FX Options Insights 10/2/25
Foreign exchange markets could experience heightened volatility, with significant price fluctuations driven by shifting sentiments connected to a worsening trade conflict. This situation may favour increased gains for the global reserve currency, which has already surpassed key levels. However, many traders have been slow to invest in it, likely leading to more unpredictable conditions. The dollar has recently reached record highs against China's yuan, the Indian rupee, and the Turkish lira, with all-time highs for Indonesia's rupiah, the Philippine peso, and the Malaysian ringgit also in close proximity. The central banks of these weaker currencies—except for the ringgit—are pursuing looser monetary policies. The EUR/USD pair has fallen below longstanding support levels, but traders who anticipated this move have reduced their positions. They have also chosen to bet on a decline in USD/JPY, holding minimal bets on the pound. Interestingly, there has been the emergence of some short positions on the dollar. With little speculative pressure to hold it back, the dollar—now more reliable than gold, which is surging in price—could potentially appreciate rapidly and substantially.
Gold has significantly outperformed the dollar since October 2022. A correction in the previously saturated investment in the USD took place in October 2002. The price of gold increased from $1613/oz to $2906/oz following the decline of the dollar. The dollar has recovered all its losses from 2022-2023, with the trade-weighted index (TWI) nearing a 20-year high. The rise of the trade-weighted dollar above its 2022 peak is approximately 1%, in contrast to gold's impressive 73% increase. Since November 24, gold has risen by 15%, influenced by the Trump effect, while the USD has only gained 8%.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!