Scotiabank strategists say the Euro rises slightly but underperforms compared to other G10 currencies.
The Euro (EUR) rose slightly by 0.1% against the US Dollar (USD), but it still lags behind other G10 currencies as we enter Friday’s North American trading session, according to Scotiabank’s Chief FX Strategists.
The European Central Bank (ECB) is currently neutral, with no immediate plans to discuss interest rates. Germany’s final Consumer Price Index (CPI) met expectations at 1.8% year-on-year, causing no significant market reactions.
Despite the China trade agreement, the CAD remains stable and unaffected by US equity or oil prices.
The Canadian Dollar (CAD) has stayed mostly the same, despite small changes in US stock futures and crude oil prices. Scotiabank’s Chief FX Strategists, Shaun Osborne and Eric Theoret, noted that the recent trade deal between Canada and China hasn’t boosted the CAD.
Prime Minister Carney’s agreement with China includes lower tariffs on Chinese electric vehicles and Canadian agricultural goods, aiming to increase trade in the energy sector. This is expected to benefit the Canadian economy and could help stabilize the USD/CAD exchange rate, which is currently around 1.39.
USD/CAD Exchange Rate Outlook
Despite these developments, the USD/CAD exchange rate has remained steady. The USD has struggled to maintain levels above 1.3925. The short-term chart hints at a possible double top pattern, meaning if the USD falls below 1.3885, it could drop to around 1.3855. A significant decline may push the USD into the upper 1.37s. The positive Canada-China trade deal hasn’t had much impact, keeping the Canadian dollar stable. The USD/CAD pair is stuck within a range, capped firmly around 1.39. This creates an opportunity, as the benefits of the deal, especially for agricultural exports, have yet to be factored into the market. Historically, canola exports to China fell nearly 15% through 2025 due to tariff disagreements, so this new deal should provide a substantial long-term advantage. However, WTI crude oil prices remain steady but uninspiring in the $80-$85 range, which usually supports the CAD. This helps explain the currency’s muted reaction to otherwise favorable news. The technical analysis indicates a potential double top near 1.3925, suggesting downward pressure on the US dollar. If it breaks below the 1.3855 mark, the USD could shift toward the upper 1.37s. Given this scenario, traders might consider buying USD/CAD put options with strike prices around 1.3850 to prepare for a possible drop while managing their risk.Options Strategy and Market Implications
This sideways movement has also reduced implied volatility, making options more affordable. For those confident that the 1.39 cap will hold, selling USD call spreads with a ceiling above 1.3950 could be a smart way to earn premium. This strategy benefits from strong resistance and the anticipated absence of significant upward movement in the coming weeks. A key factor remains the interest rate difference between the Bank of Canada and the US Federal Reserve, which has kept the pair elevated for much of 2025. Last week’s data revealed US core inflation is still above 3%, while Canadian inflation has decreased to 2.6%. This ongoing divergence supports the US dollar, but the new trade fundamentals may start to change that. Create your live VT Markets account and start trading now.Silver falls to $89.70 amid reduced geopolitical tensions and Fed policy outlook
Silver prices fell sharply as geopolitical tensions decreased, leading to lower demand for safe-haven assets. The outlook for US monetary policy also remains restrictive, adding more pressure on precious metals like silver.
Currently, silver is trading at about $89.70, down 2.50%. This drop reflects a market that favors riskier assets, reducing silver’s appeal as a safe haven.
The recent decline in silver prices is tied to easing geopolitical tensions. US President Donald Trump’s remarks about stepping back from military action have calmed investors’ concerns, prompting a shift toward riskier investments.
Additionally, Trump’s backing of Federal Reserve Chair Jerome Powell has eased worries about the central bank’s independence. The lack of new tariffs is also helping to lower trade tensions.
Silver is further pressured by high US interest rates, with employment data suggesting that a tight monetary policy will last. In this environment, assets like silver, which do not earn interest, are less attractive compared to bonds.
The market is closely watching geopolitical events and announcements from the Federal Reserve that could affect precious metals.
Last year, silver prices dropped significantly as geopolitical fears eased, and the Fed indicated higher rates for a longer period. The current situation in January 2026 looks quite different, implying a potential change in strategy—a good opportunity to reassess positions.
