The American Petroleum Institute (API) reported that US crude oil stocks dropped by 4.8 million barrels, which is more than the expected decrease of 1.7 million barrels for the week ending December 5th. Gold prices fluctuated, initially falling to around $4,200 but then rising due to increased demand for safety ahead of the Federal Reserve’s upcoming interest rate decision, where a 25 basis point cut is anticipated.

Market Movements

The US Dollar gained strength, impacting various markets, including WTI crude oil, which fell below $58.50. Ethereum rose by 6%, boosted by increased whale buying and comments from President Donald Trump about the Federal Reserve Chair. Despite a global economic slowdown in 2025, both global and European economies have shown resilience. However, the risks for economic recovery are growing, which could affect the global macro and credit outlook in the medium term. Bitcoin traded above $90,000 in a cautious crypto market, with altcoins like Ethereum and Ripple holding important support levels. In currency markets, the EUR/USD dropped for the fourth straight day, nearing the 1.1600 level. Meanwhile, GBP/USD moved toward the midrange, reacting to technical rejections and waiting for the Federal Reserve’s decisions. The bigger-than-expected decline in crude oil inventories, at -4.8 million barrels compared to a predicted -1.7 million, suggests tightening supply. However, oil prices remain under pressure due to a stronger US dollar. This trend has been consistent in 2025 when the Dollar Index (DXY) goes above 106. Traders might consider buying January call options on WTI with a strike price near $60 to prepare for a potential rebound if the dollar weakens after the Federal Reserve’s announcement.

Federal Reserve Expectations

All attention is focused on the Federal Reserve, with a 25-basis-point rate cut already expected in the market for tomorrow. The central bank’s tone will be crucial; a “hawkish cut,” indicating this may be a one-time change, could further boost the dollar. We saw similar behavior in the summer of 2019, which caused sharp and unpredictable movements in currency pairs like the EUR/USD. Gold’s stability around $4,200, even with a strong dollar, reflects significant anxiety among investors. Interest in gold call options with a $4,300 strike price has risen over 15% this past week, suggesting many are betting on a continued upward trend as a safe haven. This serves as a key indicator of fear in the market, and investors should consider protecting long positions with put options or using call spreads to manage risk ahead of the Fed’s commentary. With Bitcoin maintaining its value above $90,000, the crypto market is seen as both a risk asset and a hedge against uncertainty in the macroeconomic landscape. The 30-day implied volatility for Bitcoin options has risen back above 80%, a level last seen during the sharp correction in the third quarter of 2025. Given the expected price fluctuations, strategies like long strangles could effectively capitalize on the volatility without committing to a specific direction. Create your live VT Markets account and start trading now.

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