AUD/USD slipped towards 0.7140 in early Asian trading on Monday, with the Australian Dollar losing ground against the US Dollar amid rising US–Iran tensions. Attention now turns to the US March Retail Sales report due on Tuesday.

Iranian state TV said on Sunday that Tehran rejected new peace talks with the US after a post by US President Donald Trump on Truth Social. The post said US representatives were travelling to Pakistan for another round of negotiations on Monday.

Iran has blocked the Strait of Hormuz since US and Israeli strikes on February 28. Iran said on Friday it would reopen the waterway, but reversed the decision on Saturday after Trump declined to lift a US blockade of Iranian ports.

Safe Haven Dollar Demand

The breakdown in talks and ongoing geopolitical risk has supported demand for the US Dollar as a safe-haven currency. This has added pressure to the currency pair in the near term.

Support for the Australian Dollar comes from expectations around the Reserve Bank of Australia. Markets put the chance of a third straight rate rise to 4.35% at the 5 May meeting at about 70–72%, linked to sticky inflation and a resilient labour market.

Looking back to this time in 2025, we recall the tension in the AUD/USD pair. Geopolitical risks involving Iran were providing a strong safe-haven bid for the US Dollar. At the same time, a very aggressive Reserve Bank of Australia was preventing the Aussie from falling too far.

April 2026 Backdrop Shift

The situation today in April 2026 is quite different, as the major geopolitical headwinds have eased following the Hormuz de-escalation accord signed late last year. Recent maritime shipping data shows insurance premiums for the strait have fallen by nearly 35% compared to their 2025 peaks. This has removed a key source of support for the US Dollar and a headwind for the Aussie.

However, the domestic picture for Australia has also shifted significantly. Unlike last year’s hawkish stance, the RBA is now on a prolonged pause after the latest Q1 2026 CPI report showed inflation cooling to 3.1%, well below the 4.5% figures we saw in early 2025. This has capped the AUD’s potential rally, as rate hike expectations have been completely priced out for the remainder of the year.

With the US economy still showing resilience, evidenced by the solid March 2026 addition of 215,000 jobs, the dollar retains underlying strength. This creates a conflicting dynamic, suggesting that AUD/USD may remain caught in a range. Traders should consider options strategies like selling strangles to collect premium, betting that the pair will not experience a major breakout in either direction in the coming weeks.

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US shares rose after reports about the Strait of Hormuz staying open and claims that Iran would give up enriched uranium. The reports were later softened after the closing bell, reducing certainty about what had been agreed or announced.

The text questions who controls Hormuz shipping and whether political leaders used market-moving statements to shape narratives. It also raises the idea that accusations of non-compliance were made despite no clear commitments being in place.

Weekend Messaging And Market Fragility

It asks whether messaging was linked to efforts around a Lebanon ceasefire, while noting uncertainty about conditions on the ground. This leaves the weekend prone to negative surprises tied to geopolitics and communication shifts.

It adds that during the war the US dollar has not risen as strongly as in earlier safe-haven periods. The dollar also weakened when shares rebounded, suggesting a different pattern of risk behaviour.

It argues there is no crash, but that shares moved too far and too fast. It expects a period of step-by-step weakness as gains are digested, while noting earnings as the medium-term driver.

We’re seeing some optimistic headlines about the Strait of Hormuz and Iran that feel a bit thin, especially after the strong market run-up this year. With the S&P 500 having gained over 8% since January to push near the 6,100 level, it feels like the market has gone too far, too fast. This leaves us vulnerable to a pullback as these narratives are tested over the coming days.

Volatility Hedging And Dollar Signals

The weekend brings considerable geopolitical risk that seems underpriced by the market right now. The CBOE Volatility Index (VIX) has been hovering near a low of 14, which feels complacent given that Brent crude futures have jumped 5% in the last week alone on renewed shipping lane jitters. This disconnect suggests that buying some cheap volatility through options could be a prudent move.

We should also notice that the U.S. dollar is not acting like its usual safe-haven self during these recent flare-ups. The Dollar Index (DXY) has actually weakened by about 2% over the last month, failing to catch a bid even as tensions have risen. This unusual behavior means we can’t rely on a strong dollar to signal that a major market downturn is imminent.

Given this setup, we should consider buying some downside protection for the next few weeks. Purchasing May expiration S&P 500 (SPY) puts or establishing bearish put debit spreads offers a defined-risk way to profit from a potential “stair-step” move lower. This is about hedging recent gains or making a short-term tactical bet against the current over-optimism.

