The Richmond Fed Manufacturing Index in the U.S. dropped to -20 in July, while analysts had expected it to be -3. This indicates a decline in the manufacturing sector around Richmond. The EUR/USD pair has climbed to about 1.1760, but recent factors have put pressure on the US Dollar. Meanwhile, GBP/USD has passed 1.3500, reaching its highest level in several days due to these changes.

Gold Prices Surge

Gold prices have jumped above $3,400, hitting five-week highs. This rise is due to a weakening US Dollar, decreasing US yields, and ongoing trade tensions. Bitcoin has stayed above $118,000 after SpaceX, led by Elon Musk, transferred $150 million. Ethereum’s gains have eased a bit, moving towards $3,600, although spot ETF inflows remain stable. In politics, the early part of Trump’s second term has seen new policy changes, but the markets remain strong. There is a clear focus on “America First” policies, impacting trade and national strategies. The significant drop in the Richmond Fed’s manufacturing data indicates a slowdown in the US economy. This isn’t just a small miss; it’s a serious decline that suggests traders should brace for more weaknesses in future economic reports. Historically, sharp decreases in regional manufacturing surveys have signaled broader economic troubles.

Weakness In The US Dollar

The clear weakness in the US Dollar stems from this economic sentiment, and we expect this trend to last. We are looking at put options on the dollar index or call options on major currency pairs to benefit from further declines. Recent CFTC data shows a rise in speculative short positions against the dollar, supporting this bearish outlook. With gold exceeding previous highs, it has reaffirmed its status as a safe-haven asset amid falling yields and political uncertainty. We see this as a chance to buy long-dated call options, which would allow us to profit from further price increases while managing our risk. This approach is supported by historical trends where gold performs well during US dollar weakness and geopolitical issues. Bitcoin’s rise, driven by Musk’s company activities, offers a high-risk, high-reward opportunity. We suggest using call spreads to capture potential gains while managing the risks associated with such volatile moves. For Ethereum, its steadier growth, backed by institutional interest, makes a covered call strategy attractive. This allows us to generate income while holding the asset. The policy changes under the current administration add friction to the markets, likely keeping volatility high across various assets. This situation favors strategies that benefit from price swings, so we are considering buying straddles or strangles on major indexes. This will help us stay neutral while taking advantage of increased uncertainty from the “America First” agenda. Create your live VT Markets account and start trading now.

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