EUR/USD is currently weak, trading at four-week lows below 1.1700 due to a strong US Dollar. Traders are paying close attention to US economic data and the situation in Venezuela. Despite heightened geopolitical tensions following the US intervention in Venezuela, market sentiment remains largely unaffected. Asian stocks have risen, and European markets are expected to open slightly higher.

Impact of US Economic Data

The US Dollar has started 2026 on a strong note, thanks to positive US home sales and jobless claims figures. These data support the Federal Reserve’s cautious approach to easing amid ongoing inflation. The US ISM Manufacturing PMI is likely to show a small improvement, and December’s Nonfarm Payrolls report is crucial to gauge the strength of the US labor market. EUR/USD may decline further, as technical indicators suggest bearish trends. Support levels for the pair are around 1.1670, with additional support near the 50% Fibonacci retracement at 1.1650 and at 1.1615. A rise above 1.1715-1.1720 could help alleviate some downward pressure. The ISM Manufacturing PMI is essential for measuring US factory activity; a reading above 50 indicates growth, which is positive for the USD, while below 50 suggests contraction. The ISM Manufacturing Employment Index is also significant for assessing the US labor market. As 2026 begins, the US Dollar strengthens, pushing EUR/USD below 1.1700 for the first time in four weeks. Late 2025 saw unexpectedly strong US home sales and jobless claims, leading to a reevaluation of a quick Federal Reserve easing cycle. The likelihood of a rate cut in March 2026, as per futures markets, has dropped from over 75% to just below 60% in the past week. Although US actions in Venezuela are noteworthy, financial markets are currently focused elsewhere. The spotlight is on the US economic calendar, which will offer crucial insights into the Fed’s future moves. This week’s data, especially the labor market report, is vital for determining if the economy can sustain higher interest rates.

Key Upcoming Market Events

Traders should pay close attention to today’s ISM Manufacturing PMI, as it may provide a short-term signal. A slight improvement to 48.3 is expected for December 2025, but if it surprises above 50, it would signal expansion and likely lead to more USD buying. This could make purchasing short-term EUR/USD put options a smart move for those expecting further declines. The highlight will be Friday’s Nonfarm Payrolls report, with economists predicting an increase of about 165,000 jobs. A number significantly higher could reinforce the Fed’s cautious position and might push EUR/USD to test its next major support at 1.1650, aligning with the 50% Fibonacci retracement from the November-December rally last year. Given the potential for significant price movements after Friday’s jobs report, implied volatility is rising. One-week implied volatility for EUR/USD has increased to 7.5%, indicating that options traders expect more fluctuations than before. This setting could favor strategies like straddles or strangles for those anticipating a breakout but uncertain about the direction. Technically, the momentum remains bearish, with indicators like the RSI nearing oversold levels but not yet reversing. A failure to regain the 1.1720 area suggests that any upward movement may be temporary. Thus, traders should view any rallies as opportunities to position for further declines, targeting the support zones at 1.1650 and possibly 1.1615. Create your live VT Markets account and start trading now.

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The US Dollar (USD) is expected to rise to 6.9805 against the Chinese Yuan (CNH), but a long-term increase is unlikely. Analysts believe that oversold conditions and weakening momentum will restrict the decline to 6.9590. Last Friday, the USD reached a low of 6.9662 and closed nearly unchanged at 6.9709. Early trading in Asia shows a possible rise to 6.9805, with support at 6.9690 and 6.9650. In the one-to-three-week outlook, last month’s sharp decline is seen as excessive. While there are no clear signs of stabilization, the oversold conditions suggest limited risk of falling below 6.9590. On the other hand, if the USD breaks above 6.9950, it might indicate a recovery from its weakness. These insights come from FXStreet’s analysis, which includes expert opinions.

