Right now, my bigger trades are in equities, particularly in China AI, so the FX book is taking a backseat for the time being. The sector is showing strong relative momentum, and I see potential for a China AI “Teflon” playbook to unfold, much like what we’ve seen with US tech—where despite macro uncertainty, capital continues to flow into AI names.
That being said, the FX blob will be at the end—I’m still watching key currency setups, especially around the yen and euro, given shifting trade policy and peace talk risks and recalibrating rate expectations. But for now, the real action is in China AI.
Thanks for reading The Dark Side Of The Boom! Subscribe for free to receive new posts and support my work.
Asia wrap
Asian equities pushed higher on Friday as markets embraced the growing possibility that Trump’s reciprocal tariffs may be more of a bargaining chip than an all-out economic war. Key regional benchmarks extended gains for a third consecutive session, with the aggressive trade war rhetoric seemingly shifting toward the “Art of the Deal” playbook.
US equity futures also climbed after the S&P 500 edged closer to record highs on Thursday, fueling a broader rally that propelled global equities to fresh all-time highs.
As we suggested this morning, EUR/USD continues to float on two risk-friendly balloons—a delay in reciprocal tariffs and optimism surrounding US-Russia peace talks. However, while Trump plays the “good cop”, Vice President JD Vance is firmly embracing the “bad cop” role.
In an interview with The Wall Street Journal, Vance delivered a stern warning to Moscow, stating that the U.S. would impose severe sanctions and potentially military action if Russian President Vladimir Putin refuses to agree to a peace deal that guarantees Kyiv’s long-term independence.
Vance went even further, suggesting that sending U.S. troops to Ukraine remains “on the table” if Moscow fails to negotiate in good faith—a far tougher stance than that of Defense Secretary Pete Hegseth, who downplayed U.S. military involvement just a day earlier.
“There are economic tools of leverage, there are of course military tools of leverage the U.S. could use against Putin,” Vance declared, reinforcing the high-stakes nature of ongoing negotiations.
With geopolitical risks and trade uncertainties shaping market sentiment, investors remain locked in on Trump’s next move and whether “The Art of the Deal” truly prevails over a full-blown trade war.
China’s AI awakening ignites a stock market surge
Chinese stocks in Hong Kong are on fire, with a blistering rally fueled by the nation’s breakneck AI advancements. The Hang Seng China Enterprises Index surged 2.7% on Friday, barreling toward its highest level since February 2022. A breakout past its October peak—a key resistance level—could unleash a new wave of bullish momentum, reversing years of skepticism. Leading the charge? Xiaomi, Tencent, and Meituan, all riding the AI-fueled frenzy. Meanwhile, the CSI 300 Index—China’s onshore benchmark—edged 0.6% higher.
At the heart of this resurgence is China’s full-throttle entry into the AI arms race. For years, Beijing’s regulatory crackdowns and U.S. chip sanctions kept Chinese tech stocks under pressure. But the stunning emergence of AI startup DeepSeek has flipped the script, sending a shockwave through global markets. The realization? China isn’t just catching up—it’s gunning for AI dominance.
With Beijing doubling down on AI as a national priority, investors are rushing to reprice China’s tech and innovation potential. This is no longer just a stimulus-driven bounce—it’s a paradigm shift. If momentum holds, the Hang Seng Index could finally break out of its multi-year slump, reigniting global appetite for Chinese equities. **The AI revolution is here—**and China’s stock market is riding the wave.
Forex
One of the key aspects of transitioning from a long-dollar to a short-dollar position—especially with the market still bracing for peak tariffs—is to recalibrate carefully.
Earlier in the week, we highlighted a trade idea when USDJPY was surging just ahead of the US CPI print—namely, that once US yields started to fall, traders would feel more comfortable expressing a long yen view under the assumption that Japan would receive relatively favorable treatment from President Trump on the tariff front.
To a degree, we’re seeing that trade subtly play out now, as Japan has initiated talks with the US to sound out the specifics of Trump’s tariff plans. Given historical trade relations and Japan’s strategic importance, this discussion should be far more amicable than the broader tariff skirmishes we’ve historically seen play out The market is taking note.
FX is setting up for an interesting ride as the Trump trade premium drains from bonds and currencies. The USD re-rating still has legs, particularly against the EUR/USD, which has been attracting real-money flows. That’s reinforcing speculative demand so long as European stocks fly . peace talks roll out and tariffs are less severe.. If peace talks materialize in the near term, the EUR/USD could push significantly higher. Given that backdrop, I’m leaning back into buying the dip, adding selectively to small long positions we took on overnight.
As for broader FX markets, they may be breathing a sigh of relief over the delay in reciprocal tariffs, but I’m not convinced that’s a sign of de-escalation. In fact, it could be setting the stage for even larger selective tariffs—especially if Trump doesn’t get the concessions he’s angling for. The longer the uncertainty drags on, the higher the volatility, and traders need to be nimble as FX markets grapple with shifting geopolitical narratives and positioning dynamics.
Right now, US-Russia peace talks and the fact that the US inflation dragon isn’t scaring anyone provide as good a reason as any to go small long EUR/USD over the very short term. But let’s be clear—I’m simply trading headlines, keeping risk tight, and staying nimble.
As I mentioned earlier, when shifting from a long-dollar to short-dollar bias, it’s best to stay nimble. The peace talk optimism is good but might be fleeting , and while it may fuel some euro upside in the near term, the broader tariff risk overhang keeps me from getting too comfortable.
For now, this is a short-term tactical play, not a structural shift—tight stops, quick exits, and a willingness to reverse course fast if the narrative changes.