In contrast to strong employment data from last year, the latest Consumer Price Index (CPI) for December 2025 came in at a gentler 2.8%. This has raised expectations for further Fed rate cuts this year. With the Federal Reserve now easing policy, the cost of holding non-yielding silver is decreasing, making call options and long futures positions more appealing than in most of 2025.
We are also seeing stronger industrial demand compared to last year. Global data for Q4 2025 showed a 15% year-over-year increase in solar panel installations, with this trend expected to accelerate in 2026 due to new green energy policies. This strong demand offers significant support for silver prices, independent of monetary policy effects.
The Gold/Silver ratio is another important indicator, currently near 85. This is historically high and suggests silver is undervalued compared to gold, similar to conditions before the 2025 rally. Traders may consider strategies that benefit from a narrowing of this ratio, such as buying silver futures while shorting gold futures.
While early 2025 saw easing tensions, we are now observing renewed naval activity in the South China Sea. This uncertainty is increasing demand for safe-haven assets, a factor that was missing during last year’s correction. For derivative traders, this indicates we should be ready for higher implied volatility in the upcoming weeks.
The Japanese yen strengthens as GBP/JPY declines for the third straight session amid intervention speculation
GBP/JPY has dropped for three days straight, nearing a one-week low around 211.60. This decline follows warnings from Japanese officials about possible currency intervention. Japanese Finance Minister Satsuki Katayama mentioned that any intervention could happen alongside actions from the US.
Political uncertainty in Japan, especially with rumors of Prime Minister Sanae Takaichi potentially dissolving parliament, is affecting the Yen’s performance. Many expect the Bank of Japan (BoJ) to keep its interest rate at 0.75% during the meeting set for January 23. A Reuters poll shows no rate changes are expected in January and March, although some economists predict a tightening by late 2026.
UK Interest Rate Outlook
The UK might gradually lower rates, but recent comments from BoE policymaker Alan Taylor suggest a potential interest rate decision is close. Key upcoming reports to watch include UK labor market data, inflation rates, and Retail Sales, as well as Japan’s Consumer Price Index before the BoJ’s decision. Several factors impact the Japanese Yen, including BoJ policy, differences in bond yields between Japan and the US, and overall market sentiment. The Yen is considered a safe-haven investment, which tends to increase its value when the market experiences turmoil. The GBP/JPY exchange rate has fallen for the third consecutive day due to fresh warnings from Japanese officials regarding currency intervention, pushing the pair down to one-week lows around 211.60. This verbal warning signals that authorities are uneasy about the Yen’s recent weakness and are prepared to take action. As a result, any potential upside for the pair may be limited in the short term, increasing the chance of a sudden drop. Given the rising risk of intervention and important economic data on the horizon, option strategies are becoming more important. Current market data shows that one-week implied volatility for GBP/JPY has climbed to 11.5%, which is significantly higher than the 8% average seen in the final quarter of 2025. Traders may want to consider buying put options to prepare for a possible downturn in the pair, especially before next week’s data releases.Bank Of Japan Policy Decision
Everyone is watching the Bank of Japan’s policy decision on January 23. We expect the central bank to keep its policy rate at 0.75%. However, if Governor Ueda provides any hawkish remarks, it could strengthen the Yen even more. Based on market reactions from 2025, even small changes in the BoJ’s guidance can lead to major price shifts. The case for a stronger Yen in the medium term is becoming more compelling, especially as the policy differences between central banks decrease. A Reuters poll from last year anticipated this gradual movement towards normalization, and recent national inflation data holding steady at 2.7% supports the idea that the BoJ may raise rates by mid-year. This contrasts sharply with the Bank of England, which is signaling a move toward lower interest rates. On the British Pound side, the outlook suggests gradual easing, likely putting pressure on the currency. Last week’s UK wage growth data indicated a slowdown to 5.2%, reinforcing expectations that the Bank of England might start cutting rates as early as the second quarter. The divergence in monetary policy—between a hawkish BoJ and a dovish BoE—creates significant challenges for the GBP/JPY pair. Additionally, we need to consider the political uncertainty in Japan from rumors of a snap election. Historically, such instability can lead to short-term currency weakness, creating volatile conditions. This may present opportunities for short-term trading, but the main concerns remain the threat of intervention and the differing monetary policy paths. Create your live VT Markets account and start trading now.Viatris Inc. nears a long-standing price barrier after significant growth from its merger restructuring.
