Foreign investment in Japanese stocks has fallen sharply, declining from ¥690.1 billion to ¥-347.3 billion in November. This marks a significant reversal from earlier trends of increasing capital inflow. In other market news, various economies are making adjustments. The EUR/USD remains stable close to 1.1600, following the end of the US government shutdown. The GBP/JPY is holding steady above 203.00, nearing two-week highs as the UK prepares for upcoming economic data.

US Economic Impact

In the United States, the Dollar Index has risen to almost 99.50 as the government reopens. Meanwhile, the Japanese Yen is struggling against the USD due to uncertainty around potential interest rate changes by the Bank of Japan. The USD/INR has also increased, thanks to India’s low retail inflation data, which supports a more cautious approach from India’s central bank. Gold has reached a three-week high as market sentiment grows more optimistic about US economic trends. The UK’s GDP reports are expected, with estimates showing steady growth at 1.4% annually. European markets are reacting in different ways, while the Sui cryptocurrency is trading above $2.00, recovering from a recent drop. Foreign investors are withdrawing money from Japanese stocks, resulting in a notable net outflow of ¥347.3 billion this month. This has applied downward pressure on the Nikkei 225, which has dropped nearly 4% in the past two weeks. We might consider shorting Nikkei futures or buying put options, as continued foreign selling is likely through December. The Japanese Yen is also having a tough time, hovering near a nine-month low against the US dollar. With the Bank of Japan hesitant to raise rates, there’s minimal support for the currency. This situation makes purchasing call options on USD/JPY appealing, with the expectation that the yen may weaken further below the 152 mark seen in 2023 and 2024.

Gold and Currency Markets

The US dollar remains strong, with the DXY index stable around 99.50 after the government shutdown ended. However, expectations for a more cautious Federal Reserve are rising, especially since October’s CPI came in slightly cooler than anticipated at 2.8%. Given this uncertainty, we could explore straddles or strangles on major pairs like EUR/USD to capitalize on potential large movements. Gold is performing well, reaching a three-week high near $4,200 an ounce. This increase is driven by expectations that the Fed might slow down rate hikes, making non-yielding gold more appealing. Considering the ongoing inflation since the early 2020s, buying call options on gold or trading gold futures on the long side seems like a wise strategy. Across the ocean, the British Pound is facing pressure ahead of Q3 GDP figures. The market is already anticipating a possible Bank of England rate cut in December, as the UK economy has shown signs of stagnation with annualized growth around 1.4%. We might find an opportunity to buy puts on GBP/USD, expecting that weak growth data will reinforce these bearish outlooks. Create your live VT Markets account and start trading now.

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