However, we shouldn’t get overly bearish, as the underlying driver of strong corporate earnings remains intact for the medium term. Looking back at how we navigated 2025, we saw how solid earnings reports eventually pulled the market out of several small dips. Therefore, any bearish derivative positions should probably be short-dated, as the fundamental picture does not yet support a sustained crash.

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US President Donald Trump said on Truth Social that US representatives will travel to Islamabad, Pakistan, for negotiations with Iran on Monday. He linked the talks to tensions in the Strait of Hormuz.

He wrote that Iran “fire[d] bullets” in the Strait of Hormuz and called it a violation of a ceasefire agreement. He said the shots were aimed at a French ship and a freighter from the United Kingdom.

Strait Of Hormuz Claims And Economic Stakes

Trump said Iran had announced it was closing the Strait, while also stating that a US “blockade” had already closed it. He said a closed passage would cost Iran “$500 Million Dollars a day”.

He said the United States “loses nothing” and claimed many ships were heading to the US, including Texas, Louisiana, and Alaska, to load cargo. He referenced the IRGC in this context.

He said the US was offering a “very fair and reasonable” deal. He threatened that if there is no deal, the US would “knock out every single Power Plant, and every single Bridge, in Iran”.

He also said this approach should have been taken by other US presidents for “the last 47 years”. He ended by calling for an end to what he described as the “Iran killing machine”.

Market Volatility Outlook And Key Trades

We are bracing for a massive spike in volatility, with the VIX index likely to surge well above 20 in the coming days. The conflicting signals of high-level negotiations alongside direct military threats create maximum uncertainty, which is pure fuel for the market’s fear gauge. We saw a similar, though less intense, situation back in April 2024 when regional tensions pushed the VIX over 19, and this has the potential to be much larger.

The most direct play is on a higher oil price, specifically for Brent crude futures. With the Strait of Hormuz, the transit point for about 21% of global petroleum liquids consumption, now a live-fire zone, a significant risk premium must be priced in immediately. We believe prices could quickly test the $100 per barrel level that we briefly touched last year.

Pay close attention to the widening spread between Brent and WTI crude, as US oil is insulated from this specific chokepoint. The comments about ships diverting to Texas and Louisiana confirm that US exports are set to benefit, making WTI more attractive relative to the international benchmark. Historically, this spread has gapped out by over $10 during major Middle East crises, and we see that happening again.

We are aggressively buying calls on gold as a primary hedge against an escalating conflict. This is a classic flight-to-safety move, and we only have to look back to the spring of 2024 when similar fears sent gold to record highs above $2,400 an ounce. The threat of direct attacks on a sovereign nation’s infrastructure is a far more powerful catalyst for gold than the central bank buying we saw in 2025.

Defense sector equities are another area of focus, as the threat of destroying power plants and bridges implies the use of sophisticated munitions. We expect major contractors like Raytheon and Lockheed Martin to see a significant bid, along with the broader aerospace and defense ETFs. This is a direct reaction to the market pricing in an increased probability of military action.

However, we must be prepared for a sharp reversal if a deal is reached in Islamabad. A diplomatic breakthrough would cause oil prices to collapse and equities to rally, so any bearish position must be carefully managed. This binary outcome makes options strategies like long straddles on oil ETFs very appealing, as they profit from a big move in either direction.

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USD/CHF ended the week lower, down 0.87% on the week and 0.27% on the day. The pair hit a five-week low at 0.7775.

The pair has dropped below all major simple moving averages, including the 20-, 50-, 100-, and 200-day SMAs. It closed below the 50-day SMA at 0.7825, suggesting further downside.

Technical Momentum Remains Bearish

The RSI is in bearish territory, pointing to persistent selling pressure since 9 April. That shift began when the RSI fell below the 50 neutral level.

A move below 0.7800 would open the way to the support area around 0.7775/80, then the 10 March low at 0.7748. Additional demand is located near 0.7700.

If USD/CHF rises, resistance starts at the 50-day SMA. Above that, the next levels are the 100-day SMA at 0.7871, the 20-day SMA at 0.7909, and the 200-day SMA at 0.7937.

We are seeing a familiar setup in USD/CHF, echoing the bearish shift we observed in April of 2025. Last year, the pair broke below all its key simple moving averages, which signaled a significant downturn. This historical precedent sets a cautious tone for the coming weeks.

