Canada’s housing starts for December exceeded expectations at 282.4K (YoY)
Canada’s housing starts in December hit 282.4K, exceeding the expected 260K. This good news indicates a strong finish for the construction sector this year.
In the currency market, the USD/JPY dropped to 158.00 as the Yen gained strength. Meanwhile, the strengthening US Dollar impacted the EUR/USD and GBP/USD pairs. Gold prices fell below $4,600 per troy ounce, influenced by geopolitical events and a stronger Dollar.
Cryptocurrencies like Bitcoin, Ethereum, and XRP are maintaining important support levels despite a decline in retail demand. Bitcoin stays above $95,000, while Ethereum and XRP trade closely around average moving points.
Russian Central Bank reserves fell from $763.9 billion to $752.5 billion.
Russia’s central bank reserves have dropped from $763.9 billion to $752.5 billion.
In financial markets, silver prices have soared to a record of $93.75 due to limited supply.
The Oil Market Outlook
In the oil market, prices for West Texas Intermediate (WTI) are recovering as tensions with Iran ease, though a supply surplus is holding back larger gains. The British pound remains steady at around 1.3380 against the US dollar, supported by strong data that benefits the dollar. On the other hand, the euro is weakening, with EUR/USD falling below key levels as the US dollar strengthens. Gold prices have declined, now below $4,600 per troy ounce, due to lower geopolitical tensions and a stronger dollar. In cryptocurrencies, Bitcoin is holding above $95,000 despite decreased retail demand, while Ethereum is trading in a limited range.Dash and Market Events
In other updates, Dash is rising, reaching an intraday high of $96.85 in a correcting crypto market. Looking ahead, US PCE reports and the events in Davos will be important for dollar traders, while UK data may affect Bank of England decisions. The Bank of Japan is likely to maintain its current policies, though future guidance will be closely watched after election updates. The US dollar is gaining strength, and we expect this to continue. The Federal Reserve’s more hawkish stance is putting pressure on currency pairs like EUR/USD and GBP/USD. Current rallies in these currencies look like selling opportunities. However, there are concerns within the Fed regarding a weak labor market. The upcoming US PCE inflation data is crucial; a high number would strengthen the dollar, while a low number could reverse its gains quickly. After a surprisingly strong job market in 2025, any signs of weakness will be highlighted. We observe a significant difference in precious metals that offers an opportunity. Gold is falling due to the strong dollar, while silver has reached record highs from strong industrial demand, particularly in solar and electric vehicle sectors, which surged in 2024 and 2025. This is creating a disconnect between the prices of gold and silver. In energy markets, WTI oil prices appear capped. While easing tensions in Iran are beneficial, a persistent supply surplus is the main issue, worsened by increased non-OPEC+ production last year. This suggests that selling into strength may be the safest strategy for oil derivatives. The crypto market is reflecting risk-off sentiment for major coins. Decreased retail demand is affecting Bitcoin and Ethereum, keeping them within a narrow range. This overall weakness indicates that traders should refrain from aggressive long positions in top coins for now. Lastly, we are observing a steady decline in Russia’s central bank reserves, which have decreased by over $11 billion. This ongoing drop, which we have tracked since last year, raises the risk of future volatility in the ruble, posing a potential risk that could escalate quickly. Create your live VT Markets account and start trading now.Midcap stocks are likely to perform well because of geopolitical tensions, changes in commodity prices, and the resurgence of AI.
In 2026, the FTSE 100, Dax, and S&P 500 have all reached record highs. Mid-cap indices are also doing well, with the Russell 2000 and FTSE 250 close to their previous peaks, and the MDAX has even surpassed 30,000.
The performance of mid-cap stocks is supported by momentum and high-quality value stocks. The tech sector is a big driver for the S&P 500, with Sandisk jumping 72% and the semiconductor sector increasing by 25%. This shows the concentration risk associated with US blue-chip stocks.
