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.
US Economic Indicators
Initial Jobless Claims increased slightly to 200K, but this is still below the expected 212K. Core PCE inflation rose by 0.2% month-over-month, and the annual rate increased to 2.8%, up from 2.7%. Personal income went up by 0.3%, which is less than the expected 0.4%, but better than October’s 0.1% gain. Personal spending remained steady at 0.5%. Despite these figures, many expect the Federal Reserve to keep rates steady at their meeting in January. A Reuters poll of 55 economists suggests the first rate cut might not happen until June or later. The US Dollar Index is down 0.41%, trading at around 99.37. Additionally, trade tensions between the US and the European Union have eased following productive discussions about tariffs and a deal concerning Greenland and the Arctic. ECB policymakers have no immediate plans to change interest rates, acknowledging the resilience of the Eurozone’s economic activity, while leaving options open for future decisions.Currency Market Insights
The EUR/USD exchange rate is climbing toward 1.1750, mainly due to a weaker US Dollar and not necessarily strong confidence in the Euro. This occurs despite positive US growth and job data from late 2025. Traders should be cautious, as this dollar weakness might be overdone. The Federal Reserve’s ability to remain patient is being put to the test by the latest data. For example, December 2025’s Consumer Price Index (CPI) released earlier this month showed a 3.4% increase, slightly up from the previous month. Persistent inflation may make the Fed less likely to cut rates in June than many expect. On the other hand, the European Central Bank’s relaxed approach faces challenges from recent data. In December 2025, the Eurozone experienced a notable inflation rebound to 2.9% year-over-year. This raises the possibility that the ECB may need to take a more cautious approach, limiting how much the Euro can gain itself. For derivative traders, this situation creates potential for volatility, especially ahead of the Fed’s meeting on January 28th. The market’s dovish expectations clash with the more persistent inflation data. Options strategies like long straddles, which benefit from large price movements in either direction, may be ideal for capturing surprises from the Fed’s announcement. We have seen similar patterns before, especially during the 2023-2024 period, when markets aggressively anticipated rate cuts that central banks ultimately did not implement. The current situation feels similar, suggesting that implied volatility in EUR/USD options may be undervalued. This creates a chance for traders to position themselves for a breakout from the current range. Create your live VT Markets account and start trading now.The 4-week bill auction in the United States rises from 3.595% to 3.63%
**Currency Fluctuations**
The US 4-week bill auction yield went up from 3.595% to 3.63%. Various economic indicators were reported. Japan’s national CPI rose by 2.1% year-over-year in December. In New Zealand, CPI inflation climbed to 3.1% year-over-year in Q4, slightly above the expected 3.0%.
Currency fluctuations were noted, with the NZD/USD pair rising above 0.5900. The GBP/JPY reached a weekly high as the pound strengthened, while EUR/USD aimed for 1.1800. Gold prices surged over $4,900 per troy ounce due to a weaker US Dollar.
Ripple’s cryptocurrency token, XRP, is holding steady at $1.90, benefiting from ETF inflows, even as the market remains cautious. Chainlink (LINK) is experiencing volatility and is trading at $12.20 as retail demand decreases. There were significant geopolitical events, including a brief tension over NATO tariffs proposed by Donald Trump, which quickly eased.
