EUR/JPY traded with mild losses near 184.15 in early Asian trading on Monday. The Japanese yen strengthened against the euro as Middle East conflict escalations supported demand for safe-haven assets. Iran’s Islamic Revolutionary Guard Corps said on Monday that Iran will completely close the Strait of Hormuz if US President Donald Trump acts on threats to target a power plant. Trump gave Iran 48 hours to reopen the Strait of Hormuz to shipping or face the destruction of its energy infrastructure.

Safe Haven Demand Lifts The Yen

Ongoing risks of a prolonged conflict were linked to added support for the yen, which weighed on the cross. Japanese officials also signalled readiness to respond to currency moves. Japan’s top foreign exchange official, Atsushi Mimura, said on Monday that the government is prepared to take measures on all fronts in foreign exchange volatility. Verbal intervention was cited as a factor that could support the yen. European Central Bank policymakers are due to speak later on Monday. Attention then turns to Japan’s National Consumer Price Index inflation report for February, due on Tuesday. Looking back at the situation in early 2025, the escalating conflict near the Strait of Hormuz was a classic signal for a risk-off move. Given that roughly 21% of global petroleum liquids consumption moves through this chokepoint, we saw a predictable flight to the safety of the Japanese Yen. The most direct response for derivative traders was to buy EUR/JPY puts to position for a drop in the currency cross.

Implied Volatility Becomes Tradable

This type of geopolitical flare-up makes implied volatility a tradable asset in itself. We saw a similar dynamic in early 2022 after Russia’s invasion of Ukraine, where currency volatility surged, making long-volatility option strategies like straddles highly profitable. In that 2025 scenario, buying options was a superior strategy to shorting the pair directly, as it limited risk against sudden, sharp reversals on any de-escalation news. The verbal warnings from Japanese officials last year were more than just talk, as they added weight to the Yen’s strength. We knew at the time that Japan’s core inflation had been persistently above the Bank of Japan’s 2% target for over a year, giving authorities a credible reason to defend their currency. This fundamental backdrop meant that safe-haven flows were aligned with the underlying policy direction, making bearish EUR/JPY positions more robust. The upcoming Japanese CPI data point was the key catalyst to trade around for the following weeks. A higher-than-expected inflation print would have only emboldened Japanese authorities, creating further downward pressure on the EUR/JPY. Therefore, we would have structured trades using option combinations like bear put spreads to define risk while capitalizing on a continued decline. Create your live VT Markets account and start trading now.

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On Monday, the People’s Bank of China set the USD/CNY central rate at 6.9041. This compared with Friday’s fix of 6.8898 and a Reuters estimate of 6.8928. The People’s Bank of China aims to maintain price stability, including exchange rate stability, and support economic growth. It also works on financial reforms, such as opening and developing financial markets.

Peoples Bank Of China Leadership And Control

The central bank is owned by the state of the People’s Republic of China. The Chinese Communist Party Committee Secretary, nominated by the Chairman of the State Council, has strong influence over management and direction, and Pan Gongsheng holds both this role and the governor post. The PBoC uses several policy tools, including the seven-day reverse repo rate, the Medium-term Lending Facility, foreign exchange intervention, and the reserve requirement ratio. China’s benchmark rate is the Loan Prime Rate, which affects borrowing, mortgage costs, and savings rates, and can also affect the renminbi exchange rate. China has 19 private banks. The largest include WeBank and MYbank, and in 2014 China allowed domestic lenders funded fully by private capital to operate in the state-led banking system. The People’s Bank of China has set the USD/CNY rate weaker than the market anticipated, which is a clear signal for us. This managed depreciation suggests authorities are comfortable with a softer yuan to support their economy. We should view this as a deliberate policy direction rather than a simple market adjustment.

Market Implications For Usd Cny

This move comes as China’s export growth for the first two months of 2026 was a modest 2.1%, falling short of expectations, and the domestic property market continues to struggle. By allowing the currency to weaken, the state is effectively making its exports cheaper and providing a tailwind for its manufacturing sector. This contrasts with the US, where inflation remains sticky above 3%, reducing the likelihood of imminent rate cuts by the Federal Reserve. For derivative traders, this widening policy and interest rate gap points toward continued strength in the US dollar against the yuan. We should consider strategies that benefit from this trend, such as buying USD/CNY call options or selling CNH put options. The psychological level of 7.00 is now a more probable target in the coming weeks. We must remember that the PBOC has multiple tools, including the Loan Prime Rate (LPR) and the Reserve Requirement Ratio (RRR), to guide the economy. We saw them utilize RRR cuts twice in 2025 to boost liquidity when growth faltered. A surprise cut to the LPR in the near future would be a strong confirmation of this easing stance and would likely accelerate the yuan’s depreciation. Create your live VT Markets account and start trading now.

