The shared currency rises above 1.1740 as Trump eases tariff threats, weakening the dollar.
EUR/USD rose above 1.1740, increasing by over 0.50% as the dollar weakened despite positive US economic news. This rise was driven by better risk sentiment following US President Trump’s decision to drop tariff threats on Europe, which boosted the euro. At the time of reporting, EUR/USD was at 1.1743, recovering from a daily low of 1.1670.
Strong Economic Indicators
The strong GDP numbers from Q3 and stable inflation in the US lowered expectations for a Federal Reserve rate cut in January. Market predictions showed a 95% chance that the Fed will keep rates steady, along with reduced predictions for future cuts. In Europe, minutes from the ECB meeting indicated a shared view that underlying inflation remains close to the 2% target.
The EU’s economic calendar will include Flash PMIs for Germany, France, and the overall bloc, plus comments from ECB President Christine Lagarde. In the US, attention will be on the S&P Global Flash PMIs and consumer sentiment data. The euro has shown mixed changes against other major currencies this week, performing well against the Japanese Yen.
The ECB, based in Frankfurt, manages monetary policy in the Eurozone, focusing on price stability through interest rate decisions. Important economic data, like GDP, inflation rates, and trade balances, are key to assessing the euro’s strength. Positive trade balances, where exports exceed imports, usually bolster the currency.
Last year, when tariff threats were lifted, EUR/USD exceeded 1.1740. However, that optimism seems to have peaked, as the pair has significantly declined since then. Now, the focus has shifted from settling trade disputes to the growing differences in central bank policies.
Changing Economic Outlook
Looking back, markets correctly anticipated Fed rate cuts in 2025, but they underestimated the US economy’s strength. The US Core PCE data from December 2025 showed inflation at 2.9% year-over-year, weakening the case for more aggressive rate cuts. This stands in stark contrast to a year ago when markets expected over 40 basis points of easing.
In Europe, the ECB’s earlier confidence has diminished. Recent Eurostat data revealed that Eurozone GDP growth was almost flat in the fourth quarter of 2025, and flash PMI figures for January suggest a weak beginning to the year. Consequently, money markets now believe there is a 70% chance of an ECB rate cut by June, adding pressure on the euro.
This policy divergence signals potential increased volatility. The implied volatility in EUR/USD options remains moderate, creating opportunities to buy straddles or strangles for potential profits from significant price moves in either direction over the next month. The current environment is much uncertain compared to the risk-on attitude seen last year.
For traders with specific views, the economic outlook leans toward a weaker euro against the dollar. It would be wise to consider buying put options or setting up bearish put spreads targeting a drop below 1.0800 in the weeks ahead. The previous technical targets of 1.1800 and higher no longer seem relevant given the current macroeconomic situation.
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New Zealand’s Consumer Price Index surpasses expectations with a 3.1% year-on-year increase in Q4
Bank of Japan’s Monetary Policy Outlook
The Bank of Japan (BOJ) is likely to keep interest rates steady while the market considers possible future rate increases. The USD/JPY is showing slight gains, nearing 158.50, ahead of the BOJ’s decision on rates. For currency traders, several brokers are being reviewed, focusing on low spreads, high leverage, and special accounts. There are also guides available to help select the right brokers in different regions and platforms. FXStreet reminds traders that their market insights are for educational use only and highlight the risks involved in trading. They stress the importance of conducting personal research due to the significant risks of investments. New Zealand’s inflation rate surprised many by reaching 3.1% for the last quarter of 2025. This challenges the idea that the Reserve Bank of New Zealand (RBNZ) might ease policy soon. As a result, the market may now expect a higher chance of another rate hike or a “higher for longer” stance from the central bank.RBNZ’s Potential Monetary Policy Moves
Looking back at the RBNZ’s actions from 2022 to 2023, they were quick to respond to rising inflation. They were among the first major banks to raise rates significantly, setting an example for others. Traders should consider preparing for a similar strong response now, perhaps by using call options on the New Zealand dollar to take advantage of potential gains. The difference between New Zealand’s approach and Australia’s is becoming more noticeable. Australia’s latest inflation data from late 2025 indicates a clear cooling trend, with their monthly CPI dropping to around 3.4%. This divergence in policy—where the RBNZ seems hawkish while the Reserve Bank of Australia is more neutral—supports a long position on NZD/AUD. Historically, the interest rate difference is important for this currency pair, and it appears to be widening in favor of the Kiwi dollar. It’s also essential to note that speculative positions tracked by the CFTC up to early January 2026 showed a significant short position on the Kiwi dollar. This one-sided bet means that the recent inflation surprise could lead to a major short-squeeze, forcing those betting against the currency to cover their positions. This could amplify any initial upward movement in the coming weeks. The positive outlook for the NZD is further bolstered by a weaker US dollar, as the Dollar Index (DXY) recently dipped below 101.50 for the first time since last summer. A weaker dollar benefits commodity currencies like the New Zealand dollar. Thus, strategies such as buying NZD/USD call spreads could be a profitable way to capitalize on both Kiwi strength and a broadly weaker dollar. Create your live VT Markets account and start trading now.In January, South Korea’s Consumer Sentiment Index increased from 109.9 to 110.8.
