Australia’s latest financial report shows improvement in the country’s CFTC AUD net positions, rising from -$19K to -$18.8K. In related market movements, several asset classes shifted. The EUR/USD fell to 1.1600 due to strong US data. Meanwhile, gold dropped below $4,600 as profit-taking increased and potential changes in Fed policy loomed.

Market Pressures and Economic Data

The AUD/USD also declined as solid US data made early Fed interest rate cuts less likely. The USD/JPY reached 158.00, driven by yen strength and worries about possible market interventions. Oil prices recovered slightly due to easing tensions with Iran, but a supply surplus limited the rise. Weekly forecasts suggest inflation will remain a major influence on the FX market’s direction. The market overview pointed to the upcoming US PCE report and Davos events as key focus areas for dollar traders. The Bank of Japan’s meeting is also likely to affect market positions. Recent US economic data has been strong, dampening hopes for an early Federal Reserve rate cut. The December 2025 non-farm payrolls report showed that 215,000 jobs were added, keeping the unemployment rate low at 3.8%. This strength in the US dollar makes it harder for other currencies to make gains.

Market Sentiment and Trading Strategies

The Australian dollar remains under pressure, with large speculators keeping a negative outlook. Net short positions are significant at -18.8K contracts, showing only a slight reduction in bearish sentiment. Given the weak retail sales numbers from Australia in late 2025, using put options to hedge or express a bearish view on AUD/USD is a wise move. Gold is also under pressure from a strong dollar and the likelihood of interest rates staying high for a longer period. The chance of a rate cut by the March 2026 Fed meeting has dropped from over 70% to below 40% in just two weeks, making non-yielding gold less appealing. Traders may consider shorting gold futures or buying puts on gold ETFs as the price struggles below $4,600. Looking ahead, we should brace for increased market volatility, particularly with the upcoming US PCE inflation report being a critical data point. We’ve noticed a rise in implied volatility for major currency pairs, reminiscent of the uncertainties seen throughout much of 2024. This environment makes options strategies that benefit from significant price changes—regardless of direction—worth exploring around key events. The Euro is also facing challenges, hindered by a weaker economic outlook compared to the US for most of 2025. Conversely, the Japanese Yen’s sudden rise to 158.00 against the dollar raises concerns about potential intervention by Japanese authorities, making strong directional bets on the USD/JPY pair particularly risky in the short term. Create your live VT Markets account and start trading now.

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