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AUD/JPY traded around 111.70 in Asian hours on Monday, still down overall but above 111.50 after reducing earlier losses. The pair faced pressure as the Australian Dollar weakened amid higher risk aversion. Tensions in the Middle East increased after US President Donald Trump gave Iran a 48-hour ultimatum to reopen the Strait of Hormuz or risk damage to its energy infrastructure. Iran’s Islamic Revolutionary Guard Corps said it would fully close the strait if the US acted, and the Jerusalem Post reported Washington is weighing a ground operation to seize Kharg Island.

Australian Inflation In Focus

Markets are watching Wednesday’s Australian inflation data, with headline inflation forecast to stay at 3.8% year on year in February. This follows the Reserve Bank of Australia raising the cash rate to 4.1% in a narrowly split decision, delivering back-to-back hikes for the first time since mid-2023. The pair may remain under downward pressure if the Japanese Yen strengthens on rising oil prices and inflation worries. The Bank of Japan kept rates unchanged last week but indicated it could tighten further, while there is also speculation Japan could intervene to limit sharp currency moves. “Risk-on” refers to higher demand for riskier assets, while “risk-off” points to demand for safer assets. In risk-off periods, bonds, gold, the US Dollar, Japanese Yen and Swiss Franc tend to benefit, while risk-on conditions often support equities, most commodities and currencies such as the AUD, CAD and NZD. We are seeing a familiar pattern in the AUD/JPY, with the cross struggling under the weight of risk-off sentiment, much like it did in early 2025. While last year’s tensions were focused on the Middle East, today’s concerns stem from renewed trade friction in the South China Sea, which is similarly pressuring the Australian dollar. This risk aversion is making traders reconsider long positions in commodity-linked currencies.

Drivers For The Next Move

The focus on Australian inflation remains critical, just as it was when the headline rate was 3.8% a year ago. The latest data for February 2026 showed inflation unexpectedly holding firm at 3.6%, fueling speculation that the Reserve Bank of Australia may not be done hiking from its current 4.35% cash rate. However, this is counteracted by recent weakness in iron ore prices, which have dipped below $110 per tonne on concerns over Chinese industrial demand. On the other side of the pair, the Bank of Japan’s stance has evolved significantly since it signaled a readiness to tighten last year. Having exited negative interest rates in 2024, the BoJ is now on a slow but definite tightening path, with markets pricing in at least one more hike by year-end. This growing policy convergence with other central banks provides a fundamental tailwind for the Yen that was absent before. Given the heightened geopolitical risk and potential for Yen strength, we believe derivative traders should consider buying put options on the AUD/JPY. This strategy allows for profiting from a potential downturn in the cross while limiting the maximum loss to the premium paid. Volatility is increasing, and owning options provides exposure to downside moves driven by either a weaker AUD or a stronger JPY. Looking back, the major AUD/JPY rally of 2022-2024 was driven almost entirely by the massive policy divergence between a hiking RBA and a stationary BoJ. We are now witnessing the slow unwinding of that theme, suggesting the path of least resistance for the cross could be lower in the coming weeks. Therefore, positioning for a correction from these elevated levels appears to be the prudent move. Create your live VT Markets account and start trading now.

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The US Dollar Index (DXY) started the week with a mild rise but stayed below Friday’s swing high. It traded near 99.65, up 0.15% on the day, consolidating above 99.50. Risk sentiment remained fragile due to escalating Middle East tensions, supporting demand for the US Dollar as a reserve currency. US President Donald Trump set a 48-hour deadline for Iran to reopen the Strait of Hormuz and threatened to target Iran’s energy infrastructure.

