Yesterday morning, tariffs of 25% on Canada and Mexico and 10% on China were expected.

The markets immediately went down.

But then – an unexpected twist.

What's going on and where is it all leading?

We are following the dollar index (DXY)

More than six weeks ago, I already wrote: The main thing to keep track of is the dollar index (DXY).

I have marked the “danger zone”:

– Above 108 – risks for markets are growing
– DXY continues to grow – pressure is increasing

That's exactly what we're seeing right now.

Tariff ping-pong

Tariffs have been the main driver of the dollar in recent weeks.

And here's a new chapter.: The 25% tariff on Mexico, which was supposed to take effect this week, has been postponed for a month.

As a result, markets are fluctuating and traders are confused.

Extreme positioning

The bets on the dollar's growth are off the charts right now.

– Dollar futures positions in the 96th percentile of all time
- No one is in a hurry to exit these positions yet

In history, such situations have almost always ended either in a U-turn, or by severe deceleration.

But if the exit from the positions begins, the DXY may fall very sharply.

What about the stock market and Bitcoin?

So far, the S&P 500 and Bitcoin remain in the range.

– Support is withheld
– The rotation scenario to the upper limit remains working

While there is no breakdown down, there is no reason to panic either.

Get deeper into the pricing situation

These tariffs are not about trade. This is not 2018.

At that time, the market was falling because tariffs were specifically related to the economy.

Now their goal is migration and fentanyl. Trump promises to cancel tariffs if the situation changes, but did not give clear conditions.

Today, White House Counsel Kevin Hassett said:

“Mexico takes Trump's decree seriously. Canada seems to have misunderstood him. Trump will decide what to cancel and what not to cancel.”

And the new Secretary of Commerce, Howard Latnik, added:

“Tariffs are a tool of pressure. If Mexico and Canada take steps, there won't be any. If not, they will.”

What's next?

Markets are reacting to the headlines, but the real movements will begin when the dynamics of the DXY change.

As long as the dollar is strong, risky assets are under pressure. But if you start exiting positions, the dollar will go down and bitcoin will go up.