Markets started the new year quietly, with little major data released. The US Dollar Index remained steady above 98.00, while US stock index futures gained between 0.3% to 0.7%. Gold bounced back, trading close to $4,380 after a drop, and rose over 1% for the day. Silver also recovered, climbing above $74 with a daily increase of over 3%, although it was down nearly 7% for the week.

Stable Performance in Currency Markets

The EUR/USD stayed stable near 1.1750, with investors awaiting upcoming Sentix Investor Confidence data from Europe. The GBP/USD worked to regain its weekly losses, trading above 1.3450 after falling to 1.3400 at the year-end. In Asia, USD/JPY maintained a positive trend for two days, trading near 157.00 early Friday. These movements followed mixed trends across different currency pairs throughout the week. This quiet market atmosphere can be misleading, as low holiday volumes often hide underlying pressures. It’s a chance to prepare for increased volatility, especially with crucial US manufacturing data set to be released on Monday. Traditionally, the first full trading week of the new year often brings strong movements as institutions adjust their positions. Gold’s sharp drop at the end of 2025 and its quick rise toward $4,400 indicate significant uncertainty. Central banks continued to purchase gold at record levels throughout 2024 and 2025, adding more than 2,000 tonnes, which helps support prices amid ongoing inflation concerns. This high volatility makes options strategies, like buying straddles, appealing to capitalize on potential breakouts in either direction.

Anticipation for the US Dollar Index

The US Dollar Index is steady above 98.00, but the upcoming ISM Manufacturing PMI for December will be pivotal. Forecasts are around the 50.0 mark, making this release a key event for determining the dollar’s direction in the next few weeks. A strong reading above 51.5 may indicate renewed dollar strength, while a drop below 48.5 could lead to a significant sell-off. Silver’s daily gain of over 3% is greater than gold’s, showcasing its position as a more volatile precious metal. Despite being down for the week, this volatility offers opportunities for traders willing to take risks. We can use defined-risk options spreads on silver futures to take advantage of these sharp movements while controlling downside risk. The rise of USD/JPY towards 157.00 is largely due to the growing policy gap between a hawkish Fed and the Bank of Japan’s slow move away from ultra-loose policy through 2025. This significant interest rate difference has boosted carry trades, but it also leaves the pair open to sharp reversals. It may be wise to consider buying inexpensive, long-term put options on USD/JPY as insurance against any sudden change in the Bank of Japan’s cautious approach. Create your live VT Markets account and start trading now.

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