Middle East Risk Supports Dollar Bid

Iran said it could escalate strikes on energy infrastructure and target water desalination facilities across the Middle East. Higher crude oil prices have added to inflation concerns and reduced expectations for US Federal Reserve rate cuts in 2026, supporting the US Dollar. The Federal Reserve projected one rate cut this year, while other major central banks signalled potential rate rises to address renewed inflation pressures. This has limited upward momentum in the DXY and kept positioning cautious. The US Dollar is the world’s most traded currency, making up over 88% of global foreign exchange turnover, or about $6.6 trillion a day, based on 2022 data. The Fed targets inflation at 2% and can use quantitative easing or quantitative tightening to influence the Dollar. The US Dollar Index is holding firm above the 99.50 level, largely because of instability in the Middle East pushing investors towards the safety of the dollar. We see this as a temporary floor for the dollar, as geopolitical risk is notoriously difficult to price over the long term. Traders should view this strength with caution, as it is based on fear rather than strong economic fundamentals alone.

Oil Inflation And Rate Cut Expectations

This situation is putting upward pressure on oil prices, with Brent crude futures now trading above $110 a barrel, a sustained level we haven’t seen since the energy crisis of 2022. This surge directly fuels inflation concerns and has caused the market to rethink the likelihood of Federal Reserve rate cuts this year. The CBOE Volatility Index (VIX) has also reflected this anxiety, recently climbing above 25, which typically supports holding safe-haven assets like the dollar. While the Fed has guided for one potential rate reduction in 2026, the ongoing inflation threat makes even that single cut uncertain. We’ve seen Fed Funds futures shift in recent weeks, with the probability of a summer rate cut diminishing significantly. This recalibration of interest rate expectations is the primary engine behind the dollar’s current resilience. However, we must consider that other major central banks are in a different position and are signaling potential rate hikes to combat their own inflation. For instance, recent commentary from the European Central Bank has been notably more aggressive. A surprise hike from the ECB could trigger a rapid appreciation of the Euro against the dollar, creating a significant headwind for the DXY. Given these opposing forces, making a simple directional bet on the dollar is a high-risk strategy right now. We believe a more prudent approach is to trade the expected increase in currency volatility. Using options strategies like straddles on major pairs such as EUR/USD or USD/JPY could be effective, as they profit from a large price move in either direction without needing to predict the specific trigger. When we looked back at the market of 2022 from our perspective in 2025, we noted a similar pattern where an energy shock led to a strong dollar as the Fed tightened policy. That rally eventually lost steam once other central banks began their own aggressive hiking cycles. This history suggests that the current dollar strength may not be sustained unless the geopolitical conflict escalates much further from its current state. Create your live VT Markets account and start trading now.

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NZD/USD eased to about 0.5830 in early Asian trading on Monday, moving below 0.5850. The fall came as demand rose for safe-haven currencies such as the US Dollar during Middle East tensions. Iran’s military said it would fully close the Strait of Hormuz if the US bombs Iranian power plants. Donald Trump gave Iran 48 hours to reopen the strait to shipping or face attacks on its energy infrastructure.

Fitch Downgrade Adds To Kiwi Dollar Headwinds

Fitch Ratings cut New Zealand’s Long-Term Foreign-Currency Issuer Default Rating outlook to negative from stable, while keeping the rating at ‘AA+’. Fitch linked the Iran conflict to risks for New Zealand’s economy due to its reliance on energy imports. The Reserve Bank of New Zealand’s hawkish stance may limit further NZD falls. Markets are pricing in close to a 50% chance of a rate rise as early as May 2026. We see the NZD/USD pair under significant pressure from the conflict in the Middle East, which is driving a flight to safety. With the US Dollar acting as a primary safe haven, traders should consider buying NZD/USD put options to speculate on further downside in the coming weeks. These geopolitical risks are immediate and tend to outweigh other factors in the short term. The Fitch outlook downgrade to negative directly highlights New Zealand’s vulnerability to energy shocks, a fear now becoming a reality. We’ve seen WTI crude oil prices surge over 15% in the last week to over $95 a barrel since the threats to the Strait of Hormuz began. This directly hurts New Zealand’s terms of trade and reinforces the bearish case for the Kiwi dollar.

