On Thursday, financial markets were quite volatile during US trading hours, mainly due to comments from President Donald Trump. Trump criticized Federal Reserve Chairman Jerome Powell for not cutting interest rates and argued that the US should have the lowest rates in the world. In response, Powell pointed out that US job gains and unemployment are stable, even with inflation slightly higher than normal. Wall Street saw a decline, especially in the tech sector. Microsoft Corp. shares hit a six-year low after reporting high spending in the last quarter of 2025. As a result, the US Dollar Index (DXY) is trading around 96.20, recovering from four-year lows, while the Australian Dollar increased with Gold reaching record highs.

Major Currency Updates

The major currency pairs show differing trends. The AUD/USD pair stays near 0.7020, supported by a strong Australian Dollar. Meanwhile, USD/JPY is around 153.00, influenced by the Bank of Japan’s views on inflation and wages. The EUR/USD pair is near 1.1950, steady after a recent peak, and GBP/USD is stable above its lower US counterpart at 1.3790. Gold, after hitting a new record, is now trading around $5,330. Upcoming economic reports include Flash GDP and CPI data for Germany and the Eurozone, along with the US Producer Price Index. The tension between the White House and the Federal Reserve is causing considerable market uncertainty. This political pressure on monetary policy suggests we should brace for sharp and unpredictable market movements in the coming weeks. Notably, the VIX, a measure of market fear, spiked over 30% in January, trading above 18. Considering options to capitalise on this rising volatility might be wise. The US Dollar Index is at a crucial point, recovering from a four-year low around 96.00. With the upcoming US Producer Price Index expected to show persistent inflation at about 3.5%, this supports Powell’s firm stance and could lead to a continued dollar rally. We might look at buying short-term call options on the dollar, anticipating a move towards the 97.50 resistance level seen in mid-2025.

Gold Market Opportunity

Gold’s recent drop from its all-time high above $5,500 presents an opportunity for bullish traders. This decline is supported by strong central bank buying, which saw an increase of over 1,000 tonnes in global reserves throughout 2025. Buying call options during this dip could position traders for another increase, especially if inflation worries continue. The significant drop in Microsoft shares serves as a warning for the entire tech sector, which has been a market leader for years. Concerns over rising AI spending, now up over 40% year-over-year for major tech companies, are impacting short-term profitability. We might consider buying put options on the Nasdaq 100 as protection against a broader tech correction in the first quarter. The Australian Dollar remains strong around 0.7020 but could reverse if the US dollar gains strength. Meanwhile, hints of further tightening from the Bank of Japan could enhance the Yen’s value, making long JPY positions an appealing option. We are monitoring for a possible downturn in AUD/JPY if risk sentiment weakens. Create your live VT Markets account and start trading now.

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