Market Environment Factors

The current market is influenced by various factors, including weak US economic data and geopolitical tensions. Notably, the USD/JPY has fallen due to weak US manufacturing data and rising Japanese yields, while the British Pound (GBP) has strengthened amid geopolitical flows. Economic events affecting other currencies also contribute to the complex market dynamics impacting USD/CNH movements. We view the recent drop in USD/CNH as excessive, presenting a tactical opportunity in the coming weeks. The pair appears significantly oversold after December’s decline, indicating limited downside towards 6.9590. Given that China’s official Manufacturing PMI for December unexpectedly fell to 49.0, we anticipate a short-term recovery back to 6.9805. The weak US ISM Manufacturing index of 47.9 is a concerning indicator for the dollar’s strength. This contraction, which marks the third consecutive month below the 50.0 mark, advises caution regarding any widespread USD recovery. It may be wise to consider options to sell USD rallies against currencies like the British Pound, which has surpassed the 1.3500 level.

Market Volatility and Investment Opportunities

With the evolving situation in Venezuela, we expect high market volatility to persist. The CBOE Volatility Index (VIX) rose to 21.5 over the weekend, indicating increased uncertainty in equity markets. This atmosphere supports holding long positions in safe-haven assets like gold and the Japanese yen through futures or exchange-traded funds. The cryptocurrency market is diverging from traditional risk-averse trends, driven by its unique dynamics. Last week saw net inflows of over $500 million into spot Bitcoin ETFs, highlighting ongoing institutional interest as we enter the new year. Therefore, we should consider cryptocurrencies as a separate momentum investment, possibly using call options on BTC and ETH to capitalize on potential gains. Create your live VT Markets account and start trading now.

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Oil prices have risen to approximately $57.50 due to tensions related to US involvement in Venezuela. This increase comes after OPEC+ decided to keep production levels steady, despite worries about an oil surplus from Venezuela, which holds 17% of the world’s total oil reserves, according to the US Energy Information Administration. Initially, prices dropped as concerns about oversupply grew when the US planned to reopen Venezuela’s oil industry. However, these worries faded as the market realized it would take time and significant investment to revive Venezuela’s neglected oil sector, which might deter US investment.

OPEC+ Role And WTI Oil

OPEC+, a group of major oil producers, has decided to maintain stable output to help keep prices steady after an 18% drop in 2025. West Texas Intermediate (WTI) oil remains critical in the global oil market. Several factors affect WTI prices, including supply and demand, political events, OPEC’s decisions, and fluctuations in the US Dollar. Data from the American Petroleum Institute (API) and the Energy Information Agency (EIA) is crucial for determining oil prices. A decrease in inventory often signals increased demand, while higher inventory levels indicate an oversupply, affecting prices. With prices fluctuating around the $57 mark, we are currently in a volatile period rather than establishing a clear new trend. The price bounce from $56.00 was sudden, as the market reconsidered the immediate effects of the US’s actions in Venezuela. Traders should be careful not to assume a lasting price increase based solely on this situation. The situation in Venezuela presents a typical headline risk that won’t impact oil supplies significantly for years. The market initially reacted negatively, fearing a supply overflow, only to change direction when the overall logistics became clearer. Major oil service companies have already warned that restoring Venezuela’s failing infrastructure will require billions in investments and years of effort.

Challenges For OPEC+

OPEC+’s decision to keep production steady provides a price cushion, especially after an 18% price decline in 2025. However, their commitment is being tested, as internal reports revealed compliance with production cuts dropped to 97% in the fourth quarter of 2025. This suggests that while OPEC+ is managing to maintain production levels for now, any signs of wavering could put downward pressure on prices quickly. The broader issue that capped prices last year is still weak global demand, which the current geopolitical tensions won’t change. Recent data from December 2025 showed that China’s manufacturing PMI fell to 49.7, indicating a slowdown and lower energy demand from the world’s biggest oil importer. This persistent weakness will likely limit how high any sudden supply-induced price rally can reach. Looking ahead to this week, the EIA inventory report set for Wednesday is very important. Last week’s report indicated an unexpected increase of 1.5 million barrels when a small decrease was anticipated. This suggests that the supply may be exceeding demand in the US. If the upcoming report shows another increase, it could remove the current geopolitical price premium and push WTI back towards the low $56 range. For those trading derivatives, this environment suggests focusing on price ranges rather than betting on significant price movements. The conflicting pressures of geopolitical supply risks and weak demand fundamentals are creating a bumpy, sideways market. Thus, strategies designed to take advantage of this volatility may be wiser than outright long or short futures positions in the coming weeks. Create your live VT Markets account and start trading now.

