Tesla faced a significant drop in quarterly revenue, the largest in over ten years, with a $3 billion decrease compared to last year. This was driven by tough competition from cheaper Chinese electric vehicles and declining public support for CEO Elon Musk. Additionally, political tensions with former President Trump and the end of EV incentives have made things harder for Tesla. Musk warned of challenging times ahead as the company shifts focus to robotaxi technology. In Australia, early PMIs for July showed signs of improvement, suggesting the economy remains resilient. These results slightly lessen the chances of the Reserve Bank of Australia cutting interest rates anytime soon. Governor Michele Bullock mentioned the need for more data before confirming a trend towards lower inflation.

Japan PMI Performance

Japan’s preliminary PMIs for July showed mixed results; manufacturing dipped to 48.8, indicating contraction, while the services sector rose to 53.5, marking its fastest growth in five months. The Reserve Bank of New Zealand is considering further rate cuts if inflation continues to decline. The People’s Bank of China set the daily reference rate for the yuan at 7.1385 per dollar, its strongest level since November, surpassing market expectations. Trade talks between South Korea and the US were canceled due to scheduling conflicts. With political tensions in the air, we expect volatility, particularly with threats of tariffs between 15% and 50%. Given uncertainties about a new Fed chair nominee, buying protection through VIX futures or put options on major indices seems wise. The VIX, which measures market volatility, has recently traded near multi-year lows around 12-13, making options relatively cheap.

Tesla Market Strategy

Tesla’s CEO’s guidance and the stark revenue shortfall signal bearish trends for the company. Historically, such warnings combined with a 9% year-over-year drop in vehicle deliveries often result in continued stock declines. We are considering purchasing puts or setting up bear call spreads to take advantage of this anticipated weakness. We’re closely watching the differing policies of Australia and New Zealand’s central banks. Bullock’s comments suggest a reluctance to cut rates, while Conway appears ready to ease, supporting a long AUD/NZD position. This can be expressed through currency forwards or by buying call options on the pair to limit potential risks. Strong PMI data from Australia, along with a recent CPI reading of 4.0% that was higher than expected, boosts our confidence in the Aussie dollar. While AUD/USD is at an eight-month high, the Reserve Bank governor’s hawkish statements indicate further potential gains. We’ll trade this momentum while using stop-losses to manage any possible reversals. We see mixed signals about the yen, but increasing trade friction and a potential shift from the new deal could lead to its rise. Japan’s manufacturing PMI has turned negative again, and a stronger yen would further challenge exporters. We prefer to position for yen strength by selling upside calls on USD/JPY. The People’s Bank of China’s unexpectedly strong reference rate for the yuan indicates an intention to stabilize the currency and prevent capital outflows. This move creates an opportunity for traders selling volatility in USD/CNY. We believe that selling out-of-the-money calls on this pair is a sound strategy to benefit from the stability. The upcoming crypto policy report may bring significant volatility to the digital asset market. To navigate this event without predicting a direction, we’re considering buying option straddles on bitcoin-related ETFs. This strategy will profit from substantial price movements in either direction after the announcement. Create your live VT Markets account and start trading now.

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