Insights 
VT 
The Australian Dollar (AUD) is expected to decrease and test the 0.6555 support level. Analysts indicate that there is an increasing likelihood of the AUD breaking below 0.6555, following a sharp drop to a low of 0.6579.
In a 24-hour analysis, AUD was noted to have reached a high of 0.6624 before declining. Downward momentum is projected to persist, pressing AUD towards lower levels, while resistance is identified at 0.6595 and 0.6610.
Australian Dollar Weakness
A neutral stance was previously held for AUD, but observations from two days prior placed expectations on trading within a range of 0.6555/0.6640. As AUD fell to a low of 0.6579 and closed lower, momentum appears to build, with greater chances of a decline past 0.6555 while resistance holds at 0.6630.
If a clear break below 0.6555 occurs, attention may shift towards the late-September low of around 0.6520. This outlook provides market insights, with the FXStreet Insights Team delivering a summary compiled from analyst observations.
Given the building downward momentum in the Australian Dollar, we see an opportunity to position for a break below the 0.6555 support level. Buying AUD/USD put options with a strike price around 0.6550 would be a prudent way to speculate on this move while defining risk. This view is further supported by Australia’s latest inflation data, which at 3.1% is tracking just below the central bank’s target, increasing the odds of a dovish policy shift.
The incredible surge in gold past $4,000 an ounce is a clear signal of a major flight to safety, driven by the ongoing US government shutdown. We have seen the VIX, the market’s fear gauge, spike to over 35 this week, a level of anxiety we haven’t witnessed since the banking sector stress in early 2024. Traders could consider buying call options on gold to ride this momentum, as uncertainty is likely to remain elevated.
Market Volatility and Safe Haven Assets
This risk-off environment paradoxically strengthens the US Dollar, even as we anticipate a dovish message from the upcoming Fed minutes. Looking back, we saw a similar dynamic during the 35-day government shutdown of 2018-2019, where the dollar acted as a primary safe-haven asset despite broader economic concerns. This historical precedent suggests the dollar will remain firm as long as the shutdown continues.
We are also seeing significant weakness in the Euro, which is testing the critical 1.1600 level against the dollar. This is not just about dollar strength; growing political instability in France has caused the spread between French and German 10-year bond yields to widen by over 80 basis points. This indicates that capital is fleeing perceived European political risk, which should continue to weigh on the EUR/USD pair in the coming weeks.
