Home loan activity in Australia increased by 4.7% in the third quarter, exceeding the expected growth of 2.5%. This surprising rise signals strong demand for housing. At the same time, the Australian dollar is falling due to the cautious stance of the Reserve Bank of Australia. The Japanese yen is also struggling, nearing multi-month lows against the US dollar amid uncertainty around the Bank of Japan’s decisions.

USDCAD Stays Strong

In contrast, USD/CAD remains steady above 1.4000, supported by expectations of a US government reopening. West Texas Intermediate oil has gained slightly, trading above $60.50 as optimism grows about the potential end of the government shutdown. Elsewhere, the US Dollar Index has seen minor gains, holding close to 99.50, reflecting a similar vibe. Meanwhile, the People’s Bank of China set the USD/CNY reference rate at 7.0833, showing little change from before. This summary provides potential future insights, highlighting risks and uncertainties. It’s meant for informational purposes only and does not suggest any specific financial decision. Readers should conduct their own research before making any financial commitments. The unexpectedly strong Australian home loan figure of 4.7% points to a housing market that is hotter than expected. However, the falling Australian dollar suggests that investors are more concerned with the Reserve Bank of Australia’s cautious approach than the positive data. This gap between strong economic signals and a weak currency could mean that options pricing may not accurately reflect a possible sharp turnaround. We see this as an opportunity in the derivatives market, especially since Australian inflation remains stubborn. The latest core inflation data for September 2025 was at 3.8%, well above the RBA’s target. This leads us to consider buying AUD/USD call options set to expire in early 2026, betting that the RBA will need to shift from caution to a more aggressive stance.

US Dollar Gains

The US dollar is strengthening as hopes rise that the government shutdown is nearing its end. This reaction is reminiscent of the market response seen after the 35-day shutdown in January 2019, when the dollar enjoyed a short-term rally before broader economic factors took hold. This historical pattern suggests the current dollar strength may not last. With the US Dollar Index around 99.50, we are close to a key resistance area that has held back rallies between 100 and 103. Therefore, selling out-of-the-money call options on a dollar index ETF could be a smart move. This strategy allows us to earn premium income by betting that the shutdown-relief rally will lose momentum before surpassing these long-standing highs. Additionally, the rise in WTI crude oil above $60.50 seems more linked to positive US political news than actual market fundamentals. This optimism faces a challenge from the latest Energy Information Administration (EIA) report, which revealed an unexpected increase in US crude inventories of 2.1 million barrels last week. Buying puts on crude oil futures could serve as a useful hedge against a “sell the news” scenario, where prices fall once the government reopening is completely factored in. The Canadian dollar is also important to watch, with USD/CAD staying above the 1.4000 level, a critical psychological mark not maintained for long since 2020. Given the strong US dollar and the fragile recovery in oil prices, this level may become a new support point. Creating a bull put spread on USD/CAD could allow us to profit if the pair stays above 1.4000 in the next few weeks. Create your live VT Markets account and start trading now.

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