EUR/USD rebounded slightly after revisiting a one-week low on Monday and traded near the 1.1500 level in the Asian session. The pair remained under pressure, with the US Dollar supported by higher geopolitical risk. US defence planning for weeks of ground operations in Iran, and involvement by the Iran-backed Houthis in Yemen, increased fears of broader conflict in the Middle East. Higher energy prices also lifted inflation concerns and supported expectations for a more hawkish Federal Reserve stance.

Near Term Technical Outlook

Technically, the near-term bias stayed mildly bearish as the pair held below the flat 200-hour EMA near 1.1550. MACD was close to the zero and signal lines with a muted histogram, while RSI sat near 43, below the 50 mark. Resistance was seen at 1.1535 and then 1.1550, with a move above 1.1550 pointing to 1.1580. Support levels were 1.1490 and 1.1475, with a break below 1.1475 opening the way towards 1.1450. Looking back at analyses from 2025, we recall the bearish sentiment surrounding EUR/USD near the 1.1500 mark. The primary driver then was escalating Middle East tensions, which fueled a strong demand for the safe-haven US dollar. This perspective made any upward movement in the pair seem vulnerable. However, the situation today on March 30, 2026, is fundamentally different as the pair now trades near 1.1950. The diplomatic accords reached early this year have significantly reduced geopolitical risk, causing the dollar’s safe-haven appeal to wane. This has shifted the market’s focus squarely back to economic fundamentals. Recent data shows Eurozone Core CPI for February 2026 remains elevated at 3.1%, surprising analysts who expected a faster decline. Conversely, the latest US Core PCE data has cooled to 2.4%, suggesting inflation is more under control stateside. This divergence is now the main catalyst for the euro’s strength.

Trading Strategy And Risk Considerations

This data has forced a policy shift, with European Central Bank officials now hinting at another rate hike while the Federal Reserve signals a prolonged pause. This is a complete reversal of the hawkish Fed expectations we saw throughout 2025. The interest rate differential is now tilting in favor of the euro. In the coming weeks, traders should consider strategies that benefit from further euro strength against the dollar. Buying EUR/USD call options with strike prices above the 1.2000 psychological level could be a viable play. This approach allows participation in the upside while defining the maximum risk. To manage risk, we can use the options market to create bull call spreads, which lowers the initial cost. It is also wise to remain cautious ahead of major data releases, such as the upcoming US jobs report for March. An unexpectedly strong number could cause short-term dollar volatility and test this bullish outlook. Create your live VT Markets account and start trading now.

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The US Dollar Index (DXY), which measures the US Dollar against six major currencies, edged down to about 100.15 in Asian trading on Monday after reaching 100.35 earlier in the session. It remains close to a two-week high. The US Dollar opened higher amid rising Middle East tensions, linked to reports about a possible US ground invasion of Iran. Such tensions tend to increase demand for safe-haven assets, including the US Dollar.

Middle East Tensions And Dollar Demand

The Wall Street Journal reported on Thursday that the US Pentagon is considering sending 10,000 extra troops to Iran for ground attacks. Iran’s Parliament speaker Mohammad Bagher Ghalibaf said Iran would “rain fire” on any US troops entering Iranian territory, according to the BBC. A ground attack could escalate the war and disrupt energy supply, adding pressure to oil prices. WTI crude was up almost 2.5% above $102.00 at the time of writing. Higher oil prices can increase expectations of tighter Federal Reserve policy, as petrol costs rise in the US. CME FedWatch showed markets have almost ruled out a rate cut and implied a 24.6% chance of at least one rate rise by year-end, compared with two cuts expected before the war. US President Donald Trump told the Financial Times that a deal with Iran would come “very quickly”. The US calendar also includes March Nonfarm Payrolls data due on Friday.

