Please Welcome Imre Gams to Thoughts On The Markets

Thoughts on the Market

January 26, 2026

Before I dig in, allow me to introduce and welcome my long-term associate, Imre Gams, who is joining me as a partner and co-author in “Thoughts on the Market.”  Imre has a long history of successful trading in multiple markets, and we have worked closely for many years.  He has particular expertise in technical analysis, and we are going to regularly include some of his technical forecasts as part of the newsletter.  I am confident that you will find his contributions to be very helpful and quite synergistic with my macro analysis.  You will note that his approach and levels are a bit different from mine.  I tend to be a bit more structural, but his ideas and advice are very effective and very valuable.

Last week marked the dollar’s weakest performance since May, as a burst of erratic U.S. policymaking unsettled global markets. President Donald Trump first floated tariffs on Europe in connection with his bid for Greenland before abruptly reversing course. He then threatened 100% duties on Canada should Ottawa reach a trade agreement with China. At the same time, renewed questions over Federal Reserve independence – and speculation that Chair Jerome Powell’s successor could be pressured to deliver rapid rate cuts – further weighed on sentiment. Bloomberg’s dollar index has now fallen more than 11% since the start of last year, reflecting a broader reassessment of U.S. policy credibility. The dollar isn’t weakening because of any single action, but because the pattern of policymaking has become erratic enough to undermine confidence in the institutional backbone that normally supports the currency.  We think that unless we see some unexpected major shifts, the dollar has much farther to fall.

Other global assets are telling the same story. Bitcoin – one of the clearest “risk‑on” barometers – has dropped 12% in just four trading days after tagging its Fibonacci target near $98,000 last week. Global bond markets were hit hard, gold vaulted beyond $5,000 per ounce, and silver surged above $117 per ounce, now more than 60% higher year‑to‑date. In fact, silver has risen more than 300% since the start of 2025 – an extraordinary move by any historical standard. This is not, however, a repeat of the massive, short squeeze engineered by the Hunt brothers in 1979–1980. Today’s price action reflects deeper, longer‑term structural shifts in demand rather than a speculative cornering of the market.

That doesn’t mean gold and silver are immune to sharp corrections. A fierce pullback in both metals is overdue. But the broader point remains: the world has changed, and investors are steadily -- if unevenly -- reallocating away from U.S. dollar assets into alternative stores of value. I expect this reallocation to continue, punctuated by periodic and sometimes violent sell‑offs.

Central banks have been quietly leading this shift for years, steadily increasing the share of gold in their reserves relative to U.S. Dollars. Last year, their collective gold holdings surpassed their holdings of U.S. Treasuries for the first time in modern history -- a symbolic and structural turning point. All indications suggest that this reallocation will continue, reinforcing the broader move away from dollar‑centric reserve management.  Asset managers and individual investors are now following that lead, which helps explain the recent price action across multiple markets. We are in the early stages of what could evolve into a slow, steady “Sell America” trend.

I do not expect U.S. Dollar assets to collapse outright -- though under certain conditions, that cannot be ruled out. More likely is a prolonged diversification into other regions and sectors, including Europe, India, China, and parts of Asia. Still, the rebalancing away from U.S. equities could become disorderly if the underlying bubbles finally burst.

In that scenario, we could see a sharp decline in U.S. stocks, a rout in the dollar, severe weakness in Bitcoin, and a powerful rally in U.S. Treasuries as investors seek the deepest pool of liquidity available. Treasuries remain the ultimate refuge within the dollar system, and they would likely surge even as other U.S. assets come under pressure. Gold and silver are more complicated: one can make a strong case for continued appreciation overall as investors systematically rebalance into hard assets, but it is equally plausible that precious metals could suffer a very sharp correction after a parabolic blow‑off if broader markets begin to unwind.  At the end of the day, however, I would expect the sell-offs to settle at much higher prices than we had at the start of 2025.

This is an area that requires deeper thought, because the path for precious metals will depend heavily on the sequencing and intensity of the broader adjustment.

A few things stand out when you unpack the dynamics:

1. Policy Volatility Is Becoming a Macro Variable

Markets can digest bad policy. What they can’t price is unpredictability. The sequence we are observing --  tariffs threatened, withdrawn, then re‑threatened in a different direction -- creates a regime where traders must assume that any statement from Washington could be reversed within hours. That forces:

• Wider risk premiums
• Shorter trading horizons
• A preference for assets with stable policy anchors (CHF, JPY, gold)

The dollar historically benefits from global uncertainty. But when the uncertainty originates in the U.S., the safe‑haven bid evaporates.

2. The Fed Independence Risk Is the Real Earthquake

The market can tolerate tariff noise. What it cannot tolerate is the possibility that the Federal Reserve becomes an extension of the executive branch.

Even the perception that Powell’s successor might be pressured to slash rates aggressively is enough to:

• Pull down the front end of the curve
• Steepen the long end as inflation‑risk premiums rise (although it is also possible that money will still pour into the long end as investors flock for the liquidity of the U.S. treasury market.)
• Undermine the dollar’s yield advantage
• Trigger capital outflows from foreign holders who rely on institutional neutrality

This is the kind of structural concern that doesn’t reverse quickly.

