Germany’s import price index fell by 0.1% in December, which is better than the expected drop of 0.4%. This suggests a slight decrease in import prices. The German preliminary GDP rose by 0.3% in Q4, outpacing the predicted 0.2% increase. However, the EUR/USD stayed below 1.1950 during European trading.

Gold Under Pressure

Gold remains under pressure, staying in a downward trend below $5,100. This is partly due to a stronger US Dollar, driven by positive news about a Senate funding deal. Stellar has hit a three-month low, trading below $0.20. This decline is due to negative market sentiment and weakening momentum indicators. Microsoft faced a loss of $400 billion after a downturn following its earnings report. This sell-off impacted broader market indices, even though it mainly affected Microsoft. Bitcoin, Ethereum, and Ripple have seen weekly losses of around 6%, 3%, and 5%, respectively. BTC is nearing November lows at $80,000, while ETH has dropped below $2,800 as selling pressure increases.

Currency Market Observations

The German economy is showing improvement, with GDP and import prices exceeding late 2025 expectations. However, this progress is overshadowed by a rising US dollar. The Euro is struggling, failing to take advantage of positive domestic news. The strength of the dollar is evident, with the Dollar Index (DXY) climbing over 3% in January and breaking the 105.50 resistance level. Traders should prepare for more dollar strength leading up to the new Fed Chair announcement. This situation could favor short positions on EUR/USD futures or buying USD call options for potential gains. The German import price data indicates that the disinflation trend across Europe in 2025 might be slowing down. While Eurozone HICP inflation fell to 2.5%, steadfast prices may delay expected rate cuts from the European Central Bank. This makes shorting German Bund futures a more appealing hedge against possible hawkish surprises. The overall market is showing fear, illustrated by recent sell-offs in tech and crypto sectors. The VIX volatility index has surged over 25% in two weeks, indicating growing investor anxiety. Now may be the right time to buy protective put options on indices like the S&P 500. Gold faces challenges, as its role as a safe haven is being undermined by the strong dollar. Dropping below the $5,100 mark could increase selling pressure from managed funds. We see potential in using options to bet on a rebound, possibly through call spreads that limit costs while allowing for gains if the dollar’s rally pauses. Create your live VT Markets account and start trading now.

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