Japan’s bank lending rose by 4.1% in October compared to last year, exceeding the expected 3.8%. This indicates strong lending activity in the country. In market news, the Australian dollar faced difficulties as the US dollar gained strength, partly due to hopes that the US government shutdown may soon end. The New Zealand dollar weakened against the US dollar, and the USD/CAD bounced back, heading toward 1.4050.

Japanese Yen and Rates

The Japanese yen weakened amid speculation about changes in the Bank of Japan’s interest rates and developments related to the US shutdown. For New Zealand, the forecast for two-year inflation in the fourth quarter of 2025 is at 2.28%. The EUR/USD pair has faced resistance around 1.1600 and is currently near 1.1560, influenced by US political events. The British pound remains slightly below 1.32 as traders await UK labor data. Gold prices are approaching $4,150, aiming to close above significant Fibonacci resistance while market volatility continues. In the cryptocurrency space, UNI, WLFI, and TRUMP have performed well, boosted by political news in the US. Bitcoin, Ethereum, and Ripple are showing signs of recovery after recently hitting crucial support levels.

Market Environment and Volatility

With the US government’s 40-day shutdown nearing resolution, markets are shifting to a risk-on sentiment. The US dollar is gaining against commodity currencies, and market volatility is decreasing, as indicated by the VIX dropping from over 25 last month to around 18 now. This scenario suggests that selling volatility through short-term options could be a good strategy in the coming weeks. Japan’s economy is showing promise, with bank lending growing at 4.1%, the fastest since the post-pandemic recovery began in 2023. Despite this, uncertainty ahead of the Bank of Japan’s December policy meeting is keeping the Yen weak against the stronger US dollar. Traders might consider buying call options on USD/JPY to take advantage of this trend, while monitoring the policy meeting for any changes. Gold remains steady near $4,150, which is notable given the strong US dollar. This could indicate that inflation fears are supporting gold prices, especially after last month’s US CPI data showed a stubbornly high 3.5%. For those trading derivatives, a consistent close above the $4,130 Fibonacci level may signal an opportunity to increase bullish positions, potentially using futures to avoid time decay. There are chances in other currency pairs, too. The GBP/USD pair is lingering below 1.32 as traders await UK employment data. If job numbers turn out weaker than expected, it could push this pair lower, making put options an interesting hedge or speculative option. Additionally, New Zealand’s inflation expectation of 2.28% may limit declines in the NZD/USD, presenting opportunities for range-trading strategies. All this is happening alongside an AI-driven rally in equities, which some view as bubble-like. While the immediate attention is on the government reopening, it’s important to consider this potential systemic risk. Cautious traders might hold some out-of-the-money puts on major indices as a low-cost form of portfolio insurance. Create your live VT Markets account and start trading now.

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