long WTI. U.S. stocks remain the key market to watch in the fourth quarter. Dollar weakness tends to lead equities by one to two quarters, and Hong Kong stocks are not a major concern.
Key lines
“Taken together, the long-term bearish logic on the dollar is quite clear.” This is the core view guiding the strategy.
“When oil prices are unreasonably high, they force the market to capitulate, and then that pressure is transmitted into politics, causing prices to return to a normal level. That is what it means when water can carry a boat, but it can also capsize it.” This reflects the political insight behind oil-market dynamics.
“U.S. stocks are the most important component among dollar assets. They are tied to votes and the stability of confidence in the U.S. financial system. As long as the market can hold, the trend will be a slow bull market or a sideways upward move.” This summarizes the role and trend of U.S. equities.
$WTI Crude Oil - main 2606(CLmain)$ $E-mini Crude Oil - main 2606(QMmain)$ $Micro WTI Crude Oil - main 2606(MCLmain)$ $Gold - main 2606(GCmain)$ $E-Micro Gold - main 2606(MGCmain)$ $1-Ounce Gold - main 2606(1OZmain)$ $E-mini Gold - main 2606(QOmain)$ $USD Gold Futures - main 2605(GDUmain)$ $E-mini Nasdaq 100 - main 2606(NQmain)$ $Micro E-Mini Nasdaq 100 - main 2606(MNQmain)$ $Silver - main 2605(SImain)$ $Micro Silver Futures - main 2605(SILmain)$
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