The prolonged jump in bond yields continues to uneash damage to metals and crypto currencies. Ashraf tweeted earlier today: "The ONLY way for metals to stabilize is for the Fed to "try" to convince us later this mth that breakeven inflation is not high enough and they need to see real actual inflation inflation breakevens is NOT serious inflation. As yields soar, metals plummet; #XAUUSD says goodbye to 200DMA & #Bitcoin -17%, biggest "daily" drop since...that 27% crash in March"   Both of Friday's Premium trades (FX & index) are already well in the green. Below is one of the latest tradable charts Ashraf shared with the WhatsApp Broadcast Group. 

President-elect Biden promised to reveal a new spending proposal worth “trillions” on Thursday in what might be the defining economic moment of his Presidency before it even begins. The new wave of spending combined with the $900B just issue threatens to upend the dollar trade at a time when CFTC positioning data shows a crowded short-dollar trade.  

The US dollar has been the top-performing major currency since the Senate surprise and Biden's proposal underscores what has changed. Yes, the spending will create an enormous deficit but it will also lead to a boom in growth. Goldman Sachs is forecasting +6.2% GDP growth this year and that's before the details of the package on Thursday.

Another thing to consider is that the US (and UK) are receiving vaccine doses far quicker than elsewhere and that's going to lead to better relative growth.

On Friday, non-farm payrolls were soft but commentary from Clarida the same day highlighted diminished downside risks due to the vaccine. He also said policy is “exactly where we want it,” which likely kills talk of more QE, a WAM extension or anything else dovish. It means the next move from the Fed will be towards tightening. On QE he said he 'expects' to keep the pace through 2021 but he didn't rule out a taper.

Short-dollar is a strong consensus trade in 2021 and there are a multitude of reasons to expect long-term USD weakness but there are reasons to fear a squeeze in the near term, included in some of the crowded CFTC positions.

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR +143K vs +143K prior

GBP +4K vs +5K prior

JPY +50K vs +47K prior

CHF +9K vs +12K prior

CAD +14K vs +15K prior

AUD -4K vs -7K prior

NZD +12K vs +15K prior

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis

Latest Forex Analysis

Editors’ Picks

EUR/USD hits fresh one-month low amid souring market mood

EUR/USD has been extending its falls and dips below 1.21 as US retail sales badly disappointed and the worsening mood is supporting the safe-haven dollar. Markets digest Biden's stimulus plan. US Consumer Sentiment declined to 59.2 points. 


GBP/USD retreats toward 1.36 amid fresh dollar strength

GBP/US has pared its gains and falls toward 1.36 as the dollar gains ground. The UK economy shrank by 2.6% in November, better than estimated. The UK is ramping up its vaccination campaign and PM Johnson is pressured to ease the lockdown. 


Gold extends sideways grind near $1,850

The XAU/USD pair registered small daily gains on Thursday but struggled to extend its recovery amid a lack of significant fundamental drivers on Friday. As of writing, the pair was up 0.15% on a daily basis at $1,849.

Gold news

Forex Today: Markets “sell the fact” on Biden's stimulus, dollar rises, retail sales eyed

Markets are on the back foot after Biden hinted about tax hikes while introducing stimulus. The safe-haven dollar is edging higher despite Powell's pledge to keep monetary policy accommodative. 

Read more

DXY breaks above key downtrend, eyes move above 91.00

USD has been strongly supported on what has shaped up to be a very much risk off final trading day of the week. Most G10/USD pairs have seen significant weakness, aside from CHF/USD and JPY/USD, given that the two currencies are also considered “safe havens”.

US Dollar Index News

Forex Majors