3. The Greenland–Europe Episode Wasn’t About Greenland

It was a signal. Europe interpreted it as a willingness to weaponize tariffs for geopolitical leverage unrelated to trade. That’s a red line for the EU, which has already been preparing frameworks for:

• Coordinated retaliation
• Strategic autonomy in defense and technology
• Reduced reliance on U.S. capital markets

When the U.S. threatens Europe, Canada, and China in the same week, the message to global investors is simple: the U.S. is now a source of geopolitical volatility, not a stabilizer.

4. An 11% Drop in the Dollar Gauge Is Not a Blip

A move of that magnitude -- especially in a currency that anchors global trade and reserves -- is a referendum on credibility.

It reflects:

• Diminished confidence in U.S. policy coherence
• Expectations of lower real yields
• Rising probability of foreign diversification away from USD assets
• A reassessment of the U.S. as the world’s “risk‑free” benchmark

This is exactly the kind of environment where the dollar can enter a multi‑quarter downtrend even without a recession.

Where This Points Next

If the policy volatility continues, the dollar’s decline won’t be linear -- but the path of least resistance is lower. The bigger risk is that foreign central banks and sovereign funds begin reallocating reserves more aggressively, which would amplify the move.

The irony is that the U.S. has spent decades building the dollar’s dominance through predictability, rule of law, and institutional independence. Those are the very pillars now being questioned.

5. The Yen Is a Special Case That Deserves Separate Attention   

For weeks I’ve argued that the yen’s weakness was dramatically mispriced -- that the sheer scale of short Yen positioning made a violent reversal inevitable. The best analogy for USD/JPY in this environment has been “up the stairs and down the elevator.” The ascent was slow, grinding, and complacent; the eventual decline was always going to be abrupt. During last Thursday’s webinar, I highlighted the likelihood of major resistance near the 160.00 level and suggested that the turning point was close.  The move started several hours later.

The elevator‑down phase now appears to be underway with force. Since Thursday evening, USD/JPY has fallen roughly six Yen -- an enormous move in the world of currencies. Is this the beginning of a sustained decline toward 140.00, or even lower? Possibly. My own approach remains unchanged: maintain a core short USD/JPY position, add selectively on technical bounces, and keep the long-term overall stop safely above 158.00.  For shorter-term plays, the stop loss level can be much tighter, perhaps around the 156.00 level – a touch more than 1% from current levels.

The trade set-up in Canada/Yen is likewise very compelling.  We are expecting a sharp move lower to at least 107.50, but potentially much lower.  The stop-loss level can be reasonably tight in this currency pair as well – perhaps around 113.80.   Also, a touch more than 1% from current levels.  The risk-reward scenario for both trades is quite compelling in case the momentum continues.

Remember, the assets involved in these trades are massive.  Japan has more than $5 trillion invested in overseas markets, and that figure doesn’t even capture the trillions of dollars in short Yen exposure embedded in the crowded global carry trades. With relative interest rates now shifting decisively in the Yen’s favor, Japanese investors have every incentive to begin repatriating capital. That alone could be a powerful catalyst for further Yen strength. Once you layer in the size of the global carry complex, a move toward 140.00 USD/JPY is entirely plausible -- and even that would barely bring aggregate exposures back toward neutral.

It is still early in the process, but this is the moment to pay very close attention. Depending on how conditions evolve, we may be witnessing the initial phase of a much larger unwind -- one that could ultimately push USD/JPY back toward the 130.00 area. Such a move would require a massive, coordinated unwinding of the global short Yen structure, and it is far too soon to declare that outcome. But the ingredients are in place, and the first cracks are clearly visible.

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IMRE’S ANALYSIS

The way I look at markets is less about predicting what comes next, and more about understanding where price is operating right now.

Rather than focusing on individual setups or short-term moves, I start by asking whether the market is in agreement or disagreement. Is price being accepted at current levels, or is it being rejected? That context matters more than any single candle or headline.

When markets are balanced, opportunity tends to be limited, and risk is harder to define. When markets begin to shift out of balance, opportunity becomes clearer and participation starts to make sense.

Over time, the goal is simple: to help you see when patience is the correct decision, and when a market is actually offering risk worth taking.

This issue’s technical focus will be on the following markets listed below. Please click the link to be directed to each market’s technical chart and annotations:

(Please copy and paste the links below if you cannot access them directly.)

Forex: USD/JPY: https://www.tradingview.com/x/OieL8kBT/

Cryptocurrency: Bitcoin: https://www.tradingview.com/x/bN7WNw4S/

U.S. Equity Index futures: ES_F: https://www.tradingview.com/x/v2yiW7rY/

Precious Metals: Gold futures: https://www.tradingview.com/x/J9afjv6f/

Wishing you the very best of luck with your trading.  We welcome feedback, so feel free to write to us at info@edenridgetrading.com

Andy and Imre