Russia’s S&P Global Manufacturing Purchasing Managers’ Index (PMI) fell from 48.2 last month to 48 in October. This shows that manufacturing is still struggling since any score below 50 indicates a downturn. Meta Platforms’ stock continued its slide following disappointing earnings. The Dow Jones Industrial Average also saw little movement, finishing Friday relatively unchanged. Meanwhile, the EUR/USD pair dropped to a three-month low, influenced by the Federal Reserve’s tough stance, boosting the US dollar.

Currency Market Update

The GBP/USD fell to its lowest level in seven months due to fiscal challenges in the UK. Gold prices dropped below $4,000 for the second week in a row. In the energy market, WTI crude oil prices slightly bounced back amid modest recovery efforts and OPEC+ output discussions. Bitcoin and other major cryptocurrencies remained unstable as market interest fluctuated. However, Bitcoin did rebound above $110,000. It also celebrated the 17th anniversary of its whitepaper, which marked its transformation from a digital cash idea to a well-known financial asset. The strong US dollar is a major theme, driven by the Fed’s hawkish tone, which is pushing both the Euro and the Pound to multi-month lows. The Dollar Index (DXY) has surpassed 108, a level not consistently held since the aggressive tightening cycle of 2022-2023. Upcoming statements from Fed officials will be crucial in deciding if this trend continues. We are preparing for further declines in the EUR/USD and GBP/USD pairs, as both have broken through key support levels at 1.1520 and 1.3100. With Eurozone inflation around 2.1% and recent US CPI data above 3.5%, the difference in policies between the ECB and the Fed is clear. This situation suggests that buying put options on these currencies might be a smart move.

Gold Market Challenges

Gold is having a tough time maintaining the $4,000 level, and we expect more pressure soon. The strong dollar and rising real yields, with the 10-year TIPS yield now exceeding 2.5%, are significant challenges for non-yielding assets. Shorting gold futures could be a favorable strategy until we see a change in the Fed’s approach. Uncertainty is returning to risk assets, as shown by the stagnant Dow and the shaky demand in crypto markets. Although Bitcoin has found temporary support at its 200-day moving average, sentiment remains cautious. The VIX index has risen from the low teens to over 20 in the last two weeks, indicating that options traders should think about strategies that benefit from a more volatile market. We are closely monitoring the energy sector, as the recovery in WTI crude oil faces uncertainty ahead of the OPEC+ meeting focused on output increases. The decline in Russia’s manufacturing PMI to 48.0 also suggests potential demand weakness from key producers. Given these mixed signals, trading options on oil might be a way to navigate the anticipated volatility. Create your live VT Markets account and start trading now.

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