Looking Back And Market Drivers

We recall this time last year when fears of a US ground invasion in Iran pushed the Dollar Index towards 100. Looking back, those geopolitical tensions created a significant, though temporary, demand for safe-haven assets. Today, with the DXY trading firmly around 104.5, it is clear that persistent inflation and a resilient US economy provided more lasting support for the dollar than those initial war fears. The spike in WTI crude oil above $102 in 2025 was a direct reaction to the threat of a widening conflict disrupting supply lines. That threat never fully materialized, and as of February 2026, EIA data shows a consistent build in US crude inventories, reflecting slowing global demand. Consequently, WTI is now trading in a much lower range, near $84 a barrel, shifting the market’s focus from supply shocks to demand weakness. The market’s pricing-out of rate cuts in 2025 was the correct call, as the Federal Reserve held rates steady through the end of the year to watch inflation. That hawkish stance is now softening, as the latest CPI data for February 2026 showed inflation cooling to 2.8%, well below the peaks of last year. The CME FedWatch tool now indicates a near 80% chance of a first rate cut by July, a dramatic reversal from the hike probabilities we saw during the Iran scare. Volatility was the key trade then, with the VIX index jumping to over 25 during the peak of the Middle East tensions. Now, with the VIX hovering at a much more subdued level of 15.6, implied volatility in options is relatively cheap. This suggests traders could consider buying options, such as puts on energy stocks, to protect against a further slide in oil prices driven by economic slowing. The main driver for markets has clearly shifted from geopolitical shocks to the timing of the Fed’s easing cycle. Traders should be less focused on broad dollar strength and more on interest rate-sensitive instruments. Using options on Treasury ETFs or SOFR futures can allow for more precise positioning on whether the Fed cuts in June or delays until later in the third quarter. Create your live VT Markets account and start trading now.

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S&P 500 futures fell about 0.6% to 6,370, reaching seven-month lows during Asian trading hours ahead of the US session on Monday. Futures stayed under pressure as risk aversion rose amid uncertainty over a resolution to the Iran conflict. Reuters reported that US President Donald Trump told the Financial Times the US could “take the oil in Iran,” including seizing the export hub of Kharg Island, which he said is undefended. He also said discussions with Tehran are “doing extremely well,” with indirect talks via emissaries and a deal possibly achievable “fairly quickly.”

Geopolitical Risk Drives Futures Lower

The Wall Street Journal reported last week that the US Pentagon is considering deploying 10,000 additional troops to Iran. On Iranian state TV, Ebrahim Zolfaqari said “US troops will be good food for sharks of the Persian Gulf.” Markets are also focused on US economic releases this week, including labour market data such as Nonfarm Payrolls and the ISM Purchasing Managers’ Index. Nike, McCormick & Company, and Conagra Brands are due to report earnings in the week ahead. We remember the market jitters in 2025 when S&P 500 futures fell to 6,370 on fears of a US-Iran conflict. That sharp, geopolitically driven drop serves as a key reminder of how quickly sentiment can turn. Today, the market feels different, but the underlying risk of a sudden shock remains a primary concern for us. Currently, the CBOE Volatility Index (VIX) is hovering near 13, which is significantly lower than the spikes we saw during last year’s tensions. This suggests a degree of complacency in the market, making protective put options on indexes like the SPY relatively inexpensive. A small allocation to puts could be a cost-effective hedge against unforeseen turmoil, learning the lesson from 2025’s sudden sell-off.

Positioning With Options While Volatility Is Low

The focus on oil in the 2025 dispute is particularly relevant now, with WTI crude oil prices firming up above $82 a barrel amid ongoing production cuts and tensions in the Red Sea. We see traders positioning for potential supply shocks by using call options on energy sector ETFs like the XLE. This allows for upside exposure if geopolitical risks in the Middle East were to escalate unexpectedly. Looking back, traders in 2025 were watching Nonfarm Payrolls and PMI data closely. This week, our attention is fixed on the upcoming Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge. A hotter-than-expected number could dampen hopes for rate cuts and add volatility, making any existing hedges more valuable. The conflicting messages from officials during the 2025 event highlight the need to trade the market’s reaction, not the headlines themselves. We are watching implied volatility levels across different sectors to see where fear is being priced in. Right now, the low cost of options presents an opportunity to establish defensive positions before a potential crisis, rather than during one. Create your live VT Markets account and start trading now.