The South Korea Consumer Sentiment Index increased to 110.8 in January, up from 109.9. This indicates a slight boost in how consumers feel about South Korea’s economy.
In other economic news, the Bank of Japan decided to keep interest rates unchanged. The USD/CNY reference rate was set at 6.9929, down from 7.0019.
Gold Prices Surge
Gold prices have soared past $4,950 due to easing tensions between the US and EU. The NZD/USD pair rose above 0.5900 after New Zealand’s inflation surpassed expectations. In currency markets, the EUR/USD pair is currently eyeing the 1.1800 level, supported by a weaker US Dollar. Meanwhile, the GBP/USD is gaining strength, approaching 1.3500, thanks to pressure on the USD. Gold’s rise is backed by safe-haven demand and possible changes in Federal Reserve policies. In the cryptocurrency market, XRP remains above $1.90 despite some fluctuations. FXStreet offers in-depth analysis and data about financial markets. They aim to provide useful insights while emphasizing the risks involved in financial trading. All viewpoints in their articles are the authors’ own, and FXStreet does not guarantee error-free content.US Dollar Trends
As of January 23, 2026, continuous selling of the US dollar remains a key trend, affecting other currencies. Traders might consider buying call options on major pairs like EUR/USD and GBP/USD to profit from this trend. Futures markets are currently predicting a 75% chance of a Federal Reserve rate cut by March, suggesting a downward path for the dollar. The substantial rise in gold, now above $4,950, indicates significant market concern, even as currencies reflect a risk-on mood. Although gold’s momentum might push prices higher, its overbought status raises the risk of a sharp price drop. Traders are using strangles—buying both a call and a put option—to take advantage of expected price swings without betting on a specific direction. We’re closely monitoring the Japanese yen as the Bank of Japan keeps rates steady after raising them in December 2025. This difference in policy with the easing Fed could strengthen the yen against the dollar. We expect USD/JPY to break below the 155 level, and buying put options on this pair could be a good way to position for this move. The slight improvement in consumer sentiment in South Korea adds to a picture of relative strength in Asian economies, suggesting that the Korean Won might perform well against the weakening US dollar. Historically, rising consumer confidence has often led to gains in the KOSPI 200 index, similar to trends observed during the 2021 recovery. Create your live VT Markets account and start trading now.An unexpected development occurred, but the NASDAQ 100 still aligns with Elliott Wave analysis.
The NASDAQ 100 is being analyzed using the Elliott Wave Principle. Earlier, it was expected to move forward in the 3rd wave of a 3rd wave, leading to a final 5th wave, as long as prices stayed above certain warning levels. However, the index reached a high of 25873 on January 13 and then dropped to 24954, which contradicted the earlier prediction.
### The Unexpected Movements
These unexpected changes suggest that the index might be forming a larger ending diagonal pattern, which has a 3-3-3-3-3 structure. The rally from November to January consisted of three waves, with the first wave (W-1) measuring 0.618 times the previous larger wave, a common ratio used in this analysis. Even with the drop, as long as the index remains above important lows of 24647 and 23854, the possibility of the 3rd wave of a 3rd wave is still alive.
For confirmation, the index should exceed the January 13 high, possibly aiming for around 26900. The 3rd wave in an ending diagonal typically reaches around 123.6-138.2% of the first wave, indicating a target range of 27090-27380. Warning levels are established at 25602, 25400, 25086, 24647, and 23854, and these will be updated if the index rises further.
