Insights 
VT 
The US Energy Information Administration reported a natural gas storage increase of 87 billion cubic feet, surpassing the forecast of 78 billion for 17 October. This rise suggests trends that could impact the energy market’s dynamics.
In other updates, the Dow Jones Industrial Average sees a reduction in recent declines. Meanwhile, crude oil prices experience a surge due to US sanctions affecting supply dynamics.
Important Economic Indicators
Traders are advised to pay attention to upcoming economic indicators, such as PMIs and US CPI. There is also anticipation around a potential meeting between US officials and Vladimir Putin.
In the currency market, USD/JPY gains are noted in anticipation of inflation data from Japan and the US. Gold prices show resilience, currently consolidating around $4,150 per troy ounce.
In the digital currency sphere, Ripple (XRP) experiences an uptick in value, trading above $2.40. This is as institutional and retail interests grow despite recent volatility in the market.
The new Japanese Prime Minister, Sanae Takaichi, causes the Yen to stabilise. Markets are evaluating the effects of Japan’s fiscal policy changes alongside shifts towards monetary normalisation.
Natural Gas And The Market
Last week’s natural gas storage report on October 17 showed a build of 87 billion cubic feet, which was higher than expected. This signals we have more than enough supply heading into the winter withdrawal season. We believe traders should consider bearish positions, as Henry Hub futures have already pulled back to around $3.15/MMBtu, and this inventory level is well above the five-year average we saw back in the early 2020s.
The persistent buying of the US Dollar continues to put pressure on other currencies. With the US CPI data released last Friday showing inflation remains firm at 3.8% year-over-year, the case for a strong dollar is solid. Given the market is also pricing in a potential rate cut from the Bank of England by year-end, we see continued weakness in pairs like GBP/USD, making put options attractive.
Crude oil is showing strength, with prices pushing up against key technical levels due to new US sanctions. Geopolitical risk is clearly rising, and any further escalation could easily push WTI crude above its 50-day moving average, which is currently sitting around $88 a barrel. We feel that buying call options on oil futures is a reasonable strategy to capture potential upside from these supply fears.
Gold remains stuck, trading in a range around the $4,100 mark. While high inflation and global uncertainty provide support, the strong US dollar is acting as a major headwind, preventing a significant breakout. This suggests that range-bound strategies, like selling strangles on gold options, could be effective until a clearer trend emerges.
We are seeing the Dow Jones find some footing after recent declines, but we remain cautious. That stronger-than-expected inflation report means the Federal Reserve is unlikely to pivot to a more dovish stance anytime soon, which limits the upside for equities. We think traders should consider using this small rally as an opportunity to hedge portfolios with index puts.
