The United States goods trade balance improved from a previous deficit of $79 billion to $59.1 billion in October. This marks a positive shift in the trade figures.
USD/CAD stabilised near monthly highs as markets awaited US NFP and Canada jobs data. Meanwhile, the AUD/USD pair declined due to a shrinking Australian trade surplus and slow inflation.
Euro Dollar Decline
EUR/USD lost momentum, falling to multi-week lows near 1.1650. The persistent strength of the US Dollar affected this movement.
GBP/USD faced continuous selling pressure, dropping to fresh three-day lows around 1.3415. This occurred amid optimistic sentiment regarding the US Dollar.
Gold managed to regain some balance after an earlier pullback. The metal reached closer to the $4,450 mark amidst a recovery in US Treasury yields.
Bitcoin and Ethereum experienced selling pressure as institutional sentiment waned. Ripple declined for a third consecutive day, facing aggressive profit-taking.
Investing carries many risks, including the possibility of losing all or part of the investment. No specific investment guidance or detailed accuracy is provided in this material. Thorough research should always be conducted before making investment decisions.
US Dollar’s Impact
The US Dollar is the main story as we start the year, showing significant strength against other major currencies. The December 2025 jobs report, released last Friday, came in stronger than expected at 225,000 new jobs, beating the consensus forecast of 180,000. This is fueling the dollar’s rally and setting the tone for the market.
This strong labor market data, combined with the latest core Consumer Price Index (CPI) reading for December showing inflation still elevated at 3.1%, makes it unlikely the Federal Reserve will cut interest rates soon. We are therefore positioning for a “higher for longer” interest rate scenario. This environment should continue to provide a strong tailwind for the dollar.
We’re seeing the payoff from positive economic signals that began building in late 2025. The surprising improvement in the US goods trade balance back in October 2025, which narrowed the deficit to $-59.1 billion, was an early sign of this underlying economic resilience. That trend has continued, building a solid foundation for the dollar’s current performance.
Given this momentum, derivative strategies should focus on continued dollar strength. We are looking at buying call options on the Dollar Index (DXY) to capture broad upside. Simultaneously, buying put options on pairs like EUR/USD and GBP/USD seems prudent as they break key technical levels.
This dynamic also creates clear headwinds for commodities priced in dollars, particularly gold. The combination of a strong dollar and firming Treasury yields is a familiar pattern that weighs on non-yielding assets, much like we saw during the rate-hiking cycle of 2023. Put options on gold futures or related ETFs present a clear opportunity.
Market uncertainty and reactions to this strong data will likely increase price swings in the near term. We should therefore consider positioning for higher volatility. Buying call options on the VIX index could be an effective way to profit from the bigger market moves we anticipate in the coming weeks.
