Australia’s National Australia Bank reported that the business conditions index rose from 7 to 8 in September, indicating a positive trend in business conditions for the month. The AUD/JPY exchange rate fell to about 98.50. This decline is linked to the Reserve Bank of Australia’s cautious approach regarding possible future rate cuts.

Crude Oil Price Increase

The price of West Texas Intermediate (WTI) crude oil increased to nearly $59.50, due to easing tensions between the US and China. Gold prices have continued to rise, reaching new all-time highs. Strong demand is driven by ongoing US-China trade concerns and anticipation of a speech from US Federal Reserve Chair Jerome Powell. Australian business conditions have improved, with the NAB index reaching 8 in September. However, the Reserve Bank of Australia’s cautious stance has limited the AUD’s gains, keeping it near 98.50 against the yen. This situation presents an opportunity to purchase AUD call options, as we expect upcoming inflation data may prompt a tougher stance from the RBA.

Market Volatility

The wider market is showing mixed signals, with US stocks on the rise while gold surpasses its previous peak of $2,450 from May 2024. Meanwhile, WTI crude oil remains below $60 a barrel, indicating a possible global slowdown, akin to the weak manufacturing PMI data seen throughout much of 2024. This uncertain environment presents opportunities for those trading in volatility. The contrasting trends of rising gold prices and declining oil prices suggest a good chance for a pairs trade. We are looking to go long on gold futures while shorting WTI futures, aiming to capitalize on the ongoing economic uncertainty where safe-haven assets increase in value while industrial commodities drop. This tension between optimism in equities and fear in commodities indicates that market volatility might be undervalued. The CBOE Volatility Index (VIX) is currently around 14, which is historically low given the circumstances. This makes VIX call options a smart hedge against a potential market shock. Upcoming Federal Reserve speeches will be crucial, as any indication of a softer policy to address economic weaknesses could further weaken the dollar. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now