The currency market is cautious ahead of upcoming US inflation reports. However, the US Dollar is performing well against other currencies due to ongoing trade tensions. The US Dollar Index went over 98.00 but quickly lost some strength. EUR/USD dropped to its lowest point in three weeks at around 1.1650. Germany and the eurozone are waiting for the ZEW Economic Sentiment data and Industrial Production figures, while the ECB’s Buch is set to speak.

Performance Of Gbp/Usd

GBP/USD is currently low in its trading range and may test the 1.3400 level. The only data release from the UK is the BRC Retail Sales Monitor, along with a speech from the BoE’s Bailey. USD/JPY is still moving up towards 148.00, with the Reuters Tankan Index set to be released in Japan. Meanwhile, AUD/USD lost its early gains and fell into the mid-0.6500s. President Trump’s recent threats have impacted American WTI prices, driving them below $67.00. Gold prices fell to around $3,350 per ounce after reaching three-week highs, while Silver rose above $39.00 per ounce for the first time since 2011. Bitcoin hit a new high, surpassing $122,000 on Monday. The technical outlook suggests it may rise further, potentially exceeding $130,000. Markets are on edge, watching for tariffs and upcoming US inflation figures.

Market Volatility And Strategic Positioning

Given the current market situation, we are preparing for a significant increase in volatility. There’s a clear cautiousness, with the US inflation data being crucial to our strategy. The latest core Personal Consumption Expenditures (PCE) index, the Fed’s favorite measure of inflation, is around 2.8% year-over-year. Any unexpected increase could boost the US Dollar significantly. Currently, the market is anticipating fewer than two rate cuts this year, a change from the six or seven that were expected a few months ago. This scenario of “higher for longer” is driving our strategy. Therefore, we are not simply betting against the Euro with spot shorts; instead, we are buying puts on the EUR/USD, targeting strikes below 1.1600. Weak German industrial data will support this trade, and while we will pay attention to Buch’s comments, we see any euro strength as an opportunity to expand our positions. For sterling, the outlook is similar but has some differences. Bailey has been consistently cautious, and new BRC data shows UK retail sales growth slowing to just 0.4%, indicating a tough economic landscape. We believe GBP/USD may break below the 1.3400 level soon. Our approach is to buy put spreads, which reduces entry costs while still providing significant leverage if the pound drops after the inflation report. The rise of USD/JPY towards 148.00 is due to the growing interest rate gap, which the Bank of Japan is reluctant to close swiftly. Historically, when this pair moves so quickly, Japanese officials tend to intervene verbally, leading to sharp but temporary pullbacks. While the trend benefits us, we are hedging our long dollar exposure by purchasing affordable, out-of-the-money USD/JPY puts. This acts as a protective measure against any unexpected moves from Tokyo after the Tankan report. In commodities, the decline in WTI is directly related to trade tensions. Even the hint of new tariffs from someone like Trump can negatively impact demand forecasts. We expect a range-bound environment for now. We are structuring iron condors on oil futures, betting that fears of a global slowdown will restrict the upside, while OPEC+ will support the downside. The real action is in metals. Silver’s sharp rise past a ten-year high indicates significant speculative interest. We are avoiding naked shorts and instead using call spreads to benefit from the momentum, managing our risk in a market detached from fundamentals. For gold, its dip from recent highs shows signs of caution. We are buying short-dated puts to hedge against a stronger dollar and higher-than-expected inflation numbers, which could temporarily diminish gold’s appeal. Lastly, Bitcoin’s rise above $122,000 has pushed implied volatility to extreme heights. Buying options outright here is expensive. To target the potential $130,000 mark, we are using bull call spreads. This strategy allows us to engage in the potential upside while capping our maximum losses—a vital practice in an asset class where sentiment can change rapidly. The market is poised for a shift, and we are ready to capture the energy when it happens. Create your live VT Markets account and start trading now.

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