Looking back to early 2025, we noticed an unexpected deviation in the NASDAQ 100 after it peaked on January 13. This price action complicated the immediate outlook but eventually led into the larger ending diagonal pattern we anticipated. That pattern unfolded, pushing the index toward the 27,300 level by the second quarter of 2025 before a notable correction occurred.
### The Current Market Environment
As of late January 2026, the market is experiencing hesitation following a volatile fourth quarter. The latest Consumer Price Index report indicates that inflation remains steady at 3.2%. Meanwhile, a strong jobs report from December has reduced expectations for immediate interest rate cuts. This uncertainty is reflected in the CBOE Volatility Index (VIX), which has risen to around 19.5, indicating increased trader anxiety compared to last year.
In the coming weeks, a cautious approach seems wise. Derivative traders might consider strategies that protect against downside risk, such as buying puts on the QQQ or using bear put spreads to prepare for a potential test of the late 2025 lows. With mixed earnings reports from major tech companies so far, weakness in specific sectors could drag the broader index down.
However, any positive developments, such as a lower inflation rate or more favorable comments from Federal Reserve officials, could lead to a strong relief rally. Quick-thinking traders may want to use short-dated call options to capitalize on any bounce if the index shows signs of strength. A clear break above the recent highs near 26,100 would be the first sign that bullish momentum is returning.
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US-EU tensions ease, markets rise, and gold prices soar during diplomatic talks
US-EU tensions have eased after President Trump reached an agreement with NATO related to Greenland. This deal led to the suspension of tariff threats against eight European countries. The US Dollar Index (DXY) traded around 98.40, falling despite positive US economic data, which reduced the chance of a rate cut in the next Federal Reserve meeting.
The US Dollar declined against major currencies, dropping 1.20% against the Australian Dollar. AUD/USD was about 0.6840, while EUR/USD and USD/JPY were at 1.1740 and 158.30, respectively. Gold hit a record high, trading above $4,920, reflecting its appeal as a safe haven amidst decreasing geopolitical tensions.
Upcoming Economic Releases
Key upcoming economic releases include the Consumer Price Index from the Reserve Bank of New Zealand and Japan’s National CPI. The Bank of Japan will also announce its monetary policy decision, while preliminary PMI figures for Germany, the Eurozone, the UK, and the US will be published. Gold is significant for its history as a store of value and safe-haven investment. Central banks, especially in developing economies, have bought large amounts, with purchases peaking in 2022. Gold prices are affected by geopolitical events, interest rates, and movements in the US Dollar, due to their inverse relationships. A year ago, risk appetite improved as US-EU tensions over Greenland eased, relieving some pressures on the markets. This came after concerns about tariff threats affecting European assets. The resolution set a new tone for foreign exchange markets as we moved deeper into 2025. The US Dollar Index (DXY) was falling then, and this trend continued throughout 2025 as inflation dropped faster than expected. By the fourth quarter of 2025, the US Consumer Price Index (CPI) fell to 2.8%, leading the Federal Reserve to cut rates twice, putting more pressure on the dollar. This creates a good opportunity for shorting the dollar or buying put options on dollar-centric pairs in the coming weeks.Trends in Currency and Precious Metals
The dollar’s weakness has been beneficial for the Euro, a trend that persists. The European Central Bank has been slower in cutting rates compared to the Fed, creating an advantageous interest rate difference for the EUR/USD pair. Traders should expect this policy difference to continue, suggesting further gains for the Euro against the dollar. Gold’s rise to over $4,920 last year, even with improved risk sentiment, indicated strong underlying demand. Massive central bank purchases contributed to this, with the World Gold Council reporting an addition of 1,050 tonnes to reserves in 2025, continuing a prior trend. As long as central banks keep reducing reliance on the dollar, buying call options on gold is a smart hedge against market turmoil. At this time last year, we noted the Bank of Japan’s gradual move toward policy normalization starting in mid-2025. This has begun to reverse the yen carry trade. We expect this to accelerate, putting downward pressure on pairs like USD/JPY and AUD/JPY. Traders should be cautious about being long on these pairs and consider strategies that benefit from a strengthening yen. Given the changing monetary policies, with the Fed easing and the BoJ tightening, we expect increased currency volatility. Implied volatility on major currency options remains relatively low, creating a chance to buy straddles or strangles on pairs like EUR/USD and USD/JPY. This strategy would allow traders to profit from significant price movements in either direction over the next few months. Create your live VT Markets account and start trading now.The Japanese yen strengthens against the US dollar as USD/JPY declines due to dollar weakness.
