The US Energy Information Administration (EIA) has reported an unexpected rise in crude oil stocks. Actual figures reached 3.602 million barrels, while forecasts predicted only 1.1 million in January. This unexpected increase could impact market trends as crude inventories continue to fluctuate. The Bank of Japan is expected to keep its interest rate at 0.75% in its upcoming policy meeting. After raising rates to their highest level in decades last December, the bank is taking a pause to assess the economic effects of its previous increases.

Gold Prices Hit Record Highs

Gold prices have soared to new highs, exceeding $4,900 per troy ounce. This surge is fueled by a falling US Dollar and improved global risk sentiment. The move comes as geopolitical tensions ease, especially since Donald Trump reversed proposed tariff increases related to NATO disputes. In the currency markets, the EUR/USD pair remains steady around 1.1750, supported by decreased EU-US trade tensions and a weakening US Dollar. Meanwhile, GBP/USD is rising toward 1.3500 as the British Pound benefits from dollar selling. Traders are focused on upcoming PMI data releases. Ripple (XRP) is also holding strong above $1.90, showing a positive technical outlook after recent fluctuations. Overall, the main theme is a notable weakness in the US Dollar, which is creating clear opportunities across various asset classes. The US Dollar Index (DXY) has fallen from about 106 to under 102 in the past month, a trend we anticipate will continue. This decline in the dollar is the main factor driving prices up for assets like gold and the euro. Gold’s rise above $4,900 per ounce, despite a favorable risk climate, is directly linked to the dollar’s drop. Historically, gold tends to move inversely with the DXY, and we are currently witnessing this trend. We are preparing for further gains by purchasing call options on gold futures (/GC), aiming for the $5,000 mark.

Currency Market Opportunities Amid Dollar Weakness

The strength in EUR/USD and GBP/USD is also tied to the dollar’s weakness, but Friday’s flash PMI releases are expected to bring significant volatility. Recent European inflation data has exceeded expectations slightly, indicating a higher chance of a positive surprise in PMI releases. We are considering short-term call options on both the euro and the pound to take advantage of a potential spike. The recent increase in US crude oil inventories is a negative sign for energy prices, suggesting weak demand. This is the third week in a row that inventories have exceeded forecasts, a trend that typically leads to price drops, similar to patterns seen in spring 2024. Buying put options on WTI crude futures appears to be the best way to trade this emerging weakness. In Japan, the central bank’s decision to pause rate hikes is significant following the substantial hike in December. This indicates that the yen’s recent strength may stabilize as the market adjusts to the new policy. We are considering long positions in currency pairs like EUR/JPY, betting that European economic data will perform well. Finally, the quick reversal of proposed NATO tariffs highlights how sensitive markets are to news. The CBOE Volatility Index (VIX) surged to nearly 20 due to the tariff news before reverting to 14, reflecting the spikes we experienced during trade disputes in 2019. We should take advantage of the current calm by considering longer-term, affordable VIX call options as a hedge against future geopolitical tensions. Create your live VT Markets account and start trading now.

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