Intraday Market Thoughts

Selling Facts & DXY Positioning

by Adam Button
Jan 18, 2021 18:16

It's a holiday in the US and metals are recovering after opening sharply lower in Asia on a broad USD rally, triggered by comments regarding Yellen's likely USD stance (see below). A 'sell the fact' mood hit markets last week after Biden's big stimulus and Friday's retail sales report was a reminder of how much heavy lifting governments are doing. The pound was the top performer last week while the kiwi lagged. CFTC positioning data shows that USD shorts aren't losing their nerve despite the recent bounce. We turn to Yellen's Senate Hearings tomorrow. Below is the net short-positioning of DXY. 

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Selling Facts & DXY Positioning - Usdx Net Longs Jan 18 2021 (Chart 1)

The US is on holiday Monday so that may slow the start to the trading week. The main event this week is Biden's inauguration but barring something unforeseen like the Capitol riot, it won't be a market mover.

The holiday gives us a chance to digest the huge stimulus proposal and the market's reaction. So for the political reaction has been relatively positive but with Trump's impeachment on the agenda, clear signals have yet to emerge.

What did emerge on Friday was a poor retail sales report, down 1.4% in December compared to a flat reading expected. Worse yet, the prior was revised lower to -1.4% from -1.1%. There was an even larger miss and negative revision in the key 'control group' measure.

Two soft months from the US consumer at the most-critical time of the year suggest that stimulus is a bigger part of the equation than many market participants would like to admit.  

Early in the week, we will continue to evaluate the mood in the market. Treasury yields have retraced but the dollar has remained strong but that may be due to soft softness in equities and US-China friction. This week should offer a clearer picture on the underlying trends.

Aside from comments from Biden, Treasury Secretary-nominee Yellen will appear in the Senate on Tuesday. She will testify that the US won't seek a weaker dollar, leaving it to the market.

CFTC Commitments of Traders

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

EUR +156K vs +143K prior GBP +13K vs +4K prior JPY +50K vs +50K prior CHF +12K vs +9K prior CAD +12K vs +14K prior AUD +5K vs -4K prior NZD +15K vs +12K prior

US dollar shorts are edged higher this week with AUD flipping back to a net long, meaning futures speculators in every major currency are short the dollar.


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