The USD/JPY pair has pulled back from recent highs, now around 158.30. This drop is mainly due to some softness in the US Dollar, influenced by global currency changes. Even with steady growth and inflation data, the US Dollar hasn’t gained much strength.
Future Bank of Japan Decisions
Traders are cautious as they look ahead to important events, including the Bank of Japan’s interest rate decision on Friday, which is expected to stay at 0.75%. Investors are eager to hear insights from the post-meeting press conference and the upcoming Consumer Price Index (CPI) report from Japan, as these could shape future Bank of Japan (BoJ) policy. Japan is facing rising fiscal concerns. A snap election might lead to increased government spending. This, along with Japan’s significant public debt, could influence the BoJ’s decisions on policy normalization. In the US, the Core Personal Consumption Expenditures (PCE) for the third quarter rose by 2.9% quarter-over-quarter, matching expectations. The economy grew at an annualized rate of 4.4% in Q3, exceeding the forecast of 4.3%. Weekly Initial Jobless Claims rose slightly to 200K from 199K but were still below the expected 212K. Upcoming US PMI surveys and Consumer Sentiment data will add more factors to market predictions. The Japanese Yen has also gained strength against other major currencies, including the US Dollar, as shown in a currency strength heat map.Japanese Yen and Election Risk
Recall that the US Dollar weakened in late 2025, even amidst strong economic growth, causing the USD/JPY to retreat from its highs. Now, as of January 23, 2026, the pair trades near 160.50, primarily driven by the significant interest rate difference between the US and Japan. The snap election in Japan, set for February 8th, is the central focus. This upcoming election presents a significant risk that could further weaken the yen. Recent polls suggest that Prime Minister Takaichi’s ruling party might not achieve a clear majority, resulting in more government spending, which complicates the BoJ’s policy. This political uncertainty continues to be a challenge for the yen, contributing to its recent decline. With this risk, one-month implied volatility in USD/JPY options has risen to over 12%, up from the previous quarter’s average of 9%. Traders might consider strategies like buying straddles or strangles to benefit from a significant price movement, irrespective of the direction, following the election results. These options strategies allow for potential profit from increased volatility with a limited upfront cost. The ongoing divergence in central bank policies still favors a stronger Dollar. Japan’s national CPI for December 2025 was reported at 2.7%, giving the Bank of Japan reason to stay cautious and avoid any policy shifts before the election. In contrast, even as US inflation has eased to 3.2%, the Federal Reserve’s benchmark rate is expected to remain much higher than Japan’s for some time. Looking ahead, we are awaiting the preliminary US GDP figures for the fourth quarter of 2025, expected next week. Another solid growth figure could delay market expectations for Federal Reserve rate cuts and further support the dollar’s strength against the yen. This scenario makes long positions in the dollar against the yen, hedged with options, a tempting strategy. Create your live VT Markets account and start trading now.Gold reaches an all-time high of $4,906 despite improved risk appetite and easing US-Europe tensions
Gold (XAU/USD) soared to a record high of $4,906, increasing by 1.60% on the day and trading at $4,903. This rise came amid improved risk sentiment and reduced tensions between the US and Europe following an agreement about Greenland.
The gold rally is supported by ongoing policy uncertainty and lowered expectations. Talks between US President Donald Trump and NATO’s Mark Rutte in Switzerland resulted in the cancellation of tariff threats on eight European countries.
