The United States 4-week bill auction rate fell slightly to 3.57%, down from 3.58%. This small change reflects a minor adjustment in short-term government borrowing costs. In the currency market, USD/CAD is close to a five-month low because of differing policies between the Bank of Canada and the Federal Reserve. The GBP/USD also saw a small dip during quieter holiday trading.

Gold and Bitcoin Updates

Gold has pulled back from its record highs, now priced under $4,500, as investors take profits. The dollar remains weak due to expectations of a more relaxed Fed policy. Meanwhile, Bitcoin dropped below $87,000, with U.S.-listed spot ETFs losing $188.64 million. Looking ahead to 2026-2027, advanced countries are expected to see a positive economic outlook supported by factors from 2025. Avalanche is now trading close to $12, as Grayscale updates its form to convert its Trust into an ETF. Both EUR/USD and GBP/USD are trading within narrow ranges due to low market activity over the holiday season. This quiet trading environment has kept these currency pairs stable. The slight dip in the 4-week Treasury bill yield shows that the market doesn’t expect any hawkish surprises from the Federal Reserve soon. The CME FedWatch Tool indicates an 85% chance of a rate cut by the end of the first quarter of 2026, supporting a risk-on attitude. This low expectation for rates suggests we might see some complacency after the holidays, making it a good time to sell short-dated call options on the VIX.

US Dollar and Gold Strategies

The U.S. Dollar’s weakness, especially against commodity currencies like the Canadian loonie, is likely to continue into the next year. With the Dollar Index (DXY) around 98.50, a level not seen consistently since early 2024, the trend seems to be heading lower. This makes buying call options on currency ETFs like FXC (Canadian Dollar) and FXA (Australian Dollar) a smart move for early January. Gold’s pullback from its peak above $4,520 appears to be a normal holiday drop on low trading volume, not a signal of a change in trend. Open interest in gold futures has risen by 2% this week, suggesting that new buyers are seizing this opportunity. Thus, any price drop below $4,500 might be a chance to invest in long positions through call spreads on gold and silver futures. Equity markets are calm, but the outlook for 2026 remains positive due to expected strong growth. Implied volatility on the S&P 500 has decreased to a 24-month low of 11.2, making options cheaper compared to the volatility seen in 2023. This presents a strong case for buying long-dated call options or LEAPS on key indices like SPX and NDX in anticipation of an upcoming rally. Bitcoin’s current drop below $87,000 is largely due to ETF outflows, totaling over $500 million in just a week. While this puts short-term pressure on Bitcoin, it contrasts with the institutional buying we saw throughout most of 2025. This difference suggests the potential benefit of protective put options or put spreads to safeguard against a possible decline toward the $82,000 support level in the coming weeks. Create your live VT Markets account and start trading now.

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