WTI crude oil benchmark trades around $56.30 after bigger-than-expected inventory drop
WTI prices climbed to about $56.30 during Thursday’s Asian session after U.S. crude stockpiles decreased. The U.S. Energy Information Administration reported a drop of 3.831 million barrels for the week ending January 2, while a rise of 1.1 million barrels was expected.
This surprising decrease indicated stronger demand, helping to raise WTI prices. Additionally, the upcoming U.S. employment report for December looks important, with predictions of around 60,000 new jobs and the unemployment rate possibly falling to 4.5%.
Andrew Hauser from the Reserve Bank of Australia says rate cuts are unlikely soon.
The Deputy Governor of the Reserve Bank of Australia, Andrew Hauser, revealed that the November Consumer Price Index data met expectations. As a result, interest rate cuts are not likely to happen anytime soon. Inflation is still above 3%, which is considered too high, leaving room for potential rate hikes in the February meeting.
Currently, the AUD/USD is trading at 0.6723, with a slight increase of 0.03% today. The Australian Dollar (AUD) is impacted by many factors, including interest rates from the Reserve Bank of Australia (RBA), Iron Ore prices, the state of the Chinese economy, inflation levels, and Australia’s Trade Balance.
The Impact of RBA on Australian Dollar
The RBA influences the Australian Dollar by managing interest rates to keep inflation between 2-3%. When interest rates are high compared to other central banks, the AUD tends to rise, while low rates can weaken it. The health of the Chinese economy significantly affects the AUD, as China is Australia’s main trading partner. Strong growth in China generally increases the demand for the AUD. Iron Ore is one of Australia’s major exports, and its price directly impacts the AUD. Higher Iron Ore prices usually strengthen the AUD and improve the Trade Balance, which further supports the currency. On the other hand, a negative Trade Balance can weaken it. Since the Reserve Bank of Australia has indicated that rate cuts are not expected soon, we should rethink our short-term strategies. This means that derivatives predicting cuts to the cash rate in the near term are likely overvalued. Recent data shows inflation for December 2025 holding at 3.5%, signaling ongoing price pressures for the central bank. With a cautious outlook from the RBA, placing bets on the AUD/USD dropping below 0.6600 in the first quarter seems risky. Instead, we might want to consider selling out-of-the-money puts or structuring call spreads to take advantage of potential stability or a gradual increase in the currency’s value. Australia’s tight labor market, with an unemployment rate of 4.0% in December 2025, gives the RBA little incentive to ease policies soon.Market Volatility and Commodity Prices
This situation feels reminiscent of much of 2025, when the market frequently tried to anticipate RBA policy changes that did not materialize. That period experienced a notable decrease in volatility for short-dated AUD options as the central bank held firm. We should expect a similar trend now, making short volatility strategies potentially appealing. In addition to interest rates, key commodity prices provide support to the Australian Dollar at current levels. Iron ore prices are holding steady around $135 per tonne, largely due to consistent demand from China. China’s recent Caixin Manufacturing PMI reading of 50.9 suggests ongoing modest expansion, which should sustain demand for Australian exports. With the February RBA meeting described as ‘live,’ there is a risk of a rate hike instead of a cut. This situation suggests caution for those who are aggressively short on the Aussie dollar leading up to the decision. Any positioning might favor strategies that limit downside risk if the RBA surprises with more hawkish tones. Create your live VT Markets account and start trading now.A zigzag Elliott Wave structure formed in wave (iv) after wave (iii) completed at 6945.77.
The S&P 500 (SPX) is currently forming a diagonal Elliott Wave pattern that began from the low on November 21, 2025. This setup has five waves, with the first and fourth waves overlapping. The first wave, ((I)), rose to 6903.46, followed by a corrective wave ((II)) that ended at 6719.8. The index then climbed in wave ((III)), which further broke down into smaller impulsive waves, with wave (v) reaching 6945.77.