Diverse Performers in Mid Cap Indices
In contrast, the Russell 2000 has a variety of top performers from sectors like basic materials, energy, and telecoms. Erasca stands out, showing strength despite tech market changes. However, volatile commodity prices remain a concern, while the FTSE 100 is supported by mining and defense companies. The FTSE 250, which focuses more on the UK market, includes diverse companies like Ocado and Oxford Biomedica. Its revenue base is 45-55% from the UK, compared to 25-30% for the FTSE 100. This makes the FTSE 250 well-positioned to benefit from the UK’s recent economic growth, highlighted by surprising growth figures in November. With major indices hitting record highs, this rally seems fragile and too concentrated. The top 10 stocks in the S&P 500 now account for over 34% of the index, a level we haven’t seen since the late 1990s dot-com boom. This indicates a need for strategies like pairs trading, such as going long on Russell 2000 futures while shorting Nasdaq 100 futures, to protect against potential downturns in AI stocks. An options-based strategy could involve buying call options on mid-cap ETFs like IWM to harness their broadening momentum, while also buying put options on a tech-heavy index ETF like QQQ to hedge against tech risks. The VIX volatility index is currently low at 13.5, making options an affordable way to express this view.Advantages of Domestic Focus
In the UK, the FTSE 250’s focus on domestic companies provides a clear edge over the FTSE 100, which is more exposed to fluctuations in commodity prices and global tensions. Recent data showing a 0.2% growth in the UK economy for November 2025 reinforces this advantage, supporting a more localized investment strategy. For traders, this could mean taking long positions in FTSE 250 futures while shorting FTSE 100 futures. This approach allows them to capitalize on the potential outperformance of the domestic economy while mitigating the risks associated with multinational mining and energy firms prevalent in the larger index. It represents a direct play on the UK’s emerging economic recovery. We’ve noticed a shift towards smaller companies beginning late last year, as the Russell 2000 rose over 12% in the last quarter of 2025, while the S&P 500’s gains largely came from a few key stocks. To benefit from this ongoing momentum, traders might consider selling put spreads on mid-cap indices to generate income while maintaining a bullish outlook. This strategy capitalizes on both a rising market and the passage of time. Create your live VT Markets account and start trading now.Chris Turner from ING notes that the EUR/USD pair is experiencing low volatility of around 5% and remains range-bound.
EUR/USD is currently not very volatile, hovering around 5%. The pair is mostly moving sideways. Traders prefer the Euro for low-cost carry trades because it is less volatile compared to the Japanese Yen.
One-month EUR/USD volatility stays close to 5%, indicating little movement expected soon. The Euro’s funding cost is low, with an implied yield of 2.00%, attracting carry trades, while the U.S. dollar has a higher rate at 3.55%.
Carry Trades and Market Observations
Using the Euro for carry funding is seen as less risky than using the Yen. This is due to the higher volatility of USD/JPY at 8.5%. There’s a chance that the Bank of Japan could intervene, which would strongly impact the USD/JPY rate. As the Eurozone has limited economic data available, EUR/USD might gently drift towards 1.1555/65. This insight comes from expert market analysis. With EUR/USD showing consistently low volatility, options premiums are quite cheap. The EuroCurrency Volatility Index has been below 6.0 for weeks, making it a great time to buy strangles or straddles. These strategies could benefit if the market breaks out of its tight trading range since late 2025.Market Themes and Trading Strategies
The main market trend is selling the Euro to fund carry trades, as the interest rate gap between the Federal Reserve and the ECB supports the dollar. Recent data from early January indicates that speculators hold many short Euro positions, reinforcing this trend. Therefore, range-bound strategies should likely lean bearish, such as selling out-of-the-money calls. The Euro remains a safer choice for funding compared to the Japanese Yen. We remember the chaos that followed when the Bank of Japan normalized its policy in 2025, and the risk of intervention is still present. The Euro offers a cleaner short without the risk of sudden central bank actions. Currently, with EUR/USD around 1.0820, the previous targets near 1.15 seem far off. The lack of significant economic data from the Eurozone in the weeks ahead strengthens the case for range-trading strategies. Traders should think about selling call spreads to earn premiums while managing risk, utilizing both the low volatility and the downward pressure in the market. Create your live VT Markets account and start trading now.UOB Group suggests that USD/CNH will find support near 6.9520 and trade within the range of 6.9520 to 6.9900.
The US Dollar (USD) is expected to dip against the Chinese Yuan Renminbi (CNY), but it is unlikely to fall below the support level of 6.9520. Analysts from the UOB Group predict that the USD will mostly trade between 6.9520 and 6.9900 for an extended period.
