The US Dollar started the week with slight declines as traders awaited potential progress in US-China trade talks. This cautious mood was influenced by key central bank interest rate decisions on the horizon. After two days of gains, the US Dollar Index struggled, impacted by mixed US Treasury yields and trade optimism. Important data is expected this week, including the S&P/Case-Shiller Home Price Index and various manufacturing and oil reports from the US.

Anticipated Market Moves

The EUR/USD pair is facing resistance near 1.1650, with Germany’s GfK Consumer Confidence and the ECB’s Consumer Inflation Expectations approaching. The GBP/USD pair recovered to the low-1.3300s, with Bank of England credit data coming soon. The USD/JPY reached four-week highs, continuing a seven-day upward trend, with Japan’s Consumer Confidence report next. The AUD/USD bounced back to a three-week high around 0.6560, awaiting Australian inflation data. WTI oil saw modest gains and briefly surpassed $62.00 per barrel on hopes for a trade deal. On the other hand, Gold dropped to three-week lows around $3,970 per ounce, while Silver fell to $46.00, its lowest level in four weeks. With central bank meetings approaching, caution remains the main theme. The quiet start to the week indicates that traders are wary of making large moves until they receive more clarity from policymakers. This environment is suitable for strategies that could profit from increased volatility, rather than directional bets.

US Dollar Forecast

The recent dip in the US Dollar seems to be a pause rather than a trend reversal. With the latest US Consumer Price Index for September 2025 showing a stubborn 2.8%, we predict the Federal Reserve will maintain a “higher for longer” stance in its upcoming November meeting. It may be a good idea to buy near-term call options on the DXY to prepare for a hawkish surprise that might break the recent trend. The EUR/USD pair is struggling at the 1.1650 resistance, which has held firm since the second quarter of 2025. Recent German manufacturing PMI data showed a contraction at 48.5, indicating a weak economic outlook for the Eurozone compared to the US. We see a potential opportunity in buying put options with a strike price just below 1.1600, expecting rejection from this critical zone. The recent bounce in GBP/USD appears weak after a long decline. The Bank of England faces tough choices, as Q3 2025 inflation remains high at 3.5% despite stagnant economic growth. Given this uncertainty, a “strangle” option strategy could be beneficial—buying both an out-of-the-money call and put option to take advantage of a significant price move in either direction after the announcement. The upward trend in USD/JPY above 153.00 is the most clear among major currencies. The interest rate difference between the Federal Reserve and the Bank of Japan has favored the dollar since the rate hikes began in 2022. We should continue to use futures contracts to hold a long position, employing a trailing stop to safeguard profits against any sudden changes in sentiment. In commodities, WTI crude oil prices above $62 per barrel seem supported by factors beyond just trade deal optimism. OPEC+ recently confirmed that production cuts will continue through the first quarter of 2026, offering strong support for prices. This could be a good time to buy call options with a $65 strike price, betting on tightening supply as winter approaches. Gold’s significant drop to around $3,970 per ounce highlights its sensitivity to risk sentiment, especially after its sharp rise during the 2023-2024 global slow down. As capital shifts away from safe havens, this trend of profit-taking may persist, especially if a US-China trade deal occurs. We recommend shorting gold futures or buying puts on gold ETFs as a smart way to hedge against a sustained “risk-on” market mood. Create your live VT Markets account and start trading now.

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