US stocks started strong, with the S&P 500 rising to 6018 at first. However, it quickly dropped to 5972, getting close to the previous day’s low. This swing might be linked to the monthly expiration of options, which can affect prices. There’s also a growing interest in safe-haven assets as the weekend approaches, especially with worries about possible US involvement in Iran.

The US Dollar Demand

The US dollar is seeing high demand and remains close to its daily highs. At the start, the market showed optimism, but this quickly turned cautious. The S&P 500’s rise to 6018 indicated a willingness to take risks. However, its fall back to 5972 suggests weakening momentum. This change could be due to short-term structural factors and looming macro risks. A key reason for this shift seems to be the monthly expiry of equity options. During these times, large institutions can change their market positions, leading to unexpected price movements. These adjustments can skew how we interpret early session gains. Moreover, there’s a noticeable shift towards safer investments. Ongoing tensions between the US and Iran, especially before the weekend when markets close, often lead to a more cautious approach. It’s common for traders to move into fixed income and safe-haven currencies. This trend usually intensifies on Fridays, as many traders prefer not to hold risk over the weekend.

Volatility and Market Sentiment

We also see foreign exchange markets supporting this cautious sentiment. The strong US dollar shows that many are seeking protection. It remains robust, in line with a broader decline in riskier assets. This suggests that investors are not just hedging against equity risks; they are preparing for potential geopolitical stress into Monday. Looking ahead, we expect volatility to stay high, especially in areas with more derivatives activity. Significant price moves can occur around key strike levels as expiries approach, often leading to sharp reversals or sudden price spikes. Therefore, when analyzing current pricing trends, we need to distinguish between temporary expiry effects and longer-term market sentiment. We are closely monitoring options volume and open interest on near-term contracts. High gamma in specific areas—especially near round numbers or key strikes—can stabilize or dramatically shift prices once those levels are broken. It’s important to consider both technical factors and macro influences. As demand for safety increases and derivatives activity creates noise, we’re adopting a flexible approach. Now is not the time to increase trade duration or make heavy bets on single-day movements. Instead, responding to market levels rather than just stories has been more effective. This doesn’t mean ignoring the news; however, its impact seems influenced by market positioning more than fundamental factors this week. Create your live VT Markets account and start trading now.

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