In the fourth quarter of 2026, Australia’s trimmed mean CPI rose by 0.9%, exceeding the forecast of 0.8%. The strength of the US Dollar has weakened the Australian Dollar, with a focus on the upcoming Federal Reserve policy decision. The EUR/USD fell below 1.2000 because of renewed demand for the US Dollar, influenced by expectations around the Fed’s rate decision. Likewise, the GBP/USD hovered around 1.3800 after declining, indicating a possible bearish trend within a tightening price range.

Gold’s Rise

Gold prices continued to climb, reaching above $5,200 as investors prepared for the Federal Reserve’s announcements. At the same time, Avalanche traded close to $12 following VanEck’s spot ETF launch on Nasdaq, which has boosted market sentiment. The US Dollar Index has returned to lower levels seen last year, driven by various economic factors and increased selling from carry traders. Ripple (XRP) remained under $2.00 despite steady demand, struggling due to a weak technical setup. FXStreet offers information for educational purposes and highlights the risks involved in investing. Readers are encouraged to conduct their own research, as FXStreet and its authors do not provide investment advice and are not liable for any potential losses. With the Federal Reserve’s interest rate decision coming today, market volatility has surged. The Cboe Volatility Index (VIX), which measures expected stock market fluctuations, has risen more than 15% over the past week, indicating heightened anxiety. Derivative traders may want to consider options strategies like straddles or strangles on major indices to profit from significant price changes, regardless of their direction.

Short-Term Recovery of the US Dollar

The US Dollar is experiencing a short-term recovery after a challenging time, where the DXY index dropped nearly 5% in the latter half of 2025. Despite ongoing worries about a US economic slowdown, this renewed demand ahead of the Fed meeting is notable. Traders might explore call spreads on the dollar index to benefit from a potential hawkish surprise from the Fed, while managing their risk if the dollar’s long-term downtrend continues. Gold’s remarkable surge past $5,200 signals investor anxiety and serves as a hedge against possible monetary policy errors. This over 40% increase since the lows of Q3 2025 is reminiscent of market movements in late 2023 when expectations for future rate cuts began. Using call options to maintain exposure to gold, while limiting capital at risk, is a wise approach amid record-high prices. Both the Euro and British Pound retraced from multi-year peaks, with EUR/USD pulling back from the 1.2000 level it only recently broke after spending most of 2025 consolidating. The bearish rising wedge pattern seen in the GBP/USD chart suggests this pullback may have further to go. Buying put options on these pairs could provide a helpful hedge against a larger reversal driven by a stronger US Dollar. Australia’s inflation reading continues to be higher than expected, reflecting a trend from late 2025 where domestic price pressures remained stubborn compared to other developed countries. This situation puts the Reserve Bank of Australia in a tough spot and suggests the Australian Dollar may strengthen against currencies with more dovish central banks. This divergence offers traders opportunities to consider long AUD positions through futures or currency cross pairs. The Bank of Japan is indicating a more hawkish approach, which may bolster the Yen in the upcoming weeks. This policy shift reminds us of the initial normalization signals from 2024 that surprised many traders. Positioning for a lower USD/JPY through put options or futures appears to be a strategy aligning with this changing central bank dynamic. Create your live VT Markets account and start trading now.

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