The FTSE 100 recently hit record highs, following strong performances in Japan and the US. Even with these gains, the index is priced at 14 times earnings. Gold’s recent increase may help the mining sector bounce back. Concern is growing about a potential market bubble as Microsoft and Apple have joined the $4 trillion market cap club. Despite some nervousness around tech earnings, the market remains strong, unlike previous times of ‘irrational exuberance’.

Currency Movements

In other financial news, the GBP/JPY fell nearly 200 pips, while the USD/JPY dropped below 152.50. The latest AUD inflation data may affect the RBA’s interest rate decisions. Meanwhile, the EUR/USD rose due to optimism over US-China trade relations. Other notable events include gold stabilizing around $3,950 as US-China trade tensions ease, and the potential for a trade deal between Trump and Xi Jinping. Cryptocurrency markets are also buzzing, with Pump.fun rising above $0.0050, suggesting a possible rally. This article reminds readers that markets carry risks and uncertainties, and the information here shouldn’t be seen as investment advice. The author has no stock positions and isn’t responsible for any losses. Neither FXStreet nor the author provide personalized investment recommendations. With Wall Street and the FTSE 100 setting record highs, we shouldn’t resist this upward trend, even if it feels uncomfortable. The focus should be on protecting profits against a sudden drop, especially with significant tech earnings coming soon. The CBOE Volatility Index (VIX) is currently around 18, making it cheaper to buy protective put options on indices like the S&P 500 for insurance.

Market Strategies

The rally is mostly driven by major tech companies, particularly Microsoft and Apple. Given the concentrated rallies of 2023 and 2024, it’s smart to reduce some exposure by selling out-of-the-money call options against these stocks. This allows us to earn income from high implied volatility while keeping the underlying shares for further growth. While US stocks seem pricey with a forward P/E ratio near 26, the FTSE 100, at 14 times earnings, offers an attractive alternative. A pair trade—going long FTSE 100 futures while hedging cautiously on US indices—could be a smart way to stay invested in equities. We’re also using gold call options as a hedge, especially since gold appears to have support near $3,950 an ounce amidst a relatively calm geopolitical landscape. In the currency markets, central bank policies are creating clear trading signals for the weeks ahead. With the Federal Reserve likely to cut rates this week, we expect continued modest pressure on the US dollar. Therefore, we’re maintaining a long EUR/USD position, especially now that it has crossed its 100-day moving average. We’re also watching for potential weakness in GBP/USD around 1.3280 due to concerns about a possible Bank of England rate cut. Create your live VT Markets account and start trading now.

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