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Gold has broken down from a descending triangle following a blow-off top. Key support levels to watch are $3,200 and $3,000.

Speculative net longs in the yen have reached record highs, per the Commitment of Traders (COT) report, indicating a strong consensus for further yen strength against the U.S. dollar.

GBP/USD has rallied from 1.21 to 1.34 year-to-date but is now testing major resistance. A pullback or consolidation is likely at these levels.

Soybean futures remain range-bound in a rectangle pattern since July 2024, with resistance below $1,100 likely to cap the current advance once again.

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If we had to sum up the past week in one word, it would be “reversal.” Markets rarely move in a straight line—notably in today’s environment. Volatility is often mistakenly equated with market decline, but that’s an oversimplification. We view volatility more neutrally. It signals uncertainty, and that cuts both ways.

Looking across major asset classes, we’ve seen widespread signs of reversal. As we mentioned in our last note, we believe the market has already reached a “local peak” in terms of fear and uncertainty. Investors who jumped in late—chasing gold higher, the dollar lower, and equities lower—are likely feeling the sting, as all three have sharply reversed course. This is yet another reminder: beware of linear extrapolation.

Today, we’ll walk through some of the major reversals we’re observing.

Gold: A classic shakeout

Gold has corrected more than $300—almost 9%—since its recent high on April 22nd. In our view, this is a classic case of “rinsing out weak hands.” Long-term holders aren’t bothered by this pullback. But short-term, FOMO-driven speculators? Many are underwater, and some have likely been forced out. Once this rinse is complete, we believe the next leg higher is likely to begin.

U.S. dollar: At a turning point?

The dollar has finally found some breathing room. As equities stabilized and gold came off its parabolic rise, capital outflows from the U.S. briefly paused, giving the greenback a reprieve. Prior to that, the dollar had fallen sharply, especially against the euro, the pound, and safe-haven currencies like the yen and the Swiss franc.

We want to highlight one extreme example: speculative long positioning in the yen. This positioning was driven by expectations that the Bank of Japan (BoJ) would shift policy meaningfully. But those hopes were dashed at the latest BoJ meeting, and the yen sold off sharply in response. Now, with consensus crowded on one side, a reversal in the dollar—a sudden strengthening—could be imminent and, once again, catch many by surprise. Investors can refer to the Commitment of Traders tool for more information on the positioning by different groups of market participants in various markets.

Equities: A questionable bounce

Meanwhile, the equity market has all but erased the sharp early April decline—almost as if it never happened. This has prompted some to proclaim that “buying the dip” still works. We’re not convinced. To us, this rebound looks more like a counter-trend bounce, a short-term reset after an overstretched move lower—not a confirmation of a lasting bottom. We see little evidence that the worst is behind us in U.S. equities. Both soft and hard economic data continue to deteriorate, and ongoing tariff uncertainties are beginning to erode business and consumer confidence. In such an environment, the recent rally seems to be driven more by positioning dynamics than any genuine improvement in the macro conditions.

Finally, a word of caution. Reversals are time-frame dependent. It’s critical to distinguish between dominant trends and short-term countertrend moves. These temporary reversals happen frequently, driven by sentiment shifts, positioning, and other technical factors. Navigating them requires a flexible and tactical mindset. Good risk management—and the discipline to avoid chasing crowded trades—remains essential in markets like these.

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We conclude with the following hypothetical trades:¹

Case study 1: Short GBP/USD futures

We would consider taking a short position in GBP/USD futures (6BM5) at the current price of 1,335, with a stop-loss above 1.35, a hypothetical maximum loss of 1.35 – 1.335 = 0.015 points. Looking at Figure 3, if the overhead resistance holds, GBP/USD has the potential to fall to 1.27, resulting in 1.335 – 1.27 = 0.065 points. Each GBP/USD futures contract represents 62,500 British pounds, and each point move is 62,500 USD. Micro GBP/USD futures (M6B) are also available at 1/10^th of the standard size.

Case study 2: Short Soybean futures

We would consider taking a short position in Soybean futures (ZSN5) at the current price of 1,050, with a stop-loss above 1,090, a hypothetical maximum loss of 1,090 – 1,050 = 40 points. Looking at Figure 4, if the overhead resistance holds, soybean prices have the potential to drop back to 960, resulting in 1,050 – 960 = 90 points. Each Soybean futures contract represents 5,000 bushels of soybean, and each point move is 50 USD. Mini Soybean (XK) and Micro Soybean (MZS) futures contracts are also available at 1/5^th and 1/10^th of the standard size, respectively.

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¹ Examples cited above are for illustration only and shall not be construed as investment recommendations or advice. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. Please refer to full disclaimers at the end of the commentary.

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