The US Dollar struggled recently, testing the support level of 99.00, partly due to falling US Treasury yields. Key US data is on the way, including Initial Jobless Claims and several manufacturing indices. Additionally, Fed officials Bostic, Barr, and Barkin are set to speak. The Euro rose slightly, settling around 1.1650. This comes ahead of expectations for Germany’s GDP growth and industrial data. GBP/USD also gained, reaching approximately 1.34450, with UK GDP and other economic data expected to be released soon.

Japanese Market Movement

USD/JPY hit a multi-month high before dropping back, closing near 158.00. Upcoming data to watch includes Foreign Bond Investment, Producer Prices, and the Reuters Tankan Index. AUD/USD dipped slightly, with a particular focus on Consumer Inflation Expectations. WTI crude oil prices have increased for five consecutive days, approaching $62.00 per barrel amid worries about Iranian supply. Gold prices surged to nearly $4,640 per troy ounce, driven by expectations of Fed rate cuts. Silver also reached a record high of $92.00 per ounce. Reflecting on January 2025, the market foresaw a weaker US Dollar due to concerns over Federal Reserve policies. The anticipated interest rate cuts came true as the Fed lowered rates three times throughout the year in response to slowing inflation and a weak labor market. With the US Dollar Index (DXY) around 95.00 now, traders may want to hedge against the potential end of this dollar weakness by considering put options on currencies linked to the dollar. Last January, EUR/USD was around 1.1650 and broke higher as the dollar weakened. This trend was strengthened by the European Central Bank keeping rates steady longer than the Fed, creating a favorable interest rate difference. Looking ahead, with ECB officials hinting at their own rate cuts, traders might protect long euro positions using collars in case of a downturn.

UK Currency Dynamics

The pound’s rise to 1.3450 a year ago marked the start of a strong period against the dollar. The Bank of England’s hesitance to cut rates, due to UK inflation staying above its 2% target throughout 2025, helped boost the currency. However, traders should be cautious with long positions on sterling since recent weak retail sales data might indicate that the UK economy is struggling under high rates. The decline of USD/JPY from its peak near 158.00 became a key trend in 2025. The narrowing interest rate difference between the US and Japan, as the Fed cut rates, led to the pair falling consistently toward the present level of 142.00. We believe that most of this adjustment is complete, so selling volatility through strategies like short strangles could be profitable as the pair enters a tighter range. While WTI crude approached $62 a barrel due to supply concerns around this time last year, those fears eventually seemed exaggerated. The market shifted its attention to slowing global growth, resulting in prices averaging $55 a barrel in the second half of 2025. With oil inventories now at a two-year high, traders may consider buying puts as a low-cost way to bet on further price drops. The historic highs in Gold and Silver were a direct result of expectations for Fed rate cuts, a trend that unfolded successfully. As US real yields dropped during 2025, gold continued to rise, eventually surpassing $5,000 per ounce in the fourth quarter. Now that the rally has settled, traders can use covered call strategies to generate income from their holdings as the market digests these large gains. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now