The US Dollar remained close to recent lows due to low trading activity during the Thanksgiving holiday. Nevertheless, many still expect a Federal Reserve rate cut in December. On November 28, the US Dollar Index showed uncertainty, hovering around the 99.40 level as US markets remained inactive. Key US economic data, including the ISM Manufacturing PMI and Construction Spending figures, will be released on December 1.

Euro Moves and UK Data

EUR/USD fluctuated near 1.1600, while Germany’s Inflation Rate, Retail Sales, and the ECB’s Consumer Inflation Expectations survey are on the horizon. GBP/USD faced resistance near 1.3270, with only the Nationwide Housing Prices report being significant in the UK. USD/JPY dropped to 155.70, with upcoming Japanese indicators including the Unemployment Rate and Tokyo’s Inflation Rate. AUD/USD reached two-week highs of 0.6540, with Australia’s Housing and Private Sector Credit data awaited. WTI prices hovered around $59.00 per barrel amid geopolitical events and OPEC+ meetings. Gold remained close to two-week highs, trading above $4,170 per ounce, while Silver fell after nearing two-week peaks just below $54.00 per ounce. With expectations of another Federal Reserve rate cut in December, the US Dollar is likely to continue its downward trend. This mirrors a shift seen in late 2023, when softer inflation data, such as the 3.2% CPI in October of that year, indicated the end of the rate-hiking cycle. Traders might consider buying call options on major currencies against the dollar or put options on the DXY to take advantage of this ongoing weakness.

German Inflation Data and Euro Response

The upcoming German inflation data is crucial for the Euro, which is currently around 1.1600. With inflation in Germany remaining high over the past two years, a number that exceeds expectations could cause a significant rally in the EUR/USD pair. To benefit from potential volatility from this release, traders could set up straddles using at-the-money options to profit from larger price movements in either direction. We’re also closely monitoring the Tokyo inflation figures. A strong reading could press the Bank of Japan to consider a policy shift, which would likely strengthen the Yen from the 155.70 level. The speculation in early 2024 that led to the end of negative interest rates might be resurfacing. Buying USD/JPY put options could be a defined-risk approach to speculate on any surprises from Japanese inflation data. WTI crude prices are holding steady ahead of the OPEC+ meeting. The market seems to expect that production cuts will continue, similar to the agreements that persisted through 2024. This sets the stage for a “buy the rumor, sell the fact” scenario, where prices might dip post-announcement if there are no new bullish surprises. Hedging long futures positions with put options or selling call spreads could be smart strategies heading into the weekend. The high price of gold near $4,170 an ounce indicates a strong demand for safe havens, boosted by a weak dollar outlook. This situation is similar to breakout rallies seen when gold first surpassed previous highs back in 2024. Given these elevated levels, using strategies like bull call spreads can provide a cost-effective way to maintain a bullish position while clearly defining downside risk. Create your live VT Markets account and start trading now.

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