Wild ride in the markets: January analysis and my trading playbook

January was nothing short of a rollercoaster in the financial markets. From massive swings in volatility to geopolitical uncertainties shaping asset performance, traders and investors had plenty to digest. As we break down key trends, I'll share my take on what moved the markets and what we should watch out for in the coming weeks.

Key takeaways

1. Market volatility reached new highs—who won and who lost? January’s price swings were some of the most extreme in recent months, with natural gas and bitcoin leading the charge. But did all traders capitalize on the chaos, or were some left behind?
2. Gold held strong, but are investors shifting their bets? Gold continued to shine as a safe haven, but European indices quietly stole the show. Is this a sign that investors are moving beyond traditional safety plays?
3. The dollar’s resilience is being tested—what’s next? The greenback stayed strong in January, but upcoming economic data and shifting trade policies could challenge its dominance. Will the dollar maintain its bullish trend, or is a shake-up on the horizon?
4. Crypto’s rally might be losing steam—should you be worried? Bitcoin surged on optimism over US crypto policies, but uncertainty is creeping back. Will February bring a slowdown, or could new developments fuel another breakout?
5. Global policy shifts are sending ripples—who will adapt best? Central banks, trade policies, and economic data are reshaping the financial landscape. With major decisions looming, which assets are best positioned for the months ahead?

The biggest movers: Volatility and performance highlights

XNGUSD and BTCUSD: High volatility, mixed outcomes

Natural gas (XNGUSD) topped the volatility charts with a staggering range of 24.59%. However, this never translated into gains—it dropped 10.91% over the month. Meanwhile, bitcoin (BTCUSD) followed closely with a 22.34% volatility range. Despite the turbulence, BTCUSD managed to gain 9.60%, although it never fully capitalized on its price swings. This tells me that while bitcoin still attracts speculative interest, its upside remains capped by macroeconomic headwinds and investor sentiment.

Gold and major indices: A battle for outperformance

Gold (XAUUSD) shined brightly in January, outperforming most major assets. This was no surprise given the increasing risk aversion triggered by uncertainty surrounding the Trump administration’s tariff policy. However, European indices stole the show, surging over 7% and outpacing gold. In contrast, other indices failed to keep up, lagging behind gold’s strong performance. This suggests that investors may be positioning themselves selectively based on regional economic resilience rather than just seeking safety.

Macro trends: The forces shaping the market

The dollar’s strength: Will it persist?

The US dollar index (DXY) has remained strong, aligning with its typical bullish seasonal trend. With markets laser-focused on US trade policies and the potential inflationary impact of tariffs, a strong dollar seems likely to continue. The Fed’s reluctance to cut rates too soon could further support the greenback.

Crypto outlook: Can bitcoin maintain momentum?

While bitcoin had a solid January, February might be a different story. Investor optimism about Trump's crypto-friendly policies helped fuel BTCUSD’s rally, but momentum could slow as the market reassesses the administration's stance. That said, Trump’s executive order to create a sovereign wealth fund could be a game-changer, potentially paving the way for government bitcoin holdings. Additionally, ETF inflows might provide long-term support for bitcoin, even if short-term volatility continues.

Geopolitical risks and equities: A turning point for tech?

Escalating geopolitical tensions and concerns over high US AI equity valuations—particularly following DeepSeek's rise—could weigh on investor risk appetite. This might challenge the USTEC’s (Nasdaq 100) typically bullish seasonal tendency. The market's current pricing suggests a cautious approach to tech stocks, and any further geopolitical shocks could see a pullback in valuations.

Commodities: Tariffs, oil, and gold’s safe-haven appeal

Oil under pressure

Oil prices have been under downward pressure amid China’s announcement of a 10% tariff on US crude oil imports, effective from 10 February. Demand concerns persist, and if broader economic weakness continues, oil might struggle to find a strong bid in the near term.

Gold’s safe-haven status reinforced

Gold remains a clear beneficiary of risk aversion and inflation concerns, which aligns with its seasonal trend. With tariff retaliation threats on the horizon and inflationary pressures building, XAUUSD could continue attracting safe-haven flows.

Currencies: Key trends and expectations

USDJPY: A cautious bullish trend

Historically, USDJPY has shown a mixed but slightly bullish performance in February. However, recent hawkish comments from the Bank of Japan (BoJ) might complicate the usual seasonal trend. If the BoJ remains firm on policy, we could see upside pressure on the yen, limiting USDJPY gains.

GBPUSD: A bearish setup

Historically, February has not been kind to GBPUSD, closing lower in nine of the last ten years. Additionally, with the Bank of England (BoE) expected to cut rates by 0.25%, the pound faces additional downside risk. This suggests that traders should be cautious about expecting any significant strength in GBPUSD in the near term.

EURUSD: More uncertainty ahead

Trump's tariff threats on Europe have added another layer of uncertainty for EURUSD. Given that the pair has a strong tendency to decline in February, a combination of trade tensions and a strong dollar could keep downward pressure on the euro.

GBPJPY: Diverging policies create a bearish bias

With mixed historical performance, GBPJPY remains an uncertain play. However, the divergence between BoE’s dovish stance and BoJ’s potential hawkishness could reinforce a cautious bearish trend. If rate expectations continue to favor Japan over the UK, further downside in GBPJPY seems plausible.

Market correlations: What’s changing?

High correlation: XAUUSD, XPDUSD, and XPTUSD

Gold (XAUUSD) maintains a strong medium-term correlation (MTC) with palladium (XPDUSD) and platinum (XPTUSD). This reinforces gold’s role as a key precious metal investment tool, making it an attractive asset for investors seeking alpha returns.

Weakening correlation: US500 and USOIL

The medium-term correlation between US500 (S&P 500) and USOIL has weakened, primarily due to a weaker economic outlook reducing oil demand. However, OPEC+ remains a key player in controlling oil prices, making the relationship between equities and crude oil more unpredictable in the short term.

Negative correlation: BTCUSD and EURUSD

One of the more interesting observations is the strong negative short-term correlation (STC) between BTCUSD and EURUSD. As bitcoin often moves inversely to the dollar, any significant swings in the euro could impact bitcoin’s trajectory. There has been a notable increase in investors adopting bitcoin and the euro as alternative assets, meaning that shifts in sentiment around the dollar could drive opposing moves in BTC and EURUSD.

Focus of the month: Key events to watch

The upcoming US January NFP and CPI reports will be crucial in shaping market trends. If the data surprises, we could see heightened volatility across asset classes. Additionally, Trump’s ongoing tariff policies remain a wildcard—markets still view them as a negotiation tactic, but the potential economic impact cannot be ignored.

For currency traders, the Bank of England’s rate decision and the UK’s GDP and CPI releases will be key for GBP pairs. Meanwhile, the Reserve Bank of Australia (RBA) is also set to announce its policy decision, with expectations leaning toward an easing cycle.

Final thoughts: Stay nimble, stay informed

January gave us a taste of what could be a highly unpredictable year. With geopolitical tensions, shifting trade policies, and seasonal trends playing out in full force, staying nimble and well-informed is more crucial than ever.

As we move forward, expect volatility to persist across asset classes. Policy shifts, economic data, and geopolitical developments will drive sharp market moves, requiring traders and investors to adapt quickly.

The ability to react decisively and adjust strategies based on new information will be essential. Those who remain flexible, monitor key catalysts, and stay ahead of the curve will be best positioned for success in the months ahead.

The information on this page does not constitute financial advice or a recommendation or a solicitation to engage in any financial activity.