The market is shifting gears and most don’t see the “wind of the market” changing directions. Let me tell you, when this happens, it cleans out a lot of people’s trading accounts.

Anytime you have trends in place for many years back to back, people don’t believe it when you tell them that the direction is changing. Why? Because they think that history has reinforced their view. And this is why the market “eats their lunch” during these pivotal times.

For instance, remember when the Nasdaq went from 2000, 3000, 4000 and even 5,000 over a long period of time? After it topped just above 5,000 and pulled back sharply, what did people do? They bought up more “high tech” shares because after all “this was just a pull back” right? Wrong!

It was a trend change which meant that it was now a “bear market rally” and they had no clue because it felt like all of the others moves before. And the Nasdaq went from over 5,000 down to the 1,000s over the next several years.

Yet, at the time you couldn’t tell hardly anyone that it was the top and that a new downtrend had formed. In fact, the downtrend had been in place for almost a year before you could get anyone to believe it. Well, most of their net worth had been erased by that time. What a shame!

Trends change; but people’s mindsets don’t until it’s too late!

Well, the same thing is happening right now in the currency market and there are few who realize it this time also.

Let me give you a couple of examples. For months now, the “carry trade” has been “dead in the water” yet everyone is just waiting for it to come roaring back. And don’t get me wrong…it will have huge bear market rallies but it’s still in a long term downtrend for the next year.

The example below is representative of most any “carry trade pair” out there. It’s the “king of the carry trades” which is the pound vs. the yen (GBP/JPY). While there are a few currency pairs that pay higher interest, they don’t show up on every trading station out there. Yet GBP/JPY shows up on any trading station in existence.

Traders love this pair because it earns about $22 a day in interest, 7 days a week (per standard lot). And that’s a great thing as long as the pair is trading flat or upward trending. However, what does it matter if you earn $22 a day if you lose $200 to $300 a day in lost appreciation on the pair?

Take a look at the monthly, 10 year chart below. These carry trades have been in vogue for about 7 years or so back to back. However, a pivotal shift took place about 8-9 months ago in these carry trades and no one seems to notice yet!

The 7 year uptrend in the carry trade is broken and the trend is now downward!

So what does this tell us? Many traders will once again “get long” these carry trades on dips, not knowing that “lower lows” are coming shortly right behind them!

The carry traders are going to have a losing year in 2009. And that’s a ton of the money out there floating around in the forex market.

This tells me that the Japanese yen will flourish against most high yielding currencies in 2009 as these major countries cut their interest rates. So there’s a technical break down on the charts but also an underlying fundamental issue that ensures that the new downtrend stays intact. Slumping economies encourage lower interest rates which encourages a lower currency which means these carry trades are heading south.

2009 will be the year for the dollar and will catch MOST by surprise!

But here’s what else is going to “floor” traders this next year and even in the months to come. At the same time these carry trades are breaking down (and look at most any of them and their chart is about the same, EUR/JPY, EUR/CHF, GBP/CHF, NZD/JPY, etc.) another trade is emerging that is going to catch people off guard.

Many will not notice that the “majors” are breaking down as well, in the favor of the dollar. That’s right! The greenback!

Let’s look at a 10 year chart of the U.S. dollar index below to illustrate this point.

The buck’s 6 year downtrend has finally broken! And most traders haven’t even noticed!

This will be a hard pill for many currency traders to swallow. But even the buck has “up” years. While they are few and far between, 2009 will be one of those years. As a matter of fact, it is starting even now. Yet most won’t realize it until it’s too late and it has eaten up most or all of their account!

Any way you look at the above chart, a monumental thing just happened. The U.S. dollar index closed the month above its downtrend line for the first time in SIX years. That’s huge.

You see, since traders are accustomed to everything going up against the buck if you hold on long enough…they’ll hold on “too long” and lose all they have because this is one trend that will outlast their account balance and then some. It will be in force for so many months that it will wipe them all out before they know what has hit them.

So the carry trades are dead (except for USD/JPY and maybe USD/CHF) and the “majors” against the buck are dead for the rest of 2008 and all of 2009.

That means the only ones that will survive are those that realize “quickly” that the dollar and the yen are two of the best places to be during that time. I know it sounds crazy but its going to be the “place to be” and the place to profit in the coming year (and even now)!