The US dollar index quickly fell below the 100 mark, which surprised most people. The Trump administration attempted to reshape the US economy by reducing the trade deficit, but unexpectedly promoted the global "de-dollarization" process: traditionally, the US exports dollars to the world through trade deficits, and countries then recycle those dollar reserves to purchase US Treasury bonds and stocks, forming a closed loop. This "output - recycling" dual cycle constructs the dollar hegemony system. However, the current contraction of the trade deficit has led to a decrease in dollar supply, triggering a reversal of the dollar cycle, with funds fleeing from the US market, resulting in a situation where the dollar, US Treasury bonds, and US stocks are all declining. Capital Flow Reversal: From the US to Europe The biggest theme in the foreign exchange market recently has been "large capital rotation," with the euro, as the region that has held the most US assets in the past, naturally becoming the biggest beneficiary. Various major foreign exchange institutions are calculating the proportion of US assets held by different countries, as well as the portion that is not hedged against foreign exchange. MS: The Eurozone holds US assets worth over $8 trillion Bank of America: Capital flows show a shift from US stocks to European stocks From a regional analysis, most of the recent rise in the euro occurred during European time zones, indicating that the asset allocation flow of local European investors has driven the rise of the euro. The rapid rise of the euro has also caused many recent options barriers at the resistance level of 1.12 to be triggered, requiring negative gamma to hedge by doubling the purchase of euros, which has further accelerated the euro's rise. From the weekly chart, EUR/USD has broken through the downward trend line on the weekly chart, which may indicate that a large-scale upward cycle has begun. EUR/CNY hits a ten-year high In contrast to the euro's surge, the CNY, at the center of the tariff storm, focuses on "stability." The steady rise of the midpoint rate and the loosening of offshore CNH funds reflect the central bank's counter-cyclical adjustments. In a weakening dollar environment, maintaining relative stability of the dollar against the renminbi has weakened the renminbi basket, increasing China's export competitiveness against non-US countries, thereby offsetting some of the trade losses caused by Sino-US bilateral trade frictions. Chart: The renminbi CFETS basket index fell to 95.5 In the past, EUR/USD and USD/CNY exhibited a negative correlation, both following changes in USD, which suppressed the volatility of EUR/CNY. However, the two currency pairs have now lost their correlation and often show the same rise and fall. EUR/USD has risen from 1.03 to 1.13, while USD/CNY remains around 7.3, causing EUR/CNY to surge from 7.5 to 8.3, an increase of about 8000 points, with volatility skyrocketing. Figure: EUR/CNH 1M implied volatility exceeds 10% Global Hot Trades "Great Reversal" The EUR/USD exchange rate and the interest rate differential between Europe and the U.S. are diverging. Moreover, as the "de-dollarization" process begins, the correlation of many traditional assets is also being broken, including some popular trades that are reversing. Increased market volatility has also forced many high-leverage trades to close positions to stop losses. For example, in the U.S. Treasury market, the popular basis trades of hedge funds involving cash bonds and IRS (swap spread widening); in the foreign exchange market, long positions in high-yield currencies against the yen, as well as long positions in USD against HKD (USD/HKD is nearing the strong exchange level of 7.75) are also facing difficulties. We have entered a new era where past experiential thinking in trading must be broken, requiring more imagination. Only by continuously adapting to market changes, flexibly adjusting strategies, and following major trends can one remain undefeated in a complex and ever-changing market. Author of this article: Fang Yuqi, Source: Good Morning Forex, Original Title: "U.S. Dollar Index Falls Below 100, Euro Becomes a New Safe Haven" Risk Warning and Disclaimer The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk