Indices on New Record Highs as Volatility Picks up

Currencies

• The euro (EUR) slid even lower during yesterday’s session and touched a New Year low at 1.3109 before the rebound back to 1.3134 against the US dollar (USD). Volatility picks up as the ECB is considering adding stimulus while the US economy is growing and the Fed may raise interest rates earlier than anticipated.
• The US dollar (USD) skyrocketed and recorded a four month high at 105.30 against the Japanese yen (JPY). The US data are coming out better than expected and the US dollar gain ground against its majors. There is a lot of upside and further improving data may push the pair even higher.

Equities

• The Asian indices advanced as reports showed faster expansion in China’s industries while the Japanese yen declines. Highlighting the major indices, with the Indian 50 (IND) recorded its new record high at 8147, the China 50 (CNX) climbed up to 7400 and the Hong Kong 40 (HSX) is now trading near its 6 year high at 25176.

Commodities

• WTI Crude (OIL) collapsed from its high at 95.86 all the way down to 92.67 US dollars per barrel. The energy fall ahead of the Crude Oil inventories announcement tomorrow. It looks that the disappointing European data and the strong US dollar forced sellers to cut prices as the supplies remained sufficient.

Mover & Shaker with forex options

• Gold (XAU) remains bearish and lost more than 36 US dollars from Monday. The Precious metal recorded a two month low at 1262 US dollars an ounce, as the strength of the US economy shifts investors away from safe haven assets.
• Option traders may consider constructing a Bear Put Spread on the XAUUSD and gain if the pair continues the downside, while the risk is limited to the premium paid.
• A Bear Put Spread can be constructed by buying an in the money Put while selling an out of the money PUT.