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The article lists top brokers for 2026, highlighting those with low spreads, high leverage, and various account types. It emphasizes that no investment advice is given, and FXStreet is not responsible for any losses. Investors should perform thorough research and think about the risks associated with market activities. The rise in the 4-week US bill auction to 3.63% suggests the market is preparing for stronger short-term rates from the Federal Reserve. However, the US Dollar is paradoxically weakening against other major currencies. This indicates that traders are anticipating more aggressive policy tightening from foreign central banks, making the dollar less appealing. We see clear signs of persistent inflation abroad, with Japan’s CPI at 2.1% and New Zealand’s unexpectedly high at 3.1%. Reflecting on global inflation in 2023, central banks outside the US are now taking strong actions. This makes long positions on currencies like the New Zealand Dollar through futures or options an appealing strategy against the greenback. Gold’s rise toward $5,000 an ounce is noteworthy, driven by the dollar’s decline and ongoing inflation fears. This trend is more than just a response to short-lived geopolitical news, as central bank purchases in the last quarter of 2025 hit a multi-year high. Therefore, consider using call options on gold futures to maintain exposure while managing the risk of a sudden drop. Despite improved trade relations, underlying market volatility remains important. The CBOE Volatility Index (VIX) is around 18, lower than last week but still above the average for most of 2024. This environment favors option-selling strategies that benefit from time decay, like writing covered calls on stable, dividend-paying stocks. Create your live VT Markets account and start trading now.GBP/USD rises as risk appetite grows after trade-war de-escalation between the US and Europe
The GBP/USD is on the rise during the North American session, currently at 1.1357, a gain of 0.24%. This increase is due to improved risk appetite after easing tensions in the US-Europe trade conflict. Despite strong economic data from the US, the USD has not strengthened, allowing the GBP to gain.
During the European session, the Pound Sterling is performing well against most major currencies. This is supported by the UK’s Consumer Price Index (CPI), which rose more than expected in December. The GBP/USD pair is now trading above 1.3400, aided by unexpected inflation in the UK.
Global Market Trends
In other markets, Japan’s national CPI rose by 2.1% year on year in December. New Zealand’s CPI inflation reached 3.1% year on year in the fourth quarter. Australia’s S&P Global Manufacturing PMI increased to 52.4 in January. The Bank of Japan is likely to keep interest rates steady, with traders looking for signs of future tightening. Gold prices continue to soar, surpassing $4,900 per troy ounce, mainly due to a weakening USD. In the cryptocurrency market, Chainlink is experiencing bearish pressures with increased volatility, while Ripple is holding steady above the support level of $1.90. Overall, markets are reacting to changes in geopolitical and economic factors. With the current trends, we expect the Pound Sterling to continue strengthening against the US Dollar. The rise above 1.3400 is linked to a positive outlook from the US-EU trade developments and a weaker dollar. This indicates that traders might want to adopt strategies that benefit from further gains in GBP/USD in the short term.GBPUSD Trading Strategy
Recent UK inflation data for December 2025 showed a rise to 3.5%, exceeding the 3.2% expectation. This persistent inflation has led the markets to rule out any potential rate cuts by the Bank of England in the first half of 2026, supporting the Pound’s value. Historically, periods of ongoing inflation have often resulted in strong currency values when central bank policies are kept tight. On the flip side, despite strong US domestic data, such as the Non-Farm Payrolls report which added 250,000 jobs, the US Dollar is weakening. This indicates that global risk sentiment is currently more influential than expectations for Federal Reserve policy. Thus, we should consider short-dollar positions against a range of currencies, not just the Pound. For traders in derivatives, this market is ideal for bullish strategies on GBP/USD. We’re seeing one-month implied volatility rise to around 10%, up from the 7% lows at the end of last year, which makes long options pricier. Therefore, consider bull call spreads targeting a move towards 1.3550 to keep costs manageable while taking advantage of the upward trend. Looking ahead, the flash PMI data coming out this Friday will be a key factor. A strong UK services PMI and a weaker US reading would support the current trend and possibly push the pair higher. However, we must stay alert, as any unexpected changes in the US-EU trade situation could quickly affect these positions. Using defined-risk options strategies could be wiser than futures in such uncertain times. Create your live VT Markets account and start trading now.Kansas Fed reports slight increase in U.S. manufacturing activity from -3 to -2
Manufacturing activity in Kansas improved slightly from -3 to -2 in January. This indicates a small recovery in the sector compared to last month.
In other economic news, Australia’s S&P Global Manufacturing PMI rose to 52.4 in January. Meanwhile, New Zealand’s CPI inflation reached 3.1% year-on-year in Q4, surpassing the expected 3.0%.