Options Volatility Spikes As Traders Reprice Risk

Reflecting this uncertainty, we have watched implied volatility on one-month NZD/USD options jump to over 15%, a sharp increase from the calmer markets we observed in late 2025. Such high volatility makes strategies like straddles interesting, as they can profit from a large price move if tensions suddenly escalate or de-escalate. Selling options can also be attractive due to the high premium, but it carries significant risk. While the market is pricing in a potential RBNZ rate hike in May, this is currently being overshadowed by the overwhelming strength of the US dollar. Remember, the US Federal Reserve has maintained its own firm stance after recent US inflation data came in above expectations at 3.2%. Therefore, any potential gains for the NZD from rate hike speculation are likely to be muted as long as the geopolitical situation remains tense. Create your live VT Markets account and start trading now.

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Silver failed to build on a small bounce in Asian trade on Monday, after rising towards $69.60. It then traded lower for a fifth day, sitting just below the mid-$67.00s and down 0.80% on the day, near a six-week low reached last Thursday. Last week it broke and closed below the 100-day Simple Moving Average (SMA) for the first time since April 2025. The MACD (12, 26, 9) stayed in negative territory, with the MACD line below its signal line. The Relative Strength Index (RSI) was 32, just above oversold levels. Support was placed at $67.50, then $65.00, with a break below $67.50 pointing to the mid-$60s. Resistance was seen at $72.80–$73.80, where the 100-day SMA meets prior breakdown levels. A close above $73.80 was cited as needed to shift the bearish setup, while $80.00 was listed as the next resistance. The report said the technical analysis was produced with the help of an AI tool. We are seeing silver struggle to find any real strength, hovering near a multi-week low around the mid-$67.00s. The break below the 100-day Simple Moving Average last week, the first such move since we saw it back in April 2025, confirms a bearish shift for us. This suggests that the path of least resistance is now firmly to the downside. This technical weakness is supported by fundamentals, as recent reports point to a slight downward revision in industrial demand forecasts for the second quarter of 2026. Furthermore, the U.S. Dollar Index has shown persistent strength, climbing to a year-to-date high of 105.80 last week, which creates headwinds for dollar-denominated assets like silver. Historically, a strong dollar and softening industrial outlook have preceded periods of weakness for the white metal. For those of us using options, this setup favors buying put options or establishing bear put spreads. We see the $67.50 level as a critical line; a sustained break could trigger further selling toward strike prices near $65.00 in the coming weeks. Any small price rallies should be viewed as opportunities to enter these positions at better prices. We remember a similar technical pattern back in late 2023 when a prolonged period above the 100-day moving average was followed by a sharp break, leading to a 10% decline over the next month. Given this precedent, any attempt by silver to recover toward the $72.80–$73.80 resistance zone will likely be met with significant selling pressure. We would consider selling call spreads above this area to capitalize on what we expect to be a capped upside. Adding to our conviction, recent data shows consistent outflows from major silver-backed ETFs over the past two weeks, totaling over 15 million ounces. This movement indicates that larger institutional investors are reducing their exposure, which aligns with the bearish technical signals we are seeing on the charts. This reinforces the view that recoveries will likely be short-lived.

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Iran’s Islamic Revolutionary Guard Corps said it would fully close the Strait of Hormuz if US President Donald Trump follows through on threats to strike Iranian energy sites, according to the Guardian. Trump has given Iran 48 hours to reopen the strait to shipping or face the destruction of its energy infrastructure. An Iranian source told CNN that Tehran is proceeding with plans to monetise its control of the waterway. Oil prices rose slightly after the report, with West Texas Intermediate (WTI) up 0.24% at $97.35.

What WTI Is And Why It Matters

WTI is a type of crude oil traded globally and is one of three major benchmarks, alongside Brent and Dubai Crude. It is described as “light” and “sweet” due to lower gravity and sulphur content, is produced in the United States, and is distributed via the Cushing hub. WTI prices are mainly driven by supply and demand, including shifts in global growth, political instability, wars, sanctions, OPEC decisions, and the US dollar because oil is priced in dollars. Weekly inventory data from the API and the EIA can move prices; the API report is released on Tuesday and the EIA report the next day, and their results are within 1% of each other 75% of the time. We saw this exact situation back in 2025, with tensions in the Strait of Hormuz pushing WTI crude towards $100 a barrel. That standoff eventually de-escalated, but it serves as a critical reminder of how quickly the market can react to supply threats. Given the current date of March 23, 2026, we must consider the potential for history to repeat itself. The market is already on edge, as last week’s Energy Information Administration (EIA) report showed a surprise crude inventory draw of 3.1 million barrels, signaling tighter supply than analysts predicted. This comes as OPEC+ has committed to holding production cuts steady through the second quarter. These factors alone create an underlying upward pressure on prices. Recent intelligence from early March 2026 has noted an increase in Iranian naval patrols near the critical shipping lane, echoing the aggressive posturing from 2025. With roughly 21% of global petroleum liquids consumption moving through the strait daily, any disruption represents a significant threat to global supply. This renewed activity suggests geopolitical risk is being underpriced by the market.

