The trade balance in the United States improved from a deficit of $79 billion to $59.1 billion in October. This is a positive change in trade statistics. The USD/CAD is stabilizing near its monthly high, as traders await the US jobs report and Canadian employment data. In contrast, the AUD/USD fell because of a shrinking trade surplus in Australia and slow inflation.

Euro Dollar Decline

The EUR/USD pair dropped to multi-week lows around 1.1650, largely due to the strong US Dollar. The GBP/USD also faced selling pressure, falling to new three-day lows near 1.3415 amid a positive outlook for the US Dollar. Gold found some stability after an earlier drop, approaching the $4,450 mark as US Treasury yields recovered. Both Bitcoin and Ethereum saw selling pressure as institutional enthusiasm faded. Ripple fell for the third day in a row, hit by aggressive profit-taking. Investing involves risks, including the chance of losing part or all of your investment. This material does not provide specific investment advice or guaranteed accuracy. Always conduct thorough research before making investment choices.

US Dollar’s Impact

The US Dollar is a key focus as the year begins, showing strong performance against other major currencies. The December 2025 jobs report, released last Friday, revealed an unexpected boost with 225,000 new jobs added, surpassing the forecast of 180,000. This is driving the Dollar’s momentum and shaping market trends. This robust labor market data, along with December’s core Consumer Price Index (CPI) reading showing inflation at 3.1%, suggests that the Federal Reserve is unlikely to cut interest rates soon. We are preparing for interest rates to remain “higher for longer,” which should continue to support the Dollar. Positive economic signals that began emerging in late 2025 are yielding results. The unexpected improvement in the US goods trade balance back in October 2025, which lowered the deficit to $-59.1 billion, was an early sign of economic strength. This trend is ongoing and supports the Dollar’s recent performance. Given this upward momentum, strategies involving derivatives should emphasize Dollar strength. We are considering purchasing call options on the Dollar Index (DXY) to take advantage of potential gains. At the same time, buying put options on pairs like EUR/USD and GBP/USD appears wise as they break significant technical levels. This situation also poses challenges for commodities priced in Dollars, especially gold. A strong Dollar combined with rising Treasury yields has traditionally put pressure on non-yielding assets, similar to the rate hikes seen in 2023. Options on gold futures or related ETFs present a clear opportunity. Market uncertainty and reactions to this strong data may lead to increased price volatility soon. Therefore, we should prepare for higher swings in the market. Purchasing call options on the VIX index could be a strategic way to benefit from expected larger market movements in the coming weeks. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now