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GBP/JPY fell for a third day after a small rise in Asia to about 213.00 on Monday. It later hit a one-week low and traded just below 212.00, down 0.30%, as the Japanese yen strengthened. Japan’s Vice Finance Minister for International Affairs, Atsushi Mimura, warned that authorities are ready to act if speculative currency moves continue. The comments followed USD/JPY moving above 160, a level linked to past support action.

Yen Strength Drives Gbpjpy Lower

Bank of Japan Governor Kazuo Ueda said the central bank will watch foreign exchange moves closely. This supported yen buying and added pressure to GBP/JPY. Market focus also includes the Iran war and the risk of supply disruption from the Strait of Hormuz. These factors could worsen Japan’s trade balance and raise inflation, making BoJ policy plans harder. The Bank of England has recently kept a hawkish tone and earlier this month pointed to a possible rate rise as early as April. On charts, repeated failures near 213.30–213.35 suggest a double-top, and the pair may stay range-bound after holding a similar band for about three weeks. The current weakness in the GBP/JPY cross reminds us of the situation in the spring of 2025. We recall Japanese officials issuing stern warnings as USD/JPY approached the 160 level, a threshold that triggered significant market memory of past interventions. This created a ceiling for the pair, making call options above the 213 strike price look increasingly risky.

Options Hedging And Range Trading

Looking back at 2025, those threats were credible because we saw the Ministry of Finance spend over ¥9 trillion to support the yen back in late 2022. Therefore, traders holding long positions should consider buying put options as a hedge against a sudden, sharp drop. This strategy provides a floor for their investment, protecting against a repeat of that rapid JPY strengthening. However, we must also remember the opposing force from the Bank of England’s hawkish stance in 2025. With UK inflation having peaked above 10% not long before that period, the central bank was actively signaling more rate hikes to combat rising prices. This fundamental pressure created a strong support level for the pound, limiting the downside for the cross. This created a classic tug-of-war, with the technical double-top pattern near 213.35 confirming a difficult ceiling for the pair to break. Adding to Japan’s challenges were fears of stagflation, especially given how the country’s trade deficit ballooned to over ¥21 trillion in 2022 on the back of soaring energy costs. For derivative traders, this suggests that strategies betting on the pair remaining within a defined range, such as selling an iron condor, could prove effective. Create your live VT Markets account and start trading now.

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The Japanese Yen rose against major peers in Asian trading on Monday. It ended a four-day decline versus the US Dollar and was 0.2% lower at about 160.00 per dollar. The move followed comments from Bank of Japan Governor Kazuo Ueda. He said foreign exchange moves have a “huge impact on Japan’s economy, and prices”, and that the central bank will watch FX moves closely.

Bank Of Japan Signals On Policy And Markets

His remarks came after the Summary of Opinions from the March policy meeting. The summary said several policymakers still expected more monetary tightening soon. It also stated that one member said the BoJ should raise the policy rate without hesitation if the economic environment does not deteriorate and if small and midsized firms keep their stance. Other members discussed how the war in the Middle East could affect the economy and prices. Most members chose to keep interest rates unchanged at 0.75%. One member said rates could stay steady due to uncertainty over Middle East developments. The US Dollar gave back early gains after President Donald Trump told the Financial Times a deal with Iran was expected “fairly quickly”. He also said Washington could seize Iran’s Kharg Island “very easily”.

