A Perfect Storm Is Forming in the Market

GBP/JPY

Key zone: 201.50 - 203.00

Buy: 203.50 (on a strong positive foundation); target 204.50-205.00; StopLoss 202.80

Sell: 201.00 (after a retest of the 202.00 level) ; target 199.00-198.50; StopLoss 201.70

Powell talks about rate adjustments, Trump about China, and Beijing about new tariffs. In Japan, another political crisis is unfolding. The market finds itself at the epicenter of monetary and geopolitical risks, making it especially sensitive to any comments and actions by officials.

The Fed Chair cautiously hinted at a rate cut, but the markets “heard” more than he intended to say. The trigger for reassessing expectations was his remarks about the weakness of the labor market.

Even without fresh data from the BLS, whose publication was delayed due to the shutdown, the Fed manages to maintain a balance between price stability and full employment. Powell emphasized that inflation expectations are approaching the 2% target level.

These statements were interpreted by the market as a guaranteed hint of a rate cut in October. Federal funds futures immediately reflected this fact, which caused a sharp weakening of the dollar in global markets. The U.S. currency fell by 0.3% against the yen and the franc, while the euro strengthened by 0.3%, consolidating above $1.16. The dollar index lost 0.2%, stopping at 99.055.

Meanwhile, the U.S. and China have once again exchanged harsh statements. Trump threatened to halt imports of vegetable oil from China in response to Beijing’s refusal to purchase American soybeans.

American farmers, however, would prefer a trade deal with China instead of subsidies, which only complicates the domestic political and economic situation.

Beijing, for its part, imposed sanctions on U.S. divisions of a South Korean shipping conglomerate. In response, Trump threatened new 100% tariffs on Chinese goods starting November 1 and announced the possible cancellation of his meeting with Xi Jinping at the APEC summit in South Korea.

It is clear that both sides are strengthening their negotiating positions ahead of new dialogue rounds, but market pressure is increasing. Any sharp statement can trigger a sell-off in the dollar, while positive news may cause short-term corrections.

In Japan, the Komeito party has left the coalition with the LDP, sharply reducing the chances of the new leader, Takaichi, to form a stable government. This creates additional risks for the yen and the Japanese economy. Negotiations between the parties will resume on October 20 — a key date for currency speculation on the yen.

Short-term traders can take advantage of the current dollar weakness, but it is important to monitor key events: the Fed meeting on October 28–29, the resumption of U.S.-China negotiations, and the publication of delayed statistics.

The market is entering a period of high turbulence. Maximum caution, constant monitoring of actions by the Fed, BOJ, and Chinese authorities, and rapid adaptation of trading strategies to new conditions are required.

In the near future, the market will remain active and nervous.

So we act wisely and avoid unnecessary risks.

Profits to y’all!