EUR/USD pair loses momentum at 1.1710 after rejection at 1.1740
NZD/USD drops below 0.5800 as caution sets in after failing to hold gains
NZD/USD has dipped below 0.5800 as the market becomes cautious ahead of important US data releases. The US ADP employment report and Nonfarm Payrolls will likely impact the US Dollar’s direction in the near term.
The Kiwi Dollar rose from 0.5740 on Monday but couldn’t maintain its position above 0.5800 during Tuesday’s European session, falling to around 0.5790 as the US session began. The positive market sentiment from earlier faded during the London session, leading to less selling pressure on the US Dollar and shifting focus to key US labor data.
US Dollar Weakens as Key Data Approaches
The US Dollar weakened on Monday after the ISM Manufacturing PMI dropped to 47.9 in December, marking a 14-month low. Moreover, Neel Kashkari from the Minneapolis Fed shared a dovish outlook regarding potential interest rate cuts, affecting how the market views future Fed actions. New Zealand’s GDP figures for Q3 were better than expected, reinforcing beliefs that the Reserve Bank of New Zealand (RBNZ) completed its easing cycle last year. Governor Ann Breman indicated that a steady monetary policy is likely to continue. The New Zealand Dollar is influenced by its economy, RBNZ policies, trade ties with China, and dairy prices. It tends to strengthen with positive economic data and during risk-on periods but can weaken in times of market uncertainty. Currently, the Kiwi Dollar is stalling at the 0.5800 level as the market braces for key US employment data. The upcoming Nonfarm Payrolls report is crucial, as it may set the tone for the US Dollar in the coming weeks. With December 2025 adding a solid 215,000 jobs, significantly more than expected, we are wary of another surprising result that could boost the dollar.Market Strategies Around US Employment Data
With this important report on the horizon, buying volatility seems like a smart strategy for the near future. This might involve options such as a long straddle on the NZD/USD, which aims to profit from a big price movement in either direction after the data release. This strategy allows us to benefit from expected market jumps without needing to guess the direction. For those who expect a weaker US Dollar, the differences in central bank policies are crucial. The RBNZ appears committed to maintaining its steady policy, while Federal Reserve officials are discussing potential rate cuts, giving the Kiwi an advantage. We could act on this view by purchasing short-term NZD/USD call options with a strike price just above the 0.5850 resistance level. On the other hand, the return of cautious sentiment in the markets favors the US Dollar as a safe haven. The VIX, a key indicator of market fear, has risen from its lows in 2025 around 13 to over 16, indicating increased concern among investors. Buying put options below the recent support at 0.5740 could allow us to profit if strong US jobs data leads to a significant dollar rally. We also need to stay alert to news from China, as its economy significantly affects the New Zealand Dollar. Manufacturing PMI data from late 2025 showed only a slight expansion at 50.7, which is not the robust recovery we had hoped for. Any further signs of weakness from China in the upcoming weeks could limit the Kiwi’s upward potential, even if US data disappoints. Create your live VT Markets account and start trading now.In uncertain markets, the Australian dollar hovers around 0.6715 after retreating from 0.6740.
The AUD/USD fell to 0.6715 after failing to break through 0.6740 earlier. The US Dollar gained strength on Monday, causing the Australian Dollar to lose its earlier gains.
Traders are being careful with the US Dollar as they await important unemployment figures later this week. These numbers could shed light on the Federal Reserve’s next moves. Recent US data showed a decline in manufacturing activity, the biggest drop in 14 months, according to the ISM Services Purchasing Managers’ Index. December’s ISM Manufacturing PMI dropped to 47.9 from 48.2 in November, despite predictions for a slight increase.
