The US Dollar (USD) maintained its gains, setting a positive tone for the year, with attention on the upcoming US labour market report. The Dollar Index (DXY) exceeded its 200-day SMA, edging close to the 99.00 level.
EUR/USD experienced a downtrend, dipping towards its 55-day SMA near 1.1640. German Balance of Trade, Industrial Production and Retail Sales in the euro area are due, along with an ECB speech.
Current Market Trends
GBP/USD dropped for three consecutive days, nearing the 1.3420-1.3415 range. The BRC Retail Sales Monitor will be released on January 13.
USD/JPY saw a slight rise, crossing 157.00 briefly. Upcoming data includes Household Spending and preliminary Coincident and Leading Economic indexes.
AUD/USD continued to decline, dropping to three-day lows below 0.6700. Australia’s Household Spending figures are expected on January 12.
WTI oil prices rebounded after two days of losses, gaining near $58.00 per barrel, while traders watched Venezuela’s oil developments. Gold prices dropped to a three-day low, challenging $4,400 per ounce with a stronger US Dollar. Silver prices also fell, reaching three-day lows after visiting the $74.50 area per ounce.
Looking back at this time last year, we saw the market’s intense focus on the US Nonfarm Payrolls report, which was fueling a dollar rally with the DXY near 99.00. That strong jobs market in early 2025 kept the Federal Reserve on a hawkish path for two more quarters. Now, however, consensus estimates for this week’s payrolls data are just 110,000, and traders should be positioned for a weaker dollar if that soft reading materializes.
Historical Market Insights
We recall the significant pressure on the euro and pound in January 2025, with EUR/USD testing 1.1640 as the ECB remained passive. That weakness has reversed, as recent data shows Eurozone core inflation stubbornly holding at 3.5% in December 2025, forcing a more aggressive stance from policymakers. The bearish view on the pound has also faded, especially after UK retail sales for the fourth quarter of 2025 surprised everyone with 1.2% growth, suggesting traders should now favor buying the dips.
The push above 157.00 in USD/JPY a year ago proved to be a major peak, as it prompted direct warnings from Japanese officials that capped further gains throughout 2025. With Japan’s national core CPI now holding above the 2.5% target for three consecutive months, the Bank of Japan is under immense pressure to tighten policy. Derivative traders should consider using options to protect against a sudden drop in the currency pair.
The weakness in the Australian dollar below 0.6700 in early 2025 was linked to low oil prices, with WTI crude struggling near $58 a barrel. Today, the situation is completely different, as WTI is trading firmly above $85 a barrel amid new supply disruptions. This has provided a major tailwind for the Aussie, suggesting that long positions are far more favorable now than they were a year ago.
We remember the pullback in gold to the $4,400 mark, which was driven by a stronger dollar and speculation around index rebalancing. That dip was a clear buying opportunity, as persistent global inflation kept precious metals on an upward trajectory all through 2025. Given that the World Gold Council just reported record central bank buying for Q4 2025, any temporary weakness in gold or silver should be viewed as a chance to build bullish positions.
