US stocks made a comeback, nearly recovering losses from Thursday and Friday due to a disappointing US jobs report. The NASDAQ index closed at 20,987.91, above its 100-hour moving average but below Thursday’s close of 21,122.45. The S&P index ended Thursday at 6,339.39 and closed today at 6,329.94, just under its 100-hour moving average. Future movements in both the S&P and NASDAQ indices will be important to watch.

Foreign Exchange Market Overview

In the foreign exchange market, key indices remained within 0.20% of Friday’s levels, except for USDCHF, which increased by 0.50%. US debt market yields fell as expectations for rate cuts grow for September and later. The 2-year yield dropped to 3.677%, while the 10-year yield fell to 4.196%. Crude oil prices fell by $1.11 to $66.22, while gold prices rose by $11.42 to $3,374.09 due to lower yields. Silver increased by $0.40 to $37.41, and Bitcoin jumped by $700 to $114,928. Factory orders met expectations with a -4.8% result, following an 8.3% increase last month. San Francisco Fed President Mary Daly suggested future rate decisions will depend on economic data, with potential rate cuts in discussion. The stock market is at a crucial point, with the NASDAQ and S&P indices testing important levels. As the market tries to bounce back from last week’s poor jobs report, it shows signs of uncertainty. Traders may want to consider options to benefit from a spike in volatility instead of committing to a specific direction. Historically, before the Federal Reserve cuts interest rates, like in 2019, the VIX volatility index tends to rise. Current tensions in the indices may indicate a similar pattern is forming now. A clear break of these key levels in the coming days could lead to significant market movement. The clearest indication lies in the debt market, where yields are decreasing. This reflects investor expectations for Fed rate cuts. We anticipate this trend to continue, suggesting that traders could take long positions in Treasury futures to profit from falling interest rates.

Expectations for Future Market Trends

Supporting this view, data from CME Group shows an 85% chance of a 25 basis point cut at the September meeting. Daly’s comments about a weakening labor market further strengthen these expectations. This lays a strong foundation for betting on lower yields ahead. Lower yields and economic uncertainty foster a favorable environment for gold. We see its recent price rise as the start of a larger trend, similar to past patterns when the Fed eased policy. Buying call options on gold could be a smart way to take advantage of this expected upward movement. Historically, during the last major rate-cutting cycle that began in 2019, gold performed exceptionally well, rallying for over a year. Meanwhile, we expect crude oil prices to remain weak due to signs of a slowing economy, such as falling factory orders. Recent government data also showed an unexpected rise in crude inventories, adding downward pressure on prices. In the foreign exchange market, the biggest risk lies with the Euro, given the renewed threat of significant US tariffs on EU goods. This could put pressure on the EURUSD exchange rate soon. Using put options to safeguard against or profit from a decline in the Euro might be a wise strategy. We’ve seen similar situations before, especially during trade disputes with China from 2018 to 2019, which caused considerable fluctuations in the yuan. The current scenario with the European Union could lead to sustained downward pressure on the euro. Upcoming China services PMI data will also be crucial for shaping the outlook for global risk and currency markets. Create your live VT Markets account and start trading now.

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