In the last 11 hours, the Nikkei 225 in Asia hit a new record as the USD declined. Gold futures rose above $3,650 per ounce, WTI crude oil traded near $63 per barrel, and CME Bitcoin futures climbed towards $114,000. NVIDIA’s stock increased by 0.77%, reaching $168.31. David Solomon from Goldman Sachs mentioned there’s no hurry for immediate Fed rate cuts. Mike Wilson from Morgan Stanley hinted at the possibility of a market rally by the end of the year. MUFG predicts that the EUR/USD could surpass 1.2000 by December.

Japanese Market Update

The PBOC set the USD/CNY rate at 7.1008, the strongest since November 2024. The USD weakened as Japanese stocks rose. Japan announced an LDP leadership election set for October 4, sparking local interest. In the U.S., a job survey revealed that the chance of finding a job has decreased to 44.9%. In Australia, consumer sentiment fell by 3.1% in September, while UK retail sales showed a 3.1% yearly increase in August. Lumber futures plummeted nearly 24% from their highs in August. In politics, Athens felt a 5.2 magnitude earthquake, and China and Canada are discussing economic cooperation. Overall, the market atmosphere was risk-positive, with gold, Bitcoin, and oil prices rising despite some weak economic signals.

Market Signals Analysis

Currently, the market is sending mixed signals. Gold is rising above $3,650, indicating either high inflation or a shift towards safer investments. However, the U.S. job market looks weak, with the job-finding probability reaching a record low, and non-farm payroll growth for August slowing to just 95,000. This puts the Federal Reserve in a tricky situation, making future interest rate decisions uncertain. Some believe the Fed won’t cut rates, but we see potential in currency markets, as the Fed might need to ease while the European Central Bank stays steady. This situation supports the expectation for the EUR/USD to rise above 1.2000 by year-end, making long positions in euro derivatives attractive. Strong momentum in hard assets suggests they could be a key hedge amid economic uncertainty. Gold testing $3,700 and oil near $63 per barrel indicates traders are betting on ongoing inflation. Last month’s CPI data showing core inflation stubbornly above 4% backs this outlook. We also need to pay attention to warning signs in certain sectors. The significant drop in lumber futures raises concerns for the housing market, supported by the recent 10% dip in housing starts in August. This situation suggests that put options on homebuilder ETFs might provide valuable protection against downturns or even speculative profits. While the Nikkei reaches new heights, we remain cautious about U.S. tech stocks, as major players like NVIDIA show signs of stalling. We saw a similar trend in 2022, where rising commodity prices and inflation fears led to sharp corrections in growth-focused tech stocks. With these mixed signals, positioning for higher market volatility using VIX options seems wise. Create your live VT Markets account and start trading now.

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