Historical Price Shock Examples

Historically, events like this cause sharp, immediate price spikes, as we observed during the 2019 tanker incidents when prices jumped over 4% in a single day. The initial phase of the conflict in Ukraine in 2022 provides an even starker example, pushing WTI from $92 to over $120 in just two weeks. This precedent suggests any escalation could send prices well over the $100 mark very quickly. Traders should therefore be positioning for a significant increase in volatility in the coming weeks. Purchasing near-term call options on WTI or related energy ETFs offers a defined-risk way to capitalize on a potential upward surge. Even considering straddles could be prudent for those who are certain of a big price move but unsure of the ultimate direction. Create your live VT Markets account and start trading now.

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Gold fell to about $4,460 in early Asian trading on Monday. It stayed under pressure as the US Dollar strengthened, bond yields rose, and inflation worries grew due to higher energy prices. Conflict in the Middle East has lifted energy prices and lowered expectations for US rate cuts. The Federal Reserve kept rates at 3.50% to 3.75% after its March meeting, and the median dot plot still points to one 25-basis-point cut in 2026, while some officials now expect no cuts this year.

Central Bank Demand Supports Gold

Central bank buying may support gold demand. China’s official gold reserves rose to a record 2,309 tonnes after 16 straight months of purchases by the People’s Bank of China. Central banks are the largest holders of gold and added 1,136 tonnes worth about $70 billion in 2022, according to the World Gold Council. Gold often moves opposite to the US Dollar and US Treasuries, and it can also move against risk assets such as stocks. Gold prices can react to geopolitics, recession fears, and interest rates, as it offers no yield. Because it is priced in dollars, shifts in the US Dollar can affect XAU/USD. With gold tumbling to $4,460, the immediate outlook is pressured by a strong US Dollar. The Dollar Index (DXY) is approaching 108, a multi-year high, which makes the dollar-denominated metal more expensive for foreign buyers. Given this momentum, we see traders considering put options or shorting futures to hedge against or profit from a potential slide towards the $4,300 support level in the short term.

Rates Yields And Gold Pressure

The Federal Reserve’s decision to hold rates at 3.50-3.75% and signal only one potential cut this year makes holding a non-yielding asset like gold costly. We’ve watched the 10-year US Treasury yield hold firm above 4.5%, directly competing with gold for safe-haven capital. This high opportunity cost is a key factor weighing on the metal, suggesting any rally will face significant headwinds. Ongoing geopolitical tensions have pushed Brent crude oil prices above $110 a barrel, but the market is focusing more on the inflationary impact than on gold’s safe-haven appeal. This inflation concern is what is keeping the Fed’s stance hawkish, creating a feedback loop that strengthens the dollar and weakens gold. Traders should therefore remain cautious, as the usual geopolitical bids for gold are being overshadowed by monetary policy concerns. On the other hand, we must not ignore the significant underlying support from central bank buying. China’s gold reserves have now swelled to over 2,800 tonnes after its continued purchasing program, providing a solid floor for prices. We remember the World Gold Council data from late 2025 showing that central banks collectively bought over 1,000 tonnes for the third consecutive year, a trend that limits how far the price can fall. This tug-of-war between a hawkish Fed and strong official sector demand is creating significant market volatility. The CBOE Gold Volatility Index (GVZ) has climbed to its highest level since the banking turmoil we saw back in 2024. For derivative traders, this suggests that strategies like straddles or strangles could be effective to capitalize on sharp price swings in either direction over the coming weeks. Create your live VT Markets account and start trading now.

