US Market Movements

In October, the ISM Services Prices Paid Index in the US rose to 70, up from 69.4 in September. The Dow Jones Industrial Average bounced back with a 300-point increase as the markets began to stabilize. The Bank of England is expected to keep its policy rate steady, while the US government shutdown reaches a new high. West Texas Intermediate crude oil dropped below $60 due to a surprise rise in inventory. Gold prices increased by over 1%, counterbalancing strong US data that caused mixed reactions in the market. The NZD/USD saw a slight uptick thanks to tariff relief from China, despite New Zealand’s weak job market. The EUR/USD is struggling below the 1.1500 mark, as positive US economic data strengthens the dollar. The GBP/USD remains just under 1.3050, with expectations that the BoE will hold its policy rate at 4.00%. Gold is nearing $4,000 per troy ounce, rebounding from previous declines as US Treasury yields rise. Ethereum also shows signs of recovery after recent downturns, trading around $3,350.

Market Volatility And Opportunities

Market sentiment is uncertain with upcoming Federal Reserve actions and US data releases. Stellar may face a 15% correction due to falling demand, indicated by a Death Cross pattern. This article highlights potential trading opportunities and challenges. It emphasizes the need for thorough research before making financial decisions, acknowledging the risks involved. Inflation remains persistent, with the ISM Services Prices Paid Index reaching 70, indicating that price pressures continue. In late 2023, the index hovered in the high 50s, but now it suggests that inflation is picking up again. This, along with a surprisingly strong ADP report, raises doubts about any near-term easing of monetary policy. The futures market might be undervaluing the risk of the Federal Reserve maintaining a hawkish stance. In early 2024, the market anticipated over 150 basis points of cuts that never materialized by year-end. This suggests that positioning for higher rates for longer—such as selling SOFR futures or buying put options on Treasury note futures—could be a smart move. While equity markets show some recovery, the ongoing government shutdown creates a backdrop for volatility. This situation is typical for higher volatility, so it may be wise to buy protection or take advantage of price swings using options on the S&P 500. Purchasing VIX calls could be a direct way to profit if the current calm in stocks turns out to be temporary. There’s a significant divergence in commodities that offers clear trading opportunities. WTI crude oil has fallen below $60 due to a surprise inventory build, suggesting that selling call spreads or buying puts on oil futures is the best course of action. This situation is similar to the massive 19-million-barrel inventory build we saw in January 2023, which preceded a sharp price decline. On the other hand, gold is close to the $4,000 level despite a strong US dollar, indicating a flight to safety or serious concerns about sovereign debt. This trend is unusual and suggests bullish momentum. Using call options on gold futures could allow participation in further gains while managing the risk of a price reversal. In the currency market, the strength of the US dollar is the main theme, leaving pairs like EUR/USD struggling below 1.1500. Strong US economic data continues to support the dollar against other currencies. Therefore, consider options strategies that benefit from the dollar’s outperformance, like buying puts on the EUR/USD or GBP/USD. Create your live VT Markets account and start trading now.

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