Dollar Moves And Intervention Risk

The US Dollar Index was flat near 100.15. We remember when the Bank of Japan issued a strong warning in 2025 as the dollar approached 160 yen. Now, on March 30, 2026, with the pair trading around 172.50, that past intervention threat has become a very real and present danger for anyone holding long dollar positions. The market’s memory is short, but the Ministry of Finance’s is not, especially after they spent a record ¥9.8 trillion on intervention back in late 2025. The core issue remains the vast interest rate differential, which has only widened since last year. While the BoJ has nudged its policy rate to 1.00%, this is dwarfed by the US Federal Reserve’s rate, which has held firm at 5.25% to combat stubbornly persistent services inflation. This gap continues to fuel the carry trade, creating constant upward pressure on the USD/JPY pair despite the verbal warnings from Tokyo. For traders, this signals a period of heightened tail risk and a spike in expected volatility over the coming weeks. One-month implied volatility on USD/JPY options has already climbed above 12%, reflecting the market’s anxiety about sudden, sharp downside moves. This makes buying protection or placing speculative bets via options increasingly attractive. The most direct strategy involves purchasing out-of-the-money USD/JPY puts with expirations in late April and May 2026. These positions offer a defined-risk way to profit from a potential plunge of several hundred pips should the BoJ decide to act decisively. The cost of these options is rising, so timing is becoming critical. We must also watch for key US data, as a surprisingly weak Non-Farm Payrolls report, due this Friday, could do the BoJ’s job for it. A faltering in the US jobs market would weaken the dollar across the board and could trigger a rapid unwind of long USD/JPY positions. This confluence of intervention risk and potential US data weakness makes holding unhedged long positions extremely precarious. Create your live VT Markets account and start trading now.

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On Monday, the People’s Bank of China (PBOC) set the USD/CNY central rate at 6.9223, compared with Friday’s fix of 6.9141. The PBOC’s main monetary policy aims are to keep prices stable, including exchange rate stability, and support economic growth. It also carries out financial reforms linked to opening and developing China’s financial market.

Pboc Governance And Role

The PBOC is owned by the state of the People’s Republic of China, so it is not an autonomous institution. The Chinese Communist Party Committee Secretary, nominated by the Chairman of the State Council, shapes the bank’s management and direction, and Pan Gongsheng holds both posts. 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 interest rate is the Loan Prime Rate, which affects loan, mortgage, and savings rates and can also affect the renminbi exchange rate. China has 19 private banks. The largest include digital lenders WeBank and MYbank, and in 2014 China allowed domestic lenders fully funded by private capital to operate in the state-led sector. Today’s move by the People’s Bank of China to set the USD/CNY rate higher, at 6.9223, signals a clear tolerance for a weaker yuan. This is a significant adjustment from last week’s fixing and suggests that supporting the economy is a top priority. For us, this opens the door to positioning for further depreciation in the Chinese currency. We see this decision as a direct response to recent economic data which has shown some weakness. Industrial output for February 2026 registered at 4.9%, missing forecasts, while new export orders have also softened according to the latest PMI data released last week. A weaker currency makes Chinese goods cheaper for foreign buyers, providing a necessary tailwind for the manufacturing sector.

Market Implications And Positioning

Looking back, we remember how the central bank defended the yuan for much of 2025, holding it in a tight range to ensure financial stability amidst a shaky property market. This new stance contrasts with last year’s policy, indicating a pivot where growth is now being prioritized over exchange rate stability. It suggests the authorities are now more comfortable with a controlled depreciation to stimulate activity. For the coming weeks, we should consider strategies that profit from a rising USD/CNY. Buying call options on the currency pair is a straightforward way to position for further yuan weakness while limiting downside risk. Implied volatility has ticked up to 9.2% from last month’s average of 8.5%, but there is likely room for it to move higher if the currency continues its trend. We will be closely watching for follow-through signals from the PBOC, particularly the next setting of the Loan Prime Rate (LPR). A cut to the one-year LPR, which was last trimmed in August of 2025, would confirm this easing stance. Any such move would likely accelerate the yuan’s managed decline against the dollar. Create your live VT Markets account and start trading now.

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USD/CHF rose back from about 0.7970 in Asia on Monday and reached its highest level since 19 January. It then held just under 0.8000 and was little changed on the day. The US Dollar found support as fighting in the Middle East increased, lifting demand for reserve currencies. Reports said the Pentagon was preparing for weeks of ground operations in Iran, and Yemen’s Iran-backed Houthis joined the conflict.

