The USD experienced its worst weekly decline since May 2025, amid political tensions and market interventions. The DXY Index fell to its lowest since September, and market expectations suggest a pause in rate cuts by the Fed at the upcoming FOMC meeting.
USD/CAD fell by 1.6% to 1.37, approaching a trendline support around 1.3660. No confirmed market interventions have been noted, which might restrict further declines in USD/JPY unless specific technical levels are breached.
Euro And Pound Rise
EUR/USD benefited from the USD weakness, nearing the 1.1900 mark. GBP/USD also rose, reaching four-month highs near 1.3700, amidst a broader improvement in risk sentiment.
Gold surged past the $5,100 mark, supported by geopolitical concerns and falling US Treasury yields. Meanwhile, Bitcoin, Ethereum, and Ripple showed slight recoveries after recent declines, nearing key support levels.
Tether Gold accounted for 60% of the tokenized Gold market in 2025, with valuations exceeding $2.2 billion. This reflects growing demand for tokenized assets, with Gold prices rising globally.
Given the US dollar’s worst weekly performance since May of last year, we should position for continued weakness. The political pressures and market interventions mentioned are creating a powerful narrative against the dollar. Data from the end of 2025 showing a persistently wide US budget deficit further supports this bearish outlook.
Strategic Options
With the DXY index testing its support at 97.2, we should consider buying put options that would profit from a drop below this level. Similarly, buying call options on EUR/USD and GBP/USD is a direct way to trade the ongoing dollar slump, especially as those pairs test yearly highs near 1.1900 and 1.3700, respectively. These trades offer a defined-risk approach to capitalize on the current momentum.
The upcoming FOMC meeting, where a pause in rate cuts is expected, should be viewed with caution. This potential pause seems fully priced in, as the dollar is falling anyway, a pattern we also observed in the early 2020s when a shift in Fed expectations preceded a period of dollar weakness. Therefore, we should not interpret a pause as a signal to turn bullish on the dollar.
The record-breaking rally in gold above $5,100 per ounce is a clear signal of a flight from the dollar. This move is supported by official data showing central banks increased their gold reserves at a historic pace throughout 2025. We see value in maintaining long positions through gold futures or using call options on gold ETFs to hedge against further dollar depreciation.
In the case of USD/JPY, the talk of intervention is creating significant uncertainty, so we must watch the 154.35 level from December. Implied volatility on currency options is now elevated, making strategies that benefit from sharp moves attractive. A confirmed break below this support could trigger a swift decline, making puts on the pair a compelling tactical trade.
