India’s M3 money supply was at 9.5% on July 7, a slight drop from 9.6%. Changes in the money supply can impact the economy, affecting inflation and interest rates. The EUR/USD pair fell to the low 1.1700s as the US Dollar strengthened after a trade agreement between the US and Japan. In contrast, GBP/USD gained, holding steady around 1.3540 due to the same deal.

Gold and US Dollar Dynamics

Gold prices remained above $3,400 per troy ounce but faced pressure after peaking at $3,440 in recent weeks. This decline is due to a rising US Dollar and higher US yields. In the cryptocurrency market, Bitcoin, Ethereum, and XRP weakened, resulting in a 3.5% drop in total market capitalisation, now at $3.9 trillion. However, speculative interest persists, as shown by increased Open Interest in these digital currencies. During Trump’s second term, recent policy changes have focused on an “America First” approach, affecting trade, tax, AI, and national defense. The markets remain resilient despite the uncertainties these changes bring. With India’s slowing money supply, derivative traders should prepare for possible tightening measures from the Reserve Bank of India. The current M3 growth is about 11.2% year-over-year, and any further slowdown could impact economic growth. We recommend monitoring options on the Nifty 50 index for potential bearish strategies.

US Dollar and Market Reactions

The strength of the US Dollar is a key focus, with the Dollar Index (DXY) reaching multi-week highs above 105.5. This strength has pushed the EUR/USD pair closer to 1.0700, and we may see further declines if political uncertainty in Europe continues. Selling call options on the Euro could be a smart move to take advantage of this trend. Gold’s struggle to maintain its value is linked to rising US Treasury yields, with the 10-year note trading above 4.2%. As gold retreats from recent highs near $2,400, it suggests that the market expects fewer rate cuts from the Federal Reserve this year. We recommend traders consider put options to protect long positions against a potential drop to the $2,200 support level. The recent downturn in the cryptocurrency market has erased over $300 billion from its total worth, which now sits around $2.3 trillion. Still, Bitcoin futures Open Interest remains high at over $30 billion, indicating that speculative capital is repositioning rather than leaving the market. This volatility suggests that using straddles could be an effective strategy to trade expected price swings. His administration’s focus on protectionist policies creates a volatile situation for stocks. The VIX index shot up over 80% during the 2018 trade disputes, and we are bracing for similar volatility with new tariff announcements. Buying volatility through VIX futures or long-dated options on the S&P 500 can serve as a wise hedge against these policy-driven risks. Create your live VT Markets account and start trading now.

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