1. FX Outlook
  2. FX Options Weekly

Macro and Vol Commentary

Gold's performance surprised on the upside in recent months, with the softer dollar and inflationary expectations driving the growth in prices, bringing the metal to a close of $1,950/oz by the end of the year.

Macroeconomic Drivers

  • Gold heavily depends on macroeconomic factors, notably those coming from the US.
    • The correlation between gold and the dollar has reached -0.95 and maintained that level in recent months.
  • With the dollar declining in recent months, the greenback is set to remain on the back foot compared to the highs of 114 we saw in September.
  • The currency could find support around the 100 level in Q1 2023, given the US economy's resilience to both tighter monetary policy conditions and souring global prospects.
    • We have seen support at 100.85 solidify in recent days following the US job report that pointed to a sharp expansion in the labour market.
  • Still, we do not expect the Federal Reserve to change its rhetoric given one economic data release, and we'll pay attention to the CPI figure next week to help gauge the economic outlook in the country.
    • The figure is expected to come at 6.2%, and this will help soften the hawkish outlook from the Fed and, in turn, keep gold elevated.
  • Markets are uncertain about the outlook of inflation, and outlier indicators, such as seen last Friday, are creating strong shocks to gold prices.
  • Investors are not anticipating a recession in the US in the coming months, and with that, confidence is set to improve from the lows of Q4 when investors anticipated a recession.
  • At the same time, as the appetite for the dollar is calming, gold might shine as a traditional safe haven again.
    • This, coupled with continued geopolitical uncertainty, should benefit gold's speculative performance. With slowing economic growth in major economic sectors of the world, the threat of recession could bring gold prices to highs of $2,000/t in the coming months.
    • We do not expect the strength to be as sharp and extended as seen during last year's Ukraine crisis, but slowing growth will create more opportunities for precious metals this year.
  • This, combined with the prospects of a softer dollar and weaker asset valuations in the US, will support gold prices as investors shift their exposure to less volatile components of the economy.

Central Bank Outlook

  • In the meantime, consumer prices are softening M/M while core inflation creeps up, allowing the Fed to hike less aggressively this year, and forward swaps anticipate a 25bps hike in March, following a similar increase seen in February.
  • This could create upside opportunities for gold, and a softer pace of tightening monetary policy will drive the narrative for the attractiveness of precious metal over the coming months.
  • Further headwinds could materialise later in the year, as we expect inflation cooling to slow, as higher rates will keep fixed costs high, and the potential risk of another energy prices spike, driven mainly by China's reopening, is still on the table.
    • As a result, inflationary expectations could rise again, forcing the markets to reassess the inflation and interest rate outlook.
    • We do not see the Fed reaccelerating its pace of tightening, but instead, the terminal rates will remain higher for longer, and QT will come to the forefront of policy decisions.

We do not expect inflation to reach target levels in the near term, and with this in mind, terminal rates from key central banks will remain higher for longer. The forward swaps expect the rates to peak at 5.11% in June/July. In Q1 2023, softer interest rate hikes by the Fed will boost precious metal appetite, and higher levels of economic uncertainty will help investors shift their investments to safe havens. In the meantime, gold remains a key gauge of market view on the Fed and its monetary policy outlook, and we expect this trend to prevail. The markets are calling victory over recession too early, more pain is to come, and the real impacts of previous hikes are still to filter through the economies. Global economic weakness, and in particular the divergence between economies' growth, could create pockets of opportunities for precious metals during times of uncertainty. Overall, we are looking for a price-friendly environment for gold over the coming months, supported by the looming threat of recession and an eventual peak in central bank rates.

Sources: Bureau of Labour Statistics, federal Reserve 

Volatility Commentary

Over the end of the last year XAUUSD vol generally realised over implied with ongoing economic uncertainty and with a market still sensitive to price shocks as mentioned above we favour holding slight long vega/gamma position on XAUUSD. In the midst of USD strength following last Friday’s jobs numbers which may continue in the short term but expectations of the Fed soon reaching the terminal rate may lead to longer term XAUUSD strengthening as mentioned above. We suggest a trade benefitting from XAUUSD continuing lower in the short term but heading higher longer term.

