European markets saw various changes on July 31, 2025, driven by US tech earnings and comments from the Bank of Japan (BOJ). Big US firms like Microsoft and Meta had strong earnings, boosting tech stocks. However, European equities couldn’t hold onto their gains. S&P 500 futures rose by 0.9%, and Nasdaq futures climbed by 1.2%, as excitement grew for Apple and Amazon’s upcoming earnings. In the foreign exchange market, the Japanese yen weakened after BOJ governor Ueda downplayed inflation risks, although inflation forecasts were raised. The USD/JPY pair initially increased from 148.90 toward 150.00 but settled around the 200-day moving average of 149.51. The US dollar was weaker in other pairs as well, with EUR/USD rising 0.4% to 1.1448 and USD/CHF dipping 0.4% to 0.8115. Meanwhile, AUD/USD increased by 0.2% to 0.6445, and USD/CAD held steady around 1.3835.

Market Performance

In other markets, gold rose by 0.9% to $3,305.09, and cryptocurrencies remained strong, with Bitcoin climbing 1.0% to $118,361 and Ethereum approaching $3,800, closing in on $4,000. WTI crude oil fell by 0.5% to $69.64, showing mixed trends in commodity markets. With the surge in tech stocks but a weaker overall market, we should consider protecting our positions. We can use derivatives to bet on this trend continuing. For example, we might buy call options on the Nasdaq 100 index while purchasing put options on the Russell 2000 small-cap index. This strategy allows us to take advantage of tech gains while hedging against possible economic downturns. The yen’s decline presents a significant opportunity as the Bank of Japan isn’t likely to raise interest rates soon. With USD/JPY testing the 150 level, a key psychological point where authorities intervened in late 2022, we should watch for a potential breakout. Buying out-of-the-money call options on USD/JPY, such as with a 152 strike, could be a cost-effective way to profit if the yen weakens more.

Volatility Predictions

Current volatility levels appear low given the risks ahead. The latest US Challenger report highlighted a sharp increase in layoffs, surpassing 62,000, while political pressure on the Federal Reserve is mounting. We should think about buying call options on the VIX index or purchasing medium-term futures to protect against sudden market shocks in the next few weeks. With earnings from Apple and Amazon approaching, implied volatility in their options is very high. This indicates the market expects a big stock move, which might not happen. An iron condor strategy could help us collect premium, betting that these stocks will trade within a specific range after their results are released. The weaker dollar is supporting gold prices above $3,300 per ounce. This strength persists despite recent low Eurozone inflation figures, like France’s 1.0%, suggesting these changes are mainly driven by US factors. We can maintain a positive outlook on gold using call spreads, which limit our initial costs while enabling us to gain if the dollar continues to decline. The market’s expectations for interest rates are shifting, with US 10-year yields at 4.34% despite the Fed’s commitment to maintain its stance. The market seems to react to weaker labor data and is beginning to anticipate future rate cuts. We should consider buying Secured Overnight Financing Rate (SOFR) futures for early 2026 to prepare for a more dovish Fed policy than what is currently expected. Create your live VT Markets account and start trading now.

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