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The arrest of Venezuelan President Nicolas Maduro by the US over drug trafficking charges has surprised the world. In his absence, Vice President Delcy Rodríguez has stepped in temporarily, showing signs of a willingness to work with the US. For now, the risk to the oil market is limited. Venezuela’s supply of 900,000 barrels per day mainly goes to China, while US refiners take in less than 150,000 barrels per day. Even though losing this supply could affect forecasts, the current abundance of oil is expected to keep prices stable.

Oil Market Forecasts

Despite Maduro’s arrest, ING’s predictions for 2026 remain the same, expecting a well-supplied market with Brent oil averaging $57 per barrel. If Venezuelan production improves significantly by 2027, the forecast could rise to $62 per barrel. OPEC+ will also be crucial in shaping future market trends. Maduro’s arrest has created a lot of uncertainty in the oil market, leading to a critical situation in the coming weeks. We need to closely monitor how the power transition unfolds, as this will influence the direction of oil prices. It’s essential to prepare for short-term volatility while considering the overall market. A prolonged power struggle in Venezuela threatens around 900,000 barrels per day of oil supply. The situation can change quickly, as seen in 2019 when US sanctions caused production to drop sharply. Traders anticipating a similar disruption might want to buy near-term call options on Brent crude to benefit from a possible price surge.

Potential Outcomes

On the other hand, Delcy Rodríguez’s cooperative approach indicates a smoother transition may happen, which could lead to lower oil prices. If a stable, US-friendly government can maintain and even increase exports later this year, the market would see more supply. This scenario might make buying put options an appealing strategy for profiting from a price drop. However, any potential price rise due to a supply disruption is likely limited because the market is currently well-supplied. By late 2025, OPEC+ held substantial spare production capacity, reportedly over 3 million barrels per day. Additionally, US crude inventories were above the five-year average, providing a strong buffer against potential shocks. Given the stark difference between the two possible outcomes, trading based on volatility could be the best move. The implied volatility on oil options has likely increased, and strategies like a long straddle—which involves buying both a call and a put option at the same strike price—could be profitable if oil prices make a significant move either way. This approach capitalizes on uncertainty rather than betting on political results. Looking ahead, a stable Venezuela could negatively affect our long-term forecasts. If the country attracts investment and rebuilds its oil sector, it could bring substantial supply back by 2026 and 2027. This situation strengthens our belief that the market will remain well-supplied, keeping prices from rising steadily. Create your live VT Markets account and start trading now.

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The USD/JPY pair is showing more momentum, which hints at possible gains ahead. But right now, resistance at 157.50 is still too strong, and the USD ended at 156.81, up by 0.10%, with support at 156.75. In the weeks to come, the USD might see slight upward pressure and could move higher to test 157.50. While breaking above this level isn’t ruled out, the current momentum makes it unlikely to exceed last month’s peak of 157.80. A solid support level is found at 156.35.

FXStreet Insights

FXStreet Insights shares market observations from different analysts. Topics include how geopolitical events affect currency rates and economic data releases. These insights feature expert analysis but do not provide specific investment advice. Additional content on FXStreet examines movements in other currency pairs and assets. Topics cover geopolitical events that impact markets as well as analyses of precious metals and cryptocurrency trends. However, this information is for general knowledge and does not guarantee any investment outcomes. Currently, the US Dollar shows mild upward pressure against the Yen, though resistance at 157.50 holds strong. Despite the momentum leaning towards some advances, significant breakouts seem unlikely in the near term. Watch for support around the 156.60 to 156.75 area. This limited upward movement aligns with recent economic data that has dampened dollar enthusiasm. Last week’s ISM Manufacturing PMI for December was weak at 47.9, and Friday’s Non-Farm Payrolls report indicated steady job growth without signs of economic overheating. This situation leaves the Federal Reserve with little reason to adopt a more aggressive approach, restricting the dollar’s potential.

