New Zealand’s ANZ Commodity Price Index increased to -0.3% in October, up from the previous month’s -1.1%. This improvement reflects a shift in commodity prices during that period.

The US Dollar Index weakened to near 100.00 due to an extended US government shutdown. Meanwhile, gold is trading near $3,950 in Asia, recovering from a 1.80% decline experienced on Tuesday.

Australian Dollar Strengthens

The Australian dollar strengthened as China announced the removal of tariffs on US agricultural goods from November 10. The USD/INR maintained levels above 88.50 amid low trading volume, owing to an Indian bank holiday.

Bitcoin fell below $100,000, causing $2 billion in losses in total liquidations. Concurrently, platforms like ZKsync and Internet Computer remained stable despite the broader market corrections.

DeFi platform Balancer experienced a $120 million hack, unable to halt the perpetration due to its impact on outdated pools. The cryptocurrency market continues to deal with security challenges, despite the rise of decentralised finance.

Given the prolonged US government shutdown, we are seeing significant weakness in the US Dollar. This situation mirrors the 35-day shutdown we saw back in 2018-2019, which also weighed on the economy and the currency. As a result, traders should consider strategies that benefit from a soft dollar, such as buying call options on safe-haven assets like gold.

Gold Approaches Key Level

Gold is climbing towards $4,000, driven by the flight to safety and the weak dollar. This rally is supported by a multi-year trend of central bank acquisitions; data showed that central banks bought a record 1,078 tonnes of gold in 2022 and continued strong net purchases through 2024. This underlying demand suggests that any dips in the gold price could be buying opportunities for derivative traders.

In the commodity currency space, we see a clear divergence. The Canadian dollar is weakening as WTI crude oil prices have fallen below $60 a barrel, pushing USD/CAD to seven-month highs. In contrast, the Australian dollar is finding support from China’s decision to lift some agricultural tariffs, improving regional risk sentiment.

This creates potential pair trading opportunities, such as going long AUD/CAD. While New Zealand’s commodity price index improved slightly, it remains in negative territory, suggesting the Kiwi may lag behind the Aussie’s recovery. Therefore, long positions on the Australian dollar against its commodity peers appear favorable.

The British Pound is experiencing a sharp decline, completely detached from the broader market’s focus on the US dollar. With UK inflation statistics from recent months still hovering near 4%, double the Bank of England’s target, fears of stagflation are crippling the currency. This suggests that put options on the GBP/USD could be an effective hedge against further sterling weakness.

The broader risk sentiment is clearly negative, as evidenced by the retreat in cryptocurrencies, with Bitcoin falling below the key $100,000 level. This move away from speculative assets reinforces the current market theme of capital preservation. Traders should remain cautious, as the ongoing political situation in the US is likely to increase market volatility in the coming weeks.

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