Related Market Movements
After this, a corrective zigzag pattern emerged in wave ((iv)), where waves (a), (b), and (c) completed at 6824.31. The S&P 500 has started to move upward again in wave ((v)), beginning with wave (i) at 6965.69. A pullback in wave (ii) is expected, but there may be more upward movement as buyers come in during a series of three, seven, or eleven swings. This pattern can be seen in the 45-minute chart as of January 7, 2026. In addition to this technical analysis, other market movements include a drop in gold prices in Malaysia, a weak Australian dollar due to trade data, and a stable US Dollar Index above 98.50. These trends show that market participants are being cautious. According to the current Elliott Wave structure, the S&P 500 is in the last upward leg of a pattern that started in November 2025. We expect a small pullback soon, which could be a good buying opportunity before the next move up. This is supported by data showing that the unemployment rate in December 2025 held steady at 3.9%, indicating economic strength. For traders, this suggests preparing for more upside in the coming weeks. Buying call options on the SPX or SPY with February 2026 expiration dates could be a smart move to benefit from the expected rally in wave ((v)). Alternatively, selling cash-secured puts near the anticipated pullback zone around the 6900 level can also offer bullish exposure.Caution and Hedging Strategies
However, a note of caution is needed since this is the fifth and final wave of the diagonal sequence. Historically, finishing such patterns can lead to sharp reversals. This last advance is backed by strong Q4 2025 holiday retail sales, which showed a 4.2% yearly increase, possibly indicating a market peak. While positioning for immediate upside, traders should also think about hedging their portfolios. As the index approaches new highs, buying out-of-the-money put options for March or April 2026 could serve as affordable insurance against sudden downturns. Volatility, indicated by the VIX, has been below its 50-day average of 14.5 but could change quickly once this final wave ends. Additionally, the US Dollar Index has been rising above the 98.50 level. While the moment is currently focused on equity momentum, a strong dollar may become a headwind for earnings later this year. This is an important factor to watch as we approach the end of this upward market phase. Create your live VT Markets account and start trading now.Foreign investment in Japanese stocks surged from a net outflow of ¥1 billion to a net inflow of ¥124.9 billion recently.
Foreign investment in Japanese stocks saw a significant boost in December, shifting from a net outflow of ¥1 billion to a net inflow of ¥124.9 billion. This surge reflects growing confidence in the Japanese market, driven by economic recovery and stable financial conditions.
Investors are attracted to the favorable valuation of Japanese stocks compared to those in other major markets. This trend could provide support for Japan’s stock market, despite challenges like fluctuating global demand and domestic economic policies.
Positive Economic Outlook
The increase in foreign investment bodes well for Japan’s economic outlook, potentially leading to more stable market conditions in the future. Back in late 2024, we noted a surge in foreign investment that contributed to strong market performance throughout much of 2025. However, this optimism has recently turned cautious. The latest data from the Ministry of Finance reveals that foreign investors were net sellers of Japanese cash equities last week, marking a significant shift from the steady inflows that helped push the Nikkei 225 index above 42,500. Currently, the market is more focused on the specific actions of the Bank of Japan. With core inflation remaining above the 2% target for over a year, many are speculating that a change in the negative interest rate policy may happen soon. This speculation has caused the Nikkei Volatility Index to rise to 19.2, indicating that traders expect larger market fluctuations in the weeks ahead.Considering Market Strategies
In light of this uncertainty, we should explore strategies that can benefit from increased movement in the Nikkei 225. Buying option straddles or strangles ahead of the upcoming central bank meeting could be a smart approach to prepare for major price changes, regardless of the direction. For those who have a specific market bias, purchasing puts could hedge against a downturn if the policy change is more aggressive than anticipated. The currency market is also crucial; the yen’s weakness provided a significant boost to corporate profits in 2025. The USD/JPY is currently around 155, but any clear indication of policy tightening from the Bank of Japan could lead to a swift strengthening of the yen. Considering USD/JPY put options could be a strategy to hedge or speculate on this potential currency shift. Create your live VT Markets account and start trading now.PBOC sets central USD/CNY rate at 7.0197, slightly up from previous levels
The People’s Bank of China (PBOC) has set the USD/CNY central rate at 7.0197 for Thursday’s trading. This is a small increase from the previous rate of 7.0187. The PBOC makes these adjustments regularly to help manage currency stability and promote economic growth.