Historical Context and Trading Strategies

Looking back at 2025, the Bank of Japan often resisted major policy changes, even as the yen fell. Intervention remains a constant threat, making traders cautious about pushing the pair too high too quickly, as they may fear sudden actions by officials in Tokyo. This history creates a wary market, keeping the currency within a range. For derivative traders, this setup suggests strategies that take advantage of range-bound movements and time decay. With implied volatility slightly higher due to recent geopolitical tensions, selling options could be an attractive strategy. An iron condor, with short strikes outside the expected 156.35-157.50 range, might capture this premium. Specifically, selling call options with strike prices at or above 157.50 fits the view that this resistance will hold in the coming weeks. This can bring in income from premiums collected as long as the dollar doesn’t make a strong rally. Given the softer US data, breaking last month’s high near 157.80 is not a primary concern at this time. After the wild market shifts of 2025, it’s crucial to remain alert to external risks. The forthcoming Supreme Court ruling on presidential tariff powers could cause sudden volatility across all asset classes. Therefore, any positions should have well-defined risk parameters to guard against unexpected market changes. Create your live VT Markets account and start trading now.

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The USD/JPY pair is currently below 158.90 due to the Bank of Japan’s strong position on future rate hikes. Governor Ueda confirmed that rates will go up as the economy improves, but are still below the neutral range of 1–2.5%. Analysts believe USD/JPY may drop to 140 within a year, influenced by expected rate hikes from the BOJ and easing from the Federal Reserve. The swaps curve suggests nearly 50 basis points of BOJ rate increases in the next twelve months, while a 75 basis point easing from the Fed is expected. The USD/JPY could align with one-year implied policy rate differentials, approaching 140.00. Insights come from various experts, giving a broad perspective on the current economic landscape.

Global Currency Dynamics

In other news, the GBP/USD has climbed over 1.3500 amid geopolitical worries and weak US data. The EUR/USD bounced back in the American session, trading around 1.1700 after disappointing US ISM PMI reports. Gold is back on track thanks to geopolitical tensions and weak US data, while Bitcoin and Ethereum are thriving amid ETF inflows despite ongoing geopolitical issues. The USD/JPY pair has fallen sharply from the 158.90 resistance identified back in 2025. Predictions of policy divergence were accurate, with the Bank of Japan sticking to its hawkish stance and the Federal Reserve starting its easing cycle. As of today, January 5, 2026, the pair is near 145.00, still above the long-term goal of 140.00. The Bank of Japan has kept its promises, with the policy rate now at 1.25% following a series of hikes last year. Meanwhile, the US Federal Reserve has lowered its benchmark rate to the 4.50-4.75% range. This change has greatly reduced the interest rate advantage that previously favored the dollar, explaining the significant drop from the highs of 2025. With this large decline, traders should think about strategies to benefit from further drops but with managed risk. We suggest buying USD/JPY put options with a strike price around 140.00 that expire in the next two to three months. This strategy allows for profit from a further decrease while limiting losses in case the pair unexpectedly rises.

Implications for Traders

However, it’s essential to monitor US economic data closely. The latest CPI reading of 3.1% shows that inflation remains a concern. This could slow the pace of future Fed rate cuts, offering some support for the dollar around the 142.00-144.00 range. For cautious traders, a put spread—buying a 142 put and selling a 138 put—may be a safer way to prepare for another downturn. We recall the significant volatility in the yen from 2022 to 2024, which set the stage for last year’s major directional shift. Recently, implied volatility has decreased while the pair has consolidated, making options cheaper than a few months ago. This provides a good opportunity to prepare for the next big move before volatility potentially picks up again. Create your live VT Markets account and start trading now.

