The US Dollar (USD) fell slightly after a strong start, unable to maintain its recovery. This decline comes as there has been no progress on a deal to prevent a government shutdown, adding to the ongoing risk-averse sentiment in the market. On October 15, the US Dollar Index (DXY) struggled near the 99.50 level due to lower US Treasury yields and increased caution in the market. Key economic reports are set to be released, including the MBA Mortgage Applications and the NY Empire State Manufacturing Index, along with speeches from various Fed officials.

Currency Movements

EUR/USD bounced back, moving above the 1.1600 level. Meanwhile, the Eurozone is waiting for Industrial Production data, and speeches from European Central Bank (ECB) officials are expected to draw attention. GBP/USD dipped to multi-week lows but stabilized in the low 1.3300s by the end of the day. Notable events in the UK include speeches from Bank of England members Ramsden and Breeden. USD/JPY fell back to around 151.60, with Industrial Production data and Capacity Utilisation readings coming up in Japan. AUD/USD dropped to the 0.6440 level, with the Westpac Leading Index and Reserve Bank of Australia speeches on the horizon. WTI oil prices fell below $58.00 per barrel, affected by trade tensions between the US and China and forecasts of future industry surplus. Gold reached a record high of $4,180 per troy ounce, driven by expectations of rate cuts and a weaker US Dollar. Silver also increased, surpassing $53.00 per ounce.

Market Opportunities

The US Dollar’s weakness near the 99.50 level is likely to persist due to stalled government shutdown discussions and falling US Treasury yields. A similar political standstill led to dollar volatility in late 2023, often prompting traders to move away from the currency. Traders might want to consider buying put options on dollar-focused ETFs to benefit from further declines while managing their risk. With gold hitting $4,180 per ounce, the rush to safe-haven assets is clearly growing, driven by anticipated Federal Reserve rate cuts. This reflects the signs of a policy shift seen in late 2023 that caused precious metals to soar during inflation concerns. Buying call options on gold futures or silver ETFs may allow traders to capitalize on further gains amid trade worries without fully exposing themselves to the risk of buying at record highs. WTI crude collapsing below $58 a barrel highlights serious concerns over global demand, exacerbated by US-China trade issues and warnings from the IEA about surpluses. Recent US government data showed unexpected crude inventory increases of 2.1 million barrels last week, reinforcing the picture of weakening demand. Opportunities may exist in selling crude oil futures, anticipating that prices will test earlier lows from this year. The contrast between a rising Euro and a declining Australian dollar marks a classic risk-off scenario. Eurozone industrial production surprisingly grew by 0.5% last month, which starkly contrasts concerns over China’s economic impact on Australia. We expect this divergence to expand, making a long EUR/AUD position a smart choice to leverage European strength against commodity-related weaknesses. Considering the mix of central bank speeches and geopolitical tensions, overall market volatility appears to be a consistent trend. The CBOE Volatility Index (VIX) has already increased by over 15% this month, mirroring the patterns seen during the rate hike cycles of 2022 when uncertainty was high. Traders should look into buying call options on the VIX as a hedge for their portfolios or to speculate on ongoing market fluctuations. Create your live VT Markets account and start trading now.

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