Thursday marked a continuation of the US Dollar’s decline, reaching new monthly lows following a deal that ended the longest government shutdown in US history. Market participants are uncertain about a possible Federal Reserve rate cut in December. On November 14, the focus will shift to the US Dollar Index, which remains low even with a small increase in US Treasury yields. Important events to watch include speeches from Fed officials Logan and Bostic.

Euro Dollar Analysis

The EUR/USD pair has increased for three straight days, approaching a two-week high of 1.1660. Key economic data from the eurozone include the Balance of Trade and the Q3 GDP Growth Rate. The GBP/USD pair has risen back above 1.3200 after two days of losses. The UK will announce its Inflation Rate on November 19. The USD/JPY reached nine-month highs above 155.00 before correcting to around 154.00, focusing on the Japanese Tertiary Industry Index. The AUD/USD remained stable after hitting two-week highs near 0.6580, with the Reserve Bank of Australia’s Minutes set for release on November 18.

Commodities and Market Analysis

WTI crude oil rebounded past $59.00 due to concerns about Russian oil sanctions and global oversupply. Gold dropped from three-week highs near $4,250 to $4,190, while silver fell from over $54.00 to below $53.00 per ounce. The weakness of the US dollar is a key trend to watch in the coming weeks. With the DXY testing the 99.00 level, there may be opportunities to maintain this momentum, especially following the resolution of the government shutdown. The high US debt-to-GDP ratio, which surpassed 120% in the early 2020s, continues to weigh on the dollar, and markets are increasingly factoring this in. The uncertainty surrounding the Federal Reserve’s decision in December creates an ideal situation for volatility trades. Since the market is divided on a potential rate cut, options straddles on the EUR/USD could be a smart way to profit from significant price movements, regardless of the direction. In 2022, we saw major volatility during the Fed’s policy changes, and any clear signal of a cut could result in a similar sharp market reaction. With the Euro strengthening and pushing EUR/USD toward 1.1660, there’s a clear opportunity before the Q3 GDP figures are released. A better-than-expected growth number could reinforce this upward trend, making near-term call options on the Euro an appealing choice. Given Eurostat’s sluggish growth figures of around 0.1% quarterly from 2023 into 2024, any indication of a solid recovery would act as a strong catalyst. It’s also important to note the divergence in USD/JPY. It recently reached 155.00, while the broader dollar index was falling. This suggests significant Yen weakness, likely due to ongoing interest rate differentials with the Bank of Japan. Thus, a more effective strategy may be shorting the Yen against a stronger currency, like going long on EUR/JPY or GBP/JPY, rather than betting on a reversal in USD/JPY. The dip in gold from its $4,250 peak should be interpreted as a potential buying opportunity rather than a reversal in trend. With a weak dollar and persistent inflation concerns, purchasing call options on gold-related ETFs may be a wise hedge. This pullback seems more like profit-taking than a fundamental shift in the appeal of precious metals. In the energy market, WTI crude oil staying below $60 a barrel, despite sanctions on Russian oil, indicates that oversupply concerns are prevailing. US crude oil production, which reached over 13.2 million barrels per day in 2023, has likely continued to grow, limiting significant price increases. Traders might consider using this resistance level to sell call spreads, betting that prices will remain stable in the near term. Create your live VT Markets account and start trading now.

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