In September, Westpac’s Leading Index in Australia rose to 0% from -0.05% the previous month. This change hints at a possible shift in the country’s economic trends. The Australian dollar increased following cautious comments from the Reserve Bank of Australia. At the same time, WTI crude oil prices hovered around $58 due to oversupply and ongoing trade tensions between the US and China.

Japanese Yen Strength

The Japanese yen gained strength as demand for safe-haven assets rose, despite some political risks that may limit its growth. The NZD/USD pair stayed above 0.5700 as China’s deflationary pressures appeared to lessen in September. The People’s Bank of China (PBOC) set the USD/CNY reference rate at 7.0995, slightly down from 7.1021. Additionally, silver prices reached nearly $52.00, influenced by renewed trade tensions between the US and China. The EUR/USD rose above 1.16 after comments from Federal Reserve Chair Jerome Powell. Meanwhile, the GBP/USD climbed above 1.3300 after weak labour market data from the UK. Gold remained close to its all-time high, driven by geopolitical tensions between the US and China. The US Department of Justice seized 127,271 Bitcoin, raising its total cryptocurrency holdings to over $36 billion. This seizure involved the Cambodian-based Prince Holding Group and its founder.

Flight to Safety in Markets

Amid ongoing tensions between the US and China, there’s a clear flight to safety in the markets. This is shown by gold prices nearing a record $4,200 an ounce and a stronger Japanese yen. The CBOE Volatility Index (VIX) has consistently stayed above 25, indicating we’re likely to see continued market fluctuations in the upcoming weeks. The US dollar is weakening after the Federal Reserve chair adopted a neutral tone, not meeting hawkish expectations. This situation has pushed pairs like EUR/USD above 1.1600 and helped GBP/USD recover despite poor UK labor data. We see opportunities to buy call options on the Euro and Pound to take advantage of further dollar weakness while managing risk. Gold’s rise is a direct result of global uncertainty and expectations of future Fed rate cuts, similar to the conditions that led to its last major increase in 2020. Instead of buying futures at this peak, traders should consider call option spreads to benefit from a continued ascent toward new highs, allowing for participation with limited risk. In Australia, the Westpac Leading Index has stopped declining, which is a slightly positive sign for the economy. However, the Australian dollar’s future is closely linked to global risk sentiment and Chinese economic health. With Australia’s latest quarterly inflation steady at 3.8%, the Reserve Bank of Australia faces challenges, suggesting that volatility trades like straddles on AUD/USD might be effective. Crude oil remains weak, with WTI stuck around $58 a barrel due to ongoing oversupply concerns. New reports from the Energy Information Administration revealed another unexpected rise in US crude inventories, adding to bearish sentiment. We believe buying put options on WTI futures is a straightforward strategy to prepare for a possible drop toward the low $50s. Create your live VT Markets account and start trading now.

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