Viatris Inc. (VTRS) is a global pharmaceutical company that has faced a price limit for the last five years. The stock price increased from around $10 in late 2024 to nearly $13.55, but it hit resistance at this long-established level.
The $13.55 mark has been a strong resistance point over the years, holding steady through 2020, 2021, and into 2022. Even with its recent rise, Viatris is still below this key level, testing traders’ patience.
After reaching $13.55, the stock fell to $12.84, a decline of 2.36%. This drop suggests that traders who bought in earlier are selling their shares, creating pressure at the resistance point.
Traders are now trying to figure out if this decrease means a pause before another attempt to rise or if it points to a deeper pullback. A critical support area exists between $12.20 and $12.40, which will need to hold firm for a new challenge against the $13.55 level.
Patience is important as VTRS explores its next steps. It could build a base for a breakout or confirm that the recent rally happened too soon. If VTRS breaks above $13.55 with strong momentum, it may move towards $15 or $16. Until then, the resistance remains strong.
At the $13.55 resistance level, Viatris presents a clear opportunity for options traders. The stock’s impressive climb from late 2024 has paused at a long-held ceiling, making it a great setup for strategies that take advantage of a slowdown or reverse. With the recent rejection near the resistance, it may be wise to consider trades that profit from the stock’s inability to rise further in the short term.
For those who think the resistance will hold, a bear call spread could be a solid trade. You could sell the February $14 call and buy the February $15 call to manage risk, earning a premium if VTRS remains below $14 until expiration. This strategy benefits from both a price pullback and sideways movement, reflecting the selling pressure from traders who bought at these levels in 2021 and 2022.
The upcoming earnings report in late February adds another factor to consider, and we are already seeing implied volatility increase. The broader healthcare sector, as shown by the XLV index, has started 2026 slowly after a decent performance last year; this may mean Viatris lacks the sector momentum to break through. This overall situation supports taking a more cautious view on the stock in the near term.
Looking at the options market, there is significant open interest at the February $14 and $15 strike prices, indicating this level is a key battleground. Many traders are either betting on a breakout or, like us, selling those calls to take the opposite position. Recent data shows that put option volume is rising compared to call volume, signaling that more market players are preparing for a potential drop or seeking protection.
If you think the recent rally still has strength, adopting a defined bullish position is safer than buying the stock directly. A bull call spread—like buying a March $13 call and selling a March $15 call—would allow for upside in case of a breakout while limiting losses if resistance holds. It’s essential to watch for the stock’s ability to maintain the $12.20 support zone on any pullback for this option to work out.
Looking back at 2025, we saw Viatris struggle to gain momentum even with positive news when trading between $10 and $11. This history of price resistance makes the current battle at this significant level even more crucial. Until the stock demonstrates it can break through with strong volume, we should be cautious of the resistance that has remained in place for years.
Bank of America’s shares fell after its earnings report, even though it exceeded earnings and revenue forecasts.
Bank of America Corporation’s stock dropped after it reported earnings, even though it beat both earnings and revenue expectations. Before this decline, the stock had risen over 65% from its lows, which suggests it might have been running out of steam.
As a major player in the U.S. banking sector, Bank of America often attracts attention during earnings releases, which can lead to sharp price movements. Analyzing the stock’s behavior is important, especially after significant gains and during major events like earnings announcements.
Before the recent sell-off, the stock traded within a rising parallel channel. This pattern is often seen as bearish after a long rise. It hinted at a loss of momentum, even as prices continued to climb. The poor reaction to earnings caused the stock to break below the lower trendline of this channel, indicating possible further declines as earlier support fades.
When approaching this situation, it’s wise to be patient and wait for the stock to retrace towards the previous lower trendline. This past support could now become resistance. It’s crucial to pair technical setups with careful risk management to clearly understand the risks involved in any trading decision.
Following Bank of America’s sharp decline last Wednesday, we believe the stock’s dynamics have shifted for the coming weeks. The drop occurred despite better-than-expected financial results, indicating that the market was anticipating strong performance after a significant rise in 2025. Breaking below its established upward channel is a key bearish signal.
The negative response seems to be driven by forward guidance, especially worries about Net Interest Income (NII) for the first quarter of 2026. Although 2025’s full-year results were solid, comments about a possible 2-4% sequential decline in NII unsettled investors who expected high rates to support profits indefinitely. This is also reflected in recent economic data showing a slight increase in jobless claims to 225,000 last week, along with persistent core inflation that pressures bank margins.
