Insights 
VT 
The US Dollar (USD) fell for a second day due to dovish comments from Fed Chair Powell. Powell indicated potential for easier policy if the labour market weakens, without jeopardising inflation goals. Market expectations include a 25bps easing for the October 29th and December 10th Federal Open Market Committee decisions. This softer stance and rising US Federal debt levels are limiting the USD outlook. Equity markets steadied, with the S&P 500 stabilising near Friday’s low after Powell’s remarks.
President Trump expressed strong support for the USD but provided limited context. Across major currencies, the Norwegian Krone (NOK) advanced as oil prices stabilised, and the Australian Dollar (AUD) rose slightly post RBA insights on higher-than-expected Q3 inflation. Gold continues its rise, peaking at $4218, which may add pressure on the USD. The October Empire Survey and further central bank speaks are expected. Technical patterns indicate a potential minor top for the USD index (DXY) around 99.50, with potential losses extending below 98.80 to fill a chart gap between 97.80/00.
Investment Warnings And Insights
The article also includes various insights and forecasts across financial markets, warning of risks and uncertainties, advising thorough research before making investment decisions.
Based on the Fed’s recent dovish turn, we see a clear signal that interest rate cuts are on the horizon. The market is already pricing in a 25 basis point cut for the October 29th FOMC meeting, a move supported by the latest jobs report from early this month that showed unemployment ticking up to 4.1%. This makes positioning for a weaker US Dollar a primary strategy for the coming weeks.
The Dollar Index (DXY) appears to be forming a top around the 99.50 level, with potential to fall and fill the chart gap near 98.00. We haven’t seen the DXY consistently below that level since the brief dip in mid-2024, so a break could accelerate the decline. Therefore, buying call options on pairs like EUR/USD or AUD/USD could be a direct way to capitalize on this expected dollar weakness.
Gold’s surge to over $4,200 an ounce is a direct result of falling US rate expectations and persistent safe-haven demand. For perspective, we were trading closer to the $2,400 level just a year ago in late 2024, highlighting the incredible momentum behind this move. We believe long positions, perhaps through call options on gold futures or related ETFs, remain attractive as a weaker dollar typically provides a tailwind for commodities.
Strategies For Equity Markets
Finally, Fed Chair Powell’s comments have successfully calmed equity markets, causing implied volatility to recede. The CBOE Volatility Index (VIX), which had recently spiked above 20, is already settling back towards the 16 level. This environment makes strategies that involve selling volatility, such as writing cash-secured puts or implementing credit spreads on the S&P 500, more appealing.
