The US Dollar (USD) continued to bounce back on Tuesday, supported by new US CPI data, upcoming inflation reports, retail sales figures, and comments from Federal Reserve officials. The US Dollar Index (DXY) rose above 99.00, driven by increasing US Treasury yields and upcoming releases like Producer Prices, Retail Sales, and Business Inventories. EUR/USD dropped to 1.1630 due to USD’s strength. Germany will announce GDP growth and other economic indicators for the Eurozone on January 15. GBP/USD fell to 1.3420, with upcoming UK economic data and comments from the Bank of England on the agenda.

USD/JPY Breaks Key Level

USD/JPY climbed above 159.00 for the first time since July 2024, reflecting a positive risk environment. The economic calendar for Japan includes Machine Tool Orders. AUD/USD fell below 0.6700, as Australia is set to release data on Building Permits and Private House Approvals. Commodities gained ground, with WTI crude oil rising above $61.00 per barrel due to possible Iranian supply interruptions. Gold prices reached new highs over $4,630 per ounce, as traders anticipate Fed rate cuts, while Silver soared past $89.00 per ounce, also achieving a record high. The US Dollar is demonstrating notable strength, as the DXY remains above 99.00, despite expectations that the Federal Reserve may cut rates. The market is on edge ahead of crucial data like Retail Sales and Producer Prices, which will help clarify the economic situation. This tension between a strong dollar and rate cut predictions is the central challenge for traders right now. Last month’s inflation data from December 2025 indicated that the annual Consumer Price Index (CPI) was at 3.1%, significantly above the Fed’s 2% target. Coupled with a robust jobs report from December, which added 199,000 jobs, this suggests that the Fed may not rush to cut rates as quickly as anticipated. This contributes to the dollar’s ongoing strength, which we believe will continue to be a dominant factor in the market. Given the current uncertainty, we think that buying options to trade volatility is a smarter approach than just betting on the dollar’s direction. Speeches from Fed officials and the release of the Beige Book could lead to sharp, short-term price changes. These situations present great opportunities for straddle or strangle strategies on major pairs like EUR/USD.

All Time Highs in Gold and Silver

The rise of USD/JPY past 159.00 is especially significant, marking a level not seen since mid-2024. This momentum is fueled by increasing US Treasury yields, making the dollar more appealing. We believe that long call options on USD/JPY could be a good way to benefit from this trend while managing risks. Gold and Silver are also hitting fresh all-time highs, with Gold exceeding $4,630 and Silver surpassing $89.00. These movements are typical responses to geopolitical risks and expectations of the Fed’s looser monetary policy in the long term. While the trend is strong, the record prices suggest caution; using futures to hedge or call spreads to speculate could be wise. The energy market is showing warning signs too, as WTI crude oil has climbed to over $61 per barrel due to concerns about Iranian supply disruptions. This situation adds inflationary pressure and makes the Fed’s decisions more complicated, possibly requiring them to proceed cautiously on rate cuts. We see potential in trading call options on crude futures if these geopolitical tensions increase in the next few weeks. We are also monitoring weakness in the Euro and the Pound, with EUR/USD struggling near 1.1630 and GBP/USD around 1.3420. This contrast against the dollar reminds us of a similar trend in early 2025 when US economic resilience surpassed that of Europe. The upcoming GDP and production data from Germany and the UK this week could confirm this trend, making put options on these currencies an attractive way to hedge. Create your live VT Markets account and start trading now.

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