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, says Adam Button of ForexLive.com.

The new wave of spending combined with the $900B just issued threatens to upend the dollar trade at a time when CFTC-positioning data shows a crowded short-dollar trade.

Yields Break Metals, Cryptos - Eurnzd Fractal Jan 11 2020 (Chart 1)

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.

This past Friday, non-farm payrolls were soft but commentary from Federal Reserve vice chair, Richard 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.

MoneyShow’s Top 100 Stocks for 2021

The top performing newsletter advisors and analyst are back, and they just released their best stock ideas for 2021. Subscribe to our free daily newsletter, Top Pros' Top Picks, and be among the first wave of investors to see our best stock ideas for the new year.

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.

Learn more about Adam Button by visiting ForexLive.com.