Insights 
VT 
China’s foreign exchange reserves increased to $3.3387 trillion in September from $3.322 trillion in August. This growth reflects a positive change in the country’s economic status.
The Japanese yen weakens as Takaichi’s pro-stimulus agenda impacts the currency. USD/INR remains stable amidst ongoing trade tensions between the US and India.
Euro Dollar Stability
The EUR/USD hovers near 1.1660 due to the political uncertainty in France. Meanwhile, the US Dollar gains strength, coinciding with gold prices nearing $4,000.
USD/CNH is anticipated to trade between 7.1340 and 7.1480. Political tensions in France cause additional losses for EUR/USD as markets remain cautious.
The GBP/USD remains below 1.3450, influenced by the strong US Dollar and differing policy expectations from the BoE and the Fed. Gold struggles to maintain its peak due to USD strength and global political tensions.
Cardano (ADA) shows potential for more gains, falling 1% after a 4% rise as market optimism continues. The victory of Sanae Takaichi in Japan’s leadership race provides stability and continues monetary policy trends.
MYX Finance and Plasma lead gains with double-digit increases, along with Mantle and PancakeSwap extending their bullish trend in cryptocurrency markets.
US Dollar Strength
With European political risk driving a flight to safety, we see the US Dollar as the primary beneficiary. The Dollar Index (DXY) has pushed past the 108 level for the first time since late 2024, signaling broad-based strength. This trend makes long positions on the dollar against a basket of currencies, particularly the Euro, a compelling strategy.
The political crisis in France, marked by the new Prime Minister’s swift resignation, is creating significant headwinds for the Euro. Implied volatility on EUR/USD options has spiked as traders price in further instability, creating an opportunity to purchase puts or establish bearish put spreads. We expect the pair to test lower support levels below 1.1600 in the coming weeks.
Gold’s approach to the psychological $4,000 mark reflects deep-seated market anxiety and bets on eventual Fed rate cuts. Recent data from the COMEX shows that money managers have increased their net-long positions to the highest level in over a year. Using call options to gain upside exposure to gold derivatives offers a way to participate while managing risk.
Japan’s unwavering pro-stimulus policy continues to weaken the Yen, making it the funding currency of choice. With the Bank of Japan having reaffirmed its commitment to ultra-low rates in its September meeting, shorting the Yen against the dollar remains a high-conviction trade. The steady climb of USD/JPY past the 160 level reflects this clear policy divergence.
In contrast to the turmoil elsewhere, China’s growing foreign exchange reserves, now at $3.3387 trillion, provide a buffer against volatility. This large cushion allows authorities to keep the Yuan stable, suggesting range-bound strategies on USD/CNH could be effective. Selling options volatility through structures like iron condors appears attractive given the expectation for managed stability.
Overall market nervousness is increasing, and we have seen the CBOE Volatility Index (VIX) climb back above 22 this week. This is a sharp reversal from the relative calm we experienced over the summer months. Buying VIX call options or futures can serve as an effective hedge against a broader market downturn triggered by these escalating political tensions.
