In August, the unemployment rate in the eurozone was 6.3%, a bit higher than the expected 6.2%. This indicates ongoing economic difficulties in the region. The EUR/CHF exchange rate stabilized above 0.9350 due to mixed economic data from both the eurozone and Switzerland. The weak US Dollar is affecting the EUR/USD pair, keeping it above 1.1750.

GBP/USD and Its Influence

GBP/USD rose back to 1.3500, supported by cautious comments from the Bank of England and uncertainty surrounding the US Dollar linked to a possible government shutdown. Meanwhile, gold prices approached $3,900, driven by safe-haven buying amidst market caution. Dogecoin and Shiba Inu both saw price rises, with Dogecoin up over 7% and Shiba Inu rising more than 5% this week. These meme coins are gaining popularity as bearish pressure eases, suggesting a potential rally ahead. The US government shutdown has created a market environment that favors safe-haven assets, impacting the US Dollar and the Federal Reserve’s decisions due to a lack of new data. Litecoin’s price also rose, surpassing $118, buoyed by positive market momentum and increased trading activity. The unexpected rise in the Eurozone’s unemployment rate to 6.3% indicates softness in the European economy. Though this is slightly better than the 6.4% rate from August 2024, the miss versus projections suggests the European Central Bank might take a cautious stance. This weakness in the economy makes the recent strength of the Euro seem more reliant on outside factors rather than its own economy.

Impact of the US Government Shutdown

The ongoing US government shutdown is a major factor causing a prolonged weakness in the US Dollar. Unlike the previous shutdown from 2018-2019, when the Dollar Index (DXY) remained stable, the DXY has recently fallen below key support levels, dropping under 100.00 for the first time in months. This heightened risk aversion is pushing investors towards safer assets and other major currencies. For currency traders, this suggests a preference for long positions in pairs like EUR/USD and GBP/USD against the dollar. We recommend buying call options on these pairs to take advantage of potential gains while minimizing risks. Traders should also monitor rising implied volatility, which may make strategies like bull call spreads more affordable. Gold’s nearing $3,900 emphasizes its role as a major beneficiary of the current uncertainty. Recent data from the Commodity Futures Trading Commission (CFTC) shows a significant rise in net-long positions held by money managers. Gold is acting as a classic safe-haven asset amid the political turmoil in the United States. To take advantage of this momentum, traders might consider buying call options on XAU/USD with strike prices around $3,900 and $4,000. For those willing to take on more risk, selling out-of-the-money put options could generate income from the market’s heightened fear. However, this strategy should be carefully monitored in case sentiment shifts unexpectedly. Create your live VT Markets account and start trading now.

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