The PBOC aims to maintain price stability and support economic development through financial reforms. It is a state-owned bank and operates under the direction of the Chinese Communist Party, rather than having an independent governor.
Monetary Policy Tools of the PBOC
Unlike Western central banks, the PBOC uses different monetary policy tools. These include the seven-day Reverse Repo Rate, Medium-term Lending Facility, and Reserve Requirement Ratio. The Loan Prime Rate (LPR) serves as the benchmark interest rate, which influences both market loan rates and savings interest. This, in turn, affects the exchange rate of the Chinese Renminbi. Since 2014, China has allowed the establishment of 19 private banks, like WeBank and MYbank, supported by tech giants such as Tencent and Ant Group. Nevertheless, these banks play a minor role in China’s largely state-driven financial system. The PBOC has nudged the yuan slightly weaker against the dollar, now at 7.0197. This gradual adjustment continues a trend from late 2025, where the authorities preferred a mildly softer currency. This indicates a controlled depreciation instead of a sudden drop. This strategy likely aims to assist China’s export sector, which only grew by 2.8% in 2025. With global demand uncertain and 2026 GDP targets not yet revealed, a weaker yuan can enhance economic competitiveness. We can interpret this currency adjustment as a subtle form of easing monetary policy.Traders Strategy and Economic Signals
For traders, the PBOC’s strict control means we shouldn’t expect large fluctuations soon. Implied volatility on USD/CNH options is decreasing, recently hitting multi-year lows below 4.5, making long volatility bets costly. This environment favors strategies that capitalize on market direction and the passage of time. Historically, this approach aligns with how the PBOC managed the yuan during difficult economic times in 2024 and 2025. Authorities allowed the yuan to drop below 7.30 to relieve economic pressure but intervened to prevent excessive declines. The current, controlled depreciation above 7.00 suggests a similar strategy. We should look for additional policy clues that might confirm this easing approach, such as reducing the Reserve Requirement Ratio or the one-year Loan Prime Rate. The last cut to the LPR was a modest 10 basis points in October 2025, and the market is beginning to anticipate another reduction before the second quarter. Such a move would further put downward pressure on the yuan. Given the expected gradual rise in USD/CNY, traders might consider selling out-of-the-money CNH put options to earn premiums. Alternatively, they could establish long positions through USD/CNH call spreads for a cost-effective way to gain bullish exposure. These strategies would benefit from a slow, controlled increase in the exchange rate in the coming weeks. Create your live VT Markets account and start trading now.XAU/USD approaches $4,450 during early Asian trading as profit-taking decreases safe-haven interest
Gold prices fell to around $4,450 in early Asian trading on Thursday as traders took profits after a recent rise. Attention will soon turn to the US employment report for December, set to be released on Friday. Analysts expect about 60,000 new jobs and a decline in the unemployment rate to 4.5%.
If the reports show weaker-than-expected results, the US Federal Reserve may consider easing monetary policy. Lower interest rates could make gold more appealing, as they lower the opportunity cost of holding non-earning assets like gold. Traders are currently setting aside concerns over the recent unexpected capture of Venezuelan President Nicolas Maduro by the US.
