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[The standoff between bulls and bears intensifies, massive bets are poised for a volatile start to 2026 forex market] ⑴ Traders' sharply contrasting forex positions held for most of 2025 remain open as year draws to a close, significantly increasing the likelihood of a sharp short-term surge in market volatility. ⑵ While both dollar bulls and bears could theoretically profit, the probability is low; a loss for one side is more likely, triggering a rapid price movement in favor of the other. ⑶ The current relative calm in the market sustains this rare situation, but if 2026 starts with a trading frenzy as in previous years, these opposing positions could lead to a sharp amplification of volatility. ⑷ Traders are betting $22 billion against the dollar against the euro, yen, Mexican peso, and Brazilian real, with bullish bets on emerging market currencies likely related to the seemingly lucrative carry trades that have been prevalent this year. (5) Long positions in the Japanese yen were established during its sustained decline, with the USD/JPY pair rising from 142 in April to around 158 in November, but these long positions were still held. (6) Long positions in the euro were the largest of all forex bets, having been reduced from $18 billion to $11 billion before increasing to $16 billion by the end of November, and have already yielded substantial profits this year. (7) Meanwhile, traders also bet $31 billion on the US dollar against the Canadian dollar, Australian dollar, New Zealand dollar, Swiss franc, and British pound, but most of these positions are currently performing poorly. (8) For example, a $10 billion short position in the Canadian dollar (one of the largest long US dollar bets) deteriorated after the USD/CAD pair fell from 1.4131 on November 21 to 1.3731 on Tuesday, but traders added to their positions during the decline. (9) When the Australian dollar rose from 0.6422 to 0.6686 against the US dollar between November 21 and December 10, its net short position increased from $3.7 billion to $5.5 billion. Traders increased their short positions against the trend during a short squeeze, which can be described as extreme. (10) Short bets on the British pound have ballooned from just $400 million to over $6 billion, while the pound rose from around 1.30 to above 1.34 against the US dollar during the same period. (11) Before the holidays, although traders were in many precarious positions, they seemed to still prefer to hold or even increase their positions, which sowed the seeds for sharp volatility in the foreign exchange market in early 2026.