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**A Weakened US Dollar** The New Zealand Dollar (NZD) may drop, possibly testing 0.5740, with strong support expected at 0.5720. Last week, the NZD traded quietly within the range of 0.5752 to 0.5778, showing signs of increased downward momentum. Resistance levels are found at 0.5770 and 0.5780. In recent weeks, the NZD reached a high of 0.5853 but has since pulled back. This trend could continue, especially with resistance at 0.5800, which may lead to further declines. Analysts at UOB Group indicate that while downward pressure is present, 0.5720 could hold as strong support. A weakened US Dollar and ongoing geopolitical tensions have affected other currencies and commodities. The GBP/USD pair has gained, reaching intraday highs after weak US economic data. Gold prices have also increased, influenced by geopolitical issues and disappointing US manufacturing statistics. In the cryptocurrency market, Bitcoin and Ethereum remain bullish due to ETF inflows. Ripple has risen above $2.13, driven by investor interest in risk assets. Traders are currently assessing geopolitical factors and economic data that could impact market movements in the weeks ahead. **Derivative Positions and Strategy** The downward trend for NZD/USD suggests that a move to 0.5740 is likely soon. The pair struggled to maintain gains after peaking at 0.5853 last month, indicating that the pullback may continue. Derivative positions should be set up to take advantage of this expected weakness. This outlook is supported by mixed results from the Global Dairy Trade auctions—an important indicator for New Zealand’s economy—alongside the Reserve Bank of New Zealand’s cautious stance. These factors suggest limited potential for the kiwi’s value to surge, reinforcing a technical forecast for a weaker currency. For a direct bearish position, we might consider buying put options with a strike price close to 0.5750, expiring within the next three weeks to match the predicted timeline for this move. This strategy allows for downside exposure while minimizing risk, particularly if the strong support at 0.5720 triggers a sudden rebound. Alternatively, selling call options above the strong resistance level at 0.5800 offers another positioning method. This strategy will profit if the NZD/USD pair remains below that level, which seems likely given its recent sharp rejection from higher prices. The premium collected offers protection and benefits from both a declining price and time decay. It’s crucial, however, to monitor the US side closely. Today’s weak ISM manufacturing data typically would weaken the US dollar, but current geopolitical tensions are creating demand for safe-haven assets, which is keeping the dollar supported. This situation is currently overshadowing poor economic data, benefiting a short NZD/USD position. Create your live VT Markets account and start trading now.

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The US Dollar (USD) kicked off the week strong against major currencies, with the Dollar Index (DXY) close to its 200-day moving average. In contrast, Brent crude prices dropped 2.4%, approaching a multi-year low of $58.40 per barrel. Gold prices, however, are nearing record levels at nearly $4,550 an ounce. Equity and bond markets remained stable. Traders are looking ahead to the December ISM manufacturing data to understand inflation and the US job market. The ISM manufacturing index is expected to show a slower decline, predicting a headline index of 48.4 compared to 48.2 in November.

Fed’s Possible Rate Cut

The Federal Reserve has an opportunity to lower rates by 50 basis points, according to futures markets. This is partly due to weak job demand and reduced inflation risks. External factors, like actions from the Trump administration regarding Venezuela, have not substantially impacted the USD. Most other major central banks have paused their rate-cutting efforts. In related market movements, the Japanese Yen has strengthened due to risk aversion, while the British Pound has gained slightly with support from geopolitical matters. Market analyses, including insights from FXStreet, indicate varied impacts on currencies, commodities, and indices as economic data becomes available. The US Dollar Index (DXY) is testing its 200-day moving average, an important technical level that typically acts as strong resistance. Even though the dollar is strong this week, this might be a good time to sell, considering the broader economic conditions. The market seems to be preparing for a clash between short-term gains and a weaker dollar outlook for 2026.

Future of the Dollar

We believe that relative monetary policy will be the key factor influencing the dollar’s future, indicating a weaker dollar ahead. While other major central banks have finished their easing cycles, Fed funds futures are thinking about 50 basis points of rate cuts from the Federal Reserve this year. This expectation aligns with a shrinking labor market observed throughout 2025, where Non-Farm Payrolls averaged a weak 95,000 in the last quarter. With gold nearing its record high of around $4,550 an ounce set on December 26, 2025, there are opportunities in the options market. Buying call options on gold futures can leverage potential profits if a breakout to new highs occurs, fueled by safe-haven demand. Implied volatility in gold options has increased to a three-month high, signaling anticipation of significant movement. Brent crude prices are dropping toward a multi-year low of $58.40, a level seen in April 2025. This decline stems from ongoing concerns about a global slowdown, evidenced by the final manufacturing PMI reports from last year. Purchasing put options on crude oil offers a defined-risk way to take advantage of a potential drop below this critical support level. The upcoming December ISM manufacturing data will be a vital catalyst, particularly the sections on employment and prices paid. A weak report could strengthen the case for Fed rate cuts, likely pushing the dollar lower, which would benefit gold and possibly further hurt oil. Thus, we are expecting increased volatility in major currency pairs, making options strategies like straddles appealing around the data release. Create your live VT Markets account and start trading now.

