Pending home sales in the United States rose by 4% in August, exceeding the expected 0.3% increase. This indicates a positive trend in the housing market for that month. In currency news, the AUD/USD remains steady but below the 0.6600 level as traders await Chinese PMIs and the Reserve Bank of Australia’s interest rate decision. The situation is complicated by a possible US government shutdown, which is affecting the US Dollar.

Support for USD/JPY

The USD/JPY stayed supported near its 200-day simple moving average after the Bank of Japan shared its Summary of Opinions, increasing uncertainty about future rate hikes. Gold prices continued to climb, reaching new record highs during the Asian session. The potential US government shutdown and expected Fed rate cuts are driving this increase. Bitcoin stabilized above $114,000 despite earlier fluctuations, as investors remain hopeful for the typically strong market in October. Lastly, Jerome Powell of the Federal Reserve described the current monetary environment as challenging. He made these remarks amidst discussions about a dovish approach and various economic uncertainties.

Conflicting Market Signals

The robust pending home sales data from yesterday sends mixed signals to the market. A 4% rise in August suggests economic strength, but it contrasts with the Federal Reserve’s dovish outlook and widespread expectations of rate cuts. This clash between strong economic data and loose monetary policy may lead to increased market volatility in the coming weeks. This tension is reflected in the latest statistics. The 4% rise in home sales marks a sharp recovery from the 1.5% decline seen in the second quarter of 2025. However, with the core Consumer Price Index (CPI) from August close to the Fed’s target at 2.8%, the central bank has reasons to ease monetary policy, which may limit the US Dollar’s strength. This setting indicates continued pressure on the US Dollar, especially with the risk of a government shutdown increasing. The CBOE Volatility Index (VIX) has already risen above 20 from a quarterly average of 15, suggesting that traders expect more uncertainty. As a result, strategies that profit from price fluctuations, such as long straddles on major indices or currency pairs, become more appealing. Safe-haven assets benefit from this uncertainty. Gold has surpassed $2,850 an ounce, rallying over 20% year-to-date in 2025. We observed a similar demand for safety during the prolonged government shutdown in 2018, indicating that call options on gold miners and related ETFs could be a sensible hedge against current political and economic risks. This situation also creates opportunities in other assets, with Bitcoin maintaining its value above $114,000 as investors seek alternatives to conventional markets. In forex, the differing stances of a dovish Fed and a cautious Bank of Japan keep USD/JPY in a fragile balance. Traders should expect limited movement, with dollar weakness acting as a ceiling and ongoing uncertainty in Japan providing support. Create your live VT Markets account and start trading now.

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