In the short term, the UOB Group foresees the USD fluctuating between 6.9650 and 6.9770. It recently reached a peak of 6.9738 before dropping to 6.9614. While it may continue to decline slightly, dropping below the 6.9520 support level seems unlikely. Resistance points are set at 6.9680 and 6.9750.
Broader Perspective
Looking at the bigger picture, the outlook for the USD has been neutral since last week. On January 13, when the spot rate was 6.9710, it was expected that the USD would stay within the range of 6.9520 to 6.9900. This view has remained stable. The FXStreet Insights Team gathers expert reports and assessments, mixing insights from both internal and external analysts to provide a thorough understanding of the market. Reflecting on the analysis from January 2025, the consensus was a neutral stance, anticipating a tight trading range for USD/CNH between 6.9520 and 6.9900. This view came after a period of low volatility due to actions from monetary authorities. The main takeaway was the strength of the support at 6.9520.Current Situation
Fast forward to today, January 16, 2026, and the situation has changed, with the pair now trading around 7.1550. This shift follows China’s reported Q4 2025 GDP growth of 4.8%, which was slightly below expectations. This led the People’s Bank of China to modify its daily fixing mechanism, clearly breaking away from the old range. As a result, the low-volatility environment of early 2025 has faded, requiring a change in strategy. One-month implied volatility has increased from about 4% last year to 5.5% today. This indicates that the market anticipates larger price fluctuations in the upcoming weeks. In light of this, selling options for premium, which was a safe strategy in last year’s range, now carries high risks. Instead, it may be better to explore options that could benefit from potential price increases, like buying call spreads targeting the psychological level of 7.2000. This approach helps define our risk while positioning for further USD strength. It is now wiser to hedge against potential gains rather than bet on a return to last year’s levels. Close attention should be paid to upcoming US inflation data and China’s trade balance, as these could significantly influence market trends. The previous support at 6.9520 has now become a distant memory in today’s market. Create your live VT Markets account and start trading now.ING analyst suggests increased volatility for USD/JPY amid Japan’s upcoming snap election.
USD/JPY might see some ups and downs as Japan prepares for a snap election on February 8. The results of this election could affect the yen, depending on how well the Liberal Democratic Party (LDP) performs and what policies they are expected to pursue afterward.
If the LDP gains 34 seats in the election, it could lead to a weaker yen. This might mean a preference for easier fiscal and monetary policies. On the other hand, the alliance between Komeito and the Constitutional Democratic Party (CDP) could challenge the LDP’s power, potentially affecting the USD/JPY exchange rate.
Market Dynamics
Market conditions are also uncertain due to the possibility of foreign exchange (FX) interventions. A joint effort by the Federal Reserve and the Bank of Japan (BoJ) to sell USD/JPY could greatly impact the market. Due to these factors, USD/JPY is expected to remain volatile over the next month. Currently, one-month traded volatility is at 8.5%, which doesn’t seem too expensive. Right now, it’s hard to predict where USD/JPY will go. The snap election on February 8 creates a lot of uncertainty and could lead to significant movement in either direction, depending on how well the LDP does. If the LDP wins big and gains a simple majority by taking 34 seats, the yen might drop. This outcome would likely mean continued loose fiscal and monetary policies, which would push USD/JPY higher. We saw a similar situation during Abenomics in the mid-2010s, where expectations for aggressive easing consistently weakened the yen. However, we’ve been surprised by Japanese politics before. The opposition might be stronger than we think. The new alliance between Komeito and CDP could really challenge the LDP. If the LDP fails to gain a strong mandate, USD/JPY could end up going lower.FX Intervention Risk
We should also consider the risk of foreign exchange intervention. While Japan has acted alone in the past—spending a record ¥9.2 trillion to support the yen in late 2022—the idea of a joint intervention with the U.S. Federal Reserve is now possible. If this happens, and USD/JPY is sold off, it could lead to a sharp decline in the exchange rate. Given the high level of uncertainty, making a specific bet is risky. Instead, it might be better to focus on the expected price fluctuations. With one-month traded volatility at 8.5%, options strategies that benefit from large movements, like buying straddles, could be a smart approach in the coming weeks. Create your live VT Markets account and start trading now.UOB Group analysts expect the strong US Dollar rally to continue beyond the 160.00 level
The US Dollar (USD) continues to rise against the Japanese Yen (JPY), possibly breaking above 160.00. In the last 24 hours, USD moved within a tight range of 158.18 to 158.87 and closed slightly higher at 158.64. This movement indicates that the market is consolidating, and we can expect a range of 158.25 to 159.00.
