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Most bearish USD positions since 2018

NAS100 – Daily Candlesticks
Source: GKFX / MT4 (January 19, 2021)

NAS100 broke above its old record highs from September and November and now is within a rising trend above an up-trendline. While above the previous record highs, the long-term breakout is intact.
 

TAKEAWAYS


•    US stocks were closed for MLK holiday, futures flat, European and Japanese stocks fell
•    Janet Yellen will reportedly state that the US Treasury has a ‘strong dollar’ policy
•    Hedge funds add $10 billion in bearish bets against USD by Jan.12
•    Hang Seng, Shanghai Composite rise after China grows 2.3% in 2020 (6.5% y/y in Q4)
•    Biden plans ‘raft’ of executive orders to unwind Trump policies
•    DAY AHEAD: German CPI, German ZEW, Netflix earnings, Goldman Sachs earnings


 

GURU WISDOM


"Don't be afraid to give up the good to go for the great." -John D. Rockefeller
 

MARKETS


*Daily closing price
↗ EUR/USD    1.2075        (+0.07%)
↗ GBP/USD    1.3582        (+0.08%)
↘ USD/JPY    103.11        (-0.21%)
↘ S&P 500    3768.25    CLOSED
↗ Hang Seng    28,862.77    (+1.01%)
↗ Gold        1834.10    (0.26%)
↘ Oil (Brent)    54.76        (-0.62%)
↘ Bitcoin    36,567        (+1.85%)
 

NEWS

 

Short squeeze


CFTC weekly positioning data showed that in the week ending January 12, large speculators (hedge funds) added $10 billion in short USD futures and options positions. Since then, the US dollar has staged a small recovery. Unless the bets have been since removed, it suggests sentiment is still very bearish towards the dollar, limiting the size of any up-move. However, were the gains in the US dollar to gain momentum, these big sellers may be forced to cover their short positions, potentially adding to any gains in the US dollar in a ‘short squeeze’.

 

Yellen


Former Fed Chair and incoming US Treasury Secretary Janet Yellen is expected to affirm the United States does not seek a weaker dollar. The huge expansion of government borrowing to pay for coronavirus relief has investors selling dollars in expectation that policymakers will seek to ‘print the debt away’ by devaluing the currency.
 

China GDP


The world’s second biggest economy expanded 2.3% in 2020, its slowest pace of growth since 1976 but achieving any growth when most major countries entered a recession sees China out on top. The figures show the performance of China is key this year for the continuation of ‘reflation trades’ like long base metals, oil and small cap stocks.
 

DAY AHEAD 


*Times in GMT
07:00 - Germany Harmonized Index of Consumer Prices (YoY)(Dec) [-0.7 % Exp vs. -0.7 % Prev]
N/A – China FDI - Foreign Direct Investment (YTD) (YoY)(Dec) [6.9 % Exp vs. 6.3 % Prev]
09:00 - ECB Bank Lending Survey 
10:00 - Germany ZEW Survey – Economic Sentiment (Jan) [60 Exp vs. 55 Prev]
 

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