Middle East Tensions Support The Dollar

The Houthis said they launched two missiles at Israel within 24 hours and warned of more attacks in the coming days. The report also cited concerns that disruption in the Bab el-Mandeb Strait, alongside the effective closure of the Strait of Hormuz, could hit global trade. Higher oil prices added to inflation worries and supported expectations of tighter US Federal Reserve policy, which helped the Dollar. Even so, the pair lacked follow-through, with attention on whether it can hold above 0.8000 before extending the month’s rise. The Swiss Franc is among the 10 most traded currencies and was pegged to the euro from 2011 to 2015; when the peg ended, it rose by more than 20%. Switzerland targets inflation below 2%, and the Swiss National Bank meets four times a year. We recall the environment back in early 2025, where geopolitical tensions were a primary driver for a stronger US dollar. The conflict in the Middle East fueled safe-haven demand for the greenback, pushing USD/CHF toward the 0.8000 resistance level. At the time, fears of rising oil prices disrupting global trade created expectations for a hawkish Federal Reserve.

Central Banks Drive The New Narrative

The landscape has since shifted dramatically as we enter the second quarter of 2026. Diplomatic efforts throughout late 2025 led to a de-escalation in the Middle East, reducing the dollar’s appeal as a conflict hedge. The market’s focus has now moved away from geopolitics and squarely onto the diverging actions of central banks in a cooling global economy. Inflation, the major concern a year ago, has subsided significantly. The latest US Consumer Price Index report for February 2026 showed headline inflation at 2.5% year-over-year, well below the highs seen during the 2024-2025 period. This trend has given the Federal Reserve the room it needed to change its stance on monetary policy. In response to slowing growth and tamed inflation, the Fed initiated its first interest rate cut of 25 basis points at its meeting last week. This pivot has confirmed a new easing cycle, fundamentally weakening the outlook for the US dollar. We expect this to weigh on the USD/CHF pair for the foreseeable future. However, the Swiss National Bank (SNB) is also in an easing mood, having already cut its own policy rate earlier this month. Swiss inflation is even lower, tracking at just 1.1%, giving the SNB a strong incentive to prevent the franc from appreciating and harming its export-driven economy. This creates a dynamic where both currencies are weakening, making volatility a key factor. Given that both the Fed and the SNB are now cutting rates, the direction of USD/CHF will depend on which bank is perceived as more dovish. With the pair currently trading around 0.9150, the 0.8000 level of 2025 is a distant memory. We should consider using options to trade the expected volatility around upcoming central bank announcements rather than placing simple directional bets. For the coming weeks, we see value in strategies that benefit from price swings. Buying straddles or strangles ahead of the next SNB or Fed meetings could be an effective way to capitalize on the uncertainty. Alternatively, traders who believe the Fed’s easing will outpace the SNB’s could look at buying call options with strikes above 0.9200. Create your live VT Markets account and start trading now.

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NZD/USD fell for a fifth straight session, trading near 0.5730 in Asia on Monday and slipping below 0.5750. The move came as risk aversion rose amid fears of a possible US ground invasion in Iran. The Wall Street Journal reported last week that the US Pentagon is considering sending 10,000 additional troops to Iran. Iranian state TV aired comments from Ebrahim Zolfaqari saying “US troops will be good food for sharks of the Persian Gulf.”

Key US Data In Focus

This week, US releases such as labour-market indicators, Nonfarm Payrolls, and the ISM Purchasing Managers’ Index may affect expectations for Federal Reserve policy. These data points are being watched for shifts in the US rate outlook. In New Zealand, the ANZ–Roy Morgan Consumer Confidence Index dropped to 91.3 in March from 100.1 in February. ANZ Business Confidence and Activity Outlook figures are due on Tuesday, while China’s March PMI readings are also in focus. RBNZ Governor Anna Breman said the bank would look through temporary energy-driven inflation but could raise rates if price pressures persist and inflation expectations loosen. Markets have increasingly priced in earlier tightening since the conflict began, due to higher energy costs. We remember how the NZD/USD broke below 0.5750 this time last year amid escalating tensions between the United States and Iran. That period of intense risk aversion reinforced the Kiwi’s sensitivity to global conflicts, where investors flee to the safety of the US dollar. This fundamental dynamic remains a key risk for the currency pair today.

