MBA mortgage applications in the United States rose to -4.7% as of October 3, up from -12.7%. This indicates a slower decline in the mortgage market despite various economic pressures. Key market movements include GBP/JPY reaching 205.00 due to delayed expectations for a Bank of Japan rate hike. The USD/CHF rate is climbing, supported by a strong US Dollar and speculation about possible Swiss National Bank rate cuts.

Market Insights

The Federal Reserve’s meeting minutes are highly anticipated for clues on upcoming rate cuts, especially since a government shutdown has postponed the release of US jobs data. Meanwhile, the GBP/USD has stabilized as the US Dollar weakens, with traders looking for more communication from the Fed. Gold remains above $4,000 per troy ounce, driven by increased demand for safe investments amid political unrest in France and uncertainty in the US economy. The Fed’s September meeting minutes are expected to shed light on the future of rate cuts during the ongoing government shutdown. Solana, a cryptocurrency, is trading over $220, with investors hoping for a breakout to $250. Nevertheless, declining on-chain activity may delay this target. The current US government shutdown adds significant uncertainty, making volatility a key focus for trading. Consider buying options on major indices, as implied volatility is likely to increase. History, like during the long shutdown from 2018 to 2019, shows that the CBOE Volatility Index (VIX) spiked sharply, rewarding those who were prepared for market turbulence.

Trading Strategies During Uncertainty

With essential economic data like the jobs report delayed, the upcoming Fed minutes will guide us on future rate cuts. Expectations for another rate cut are growing, making trading derivatives linked to the SOFR (Secured Overnight Financing Rate) a solid strategy. We can use options on futures to position for an even more aggressive cutting cycle if the economy worsens. Gold moving above $4,000 signals a flight to safety, driven by the US shutdown and concerns about France’s political situation. This reaction is similar to safe-haven rises during the 2008 financial crisis and the 2020 pandemic. Buying call options on gold futures or related ETFs remains a smart strategy to protect against instability. The US Dollar is currently benefiting from safe-haven flows, but this strength might not last if the Fed pursues aggressive rate cuts. At the same time, the Euro is under pressure from political issues in France, pushing EUR/USD towards the important 1.1600 support level. Buying put options on the Euro looks like a straightforward trade until political risks in Europe ease. Mortgage applications have improved to -4.7%, but this still signals a weak housing market. This is not yet a sign to buy housing-related assets. These negative figures are reminiscent of the slowdown we saw in 2023 before a period of sluggish home sales. Create your live VT Markets account and start trading now.

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