The US Dollar has reached a two-month high, driven by the Federal Reserve’s rate cut, cautious comments from Chief Powell, and ongoing government shutdown concerns. The US Dollar Index has climbed above 99.70, supported by rising US Treasury yields. EUR/USD has dropped below 1.1550, showing little reaction to the ECB’s interest rate decision. The focus now shifts to inflation rates in the eurozone and retail sales data from Germany. GBP/USD has decreased to around 1.3120 due to the strengthening US Dollar and expectations of a Bank of England rate cut. UK housing prices are the next key topic.

Key Developments in Asia-Pacific Markets

USD/JPY has surpassed 154.00 as the Bank of Japan keeps its rates steady. Upcoming data from Japan will include Tokyo CPI, unemployment rates, industrial production, and retail sales. AUD/USD has declined to about 0.6530 despite positive trade news, with Australia’s producer prices and credit data expected soon. US WTI oil prices have approached $61.00 per barrel while analyzing the US-China trade deal. Gold is trying to bounce back from recent lows but struggles to break above $4,000 per ounce, while silver prices are climbing toward $49.00 per ounce. With the Federal Reserve indicating a “higher for longer” interest rate approach, the US Dollar Index is holding steady above 106.50. Recent US Core PCE data shows inflation remains sticky at 2.8% year-over-year, suggesting that rate cuts are unlikely soon. This implies that option traders might explore strategies that benefit from ongoing dollar strength or low volatility. The Euro is facing challenges, with EUR/USD testing the 1.0500 support level seen during market turmoil in 2023. This weakness arises from the latest Eurozone flash CPI, which was only 2.1%, increasing pressure on the ECB to lower rates ahead of the Fed. Traders should keep an eye on any solid break below this key support, which could lead to further selling. Similarly, GBP/USD is currently weak near 1.2050 as the UK economy shows signs of slowing down. The latest quarterly GDP figures revealed a slight 0.1% contraction, fueling speculation that the Bank of England may need to consider easing monetary policy early next year. In this context, holding long positions in the Pound seems risky for now.

Pressures on Asian Markets

The Japanese Yen continues to weaken, with USD/JPY approaching 158.00, a level that drew major market attention and discussions of intervention back in 2024. Despite the Bank of Japan’s gradual exit from negative rates, the recent Tokyo CPI at 2.5% is not strong enough to indicate aggressive policy tightening. We are closely watching for any official comments, similar to those during the volatility of 2022-2024. Commodity currencies like the Australian Dollar are feeling pressure from the strong greenback, with AUD/USD around 0.6400. While demand for major exports remains steady, worries about a global economic slowdown limit any significant gains. Traders should keep an eye on upcoming Chinese PMI data for guidance. Oil prices are rising, with WTI crude nearing $90 per barrel due to renewed geopolitical tensions in the Middle East and tight supply. The latest EIA report confirmed reduced US crude inventories, showing a draw of over 3 million barrels. This underlying support suggests that any price dips may be seen as buying opportunities. Gold is struggling to maintain a rally above $2,250 per ounce, hindered by high US Treasury yields, with the 10-year note around 4.5%. While gold is attracting some safe-haven demand, the high opportunity cost of holding a non-yielding asset poses a significant challenge. Positions in derivatives should account for a potentially range-bound market until a new catalyst appears. Create your live VT Markets account and start trading now.

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