Nifty and BankNifty surged strongly after positive US-India trade talks and better global market sentiment. This analysis uses Elliott Wave theory to determine if this rise indicates a true trend reversal or just a temporary bull trap at the significant 60,000 level. The US Consumer Price Index (CPI) report for December is set to be released today at 13:30 GMT. It’s expected to show stable inflation, which may affect short-term movements in the US Dollar. Additionally, meme coins like Dogecoin and Shiba Inu are facing selling pressure, showing a decline over the past seven days since January 4.

Forex Market and Energy Trends

In the Forex market, the AUD/USD pair is trading between 0.6685 and 0.67305. Meanwhile, USD/JPY is hitting highs not seen in over a year, reaching 159.00. Additionally, European gas prices have risen due to cold weather and geopolitical concerns, while the oil market is rallying amid these uncertainties. Legal disclaimers warn that market investments carry risks. The information provided should not be regarded as trading advice. Readers should perform thorough research, as markets carry substantial risks, including the possibility of losses. Advisors will not take responsibility for any errors or losses resulting from decisions made based on this information. We are observing a notable rebound in Nifty and BankNifty, bringing them to the critical 60,000 level. This rise is driven by positive sentiment from US-India trade talks, which are restarting soon. The key question is whether this momentum will last or if it’s just a brief reaction to news. The immediate attention should be on today’s US Consumer Price Index data for December 2025. If inflation is higher than expected, it could quickly dampen the current positive outlook and bolster the US Dollar, which may put pressure on emerging markets like India. The consensus forecast is a 2.8% year-over-year increase, and any variations could lead to a strong market response.

Trading Strategies and Market Risks

Given the uncertainty, simply taking a long position is risky. Traders should consider using options to manage their risk effectively. Buying straddles could help capitalize on significant market moves after the CPI release. Although the India VIX has dropped to 14.5 over the last two sessions, it remains higher than the sub-12 levels seen during most of the third quarter of 2025, suggesting that option prices are still elevated. While the optimism around trade talks is there, it should be approached cautiously. A similar situation occurred in July 2025 when initial excitement over a tech accord faded rapidly once the final details were less impressive than expected. For now, the positive sentiment hinges on the resumption of talks, not a solid outcome. Moreover, rising political pressure on the US Federal Reserve, emphasized by recent grand jury subpoenas, adds uncertainty to future monetary policy. This situation can overshadow any positive news from trade discussions. A Fed seen as less independent poses a significant challenge for global market stability. Therefore, in the upcoming weeks, it’s wise to protect any existing long positions by considering put options. Selling out-of-the-money call options could also be an effective strategy to earn income while providing some protection against a potential downturn. We must stay alert to the possibility that this rally might be a bull trap, aimed at attracting buyers before a reversal occurs. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now