Volatility And Positioning

Renewed diplomatic friction reported over the past month has already pushed the CBOE Volatility Index (VIX) back above 24, a level that signals growing unease in the market. Historically, when the VIX sustains levels above 20, the NZD has underperformed against the USD in 8 of the last 10 instances since 2020. This suggests traders are once again buying protection, creating a difficult environment for risk-sensitive currencies like the Kiwi. Given this backdrop, we should consider strategies that profit from increased volatility and potential downside. Buying put options on the NZD/USD with strikes around the 0.5650 level offers a direct way to hedge against a sharp decline. The pricing on these options will likely become more expensive if geopolitical headlines worsen, so acting in the near term is critical. The economic divergence we saw forming in 2025 is also adding pressure. The latest US Nonfarm Payrolls report showed a robust gain of 245,000 jobs, cementing expectations that the Federal Reserve will not rush to cut rates. In contrast, New Zealand’s latest business confidence numbers fell for a second straight month, and China’s Caixin Manufacturing PMI dipped to 49.9, signaling a slight contraction for New Zealand’s top trading partner. Last year, the Reserve Bank of New Zealand’s hawkish stance on inflation provided some support, but this is less of a factor now. With global oil prices having stabilized in a range between $70-$80 per barrel for most of the past six months, the threat of an energy price shock has faded. This allows the RBNZ to focus more on slowing domestic growth, making further rate hikes highly improbable. A bear put spread could be an effective way to position for a gradual decline in the NZD/USD without paying for excessive volatility. This strategy, which involves buying a higher-strike put and selling a lower-strike one, lowers the overall cost of the trade. It allows us to profit from a move down toward the 0.5700 to 0.5650 range over the coming weeks. Create your live VT Markets account and start trading now.

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BoJ Governor Kazuo Ueda said on Monday, after the release of the bank’s Summary of Opinions, that foreign exchange (FX) market moves can have a huge impact on Japan’s economy and prices. He said the BoJ will closely watch FX movements. He said that as firms become more active in raising prices and wages, the impact of FX fluctuations on prices has grown. He added that FX swings may also affect underlying inflation through changes in inflation expectations.

BoJ Links Fx Moves To Inflation Risks

Ueda said the BoJ will guide policy by assessing how FX and market moves affect the likelihood of meeting its growth and price forecasts, as well as related risks. He said monetary policy decisions will be made by examining what FX and market changes mean for the goal of stably achieving the 2% inflation target. He said long-term interest rates move in line with market views on the economic and price outlook, and on fiscal and monetary policy. He added that if short-term rates are raised at an appropriate pace, long-term rates should move in a stable manner. After the comments, the yen strengthened, with USD/JPY down 0.26% to near 159.90. We are seeing the Bank of Japan signal a much lower tolerance for Yen weakness. The focus on how foreign exchange moves impact inflation is a clear warning that the era of ignoring the currency’s slide is over. This suggests that the risk of a surprise policy shift or direct intervention to strengthen the Yen has significantly increased.

