Insights 
VT 
The Jibun Bank Manufacturing PMI for Japan in October recorded a slight decrease, coming in at 48.2, which was just below the forecast of 48.3. This figure remains under the 50.0 threshold, indicating a contraction in the manufacturing sector.
Elsewhere, the Reserve Bank of Australia held interest rates steady at 3.6%. Additionally, the USD/JPY pair reached new multi-month highs, partially due to uncertainties with the Bank of Japan’s policy.
Euro And US Dollar Movement
The EUR/USD dropped to around 1.1510 amid a stronger US Dollar and cautious Federal Reserve sentiment. Conversely, gold prices sank below $4,000 following hawkish comments from the Federal Reserve, leading to diminished bets on further rate cuts.
In cryptocurrencies, Aster, Cosmos, and Bitget have suffered significant losses, attributed to a broader sell-off across the market. Reduced on-chain activity and increased bearish bets have heavily impacted the Cardano price, pushing it below $0.58.
The upcoming week brings anticipation regarding US Federal Reserve decisions, with potential impacts on global currencies. Markets are bracing as central banks in Australia and the UK announce their latest rate decisions. Both developments could influence the future monetary policy landscape.
Japanese Manufacturing PMI and Economic Outlook
The Japanese manufacturing PMI coming in at 48.2 confirms a contraction and reinforces the negative outlook for Japan’s economy. This slight miss adds to the existing uncertainty surrounding the Bank of Japan’s policy. We have seen that extended periods of sub-50 PMI readings, like those in 2023, historically correlate with sustained Yen weakness.
The underlying trend remains a strong US dollar, driven by a hawkish Federal Reserve outlook. This is pressuring commodity currencies like the Aussie and Kiwi dollars, especially as China’s official manufacturing PMI recently registered 49.5, signaling weak demand. The dollar’s dominance is reminiscent of the 2022-2023 tightening cycle when the US Dollar Index (DXY) climbed to 20-year highs.
We should consider positions that benefit from continued yen weakness and dollar strength. This could involve buying USD/JPY call options or selling yen futures. The Bank of Japan’s historical hesitation to meaningfully move away from its ultra-loose monetary policy, a stance it held for years, continues to weigh on the currency.
This risk-off sentiment is spreading to other assets, with gold struggling to hold key levels. A strong dollar makes gold more expensive for foreign buyers and reduces its appeal when US Treasury yields are attractive. The sell-off in crypto markets further confirms that traders are moving away from speculative assets and into the relative safety of the dollar.
The selling pressure on AUD/JPY is a key indicator of this risk-averse environment. With Australia’s central bank holding rates steady and Japan’s economy weakening, put options on this pair could be an effective way to position for further downside. This trade acts as a direct play on weakening global growth prospects.