Neel Kashkari’s Comments
Minneapolis Fed President Neel Kashkari suggested there might be rate cuts due to rising unemployment risks. Meanwhile, in Australia, strong consumer inflation figures have led many to believe the RBA might raise rates soon. Key reports, including the Australian S&P Global Services PMI and monthly CPI, are set to be released on Wednesday and are crucial for confirming these expectations. The Services PMI is an important measure for Australia’s services sector performance. A score above 50 indicates growth. Investors will closely watch its release, as it can predict trends in GDP, jobs, and inflation. The next update is due on January 6, 2026. There’s a growing split between the US Federal Reserve and the Reserve Bank of Australia’s policy outlooks. Markets are increasingly expecting the RBA to raise rates to control inflation while anticipating Fed rate cuts due to a slowing US economy. This difference may lead the AUD/USD to rise in the upcoming weeks.Economic Indicators and Strategies
The argument for a weaker US dollar is gaining strength, especially after the recent ISM Manufacturing PMI showed the fastest contraction in 14 months. This trend follows the disappointing November jobs report, which only added 155,000 jobs when many expected more. These signs of a slowing economy likely influence Minneapolis Fed President Kashkari’s recent concern about unemployment. On the other hand, the Australian dollar is supported by ongoing inflation, a key issue we’ve been tracking for the past year. November 2025’s annual inflation rate surprised many at 4.5%, putting pressure on the RBA to act. Thus, the upcoming monthly CPI data is vital; a high number would likely strengthen the case for a rate hike. For traders, this uncertain environment makes options strategies appealing to manage the expected volatility. Buying AUD/USD call options set to expire in February may be a smart way to prepare for a potential rally after this week’s data. This method allows traders to gain profit while limiting their risk to the premium they pay. This trading approach is backed by current market data, showing nearly a 70% chance of a Fed rate cut by June. In 2025, Australian CPI releases often led to daily moves over 1%, highlighting the need to manage risk around these key announcements. A rise above the 0.6740 resistance level could indicate the start of a stronger trend. Create your live VT Markets account and start trading now.Consumer confidence in Mexico rises to 44.8 in December, up from 44
In December, Mexico’s consumer confidence index rose to 44.8, up from 44. This indicates a slight increase in how households feel about the economy compared to last month.
In other news, updates on the market included changes in currency pairs and precious metals. The EUR/USD pair faced pressure, while the GBP/USD struggled to keep its earlier gains. Gold experienced a dip from a weekly high, but it still held on to some gains. Additionally, Bitcoin and other cryptocurrencies cooled down after recent rises.
Investment Disclaimer
FXStreet noted that all information provided is not investment advice. This content serves informational purposes only, and anyone thinking about investing should do their own research. It’s important to remember that investing in open markets can be risky, including the possibility of losing all your initial investment. The rise in Mexico’s consumer confidence to 44.8 is noteworthy. This small improvement, alongside strong nearshoring investments seen throughout 2025, suggests that Mexico’s economy is showing solid strength. This could mean more stability for the Mexican Peso (MXN) in the next few weeks. This sets a strong base, especially with data on foreign direct investment. In the last quarter of 2025, investments in Mexico’s manufacturing sector, driven largely by companies moving their supply chains, increased by over 5% compared to the previous year. This influx of capital helps shield the Peso from outside economic shocks. Central bank dynamics are now crucial. While the Fed is hinting at significant rate cuts of more than 100 basis points for 2026, we anticipate Banxico will be more careful, as Mexico’s inflation finished 2025 at a high 4.4%. This growing interest rate gap favoring the Peso could attract carry traders and further support the currency against the US Dollar.Consideration of Mexico Focused Investments
Considering this outlook, we are looking at buying call options on Mexico-focused ETFs like EWW. This approach allows us to take advantage of potential gains from a strong domestic economy while keeping our risk limited. The options market currently shows low volatility, making it a good time to enter. However, we need to stay cautious about spillover effects from the United States, as important US labor reports are coming out soon. Any significant downturn in the US job market could reduce demand for Mexican exports. To protect against this risk, we are exploring short-term put options on the USD/MXN currency pair. Create your live VT Markets account and start trading now.In December, consumer confidence in Mexico increased from 44.2 to 44.7
In December, Mexico’s consumer confidence index increased to 44.7, up from 44.2. This rise shows a positive change in how consumers feel as the year comes to a close.
Several factors impacted the financial markets, including economic data from Europe and the US. For example, EUR/USD positions fell due to mixed market conditions, even though German inflation data was positive.