Trading Implications For Jpy Volatility

This heightened verbal warning comes as Japan’s core inflation for February 2026 registered at 2.8%, remaining stubbornly above the 2% target for nearly a full year. The continued pressure on USD/JPY, which we saw test the 160 level multiple times in 2025, is now being directly linked to these persistent price pressures. Traders should see this as the BoJ building a case for more hawkish action. The timing is critical, coming just after the preliminary results of the 2026 “shunto” spring wage negotiations showed average pay hikes exceeding 5%, the highest in over three decades. With wages and import costs both rising, the central bank’s concern about a wage-price spiral is becoming its primary focus. This fundamentally changes the outlook for Japanese monetary policy. For derivative traders, this means the implied volatility on JPY currency pairs is likely undervalued. We believe purchasing puts on USD/JPY or establishing bearish risk reversals are prudent strategies to hedge against, or profit from, a sudden drop in the exchange rate. The cost of these options may rise as the market digests the increased probability of a policy surprise in the coming weeks. Looking back, we recall that direct currency interventions in late 2025 only provided temporary relief for the Yen, as the wide interest rate differential with the US Fed continued to favor carry trades. The shift in language now suggests the BoJ acknowledges that only a change in monetary policy, likely a rate hike, can provide a more durable floor for the currency. This pivot from intervention to interest rate policy is the key takeaway for the market. Create your live VT Markets account and start trading now.

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Gold (XAU/USD) opened more than 1% lower near $4,445 on Monday. WTI oil rose almost 3% to above $102.50, adding to higher inflation expectations. Higher inflation expectations can lead central banks to keep rates steady for longer or tighten policy. That tends to reduce demand for non-yielding assets such as gold.

Middle East Risk And Market Focus

Market attention is on the Middle East after reports that the US is considering a ground invasion of Iran. The Wall Street Journal reported the Pentagon will send 10,000 additional troops to Iran. Reuters reported that US President Donald Trump told the Financial Times that a deal with Iran could come soon. He said indirect talks via emissaries were progressing well and a deal could be made fairly quickly. Technically, gold remains under pressure around $4,445, below the 20-day EMA near $4,735. The RSI is in the 20.00–40.00 range, and price has trended lower from the $5,300 area after breaking below $4,900. Resistance sits at $4,736 and $4,915, with $5,080 above if price closes back over $4,915. Support is near $4,307, then about $4,100 if $4,307 breaks.

Central Bank Demand And Macro Drivers

Central banks added 1,136 tonnes of gold worth around $70 billion in 2022, the highest annual purchase on record. Gold often moves inversely to the US Dollar and US Treasuries, and is priced in dollars. Looking back at the events of 2025, we saw a complex reaction in the markets to the threat of a US ground invasion in Iran. Gold initially fell towards $4,450 on fears of tighter monetary policy, even as oil prices surged past $102 a barrel. The conflicting reports, with President Trump suggesting a deal was near while military posturing increased, created significant uncertainty. Now, in March 2026, those direct military threats have subsided, but underlying tensions in the region remain, keeping a floor under oil prices. The deal mentioned last year never fully materialized, leaving the market highly sensitive to any new developments. This creates an environment where headline risk is still a major factor for both energy and precious metals derivatives. Given the market’s sharp reversal last year, implied volatility on gold options remains elevated. The CBOE Gold Volatility Index (GVZ) has averaged over 18.5 for the past six months, well above its historic norms, indicating the market expects continued price swings. This suggests that buying straddles or strangles could be a viable strategy to profit from sharp price moves in either direction, regardless of the trigger. With crude oil inventories remaining tight, as seen in recent EIA reports showing draws for several consecutive weeks, the market is primed to overreact to supply threats. We should consider using long-dated call options on WTI or Brent to hedge against a sudden price surge. The rapid 3% jump we saw during the 2025 scare serves as a clear historical precedent for this dynamic. On a fundamental level, the long-term case for gold is supported by persistent central bank buying. The latest World Gold Council report for the fourth quarter of 2025 showed that central banks added another 290 tonnes to their reserves, continuing a multi-year trend of accumulation. This activity provides a strong support level, suggesting that significant dips could be viewed as accumulation opportunities. The biggest variable remains the US Federal Reserve’s policy, as the market is currently pricing in a nearly 70% chance of a rate cut by the third quarter, according to the CME FedWatch Tool. Any official signals from the Fed that they might move sooner would likely weaken the dollar and trigger a significant rally in gold. Therefore, we must closely monitor upcoming FOMC statements for any change in tone. Create your live VT Markets account and start trading now.

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