For those trading derivatives, this isn’t a time to rush in and buy puts to chase the stock lower. The technical break indicates that patience is key. It may be better to wait for a short-term bounce back toward the previous support line. This area will likely act as new resistance, making it a better entry point for bearish trades.
A practical strategy would be to wait for BAC to rise slightly before considering buying March 2026 bear put spreads. For instance, one might buy the March $55 put and sell the March $50 put to create a defined-risk position that profits if the stock continues to slide over the next two months. This method takes advantage of a bearish outlook while clearly defining the maximum potential loss.
The volatility drop after Wednesday’s earnings report makes this an appealing opportunity for option buyers. Implied volatility for BAC has already decreased from over 45% before earnings to around 30%. This pattern has occurred historically, making options cheaper. This allows us to create a trade without overpaying for the excitement surrounding the earnings report.
We see this setup reflecting what happened in the broader financial sector (XLF) back in mid-2025. After a strong rally, the sector corrected over 10% when the Federal Reserve indicated that interest rates would remain higher for longer than expected. This historical example suggests that once positive momentum in the banking sector shifts, the follow-through can be significant.
January’s NAHB Housing Market Index in the U.S. falls short of expectations, reporting a score of 37
The NAHB Housing Market Index for January reported a value of 37, which is lower than the expected 40. This suggests that the housing market outlook is weaker than thought.
Other financial markets are also moving. The price of gold fell below $4,600 per troy ounce due to a stronger US dollar. In the cryptocurrency market, Bitcoin stays above $95,000 despite lower retail demand, while Ethereum and XRP hold their support levels amid market changes.
Upcoming Financial Events and Influences
Some future events may impact financial markets, including the US PCE report and discussions at Davos. The Bank of Japan’s next meeting could also influence the market, along with updates on UK CPI and retail sales data. Dash cryptocurrency showed strength, hitting an intraday high of $96.85, rising in retail interest and with futures Open Interest at $165 million. The NAHB Housing Market Index hit 37, missing forecasts and staying significantly below 50, which signals growth. This decline points to weak homebuilder confidence, likely affected by mortgage rates that have stayed above 6.5% for most of 2025. This could challenge the narrative of a “resilient US economy” that has been supporting the dollar. Markets are now adjusting the likelihood of a rate cut in March. The CME FedWatch probabilities have dropped from over 70% last month to below 40% now. Traders should look for chances in interest rate futures, especially as contracts for the first half of 2026 are declining. Strong US data, particularly the upcoming PCE inflation report, may extend these rate cut expectations even further.Currency and Commodity Market Trends
The strength of the dollar is impacting the market, pushing EUR/USD toward 1.1600 and keeping GBP/USD below 1.3400. It may be wise to buy put options on pairs like AUD/USD, as strong US data contrasts with slowing global growth. We are also seeing rising implied volatility in forex options, indicating that the market is preparing for larger currency movements in the coming weeks. Gold prices are struggling below $4,600 due to a strong dollar and the possibility of higher rates, making it less appealing. Traders are closing long positions, similar to what happened in late 2024 when hopes for a rate cut faded. For oil, WTI remains in a range, so selling covered calls or setting up iron condors could help profit from this sideways movement as geopolitical risks are offset by increasing US inventories. Create your live VT Markets account and start trading now.Small caps showed strong gains, but the S&P 500 and Nasdaq struggled to break through resistance levels.
The S&P 500 and Nasdaq struggled to get past the 7,020 mark, while the Russell 2000 showed positive trends. As the weekend approaches, stock indices are moving cautiously. Historically, bond markets do a better job of predicting market swings.
Bitcoin is stuck in a rut, returning to a state of indecision after a failed attempt to break out. With few economic reports today before a long weekend, options expiration is influencing how the markets behave.
