Markets have taken a sharp turn this week. The mood shifted noticeably from fear back toward optimism — and the data supports it. The VIX sits at 16.37, reflecting a calmer environment after last week’s spike in anxiety. Traders are beginning to lean into “risk-on” behavior once again, and that’s being echoed across multiple asset classes.
For anyone new to this series, you can read more about how the VIX reflects collective market psychology in my piece Mastering Market Sentiment — The Psychology Behind Currency Trading.
Gold, Oil, and the Return of Risk Appetite
The Gold-to-Oil Ratio currently stands at 66.89 — still historically elevated, but notably down from last week’s levels. To put that in perspective, one ounce of gold now buys nearly 67 barrels of oil. Under normal economic conditions, this ratio hovers between 10 and 30. When it rises this far, it usually means one thing: stress in the system.
A high ratio tells a story of weak oil demand and a rush into gold — the classic “safe-haven” behavior. But this week, oil prices reversed bigly from their previous downtrend, signaling that the risk-off panic might be fading. Gold, meanwhile, has started to pull back from its highs. It looks like a correction, not a collapse, but the message is clear: traders are stepping back into risk.
If you want to understand the full implications of this relationship, check out The Gold-to-Oil Ratio: A Historical and Practical Guide.
For this week’s trading stance, the direction is clear — we’re treating the market as risk-on.
The Landscape of Yields and Strength
Ten-year government bond yields continue to provide context for currency behavior. The U.S. remains near the top of the pack, behind only the U.K. and Australia, while Japan and Germany continue to anchor the lower end of the spectrum. These yield spreads are crucial — they quietly determine where money flows in a risk-on world.
Currency Strength Overview — October 2025
Using gold as the universal benchmark, let’s walk through where each major currency stands this month — and what that means for traders.
United States Dollar (USD)
The S&P 500 vs Gold ratio sits at 1.65, with gold dropping and equities returning to their highs — a textbook sign of returning confidence. The USD has been the second-strongest currency in October and ranks fifth over the three-month horizon.
Short-term, the dollar remains a buy across the board — except against the Swiss Franc. In the medium term, USDCAD and USDJPY look attractive buys, while NZDUSD remains a sell.
Longer term, the picture doesn’t change much: USDJPY and USDCAD both remain solid long positions, while NZDUSD continues to lag. Yet, it’s worth noting that year-to-date, the dollar still holds the title of the weakest major — a reminder that the tide can shift quickly.
Euro (EUR)
The DAX vs Gold ratio stands at 6.85, and CAC 40 vs Gold sits at 2.33, both hovering around or slightly below average levels. The euro continues to impress across most time horizons — fourth strongest in October, second over three months, third over six, and the strongest year-to-date.
That strength suggests consistent institutional support, even in a risk-on environment. German bond yields remain low, which would normally weaken a currency, but the euro’s resilience tells a different story — capital is flowing toward stability.
Short-term, EURAUD and EURJPY look like buys, while EURUSD and EURCHF lean sell. Medium to long term, the tone shifts bullish: EUR remains a buy across the board, especially against the weaker high-yielders.
British Pound (GBP)
The FTSE 100 vs Gold ratio is 3.12, with the FTSE at highs and gold backing off — another nod to a risk-on comeback. The pound ranks sixth this month but performs solidly over longer timeframes: fourth at three and six months, and third year-to-date.
The U.K. also boasts the highest 10-year bond yield, adding fuel to the pound’s strength. Short-term, GBPJPY and GBPAUD look like buys, while GBPUSD and GBPCHF may underperform. Over the longer horizon, the pound holds a clear edge — particularly against the euro, franc, and antipodean currencies.
Japanese Yen (JPY)
The Nikkei 225 vs Gold ratio sits at 0.078, the lower end of its typical range, and that weakness translates directly to the yen. October marks the weakest performance for JPY this year, confirming what the charts have been whispering: the yen is under siege.
In a risk-on environment, the yen is often the casualty — and this week’s no exception. Across nearly every timeframe, JPY is a sell. USDJPY, EURJPY, GBPJPY, AUDJPY, and CHFJPY all favor the non-yen side of the trade. The Bank of Japan’s ultra-low 10-year yields continue to make the currency the market’s preferred funding tool.
Canadian Dollar (CAD)
The loonie ranks third strongest in October, showing steady resilience. Oil’s rebound gives it tailwind, and yield spreads remain favorable. Short-term, look to buy CADJPY and USDCAD, while selling AUDCAD.
Over the three-month and six-month windows, CAD’s performance slips slightly to sixth place, but strong pairings like GBPCAD and EURCAD remain in play. Year-to-date, CAD is seventh, suggesting it’s more of a tactical play than a long-term powerhouse for now.
Australian Dollar (AUD)
October has been rough on the Aussie, ranking seventh for the month. Yet, over three and six months, it becomes the strongest major — a fascinating reversal that underscores how cyclical commodity currencies can be.
Short-term trades favor selling AUDUSD and buying EURAUD and GBPAUD, but over the medium term, the script flips. For traders with patience, the AUD could still be one of the most promising comeback stories going into year-end.
New Zealand Dollar (NZD)
The Kiwi lands fourth for October, but its momentum fades quickly over longer timeframes. Three months out, it’s the weakest, then recovers to fourth strongest over six months, and third strongest year-to-date.
That volatility makes NZD a trader’s currency — nimble, reactive, and often rewarding short-term plays. Currently, NZDUSD and NZDCHF look like sells, while NZDJPY and GBPNZD hold potential on the long side.
Swiss Franc (CHF)
The Swiss Franc remains the second strongest currency across nearly every timeframe — October, six months, and year-to-date. It’s the quiet achiever in a world that still values safety, even in a risk-on week.
The bias remains clear: buy CHF across the board except against the USD. USDCHF continues to look vulnerable, while CHFJPY, AUDCHF, and EURCHF all present interesting long opportunities depending on risk appetite and horizon.
Final Thoughts
This week’s markets remind us of a timeless truth: sentiment shifts faster than fundamentals. What looked like fear just days ago has turned into opportunistic confidence. Gold’s retreat, oil’s bounce, and equities’ climb all point to traders stepping back into risk.
But beneath that optimism, some fractures remain. The gold-to-oil ratio tells us that the global economy isn’t entirely out of the woods yet. For disciplined traders, that’s not a warning — it’s a map. When everyone else is chasing headlines, we trade the structure beneath them.
Stay sharp. Trade with purpose. And as always — walk the path of the warrior.