Stock Market Performance

On August 27, 2025, the North American trading session showed mixed results in the forex market. The US dollar gained slightly against the euro (+0.09%) but remained steady against the yen. It faced minor losses against the pound (-0.12%), the franc (-0.10%), and the New Zealand dollar (-0.02%). In commodity currencies, the dollar fell by 0.33% against the Canadian dollar and 0.25% against the Australian dollar. Although US yields initially rose, they reversed later with the yield curve steepening. In the US Treasury market, a $70 billion auction of 5-year notes had a high yield of 3.724% with a bid-to-cover ratio of 2.36x. Domestic demand was strong, but international interest was weaker. Crude oil inventories declined significantly, bringing crude oil prices to $64.15, a $0.90 increase. Crude prices bounced back above the 100-hour moving average, signaling a volatile trading environment. In the stock market, US indices made gains, with the S&P hitting a record high for the 19th time this year. Nvidia reported strong revenue growth, but its shares dropped by 4.5% after earnings of $1.08 fell short of expectations. Bitcoin also saw a rise of $215 but remained below important resistance levels. There is a noticeable disconnect between the record-high stock prices and the choppy currency markets. The dollar is having trouble finding direction, which indicates trader uncertainty, even as the S&P 500 closed at a new high. This divergence can often lead to increased volatility, so we should be cautious about chasing this stock rally. Political pressure on the Federal Reserve is a key factor contributing to this tension and will likely influence market movements in the coming weeks. With the CBOE Volatility Index (VIX) sitting near 14.5, which is low given the political situation, purchasing protection seems affordable. We should think about buying VIX call options or out-of-the-money puts on the SPY to hedge against any sharp market reactions related to Fed news after Labor Day.

Yield Curve and Commodity Markets

The yield curve is steepening, now at its widest since early 2022, which signals that the bond market is anticipating higher long-term inflation or growth. We noticed this trend beginning back in 2021. We can take advantage of this by trading yield curve spread futures, betting that the gap between long- and short-term rates will increase. Nvidia’s significant revenue miss is an immediate concern. As a major player in the market, its disappointing results could spread fears throughout the tech sector and dampen overall market sentiment. It’s wise to hedge long positions with puts on the QQQ index right now. In commodities, crude oil shows short-term strength, rebounding off important technical levels due to inventory draws. With WTI crude around $64, which is still below the highs of 2022, buying short-dated call options is a cost-effective way to bet on a rebound toward the $68-$70 range. This is a tactical play based on current momentum. Gold trading near $3,400 an ounce reflects investors’ desire for safety from inflation and political instability. This reinforces our long volatility position. We should keep or expand our long positions via GLD calls or gold futures to guard against a weaker dollar or sudden market shifts. The dollar’s weakness against commodity currencies like the Canadian and Australian dollars is linked to the recent rise in oil prices. This trend may continue as oil prices climb. We can express this view by buying calls on currency ETFs like FXC or by shorting the USD/CAD pair. Create your live VT Markets account and start trading now.

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