In December, average hourly earnings in the United States rose by 0.3% compared to the previous month, which was as expected. The GBP/USD pair fell below 1.3400, marking its fourth consecutive decline due to strong performance by the US Dollar, following mixed Nonfarm Payrolls data. Gold prices approached yearly highs, trading around $4,500 per troy ounce. It benefitted from a risk-off sentiment, even with upward pressure from the US Dollar and rising US Treasury yields. In the cryptocurrency market, Bitcoin hovered around $90,000, while Ethereum remained above $3,000. However, Ethereum faced challenges due to ETF outflows.

XRP Pressures and Market Outlook

The XRP token is under pressure due to declining retail demand, as shown by a drop in futures Open Interest to $4.15 billion. Looking ahead, key events like the US CPI release and possible geopolitical developments could influence market movements, with heightened focus on Fed communications. Mixed economic data has slightly weakened the Euro against the US Dollar, causing currency exchange rates to fluctuate. In November, China saw its net gold imports from Hong Kong double, reflecting dynamic trade trends. The US labor report from December 2025 showed wage growth met expectations, but other indicators pointed to softness, creating uncertainty. In this environment, the US Dollar is viewed as a safe haven, even in a sluggish jobs market. Traders seem more concerned with global risks than domestic growth at this time.

Market Volatility and Trading Strategies

With the important US Consumer Price Index (CPI) report coming next week, expect increased market volatility. In December 2025, the CPI reading was steady at 3.1%, and another strong report could force the Federal Reserve to keep its restrictive policies. This makes buying options that benefit from price swings, like straddles on major currency pairs, a wise strategy in the days ahead. The upward trend of the US Dollar is the most straightforward trade, and we should prepare for it to continue. We are exploring put options on EUR/USD, aiming for a drop towards the 1.1600 mark. For GBP/USD, a move below its 200-day moving average near 1.3380 would be a strong indication to increase bearish positions. Gold is nearing yearly highs around $4,500 an ounce, yet this rally contrasts with a strengthening dollar. This scenario is risky, suggesting traders should use call options for potential further upside while clearly defining their risk. The strength of gold is currently more influenced by geopolitical fears than by a weakening dollar, making it an unstable foundation. In the crypto markets, institutional interest that previously boosted prices in 2025 seems to be fading. With Bitcoin struggling to stay above $90,000 and Ethereum facing ongoing ETF outflows, the path ahead looks lower. We believe buying put options on both assets could be an effective strategy to hedge or speculate on further declines. Create your live VT Markets account and start trading now.

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