Commodities and Cryptocurrency Movements
The commodities and cryptocurrency markets experienced different trends. Gold prices settled above $4,450 due to global tensions, while cryptocurrencies like Bitcoin adjusted after significant gains. Traders are also looking at possible developments in Venezuela and their impact on the market. Meanwhile, the value of Cardano went up, suggesting it might rise another 20%. For broker options in 2026, there is detailed information on Forex, CFD, and Gold trading. Comprehensive guides are available for those wanting to choose the best trading platforms and learn about regional broker options. FXStreet highlights the need for personal research before making market decisions. They emphasize that investing carries substantial risks and do not provide specific investment recommendations. The company and its authors are not responsible for any errors or losses related to the published information.Market Signals and Investor Strategies
The market is signaling caution ahead of important US labor reports this week. A Federal Reserve official has called for aggressive rate cuts in 2026, creating a conflict between low-rate policy expectations and the current stability of the US dollar. Derivative traders should prepare for significant volatility, using options to protect against or speculate on dramatic movements after the employment data is released. Given the weak data from the Eurozone, the EUR/USD pair appears vulnerable, struggling around the 1.1700 level. The British Pound is stronger but has retreated from recent highs near 1.3570, indicating its fate is also linked to the dollar’s next move. Buying puts on EUR/USD may be a straightforward way to prepare for a strong US jobs report that could delay expected rate cuts from the Fed. Looking back, a similar situation occurred in late 2023 and early 2024 when unexpectedly strong economic data pushed the market to delay its timeline for rate cuts. The series of cuts that started in late 2024 and continued through 2025 was based on a softening labor market. A strong jobs report now could quickly unwind those dovish bets and significantly boost the dollar. Gold is benefiting from speculation about rate cuts and geopolitical risks, holding steady above $4,400 per ounce. A weak US labor report could drive gold prices higher, making long-dated call options an attractive strategy for capturing further gains. In contrast, strong hiring could lead to a sharp correction in gold prices as the dollar rises. The slight increase in Mexican consumer confidence is a positive, albeit small, sign for the peso. Given the extended period of high interest rates maintained by Banxico throughout 2024 and 2025 to combat inflation, this suggests domestic stability. There’s potential to use options to bet on the peso strengthening against the US dollar, especially if the US labor market shows weakness. In the crypto markets, the pullback in Bitcoin and Ethereum from recent highs indicates healthy profit-taking. With open interest in Bitcoin futures rising over $25 billion, a level not seen since the bull market of 2025, the market is set for its next major move. Traders might use straddle or strangle options strategies to benefit from a breakout, no matter which direction it goes. Create your live VT Markets account and start trading now.USD/JPY rises towards 156.50 during the European session as focus shifts to US NFP data.
USD/JPY saw a slight rise, trading around 156.50 during the European session on Tuesday. This increase comes with a minor recovery in the US Dollar as investors prepare for the US Nonfarm Payrolls (NFP) data for December, which will be released on Friday.
The US Dollar Index (DXY), which measures the Dollar against six major currencies, edged up to about 98.45. Earlier, the Dollar had weakened due to a positive market sentiment as investors reacted to US military actions in Venezuela.
US Nonfarm Payrolls and Labor Market Concerns
Attention is now on the US NFP data, especially as Federal Reserve officials are more worried about labor market risks than inflation. Investors will also review the ADP Employment Change and ISM Services PMI data from December, along with November’s JOLTS Job Openings. Meanwhile, the Japanese Yen remains weak, even though Bank of Japan (BoJ) Governor Kazuo Ueda hinted at possible interest rate hikes soon. He indicated a need to adjust monetary policy to support steady growth and stable inflation. The BoJ began its loose monetary policy in 2013 to boost the economy and encourage inflation. Changes in 2024 marked the BoJ’s first interest rate hikes, moving away from a policy that had weakened the Yen amid global monetary policy shifts. Looking back to late 2025, attention was on the US Nonfarm Payrolls report while USD/JPY was near 156.50. This focus was validated when the December jobs report showed a disappointing gain of only 120,000 jobs, while forecasts predicted 160,000, confirming the Federal Reserve’s worries about a slowing labor market.Market Reaction to Labor Data
This weak labor data caused the US Dollar Index to drop from 98.45 to its current range around 97.50, driving the USD/JPY pair lower to about 153.00. This indicates a clear downturn for the dollar after the crucial data release. At the same time, the Bank of Japan’s position from late last year appears stronger. Governor Ueda’s hints at further interest rate hikes are supported by new inflation data, with Japan’s core CPI remaining above the 2% target at 2.5%. This difference in policies — a possibly dovish Fed versus a hawkish BoJ — suggests that the Japanese Yen may continue to strengthen. In this context, traders might consider preparing for further declines in USD/JPY. Buying put options with strike prices below 152.00 could be a good way to profit from a further drop, targeting the significant psychological level of 150.00 in the coming weeks. This strategy limits risk to the premium paid for the options. However, it’s essential to monitor upcoming US inflation data. A surprisingly strong Consumer Price Index (CPI) report could quickly disrupt the expectation of an imminent Fed rate cut, causing a rebound in the US dollar. We saw similar volatility in early 2024 when strong inflation figures repeatedly delayed market hopes for policy relaxation. Create your live VT Markets account and start trading now.Commerzbank reports that OPEC+ plans to maintain production levels until March, with minor adjustments.