US Economic Outlook
US economic data has been better than expected, with third-quarter GDP surpassing projections. While the Federal Reserve’s inflation gauge stabilized, it remains below 2%. Despite the positive US economic news, money markets predict a 41 basis point easing by year-end. US Treasury yields are steady, and the Dollar Index dropped 0.47% to 98.32. Gold is targeting $5,000 but may face a downside if it falls below $4,850. Central banks have significantly increased their gold holdings, purchasing 1,136 tonnes in 2022 alone. Countries like China, India, and Turkey are building up their reserves. Gold often rises during geopolitical tensions or when interest rates decrease, usually moving opposite to the US Dollar and Treasuries. Gold’s rise above $4,900 is unusual, especially given the strong US economic data from late last year. The price surge is mainly driven by a weakening US Dollar and ongoing expectations for Federal Reserve rate cuts in 2026. This creates a challenging situation where the trend appears strong, but the underlying factors seem uncertain.Central Bank Activity
The demand for gold isn’t purely speculative; strong institutional buying is supporting its price. According to the World Gold Council, central banks bought another 250 tonnes in the fourth quarter of 2025, continuing a multi-year accumulation trend. Additionally, gold-backed ETF inflows in early January have already exceeded those of the entire previous quarter, signaling increased interest. With the Relative Strength Index (RSI) now in overbought territory, simply buying futures may be risky due to the possibility of a sharp pullback. Traders might consider using options, like a bull call spread for March contracts, to benefit from a continued move toward the psychological $5,000 level while limiting their risk. This approach is more cost-efficient than outright call purchases, especially during high volatility. For those already holding long positions, it’s crucial to safeguard gains against a potential reversal. Buying protective puts with a strike price around $4,800 can serve as insurance against sudden drops. A similar sharp correction occurred after a significant milestone was reached in mid-2024, reminding us that record highs can be volatile. The Federal Reserve is a key player in this scenario. The market anticipates rate cuts, despite officials’ comments about the January meeting. Traders are overlooking the Fed’s current stance, predicting weaker data later this year. Any subtle change in the Fed’s language next week could lead to drastic price movements, highlighting the importance of careful risk management. Create your live VT Markets account and start trading now.Indian markets experience sharp reversal of Nifty and Bank Nifty after initial gains
In a recent look at the Indian markets, both Nifty and Bank Nifty started strong with big gap-ups. However, they quickly turned around. Nifty hit a resistance zone and then dropped, entering a sideways correction, as highlighted by Elliott Wave analysis.
Recent financial updates show the USD/JPY close to 158.50 ahead of a Bank of Japan rate decision, expected to stay at 0.75%. Japan’s national CPI rose by 2.1% year-on-year in December, and New Zealand’s NZD/USD climbed above 0.5900 due to higher-than-expected inflation.
Market Insights Overview
More market insights reveal that EUR/USD is focused on 1.1800, while GBP/USD is around 1.3500 due to ongoing USD selling. Gold continues to break records, now exceeding $4,950. The Bank of Japan is likely to maintain steady rates, with markets on the lookout for hints of future tightening actions. FXStreet, the source of this information, states that the content is for informational purposes and encourages thorough research before making investment decisions. This article is not investment advice and does not take responsibility for any financial losses or damages from using the information. The sharp change in the Nifty after briefly crossing 25,435 serves as an important warning. A market that opens with a big gap up but ends near its low indicates that sellers are outnumbering buyers at higher prices. This behavior could signal an exhaustion of the current uptrend. This rise in uncertainty is backed by the India VIX, which has jumped over 35% in the past week, now trading above 19, a level not seen consistently since late 2025. This increase means the cost of options, or insurance, is rising quickly as traders expect greater price fluctuations. Traders should be cautious about holding unhedged long positions.Derivatives Trading Strategy
In this environment, derivative traders might explore strategies that benefit from a range-bound or declining market. Bear call spreads above the strong resistance at 25,500 could provide a defined-risk approach to take advantage of the potential market ceiling. This strategy gains from both a drop in the Nifty and time decay. The selling pressure seems to be driven by institutional players, with recent data indicating that Foreign Institutional Investors (FIIs) have sold over ₹8,500 crore in the cash market this week. This is a notable shift from the strong buying we saw in the last quarter of 2025. We must acknowledge this change in institutional activity. Options data reinforces this cautious view, showing a significant rise in open interest for call options at the 25,500 and 25,600 strike prices. This concentration of calls serves as a strong barrier to any further upward movement in the near term, indicating a period of consolidation or correction rather than continued gains. While we focus on domestic trends, we cannot ignore global factors, especially the upcoming Bank of Japan policy meeting. Any unexpected hawkish stance from the BoJ could strengthen the yen and spark risk aversion across Asian markets. This could intensify the corrective trends we are already seeing here at home. Create your live VT Markets account and start trading now.US crude oil stocks rise by 3.602 million barrels, exceeding predictions
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.Euro strengthens against a declining US dollar, trading around 1.1742 amid strong US economic indicators
The Euro is strengthening against the US Dollar, currently trading at about 1.1742. This rise is mainly due to a weaker US Dollar, as traders are overlooking positive economic data from the US.
Recent US data indicates stable inflation and strong growth. Core Personal Consumption Expenditures (PCE) rose by 2.9% in Q3, and the annual GDP for Q3 grew by 4.4%, surpassing the 4.3% forecast and up from 3.8% in Q2.
