Insights 
VT 
The US Dollar began the week with modest declines, amid anticipation for potential trade progress between the US and China. This caution set the tone as several key central bank interest rate decisions loomed.
The US Dollar Index faltered after two days of gains, influenced by mixed US Treasury yields and trade optimism. Key data including the S&P/Case-Shiller Home Price Index and various US manufacturing and oil reports are due.
Anticipated Market Moves
The EUR/USD’s recovery faced resistance near 1.1650, with Germany’s GfK Consumer Confidence and the ECB’s Consumer Inflation Expectations upcoming. GBP/USD bounced back to the low-1.3300s, with BoE credit data due soon.
USD/JPY reached four-week highs, continuing a seven-day climb with Japan’s Consumer Confidence next in line. The AUD/USD rebounded to a three-week peak around 0.6560, with Australian inflation data pending.
WTI oil saw modest gains, briefly exceeding $62.00 per barrel on trade deal hopes. Conversely, Gold tumbled to three-week lows around $3,970 per ounce and Silver fell to $46.00, its lowest in four weeks.
With central bank meetings on the horizon, we see caution as the dominant theme. The market’s quiet start to the week suggests traders are hesitant to take on large positions before getting more clarity from policymakers. This environment is ideal for strategies that profit from a potential spike in volatility, rather than directional bets.
US Dollar Forecast
For the US Dollar, the slight dip appears to be a pause, not a reversal. Given that the latest US Consumer Price Index for September 2025 registered a still-stubborn 2.8%, we believe the Federal Reserve will signal a “higher for longer” stance in its upcoming November meeting. We should consider buying near-term call options on the DXY to position for a hawkish surprise that could break the recent consolidation.
The EUR/USD pair is struggling at the 1.1650 resistance level, a ceiling that has held firm multiple times since the second quarter of 2025. With the latest German manufacturing PMI data showing a contraction at 48.5, the economic outlook for the Eurozone remains weak compared to the US. We see an opportunity in buying put options with a strike price just below 1.1600, anticipating a rejection from this key technical zone.
Sterling’s small bounce in GBP/USD seems fragile after its prolonged decline. The Bank of England faces a difficult choice, as Q3 2025 inflation remained sticky at 3.5% even as economic growth stalled. This uncertainty makes a “strangle” option strategy appealing, where we would buy both an out-of-the-money call and put option to profit from a large price swing in either direction post-announcement.
The uptrend in USD/JPY above 153.00 remains the clearest trend among the majors. The interest rate differential between the Fed and the Bank of Japan, a dominant theme since the rate hike cycles began back in 2022, continues to favour the dollar. We should continue to use futures contracts to maintain a long position, using a trailing stop to protect profits from any sudden shifts in sentiment.
In commodities, WTI crude oil holding above $62 a barrel seems supported by fundamental factors beyond just trade deal hopes. OPEC+ confirmed just last week that its production cuts will extend through the first quarter of 2026, putting a solid floor under prices. We view this as a good time to purchase call options with a $65 strike price, betting on tightening supply heading into the winter months.
Gold’s sharp drop to near $3,970 an ounce shows how sensitive it has become to risk sentiment after its historic run-up during the 2023-2024 global slowdown. As capital rotates away from safe havens, this profit-taking trend could continue, especially if a US-China trade agreement materializes. We believe shorting gold futures or buying puts on gold ETFs is a prudent way to hedge against a sustained “risk-on” market mood.
