Insights 
VT 
The United States ISM Manufacturing New Orders Index increased from 48.9 to 49.4 in October. This indicates a slight improvement in manufacturing activity in the US.
Meanwhile, the Canadian Dollar is experiencing fresh weakness as it continues to falter. The Dow Jones Industrial Average dipped, with artificial intelligence investments impacting broader market gains.
Policy Measures And Market Reactions
The Federal Reserve’s Cook mentioned ongoing policies aimed at easing inflation pressures. In other news, the Reserve Bank of Australia is anticipated to maintain its interest rates.
The USD/JPY traded flat near multi-month highs, while the USD/CHF reached a three-week high amid a US Dollar strength. The EUR/USD remains under pressure near the key 1.1500 support area due to the dollar’s recovery.
In the currency market, GBP/USD is consolidating below the 1.3150 level, affected by a stronger Greenback. Gold has slipped back toward the $4,000 mark amid rising US Treasury yields and easing trade tensions.
Cryptocurrency Market Concerns
The cryptocurrency market faces challenges, with Ripple (XRP) struggling to recover, trading above $2.40. Cardano (ADA) has fallen by 6%, trading below $0.58, indicating bearish sentiment among market participants.
The rise in the ISM Manufacturing New Orders index to 49.4 is a slight improvement, but we see this as a sign of stabilization rather than a return to strong growth. This is the fifth consecutive month the index has remained below the 50-point threshold, indicating an ongoing contraction in the factory sector. Derivative traders should be cautious about being overly bullish on industrial-linked assets and consider selling call options against rallies.
We believe the market is correctly scaling back expectations for a Federal Reserve rate cut, especially after October’s core inflation report last month came in stubbornly high at 3.5%. Looking at Fed Funds futures, the probability of a rate cut by March 2026 has fallen from over 50% just two weeks ago to under 20% today. This policy repricing is fueling the dollar’s strength, making long positions in U.S. Dollar Index futures an appealing strategy.
With the EUR/USD pair testing the key 1.1500 support level, traders should prepare for increased volatility. This level held firm during the summer of 2024, and a decisive break below it could accelerate selling pressure. Purchasing put options on the EUR/USD offers a defined-risk way to profit from a potential downward move.
Caution is warranted for the British Pound ahead of next week’s Bank of England meeting, with the GBP/USD pair struggling below 1.3150. Given the UK’s recent weak retail sales data, we expect the BoE to maintain a more cautious tone than the Fed, creating a policy divergence that favors the dollar. A bear put spread on GBP/USD could be an effective strategy to capitalize on this potential weakness while limiting the premium paid.
Gold’s slide back towards $4,000 an ounce is a direct reaction to the strengthening dollar and the 10-year Treasury yield climbing back above 4.85%. This makes holding a non-yielding asset like gold more expensive. For those holding long positions, writing covered call options can be a prudent way to generate income while this pullback continues.
The persistent sell-off in cryptocurrencies like Ripple and Cardano highlights a broad risk-off sentiment in the market. Data shows that open interest in perpetual futures for major altcoins has fallen by nearly 15% in the past week, suggesting traders are closing positions rather than initiating new shorts. We advise against trying to catch this falling knife; buying protective puts or simply waiting for market sentiment to shift is the safer play.
