The US dollar is still falling, affecting pairs like EUR/USD, USD/JPY, and GBP/USD. All three are trading near their session lows. Overnight, BoJ official Nakagawa spoke about Japan’s slow economic recovery and suggested that interest rate changes might be needed, urging caution due to trade policy uncertainties. These tensions could impact wage growth in Japan and influence global market sentiment. ECB’s Rehn observed that the eurozone’s growth remains strong, even as inflation slows toward the 2% target. He assured that the ECB will act if necessary, especially given pressure on the Federal Reserve, but warned against expecting a quick decline in the US dollar’s power. The second estimate of US Q2 GDP and other economic data will be released soon, but their effect might be minor.

Nvidia And Other Equities

In the stock market, Nvidia reported mixed premarket results, with earnings per share (EPS) at $1.08, slightly above expectations of $1.01. Despite this revenue success, shares fell by 1.2%. CrowdStrike shares dropped by 2.81%, while Snowflake shares surged by 13.88%. In the bond market, yields are showing mixed trends, with small increases in short-term yields and slight decreases in long-term yields. In other markets, crude oil is trading at $64.09, gold is up 0.19% to $3,405, and Bitcoin rose by $1,657 to $112,930. With the ongoing decline of the US dollar, we think the immediate path will likely be lower. Derivative traders should explore strategies that capitalize on this weakness, especially against currencies from central banks that are maintaining or becoming more aggressive with their policies. The upcoming US data, while significant, reflects past performance and is unlikely to change the current trend unless there are surprising positive results.

Opportunities In Forex Markets

The euro seems stable as ECB officials express confidence in the economic resilience of the region. The latest flash CPI estimate for August shows Eurozone inflation at 1.9%, which meets the central bank’s target and lessens the urgency for rate cuts. We see an opportunity to buy near-term call options on the EUR/USD to take advantage of potential increases while managing risk. For the Japanese yen, the Bank of Japan’s clear plan to increase interest rates creates a noteworthy policy difference compared to a possibly slowing US Federal Reserve. Although July’s wage growth in Japan was only 1.8%, the upcoming September Tankan survey could significantly strengthen the yen. Traders might consider buying put options on the USD/JPY, expecting a downward shift. Signals from the US bond market support the negative outlook for the dollar. The flat yield curve indicates growing concerns about US economic growth, similar to patterns seen before the 2024 slowdown. This situation generally puts pressure on the dollar as markets anticipate future Fed easing. This bearish sentiment for the dollar is reflected in other asset classes as well. Gold remains solidly above $3,400 an ounce, indicating a strong preference for safe-haven assets outside the US dollar. This overall market activity suggests that the dollar’s recent decline will likely continue. Create your live VT Markets account and start trading now.

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