Gold As A Safe Haven Asset
Gold is a valuable asset, especially during uncertain times. Central banks bought 1,136 tonnes of gold in 2022, increasing their reserves. Gold tends to move in the opposite direction of the US Dollar and US Treasuries, along with other riskier assets. Since gold is priced in US Dollars, its value depends on the strength of the dollar. When there are geopolitical tensions or fears of a recession, gold prices often rise as people seek safety. Typically, gold performs better when interest rates are low, while a strong dollar can keep prices down. Conversely, a weak dollar can boost gold prices. Currently, gold is retreating to around $4,450, likely due to traders taking profits after the surge driven by geopolitical events. The market is momentarily focused on upcoming US economic data. Specifically, everyone is watching the US employment report for December 2025. Traders should prepare for a significant price shift after this report, as expectations are low with only 60,000 new jobs anticipated. If the number falls below this, it could lead to more bets on Federal Reserve rate cuts, pushing gold prices higher and making call options appealing. On the other hand, if the jobs report is unexpectedly strong, it could strengthen the dollar and lead to a sell-off in gold, making put strategies more favorable.Economic Indicators And Federal Reserve Policy
The low jobs estimate indicates a significant economic slowdown compared to 2024, when job growth averaged over 180,000 monthly. The unemployment rate is also predicted to be 4.5%, a sign of a cooling labor market. This situation may encourage the Federal Reserve to consider easing its monetary policy soon. Recent inflation data supports the case for rate cuts. Inflation peaked at around 4.8% in mid-2025 but has since dropped to a more manageable 3.5% in November. This gives the Fed the ability to cut rates to help support the slowing economy. Lower interest rates reduce the opportunity cost of holding gold. Additionally, strong demand from global central banks is helping to keep gold prices stable. After record purchases in 2022 and 2023, central banks added another 350 tonnes of gold in the third quarter of 2025, according to World Gold Council data. This trend is a strong long-term support for gold. The recent dip in gold prices can also be linked to trader positioning. Data from late December 2025 showed hedge funds had built their largest net-long position in over two years, indicating that the market was ready for profit-taking at any signs of stability. The current price movements appear to be a healthy consolidation phase before the next major event. Create your live VT Markets account and start trading now.GBP/USD stays above mid-1.3400s, keeping its bullish potential despite recent losses
The GBP/USD pair is stabilizing above the mid-1.3400s, as a weak risk environment supports the US Dollar. The differing monetary policies of the Federal Reserve and the Bank of England are helping to maintain support for the dollar while limiting losses.
Recent US data shows mixed results. The ISM services PMI rose to 54.4, but job growth in the private sector was lower than expected. Job openings also dropped more than anticipated, raising expectations for rate cuts by the Federal Reserve, which could hinder the US Dollar’s appreciation.
The Bank Of England And The British Pound
The Bank of England is suggesting that it is approaching neutral interest rates, which could help the British Pound. There are no significant UK economic announcements expected on Thursday, so GBP/USD will be influenced by US trends. Traders will focus on the US Weekly Initial Jobless Claims and the upcoming Nonfarm Payrolls report, which will impact the demand for the US Dollar and future movements of GBP/USD. The Pound Sterling is the oldest currency in the world and plays a significant role in global forex markets. The Bank of England’s decisions greatly affect its value, and economic data along with trade balances are also important. A strong UK economy and a positive trade balance generally strengthen the Pound. As of January 8, 2026, the GBP/USD pair remains steady above the mid-1.3400s, but there is uncertainty about its direction. This price movement indicates the ongoing struggle between expectations of the US Federal Reserve and the Bank of England. The market is currently in a waiting phase, digesting recent data and looking for new drivers.US Economic Signals And Predictions
In December 2025, US economic signals were mixed, increasing expectations for Federal Reserve rate cuts this year. The Nonfarm Payrolls report released last Friday showed the economy added 150,000 jobs, falling short of the 175,000 expected and indicating a slowing labor market. This supports the view that the Fed’s next major policy move will likely be to lower interest rates. Conversely, the Bank of England has limited options for easing its policy. The latest inflation data for December 2025 showed the UK’s headline CPI at 3.9%, nearly double the BoE’s 2% target. This persistent inflation complicates any signals for upcoming rate cuts, likely providing support for the Pound. For derivative traders, this gap in fundamental outlooks suggests that the current calm in GBP/USD may not last. Buying call options with expirations in late February or March presents a good risk-to-reward opportunity, as it positions traders for a potential breakout above the 1.3600 level. This strategy allows for potential gains while limiting risk if the US Dollar unexpectedly strengthens. Create your live VT Markets account and start trading now.Australia’s trade surplus decreased to 2,936 million, down from a revised 4,353 million month-on-month.
Australia’s trade surplus decreased to 2,936 million AUD in November, down from 4,353 million in October, according to the latest figures from the Australian Bureau of Statistics. Exports fell by 2.9% in November, while imports rose slightly by 0.2%.
The AUD/USD exchange rate dropped by 0.03% to 0.6719. A heat map shows that the Australian Dollar was weakest against the New Zealand Dollar. The Trade Balance report, released at 00:30 GMT, offers an early look at how exports are performing.
