The US Dollar (USD) dropped for a second day following comments from Fed Chair Powell. He suggested that the Fed might adopt a more lenient policy if the job market weakens, without compromising inflation targets. Market expectations are leaning towards a 25 basis point cut during the Federal Open Market Committee meetings on October 29th and December 10th. This softer approach and increasing US Federal debt levels are clouding the USD’s outlook. The S&P 500 steadied, lingering near Friday’s low after Powell’s remarks. President Trump voiced strong support for the USD but offered little detail. Among major currencies, the Norwegian Krone (NOK) rose as oil prices stabilized, and the Australian Dollar (AUD) gained slightly after insights from the RBA predicted higher-than-expected Q3 inflation. Gold is on the rise, reaching $4,218, which could further pressure the USD. The October Empire Survey and more central bank statements are on the horizon. Technical patterns suggest a possible minor peak for the Dollar Index (DXY) around 99.50, with potential declines extending below 98.80 to fill a gap between 97.80/00.

Investment Warnings And Insights

This article shares insights and forecasts across financial markets, highlighting risks and uncertainties. It advises thorough research before making investment choices. The Fed’s recent dovish shift signals that interest rate cuts may be coming soon. The market is already expecting a 25 basis point cut at the October 29th FOMC meeting, bolstered by the latest jobs report showing unemployment rising to 4.1%. Thus, positioning for a weaker US Dollar is a key strategy for the next few weeks. The Dollar Index (DXY) seems to be nearing a peak around 99.50, potentially dropping to fill a gap near 98.00. It hasn’t been consistently below that since a brief drop in mid-2024, so a break below could speed up the decline. Therefore, buying call options on pairs like EUR/USD or AUD/USD could be a smart move to benefit from this expected dollar weakness. Gold’s rise above $4,200 an ounce reflects declining US rate expectations and ongoing safe-haven demand. Just a year ago, in late 2024, we were closer to $2,400, showcasing the strong momentum of this trend. We believe that going long, perhaps through call options on gold futures or related ETFs, remains an attractive strategy as a weaker dollar often benefits commodities.

Strategies For Equity Markets

Finally, Powell’s comments have eased equity market tensions, leading to a drop in implied volatility. The CBOE Volatility Index (VIX), which recently surged above 20, is already trending back toward 16. This environment makes strategies involving selling volatility, like writing cash-secured puts or credit spreads on the S&P 500, more appealing. Create your live VT Markets account and start trading now.

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