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Fitch Ratings revised the Outlook on New Zealand’s Long-Term Foreign-Currency Issuer Default Rating to Negative from Stable and affirmed the rating at AA+. It said large debt reduction is harder to foresee after delays to fiscal consolidation in recent years. Fitch reported that the general government debt-to-GDP ratio has risen over the past six years, after the economy faced several shocks. It added that fiscal consolidation measures are likely only after the 2026 election, which adds uncertainty to the fiscal outlook.

Fiscal Outlook And Debt Risks

It also cited risks from the Iran war because New Zealand depends on energy imports. The New Zealand Finance Minister, Nicola Willis, said the government aims to reduce spending as a share of GDP, return the headline operating balance to surplus, and lower the debt path. In markets, NZD/USD was down 0.05% on the day at 0.5830, after moving off earlier lows. A table on currency moves said the New Zealand dollar was the weakest against the Canadian dollar. Given the downgrade in New Zealand’s credit outlook, we should view this as a clear signal to increase bearish positions on the New Zealand dollar. The combination of delayed fiscal tightening and rising debt creates a fundamental weakness for the currency. We should be positioning for further downside in the NZD/USD pair over the coming weeks. This negative sentiment is supported by the numbers, as our general government debt has now reached 52% of GDP, a substantial increase from the levels below 40% we saw before the spending surge in 2025. With significant fiscal measures unlikely before the election later this year, there is no near-term catalyst to reverse this trend. This uncertainty points towards a weaker currency.

Energy Shock And Currency Pressure

The war in Iran is directly impacting our economy, as the price of Brent crude has now topped $115 a barrel. As a net energy importer, this inflates New Zealand’s import bill and weighs heavily on our terms of trade. This also explains the Kiwi’s particular weakness against the Canadian dollar, as Canada benefits from higher energy prices. This environment puts the Reserve Bank of New Zealand in a difficult position, especially after the latest inflation data for February showed consumer prices were still rising at a hot 3.8% annual pace. They cannot easily cut interest rates to support the economy while inflation remains so far above target. This policy bind limits any potential upside for the NZD. Therefore, we will be looking at buying NZD/USD put options to profit from a potential move towards the 0.5600 lows seen in late 2025. The current price of 0.5830 offers an attractive entry point for initiating new short positions. Heightened volatility is expected, so using options provides a defined-risk way to express this negative view. Create your live VT Markets account and start trading now.

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WTI, the US oil benchmark, opened Monday higher and built on Friday’s 3.5% rise. It briefly returned to $100 in early trading. The move followed fresh escalation in the Middle East after comments by US President Donald Trump on Saturday. Trump said US forces would ‘obliterate’ Iranian energy facilities if Iran does not open the Strait of Hormuz within 48 hours.

Market Reaction And Strait Of Hormuz Risk

Iran responded on Sunday by warning it would strike the energy and water systems of Gulf neighbours if the US carries out the threat. The Israeli military also said Tehran fired two long-range missiles at Arad and Dimona in southern Israel. Israel reported about 160 people were injured in those strikes. Markets are weighing the risk of further attacks on civilian and energy infrastructure, and uncertainty over access through the Strait of Hormuz. WTI price action later will depend on further developments connected to the strait and regional tensions. Traders will watch whether early-week gains hold. We are seeing echoes of the tensions from 2025 when WTI crude briefly topped $100 a barrel. Last year’s escalation involving the Strait of Hormuz taught us how quickly geopolitical risk can be priced into the market. That memory is influencing how we view the current stability.

Positioning And Derivatives Ideas

With WTI currently trading around $85, the market feels less volatile than it did during the 2025 crisis. However, the latest EIA report shows global oil inventories are still 3% below the five-year average, leaving very little buffer for supply shocks. This fundamental tightness means any new flare-up could have an outsized impact on prices. We believe this environment warrants owning upside exposure through derivatives, as the 2025 event showed how quickly prices can move. Buying long-dated call options or bull call spreads on WTI or related ETFs offers a defined-risk way to capture a potential spike. The CBOE Crude Oil Volatility Index (OVX) hovering in the mid-30s reflects this lingering anxiety, making these options more expensive but potentially necessary. For those viewing current tensions as mere rhetoric, selling out-of-the-money put credit spreads could be a strategy to collect premium, betting that support levels will hold. However, the lesson from 2025’s sudden missile strikes on Israel is that headlines can change violently and without warning. We are therefore cautious about taking on undefined risk in this market. Create your live VT Markets account and start trading now.

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