OPEC+ producers have decided to keep their production levels unchanged until March. There are small differences, with Kazakhstan, Iraq, and Russia slightly varying from the set production targets.
Saudi Arabia has lowered its official selling prices for the third month in a row. This new pricing puts the premium for Arab Light Crude at the lowest level in five years, now just 30 cents above the Oman/Dubai benchmark in Asia.
OPEC Meeting Decisions
OPEC+ producers met briefly over the weekend to confirm their plan to maintain steady production. We expect this decision to be confirmed again at their next meeting in early February. In November, Kazakhstan and Iraq produced more than their targets, while Russia produced less. Overall, the total shortfall from the planned output was modest at 140,000 barrels per day, according to IEA data. The limited capacity for increased production matches with Saudi Arabia’s price cuts. The lower premium shows that oil supply gains are restricted amid ongoing adjustments in prices. With OPEC+ set to keep production steady until the end of March, we don’t see any reason for a major price increase in the near term. This decision was anticipated, which means we can expect a period of price stability or possibly weakness. The market now has a clearer understanding of supply fundamentals for the first quarter.Saudi Arabia Price Cuts
A key indicator is Saudi Arabia reducing its official selling prices for the third month running. This keeps the premium for Arab Light at a five-year low, showing that they are competing for market share in Asia. It also hints that the demand isn’t strong enough to handle the current output at higher prices, which is a concerning sign. Recent data supports this view, revealing an unexpected increase in U.S. crude inventories. The latest EIA report noted a surprise rise of 1.8 million barrels. Additionally, China’s manufacturing PMI data from last week pointed to a slowdown, raising worries about global oil demand growth in the upcoming months, which aligns with Saudi pricing strategies. We saw a similar situation in the fourth quarter of 2025, where worries about a slowing global economy kept prices from rising, despite ongoing geopolitical tensions. That period showed us that weak demand can overshadow supply-side concerns. This historical context adds to our cautious outlook now. In the coming weeks, this suggests a good strategy for crude oil futures could be to sell out-of-the-money call options to collect premiums, as price increases seem limited. It would be wise to establish positions that benefit from prices remaining below key resistance levels, like $80 for Brent. This tactic gains from both price stagnation and the passage of time. We must stay alert for unexpected developments in geopolitical hotspots that could quickly change supply expectations. Traders should also watch for upcoming inflation reports from the U.S. and Europe; any signs of robust economic performance could alter demand expectations. The next OPEC+ meeting in early February will be a significant date to watch for any policy changes. Create your live VT Markets account and start trading now.As risk-on sentiment prevails, the US dollar weakens while the pound sterling excels among G10 currencies
The US Dollar started strong but then weakened as global risk appetite increased. This shift allowed the Pound Sterling to perform better than other G10 currencies. Despite some market volatility, risky assets saw gains, and gold prices rose due to recent US actions in Venezuela and a softer ISM manufacturing report. These developments hinted at possible Federal Reserve rate cuts.
Geopolitical issues, especially disruptions in Venezuelan oil production, and a focus on AI growth are shaping the market. The Federal Reserve has cut rates three times since September 2025 and is expected to continue reducing them into 2026, influenced by changes in leadership.