Impact of Reserve Bank of Australia
The Reserve Bank of Australia’s interest rate decisions influence the value of the AUD. The AUD is affected by several factors, including iron ore prices, the health of China’s economy, and domestic inflation. Iron ore is Australia’s top export and has a direct impact on the AUD’s value. A positive trade balance usually strengthens the AUD, while a negative balance can weaken it. Australia’s largest trading partner is China, and its economic health greatly influences Australian exports and the AUD. The Reserve Bank of Australia aims to keep inflation between 2-3% by adjusting interest rates. Australia’s trade surplus saw a sharp drop late in 2025, falling to A$2.9 billion in November due to lower exports. This decline signals a potential decrease in foreign demand for Australian goods. The earlier strong export performance may be fading. This trend appears to continue into the new year, with December 2025 data showing further narrowing of the surplus. The main reasons are slow overseas demand and a slight increase in domestic imports, putting pressure on the Australian dollar as we approach the first quarter of 2026.Impact of China’s Economy
A significant factor is the ongoing weakness in China’s economy. Recent manufacturing PMI data indicates only slight growth. As a result, iron ore prices have fallen from over $130 a tonne in late 2025 to about $115 now. This decline impacts Australia’s export revenue and lowers the currency’s value. Given this economic backdrop, a rate hike from the Reserve Bank of Australia at the February 2026 meeting is very unlikely. We expect that the market will start to anticipate a more dovish approach from the RBA for the rest of the year, unlike the US Federal Reserve, which is delaying its potential rate cuts. For traders, this suggests a strategy to position for a potential decline in AUD/USD in the coming weeks. Buying put options with a strike price below 0.6700 could be a smart move to take advantage of a break below recent support levels. If the exchange rate falls below the January 2026 low of 0.6671, we may see a quick test of the 0.6614 level seen in December 2025. We should also consider currency pairs, as the Aussie dollar shows significant weakness against the Kiwi. The trend of AUD underperforming against the NZD observed at the end of 2025 seems likely to continue. Thus, taking bearish positions on the AUD/NZD pair could be a good opportunity. Create your live VT Markets account and start trading now.Foreign investment in Japanese stocks fell to ¥-342.2 billion from ¥-1 billion.
Japan’s foreign investment in stocks dropped significantly, falling to ¥-342.2 billion in December from ¥-1 billion previously. This decline points to a loss of confidence in the market and may signal broader economic issues or changes in market sentiment.
The fluctuations in foreign investment raise concerns about the future of Japan’s stock market. These shifts occur as the country faces both local and global economic challenges.
Foreign Investors Pulling Out
There’s a clear warning sign: foreign investors withdrew a net ¥342.2 billion from Japanese stocks last month. This marks a big turnaround after a strong year where the Nikkei 225 soared past 42,000 in November 2025. The data shows that large overseas funds might be cashing in their profits. With this recent trend, it might be wise to consider buying put options on the Nikkei 225 index for the upcoming weeks. The retreat of investors corresponds with growing speculation that the Bank of Japan may signal a policy change in the first quarter. This could strengthen the yen and increase pressure on stocks. We saw similar market reactions cause temporary dips during speculation about policies back in 2024.Impact On Currency Markets
The currency market is crucial in this scenario, with the USD/JPY rate remaining high around 156 through late 2025. Foreign investors might be selling stocks now to prepare for a potential strengthening of the yen, which would lower their returns when converted back to dollars. This makes currency-hedged strategies or direct bets on a declining USD/JPY rate more appealing. This large outflow indicates increasing uncertainty, and we should expect more market volatility. The Nikkei Volatility Index has already risen from a low of 16 to over 19 in the past few weeks, showing heightened market concern. In this environment, buying option premiums, such as through straddles, is a viable strategy to profit from a significant market shift in either direction, although the current trend seems to lean downwards. Create your live VT Markets account and start trading now.Australia’s trade balance decreased from 4,385 million to 2,936 million.
Australia’s trade balance fell to 2,936 million AUD in November, down from 4,385 million AUD in October. This change shows a decline in trade performance month over month.