XAUUSD 1-month Implied vs Realised Volatility

Realised And Implied (60)

XAUUSD Trade Idea

  • Trade in 6 month expiry
  • Buy XAUUSD Call, KI with strike 1900 and 1825 Down KI barrier in 5k Oz Notional for circa 235k USD
  • For reference Vanilla equivalent would be circa 453k USD
  • For a more aggressive take on this trade one can also sell a Vanilla 1750 strike Put 5k Oz Notional for circa 100k USD to net off against the buy option

Positioning Charts

USDBRL NDO Positioning Data 24/01/2023 - 31/01/2023

The appetite for USDBRL diminished in the week ending February 7th, with biggest expiries taking place last week. February expiries are mixed between calls and puts, and the size of notional is marginal, suggesting a lack of momentum in either direction from the market. There are some big put expiries in the first week of March, ranging from 4.70-5.00. After then, there are few options, and some marginal calls are seen to go up to 6.00-6.20. Overall, the near-term momentum seems unchanged, and markets are comfortable at current levels. 

Usd Brl 24 31 (3)

USDBRL NDO Positioning Data 31/01/2023 - 07/02/2023

Usd Brl 31 7 (1)

USDCNY Vanilla Positioning Data 24/01/2023 - 31/01/2023

USDCNY positioning decreased strongly, a week after the Chinese investors returned to the market. The week ending on February 7th consists mostly of calls around the 6.70-6.90 area, with further upside building above the 6.90 level in March. Given the number of calls remained unchanged, and puts diminished, we suspect that the bears have left the market, as the bulls kept their positions unchanged. As a result, we expect to see marginal upside in the near term. 

Usd Cny 24 31 (3)

USDCNY Vanilla Positioning Data 31/01/2023 - 07/02/2023

Usd Cny 31 7 (3)

XAUUSD Vanilla Positioning Data 07/12/2022 - 07/01/2023

XAUUSD saw appetite improve in the month ending February 7th, as markets placed their bets ahead of the key central bank meetings. The number of calls are exceeding puts marginally, but the upside momentum is building for prices above $1,900/oz.  The month ending January 7th saw one big put option expiring around $1,750/oz level, but the range improved in recent weeks, and most of the puts are not expiring around the $1,800-$1,900/oz level. Option expiries are pointing to building upside momentum in April. 

Xau Usd Dec Jan

XAUUSD Vanilla Positioning Data 07/01/2023 - 07/02/2023

Xau Usd Jan Feb

Charts and Tables

FX Expiries

Expiry (36)

Volatility Grid

Grid (61)

Historical Spot FX Volatility (30D Rolling)

Chart (30)

FX Matrix (today)

Spot (88)

Weekly Change

Week (69)

Key Events & Releases

Calendar (102)

Technical Charts

JP Morgan Global FX Volatility 


The index continued to remain range-bound, as it fluctuated around the moving averages levels, but momentum on the upside has waned. The index found support at the moving averages and settled at 10.45. The stochastics are starting to fall, and momentum is seen building on the downside. The stochastics are falling out of overbought, and the MACD diff is positive and converging. The moving average levels at 10.40 are firm, and the index would first need to break below these levels before testing 10.00. Alternatively, appetite above current levels could set the scene for 10.50 and 11.00 in the longer term. We expect some downside in the near term but find support at the moving average levels. 

Dollar Index 


The index jumped higher in recent days, but resistance at 104 held firm, and now the index is at 103.10, and the level is now back within the longer-term downward trend. The indicators point to a downside shift, with %/K%D diverging on the downside near oversold, and the MACD diff is negative and diverging. To confirm the acceleration of trend, the index needs to break below the support of 200 MA at 102.99 before testing other moving averages at 102.41 and 102.23 for 50 and 100 MA, respectively. Alternatively, if the longer-term downside trend is to be broken above, we could see levels test 103.50 and then 104. The indicators point to a build-up of momentum in the near term, and we expect to see prices breach 100 MA. However, the moving averages will cap any strong downside momentum, and the index will continue on a marginal downward trajectory in the longer term.



The pair weakened at the start of the month, finding support at 1860, and has continued on an upward trend once again in recent days. Today’s candles are testing 200 MA at 1881 once again but showed a lack of appetite to break above it, with narrower-bodied candles and long upper shadows. The indicators point to a softening trend on the upside, as stochastics are slowing near overbought, and the MACD diff is positive and now converging. The next robust level on the upside is at 19.00, and if the pair breaks above it, we could see future gains to the moving averages at 1910. On the downside, if 1875 is broken, this could suggest further impetus to 1850 and 1800, respectively. We expect XAUUSD to gain ground in the near term but find resistance at the longer-term moving average level in the near term.



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