The US Dollar Index fell to around 95.76, touching the lowest level since 2022 and reaching a critical point of dollar strength and weakness. The next step depends on whether the US government will intervene or let it go!

Along with the decline of the US Dollar Index, the prices of 10-year and 30-year US Treasury bonds have fallen, yields have risen, and gold continues to rise. These are typical signs of short-term dollar asset sell-off. If the Japanese government does not step in to support US bonds, the situation could become even more dire.

Next, the once-triangle of stocks, bonds, and currencies no longer exists. It now depends on which sector the US government chooses to protect. Based on Trump's policies, the most likely scenario is to support US stocks, while coordinating with fiscal measures and other overseas buyers like Japan to support US bonds, and temporarily delaying the weakening of the dollar through interventions by the Treasury and the Federal Reserve.

Once the US Dollar Index effectively breaks below 96 and enters a weak dollar phase, it indicates a shift in macro direction from monetary to fiscal dimensions. The selling of dollar assets will increase, bond market pressure will grow, the US government’s deficit structure has not been fully improved, and there is still significant Treasury supply. Inflation tail risks remain, and under these combined factors, the stock, bond, and currency markets must selectively defend. Of course, whether the weak dollar phase officially begins depends on whether support or a rebound can form around 96. If it effectively breaks below 96, it signals the arrival of the weak dollar phase.

A pullback to around 87730-86500 can be used to go long, with a rebound target around 89200-90200. A rebound to 89400-89800 can be shorted, and additional positions can be added around 90400-90800, with a target near 87700-86500.