USD Longs Climb to Highest Level Since March 2020, Greenback’s Downturn Coincides with BTC Rally

The net long dollar position has grown to $2.99 billion this week, up from just $399.69 million in the previous week. Meanwhile, bitcoin net shorts are rising as the BTC price surges to $42,500, last seen in May.

The USD Index has been going down for the past ten days, sliding from nearly 93.2 to 91.79 on Friday — a level last seen over a month back.

This downturn comes after the greenback enjoyed an uptrend for about three months between late May and July. In 2021, the first quarter for USD was an uptrend which followed a downtrend for just under two months.

This is unlike 2020 when the USD Index rallied strongly past 103 in March while every other asset got annihilated. And just as Bitcoin, crypto, stocks, gold, and oil started recovering, USD went down hard to a multi-year low of 89.2 in the first week of January this year.

Interestingly, after 16 long months of net shorts, US dollar positioning finally flipped to net long last week.

Now US dollar net longs have reached their highest level since early March last year, according to CFTC data. The net long dollar position has risen to $2.99 billion this week, from a mere $399.69 million in the previous week.

In contrast, in the cryptocurrency market, bitcoin net shorts rose to 1,572 contracts from net shorts of 1,192 the previous week. This could be because CME traders are hedging their longs.

USD’s downturn coincides with Bitcoin’s uptrend to the point when it bottomed out on July 20, and the day USD had its local top.

Late on Friday or early Saturday, the Bitcoin price surged as high as $42,500, a level that was last seen in May after registering ten green candles in a row.

Since May, the dollar has been poised for its worst weekly performance as the US Federal Reserve made dovish remarks combined with underwhelming economic data.

The downtrend in greenback began as Fed Chair Jerome Powell said after a policy meeting that rate increases were “a ways away” and the job market still had “some ground to cover.”

“While the Fed continued to say it was moving towards winding back its money-printing program, the Fed’s move towards this shift looks likely to be slower than previously anticipated,” said Steven Dooley, currency strategist at Western Union Business Solutions.

US gross domestic product number (GDP) provided little support as the economy of America expanded at a 6.5% annualized rate in the second quarter boosted by massive government aid. Still, even this growth was just slightly better than Q1 and fell short of the expected 8.5% acceleration.

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