Japan’s foreign investment in stocks dropped significantly from ¥1885 billion to ¥752.6 billion in October. The Australian dollar weakened as the US dollar strengthened due to risk aversion. Meanwhile, gold prices fell as traders took profits ahead of important US inflation data.

US Considered Export Restrictions to China

The US is looking into export restrictions on software sold to China. The US dollar index remained around 99.00, hinting at the possibility of a US-China trade deal. Before Canadian retail sales data came out, USD/CAD stayed below 1.4000. Canadian Prime Minister Mark Carney pointed out the end of long-term economic ties with the US. EUR/USD rose above 1.1600 after a slight pullback of the US dollar. However, GBP/USD faced four consecutive days of losses, settling around 1.3350 as traders awaited crucial economic indicators. Gold prices faced downward pressure, staying below $4,100 amid global tensions. Bitcoin approached $107,000, with expectations of a drop under $100,000 by the weekend. Gold and silver prices plummeted, affecting mining stocks. ETF manager 21Shares is set to merge with crypto broker FalconX in an undisclosed deal.

Investment Risks Information

A reminder about investment risks was shared, highlighting the importance of thorough research and the absence of personalized advice. Given the steep decline in foreign investment in Japanese stocks, we should expect continued weakness in the Nikkei 225. This recent October data marks a shift from the strong foreign buying trend observed in early 2024. It might be wise to consider buying put options on Japanese equity ETFs as a hedge or a speculative short position for the coming weeks. The US dollar is gaining strength due to a broader risk-off sentiment, and this trend is likely to continue. Recent Federal Reserve minutes from early October 2025 confirmed their commitment to holding interest rates steady, which supports the dollar against currencies like the Australian dollar. There are opportunities to go long on the US Dollar Index (DXY) through futures contracts, especially as it finds support. We should remain cautious with gold, as traders are locking in profits ahead of crucial US inflation data expected in mid-November. Following the persistent inflation we experienced in 2023 and 2024, any rise could negatively impact gold by strengthening the dollar further. Short-term bearish strategies, like selling call spreads on gold futures, may be effective before the inflation release. Prime Minister Carney’s remarks about economic detachment from the US indicate a significant long-term challenge for the Canadian dollar. This aligns with recent trade data from Statistics Canada, showing a steady decline in cross-border trade volumes over the last two quarters. We believe going long on USD/CAD through spot or options is a prudent choice, aiming for a move above the 1.4000 level. Rising US-China tensions are creating uncertainty, and derivatives can help manage the resulting volatility. The news of potential US export limits may negatively affect both Chinese tech stocks and US semiconductor companies. We can prepare by employing options straddles on relevant sector ETFs to profit from significant price moves in either direction. Bitcoin’s current fluctuation around $107,000 indicates notable risk, especially after its surge following the 2024 halving event. The derivatives market reflects this anxiety, with rising open interest in put options expiring in November and December 2025. Traders might consider purchasing puts to safeguard long positions or speculate on a decline below the crucial $100,000 mark. Create your live VT Markets account and start trading now.

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