India’s foreign exchange reserves grew from $701.36 billion to $709.41 billion as of January 19. This is a significant increase as the new year unfolds. US producer prices increased by 3% in December. At the same time, the EUR/USD fell to around 1.1920, as the US dollar gained strength after recent announcements from the Federal Reserve.

Gold Prices Face Challenges

Gold prices dropped below $5,000 per troy ounce due to profit-taking, a stronger US dollar, and rising US Treasury yields. In the cryptocurrency market, Stellar fell below $0.20, reaching a three-month low, reflecting ongoing cautious sentiment. After reporting earnings, Microsoft experienced a downturn, losing $400 billion in market value, making it the second-largest loss ever recorded. Bitcoin, Ethereum, and Ripple also saw weekly declines, with Bitcoin nearing November lows at $80,000. The GBP/USD pair declined to three-day lows near 1.3720, driven by a rebound in the US dollar. Additionally, the EU-India trade deal and Federal Reserve policies are affecting currency movements. With Kevin Warsh appointed as the new Federal Reserve chair, there will likely be a shift towards more aggressive anti-inflation policies. The rise in US producer prices by 3% in December 2025 suggests a stronger US dollar. We might consider buying call options on the dollar index or puts on pairs like EUR/USD and GBP/USD to leverage this trend.

Gold and Technology Sector Struggles

Gold prices are under pressure from a stronger dollar and the expectation of rising interest rates, breaking the $5,000 level. A similar trend occurred in 2022 when the Fed began increasing rates, making non-yielding assets like gold less attractive. Buying put options on gold futures could be a smart way to profit from this downward trend. Microsoft’s $400 billion loss in a single day serves as a serious warning for the technology sector, which is sensitive to higher borrowing costs. This fear is evident in the CBOE Volatility Index, which has risen to over 25, its highest in months. We can prepare for further declines by purchasing put options on the Nasdaq 100 index. The negative sentiment is also affecting cryptocurrencies, with Bitcoin nearing its lows from last November. The derivatives market reflects this bearish view, showing decreasing open interest and negative funding rates as traders expect further losses. This scenario supports shorting crypto futures or buying puts on crypto-related stocks. Meanwhile, India’s foreign exchange reserves have increased to over $709 billion, indicating that the Reserve Bank of India is purchasing dollars to stabilize the rupee. This intervention provides a support level for the USD/INR currency pair. This could present an opportunity to sell volatility using option strategies, as the central bank’s actions may limit significant price fluctuations. Create your live VT Markets account and start trading now.

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