Looking ahead to the next 1-3 weeks, analysts have a positive outlook for the USD. Currently at 159.15, it’s noted that even though the USD is overbought, there is still potential to surpass the 160.00 resistance level. After hitting 159.45, the upward momentum seems to be slowing down. If the USD consolidates in the short term, a drop below the 157.70 support level would suggest that reaching 160.00 is unlikely.
Do Your Own Research
The FXStreet Insights Team shares market observations from experts and adds more analysis. This information should not be viewed as investment advice and comes with risks. Readers are encouraged to do their own research before making investment decisions. It’s essential to remember that FXStreet and its authors are not registered investment advisors. We see the potential for the USD to continue its rally against the yen, aiming for a break above 160.00 in the coming weeks. This outlook is supported by the latest US Non-Farm Payrolls report from early January, which showed a strong addition of 210,000 jobs, surpassing expectations. This data highlights the resilience of the US economy and reduces the likelihood of Federal Reserve rate cuts. On the flip side, the yen is under pressure due to the Bank of Japan’s ongoing supportive policies. Japan’s recent core CPI figures, released last week, were a modest 1.9%, missing forecasts and falling below the central bank’s target. This situation further emphasizes the significant interest rate gap that favors the dollar. For derivatives traders, this outlook suggests looking at call options for further upside. Buying at-the-money or slightly out-of-the-money calls with expiration dates in late February or March can allow traders to benefit from movements towards 160.00 while limiting potential losses. With implied volatility for USD/JPY hovering around 9.5%, options are a practical way to express this view.Potential Intervention From Japanese Authorities
However, the 160.00 level is a key psychological barrier, and we should be cautious about possible intervention from Japanese authorities. We remember that the Ministry of Finance intervened to support the yen with over ¥9 trillion last spring and summer when rates surpassed similar levels. This historical context makes selling out-of-the-money call options to finance long calls—creating a call spread—an appealing strategy to lower premium costs and clarify profit zones. While the upward trend appears strong, the 157.70 support zone is crucial. A significant drop below this level would indicate that the current upward momentum has failed, undermining the bullish outlook for the near future. This level should be a critical point for evaluating long positions. Create your live VT Markets account and start trading now.Oil prices drop after five days of increases due to the US’s cautious approach to Iran
Oil prices fell after rising for five days straight, with ICE Brent dropping 4.15%. This decline happened after the US chose not to act immediately against Iran during ongoing protests.
There were worries about potential US military action, which could block oil shipments through the Strait of Hormuz, where about 20 million barrels per day are transported. While some risks have eased, concerns remain, potentially shaking up the market in the short term.
Market Observations
Analysts noted that the ICE Brent timespread showed strength even with falling prices. This resilience is likely due to decreased oil flows from Kazakhstan’s CPC terminal, indicating tightness in the spot market. The FXStreet Insights Team gathers key market observations from experts and adds its own analysis. The article covers currency performance, including GBP/USD and USD/CAD, along with changes in gold markets. It also features promotional content for financial newsletters and ads for top brokers in 2026. Legal disclaimers clarify that the opinions expressed belong to the authors and do not necessarily reflect FXStreet’s views.Oil Market Dynamics
After five days of rising prices, oil has finally dipped, with Brent crude dropping over 4% to around $81 a barrel. The decline began when the White House indicated it prefers diplomatic solutions instead of immediate military action amid tensions with Iran. This shift has lowered the geopolitical risk premium that had been factored into oil prices. As fears of an immediate conflict fade, the market’s focus is returning to bearish fundamentals. The U.S. is producing oil at a strong rate of 13.3 million barrels per day, close to record levels. The International Energy Agency also reported that global demand growth will slow to just 1.1 million barrels per day by 2026 due to economic challenges in Europe and China. This pattern is familiar to traders. A similar situation unfolded in the fall of 2025, when tensions in the Persian Gulf briefly pushed prices up, only for weak economic data to pull them down. The lesson here is that geopolitical risk premiums often don’t last long unless followed by real action, allowing supply and demand dynamics to take charge. Looking ahead, selling into strength may be a wise approach. One could consider selling call spreads on March or April Brent futures contracts to capitalize on a steady or declining market. Still, some tightness persists in the physical market, which might keep the front-month contract firm. Caution is essential, and any outright short positions should be managed carefully to respond to sudden supply issues. While the immediate threat has eased, the situation remains uncertain, and there’s a significant risk of missteps. Approximately 21 million barrels of oil flow daily through the Strait of Hormuz, making up about 20% of global consumption. Therefore, holding inexpensive out-of-the-money call options could be a smart way to protect against a sudden escalation that might cause prices to spike. Create your live VT Markets account and start trading now.Gold price stays steady around $4,600, struggling to break the $4,640 peak
**Gold Market Technical Analysis**
Gold (XAU/USD) is currently priced at around $4,600. Recently, it dipped but did not fall below $4,570. This comes after an unsuccessful attempt to reach a record high of $4,640, largely due to a stronger US Dollar.