Gold and USD Volatility
Gold and the USD are fluctuating; gold dropped below $4,600 as the USD strengthened. Easing geopolitical tensions affected the value of precious metals and currencies. Cryptocurrencies like Bitcoin, Ethereum, and XRP maintain some support, but retail demand is fading. However, Dash saw a rise, reaching $96.85 due to increased interest from retail investors and active futures trading. Next week, all eyes will be on US PCE data, which could influence predictions regarding Federal Reserve rate changes. Additionally, Japan’s central bank policies and economic data from the UK are important for market movers.Market Dynamics and Strategies
With the S&P 500 and Nasdaq failing at the 7,020 level, we should focus on where the momentum lies. The Russell 2000 clearly leads, showing strong gains, while large-cap stocks are stalling. This points to a potential rotation, suggesting that traders might want to consider buying small-cap derivatives, like call options on the IWM ETF. This trend seems connected to the bond markets and ongoing uncertainty about Federal Reserve rate cuts. We experienced a similar trend of small-cap stocks outperforming during rate uncertainties back in mid-2025. With the VIX index staying above 16 this month, indicating heightened caution, it’s smarter to invest in stronger performers rather than chasing the broader market. Given the upcoming long weekend and options expiration, it’s wise to hedge our portfolios. The weakness in large-cap stocks, especially as major tech companies have only gained 2% this year, suggests potential risks. Buying puts on the SPY or QQQ could be an effective way to protect against a possible market downturn in the weeks ahead. The crypto market also shows signs of indecision, with Bitcoin not managing to break out and trading sideways. Futures open interest has decreased by nearly 10% since the start of January, indicating that speculative interest is declining. This reinforces a cautious approach, favoring specific, targeted trades over broad bullish investments. Create your live VT Markets account and start trading now.Victory NASDAQ-100 Index (USNQX) is a strong option for index fund investment
Victory NASDAQ-100 Index (USNQX), based in Columbus, Ohio, has been managed by Victory since 2000 and currently holds $6.50 billion in assets. Mannik Dhillon has managed it since 2019.
In the last five years, USNQX has achieved an annualized return of 14.81%. Over three years, this return increases to 32.66%, placing it in the top third of its category. Note that these returns may not include some fees, which could lower the overall performance.
Increased Volatility and Risk
USNQX is more volatile than similar funds, with a three-year standard deviation of 15.64%, higher than the average of 12.26%. Its five-year standard deviation is 19.22%, compared to the average of 13.91%, indicating rising risk over time. The fund has a five-year beta of 1.17, highlighting its greater volatility compared to the overall market. Its five-year alpha is -0.88, showing it struggles to beat the S&P 500. USNQX is a no-load fund with an expense ratio of 0.42%. The minimum initial investment is $3,000, with subsequent investments needing to be at least $50. Note that fees from investment advisors may affect returns and are not included in these figures.Market Volatility and Trading Strategies
The NASDAQ-100 has shown strong returns, but it also has higher volatility, as indicated by its 1.17 beta. It tends to do well in rising markets and not as well in falling ones, which creates opportunities for traders using derivatives. Given the current economic conditions, we expect this volatility to continue in the upcoming weeks. Recent inflation data from January 14th rose slightly to 3.4%, adding uncertainty about the Federal Reserve’s future actions. This is reflected in the CBOE Volatility Index (VIX), which increased to 18 this week, up from around 14 for most of December 2025. This indicates that option premiums are rising, rewarding strategies that can anticipate significant price changes. With the higher implied volatility and important tech earnings reports due at the end of January, buying straddles on the Invesco QQQ Trust (QQQ) might be a smart strategy. This allows for potential profits from large price moves in either direction, especially considering how the market reacts to earnings surprises throughout 2025. This method avoids having to predict the direction of the market after earnings. It’s important to note the index’s negative alpha, which means it may not do as well as the S&P 500 on a risk-adjusted basis. For those uncertain about a major breakout, a pairs trade—going long on S&P 500 futures while shorting NASDAQ-100 futures—could help protect against broader market declines. This strategy could take advantage of any relative weakness in the tech-heavy index. In the fourth quarter of 2025, the NASDAQ-100 index consistently faced resistance at the 18,500 mark. As we near this critical level again, using weekly options for defined-risk bets can be beneficial. These short-term options provide a cost-effective way to trade around specific economic data or earnings announcements. Create your live VT Markets account and start trading now.In December, U.S. industrial production exceeded expectations with a monthly increase of 0.4%
In December, industrial production in the United States increased by 0.4%. This was better than the expected 0.1% rise, indicating stronger activity in the industrial sector.
Other topics include fluctuations in currency and commodity markets. The GBP/USD saw volatility, while Gold prices dipped below $4,600 per troy ounce due to a stronger US Dollar. The cryptocurrency market struggled as well, with Bitcoin staying above $95,000, despite a drop in retail interest.