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The Australian Dollar (AUD) may face a decline, possibly testing the 0.6670 level. If it drops below this, it is unlikely to fall past 0.6640. In the next 24 hours, the AUD increased to 0.6707 and closed at 0.6692, up by 0.27%. In the coming weeks, the AUD is expected to trade between 0.6640 and 0.6730. Even though it reached a 14-month high of 0.6727 last month, its upward momentum has slowed. This, along with overbought conditions, suggests that the AUD will trade within a range soon. Analysts from UOB Group, Quek Ser Leang and Peter Chia, identify resistance levels at 0.6695 and 0.6710.

Projected Trading Range

We anticipate that the Australian dollar will trade within a range for the next few weeks, as the strong growth seen late last year has diminished. A slight decrease toward 0.6670 seems possible in the short term, with expectations that it will remain mostly between 0.6640 and 0.6730. This perspective is supported by the actions of central banks noted at the end of 2025. The Reserve Bank of Australia kept rates steady at 4.35% in its last meeting of the year. Meanwhile, the US Federal Reserve remained cautious, not indicating any immediate rate cuts. This policy stance limits the potential increase for the AUD compared to a stable US dollar. Additionally, important commodity prices are not providing much support, which usually limits the strength of the Aussie dollar. Iron ore prices have dropped to about $132 per tonne after exceeding $140 in late December 2025. Recent data from China showed a December manufacturing PMI of 49.0, signaling a continued decrease in factory activity.

Range Bound Strategies

With this range-bound expectation, strategies that take advantage of low volatility could be beneficial. One approach may be selling out-of-the-money call options with strike prices above the resistance level of 0.6730. This can generate premium income as long as the AUD/USD does not rise above this level. Traders might also want to consider selling put options with strike prices below the key support level of 0.6640. This approach allows for earning income if the currency pair stays within the expected range. The aim is to benefit from the currency’s stability over the next few weeks. Create your live VT Markets account and start trading now.

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The article discusses recent currency movements and forecasts. The EUR/USD is recovering, hitting the 1.1700 level after disappointing US data. Meanwhile, the GBP/USD climbed above 1.3500 following weak US December PMI figures, which fell from 48.2 to 47.9, below the expected 48.3.

Geopolitical Tensions and Commodity Prices

Geopolitical tensions are impacting commodity prices. Gold is rising close to $4,450 due to US actions in Venezuela. Bitcoin is trading above its 50-day EMA, benefiting from ETF inflows. Other cryptocurrencies like Ethereum and Ripple are also on the rise, with Ripple crossing $2.13. FXStreet offers market information for informational purposes only. It emphasizes the importance of independent research before making financial decisions and is not responsible for any investment outcomes based on this information. We’re watching Brent crude closely after it bounced back from the $58.40 lows seen in April and May 2025. Downward momentum remains strong, with a key resistance around $64. Given the weak US manufacturing PMI data from December at 47.9, any rally towards this resistance may provide a good chance to short or buy puts.

Market Opportunities and Risk Considerations

The US Dollar is on shaky ground, a trend we expect to continue after the weak manufacturing data before the new year. This disappointing ISM reading suggests the upcoming Non-Farm Payrolls report could show more weakness, further pushing down the dollar. We see this as a chance to favor long positions in pairs like GBP/USD, which is already nearing 1.3500. The geopolitical tensions from US intervention in Venezuela are affecting market sentiment, leading to a flight to safety. Gold’s rise toward $4,450 and Silver’s leap above $75 are responses to this uncertainty, similar to patterns seen during significant global crises. In the coming weeks, holding long positions in precious metals—potentially using call options to manage risk—seems sensible until the situation calms. Cryptocurrencies are emerging as a separate asset class, appearing disconnected from the general risk-off sentiment. Bitcoin and other major coins are being driven by strong institutional demand, with net inflows into spot ETFs reportedly topping $500 million during the last week of 2025. We should capitalize on this momentum, as the market favors adoption stories over geopolitical news from Venezuela. Create your live VT Markets account and start trading now.

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