Recent US data showed a decrease in weekly jobless claims and improved manufacturing conditions in New York and Philadelphia. These improvements support the idea that the US Federal Reserve will keep interest rates steady for now.
From a technical standpoint, the XAU/USD pair is showing bearish signs through a head-and-shoulder pattern, which could indicate a possible trend change. The Relative Strength Index (RSI) is nearing a bearish divergence, and the Moving Average Convergence Divergence (MACD) line is below the signal, suggesting a loss of momentum.
To see a more significant correction, gold must break below $4,570, with targets around $4,500. If it rises, breaking past $4,640 could lead to targets of $4,689 and $4,763 based on Fibonacci extensions.
**Central Bank Activity**
Gold has always been viewed as a safe asset and a hedge, and central banks are significant buyers of gold. In 2022, they made record purchases of 1,136 tonnes. The price of gold usually moves in the opposite direction of the US Dollar and riskier assets, and it often reacts to geopolitical tensions and changes in US interest rates.
As gold hovers around $4,600, this is a critical moment for the market. The failure to surpass the all-time high of $4,640, combined with strong US economic data, suggests that the Federal Reserve is unlikely to cut rates soon. This environment can make it challenging for gold, a non-yielding asset, to maintain its upward momentum.
The most recent Consumer Price Index (CPI) report from January 14th showed that core inflation remains high at 3.1%. This data gives the Fed little reason to relax its monetary policy. Consequently, the US Dollar Index has remained firm, above 105.5, a level not seen since last November, creating a headwind for gold. This situation leads derivative traders to consider protective strategies against a potential decline.
A small head-and-shoulders pattern is forming on the charts, often indicating a trend reversal. This makes put options with strikes near $4,500 an interesting option in the upcoming weeks. A confirmed break below the $4,570 support would trigger a deeper correction toward the 100-period moving average. The fading momentum on the MACD supports this cautious outlook.
**Option Strategies for Traders**
Despite these concerns, the overall bullish trend is still intact. We should remember the sharp rallies that followed similar patterns in 2025. Traders may want to buy call options with strike prices above the $4,640 high to prepare for a potential breakout towards the next target of $4,689. This strategy could be profitable if the current weakness turns out to be a brief pause rather than a full reversal.
Looking at the larger context, central banks were significant buyers throughout 2024 and 2025. However, initial data for the fourth quarter of 2025 showed a 15% slowdown in their buying pace. This aligns with recent CFTC data, which indicates that large speculators have reduced their net-long positions for the second consecutive week, suggesting that some big players are taking profits at these high levels.
Create your live VT Markets account and start trading now.
Indian rupee falls to a two-month low against the US dollar amid foreign fund outflows
The Indian Rupee has recently dropped, hitting a two-month low against the US Dollar, which has increased by 0.55% to around 91.15. This decline is due to Foreign Institutional Investors (FIIs) pulling out Rs. 4,781.24 crore from the Indian stock market, as US-India trade talks have stalled.
In January, FIIs sold more than they bought on nine of the ten trading days, cutting their investments by Rs. 21,706.27 crore. Although officials from India and the US made optimistic comments, no significant trade agreements emerged. According to HSBC economists, weak capital inflows are a major issue for the Indian Rupee.