US Economic Prospects
The US economy may see improvements from AI investments and tax cuts, which could strengthen the Dollar later this year. The labor market will play a crucial role, with key employment data on the horizon. The market is fluctuating rapidly, with gold holding its gains despite resistance from the Dollar, while Bitcoin retraced after reaching new highs. Issues in Venezuela create uncertainties but aren’t expected to change market or economic predictions significantly. Solana prices have recently risen due to strong institutional demand, resulting in significant inflows into exchange-traded funds connected to this cryptocurrency. Currently, the market seems to be at odds with the Fed. It’s predicting at least two rate cuts for 2026, while the Fed hinted at only one cut last year. This disconnect is causing volatility, especially with the important jobs report due this Friday. The CME’s FedWatch Tool shows over a 70% chance of a rate cut by the March meeting, a figure that could shift quickly if labor data exceeds expectations.Risk-On Mood
With the current risk-on sentiment, we are observing the US Dollar’s weakness against currencies like the Pound Sterling. In Q4 2025, UK core inflation stayed above 3.5%, leading to the belief that the Bank of England will be slower to cut rates compared to the Fed. Options traders should brace for continued volatility in the GBP/USD pair, which recently broke key resistance levels. The ongoing bullish trend in equities is driven by the narrative surrounding AI growth, encouraging investment in technology sectors. We think using derivatives on tech-heavy indexes is a smart strategy for capitalizing on this long-term trend. This belief is backed by late 2025 data from the Bureau of Economic Analysis, which showed business investment in intellectual property products increased at an impressive annualized rate of over 8%. In the commodities sector, the naval blockade in Venezuela is causing short-term disruptions in oil markets. February WTI crude futures have surged over 5% in the past week, trading above $85 per barrel, placing the market in backwardation. Therefore, any options strategy should focus on short-term price movements rather than long-term supply changes. Create your live VT Markets account and start trading now.UOB Group analysts predict USD/CNH may fluctuate between 6.9720 and 6.9920, with limited downside risk.
The US Dollar (USD) against the Chinese Yuan (CNH) is expected to trade between 6.9720 and 6.9920. Analysts at UOB Group suggest there might be a test of 6.9590 due to oversold conditions and weaker momentum.
In the last session, the USD bounced back to 6.9915 and closed at 6.9827, which is a 0.17% increase. The forecast remains that the USD will stick to this range unless it breaks above the 6.9950 resistance level.
Market Observations
The FXStreet Insights Team, which includes journalists and analysts, gathers important market observations from top experts. Gold has dipped slightly but is still above $4,450, supported by geopolitical tensions. Bitcoin is facing resistance around $93,000, while Ethereum and Ripple may see some profit-taking. In other areas, GBP/USD has pulled back after reaching a three-month high, now trading below 1.3550. Solana continues to rise, trading above $137, due to increased institutional interest and over $16 million in spot ETF inflows. Despite ongoing concerns in Venezuela, current market forecasts remain steady, showing resilience amid political instability.Economic Indicators
Back in January 2025, we believed the dollar would trade narrowly against the yuan, likely between 6.9720 and 6.9920. At that time, we saw the pairing as deeply oversold, indicating any further declines should be limited. The key resistance level was 6.9950. However, the yuan strengthened more than we thought in the following weeks. China’s Q4 2024 GDP data, released mid-January 2025, surprised us with a 5.4% growth rate, boosting confidence in their recovery from the pandemic. On the US side, inflation data for December 2024 came in softer than expected at 3.0%, increasing the likelihood of Federal Reserve rate cuts. This difference in economic outlook put pressure on the dollar, causing the USD/CNH pairing to fall below the identified support level of 6.9590. Currently, with USD/CNH trading around 6.8800, implied volatility in USD/CNH options is at multi-month lows. This suggests the market is calm and anticipating stability. Strategies like selling straddles or strangles could be effective for collecting premiums, betting on a steady range before the Lunar New Year. For those who think China’s current policy support may be lacking, buying inexpensive out-of-the-money call options on USD/CNH could be a cost-effective way to prepare for a potential rebound. Last year showed that fundamental data can quickly outpace technical trends. We need to keep a close watch on upcoming trade balance figures for hints of a weaker export market. Create your live VT Markets account and start trading now.UOB Group analysts suggest that USD/CNH will range between 6.9720 and 6.9920, with a possible test of 6.9590.
The US Dollar is expected to trade between 6.9720 and 6.9920. Analysts from UOB Group believe that, because of oversold conditions and decreasing momentum, the downside may only reach around 6.9590.
Recently, the US Dollar rose more than expected to 6.9915 but later fell back to close at 6.9827, showing a 0.17% gain. The upward momentum has slowed due to this pullback, and we anticipate it will stay within the proposed range today.
