China’s trade balance dropped in September, going from CNY 732.7 billion to CNY 645.47 billion. Even though exports remained strong, the trade surplus decreased. The Japanese Yen is struggling due to ongoing political instability and a general risk-on sentiment in the market. The USD/INR pair saw a small decline, possibly influenced by expected actions from the Reserve Bank of India.

NZ and AUD Dollar Gains

The NZD/USD is making gains, nearing 0.5750, likely fueled by hopes for a resolution in the US-China trade conflict. The AUD/USD is also stable around 0.6550 after new data from China’s trade balance surfaced. EUR/USD is steady, trading above 1.1600 amid rising tensions between the US and China. The GBP/USD has weakened below 1.3350, pressured by a stronger US Dollar, even with Trump’s threats of tariffs on China. Gold prices hit record highs and continue to rise amid the US-China trade tensions. It is trending upward within a rising channel, suggesting more potential for growth. PancakeSwap, Aster, and SPX6900 saw major recoveries, each gaining over 20% after last week’s market sell-off. Meanwhile, Bitcoin faced its biggest drop since 2025, losing nearly 10% due to Trump’s new tariff threats on China.

Economic Volatility and Strategies

The recent threat of 100% tariffs on Chinese software has sparked significant volatility in the markets, a sentiment reflected in last Friday’s massive sell-off in cryptocurrencies. This clearly indicates a risk-off atmosphere as we move forward. We need to brace for sharp price swings driven by headlines. China’s shrinking trade surplus, now at 645.47 billion CNY, raises concerns about global growth and puts pressure on commodity currencies. Previously, we witnessed similar effects during the 2018-2019 trade disputes, which weakened the Australian and New Zealand dollars. Therefore, purchasing puts on AUD/USD appears to be a smart protection against adverse trade news. In this climate, gold shines as the ultimate safe haven, surpassing $3,950 to reach new heights. This continues the upward trend that accelerated after breaking the previous 2024 high of around $2,150. Traders should think about buying call options on gold-backed ETFs to benefit from potential upside while managing risk. Market anxiety is high, and we anticipate the CBOE Volatility Index (VIX) to remain elevated, likely above the 25-30 range seen during prior tariff escalations in 2019. This creates opportunities for long volatility strategies, such as buying straddles on the S&P 500, to capture large movements regardless of direction, responding directly to uncertainty from the US government shutdown and trade disputes. The specific threat against “critical software” puts the technology sector at risk. We should prepare for significant underperformance in tech-heavy indices like the Nasdaq 100. Considering protective puts or speculative short positions using futures on the Nasdaq could be wise to shield against steep declines. Create your live VT Markets account and start trading now.

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