Insights 
VT 
Increased Volatility in the Forex Market
In the cryptocurrency sector, meme coins like Dogecoin, Shiba Inu, and Pepe are facing pressure, testing monthly support levels amid a wider market downturn. Zcash, however, maintains its positive momentum, trading near $360 with bullish sentiment persistently rising.
The US-China trade dialogue between Trump and Xi ended without surprises, focusing on tariff reductions for fentanyl and the resumption of US soybean exports. This agreement includes China’s agreement to delay export controls for another year.
We see significant confusion surrounding the Federal Reserve’s next move, creating a prime environment for volatility plays. While bets on a December rate cut have climbed to over 70%, recent US Core PCE inflation remains stubborn at 3.5%, well above the target. This divergence in data and expectation suggests that options strategies like straddles on the SPX or major currency pairs could be effective.
Gold is consolidating above the critical $4,000 level, a price point we haven’t seen since the inflationary pressures and geopolitical conflicts of 2024. This high valuation reflects a deep-seated demand for a hedge against uncertainty and potential currency debasement. Any definitive dovish signal from the Fed in the coming weeks would likely serve as the next catalyst for a move higher.
Japanese Yen and Global Forex Movements
In Japan, the small rebound in retail sales does little to change the bigger picture for the yen. The Bank of Japan just maintained its negative interest rate policy in its October meeting, reinforcing the massive policy gap with other central banks. We believe shorting the yen remains the most straightforward trade, especially against currencies with hawkish central banks.
The EUR/JPY cross holding near its record high of 178.00 is a clear example of this policy divergence. With the European Central Bank holding rates at 3.0% to fight inflation that is still above 3%, the fundamental case for a strong euro against a weak yen is solid. We expect dips in this pair to be bought quickly.
The British Pound is caught in the crossfire, trading sideways above 1.3150 as it awaits clarity from the US. With UK inflation recently surprising to the downside at 4.1%, the Bank of England is firmly on hold. This leaves the GBP/USD pair’s direction almost entirely dependent on upcoming US jobs and inflation data.
Finally, the managed trade relationship between the US and China is reducing one major source of global market risk. This calm could suppress volatility, making long-premium option strategies more expensive to hold. We are watching to see if this stability diverts capital away from safe-haven assets like the US Dollar and into global equities.