Macro Policy Divergence In Focus

As of today, April 18, 2026, the pair is again trading just below its 50-day SMA, with the Relative Strength Index showing persistent selling pressure. This technical weakness is very similar to the momentum that pushed the price toward its lows this time last year. The structure suggests that sellers are currently in control of the market’s direction.

This view is reinforced by the Swiss National Bank’s recent hawkish tone, aiming to curb inflation which was last reported at a stubborn 2.2% year-over-year for March 2026. Meanwhile, the latest US jobs report from early April showed a slight cooling in wage growth, giving the Federal Reserve less reason to be aggressive. This divergence in central bank policy favors a stronger franc.

Traders should watch the 0.7800 level closely, as it was a key psychological support in the 2025 downturn. A firm break below this point would open the door to targets tested last year, such as 0.7775 and then the 0.7748 low. The market appears to be building momentum for a test of that critical support.

Given this outlook, purchasing put options with strike prices near 0.7800 could be a strategy to position for further downside. Shorting USD/CHF futures contracts is another direct approach, using a stop-loss just above the 50-day SMA to manage risk effectively. These positions would benefit if the historical pattern from 2025 repeats itself.

However, we must also consider the risk of a reversal if the pair manages to climb back above the key moving averages. A break of resistance around the 0.7870 area could invalidate the bearish thesis. This would suggest that any downward move was a false signal, potentially trapping short positions.

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DBS Group Research expects Singapore’s inflation in March 2026 to rise to 1.6% year-on-year for core inflation and 1.8% year-on-year for headline inflation. This compares with 1.4% and 1.2% in February.

The report links the rise to imported energy costs after the Middle East conflict. It refers to spikes in global crude oil, refined petroleum, and gas prices.

Inflation Drivers And Near Term Implications

Higher prices are expected in point-to-point transport services, air travel services due to airfare increases, and private transport. Price pressures in electricity and gas, and in food, are reported as contained for now.

The article states it was produced with help from an artificial intelligence tool and reviewed by an editor.

We see the March inflation numbers confirming the initial shock from energy prices, driven by the Middle East conflict. With Brent crude having averaged over $98 a barrel last month, a significant jump from February levels, this upward trend was anticipated. These figures now form the baseline for our forward-looking strategies as we assess how persistent these pressures will be.

Given this inflationary environment, we anticipate the Monetary Authority of Singapore (MAS) may adopt a more hawkish stance in its next policy review. This makes positioning for higher short-term interest rates a viable strategy. Traders should consider looking at SORA futures, as the market will likely begin pricing in a steeper appreciation of the S$NEER policy band.

Derivative Positioning Across Rates And FX

This leads directly to opportunities in currency derivatives, as the Singapore Dollar is the primary tool for monetary policy. A tightening bias typically strengthens the SGD against its trading partners. Looking back at the MAS tightening cycle in 2022, we saw the SGD gain considerable ground, so buying call options on the SGD against the USD could offer favorable risk-reward.

The root cause of this inflation remains the energy market, where uncertainty continues to loom. As long as geopolitical tensions persist, the risk of further supply disruptions remains high, suggesting continued price volatility. We believe buying call options on Brent crude futures for the coming months is a prudent way to gain exposure to potential upside price spikes while defining downside risk.

On the equity front, these conditions create a divergence in sector performance. Higher fuel costs and potential interest rate hikes could negatively impact transport stocks like Singapore Airlines and interest-rate-sensitive sectors such as REITs. Consequently, we are looking at buying put options on these sectors, while also considering long positions in local energy companies that may benefit.

Overall market uncertainty is elevated, which suggests volatility itself is a tradable asset. The current environment is ripe for strategies that profit from large market swings, regardless of direction. We are therefore considering using options on the Straits Times Index, such as straddles, to capitalize on the potential for increased market movement in the weeks ahead.

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UBS Chief Economist Paul Donovan reviews how AI might affect productivity and whether the EU could gain an edge over the US. He says AI-driven productivity gains are still mostly potential rather than realised.

He states that adopting new technology should, over time, improve economic efficiency. He also asks whether any economy could gain a competitive advantage as attention shifts from creating technology to using it.

Ai Productivity And Competitive Positioning

He refers to academic work suggesting that if AI raises an individual’s productivity, it could boost low-skilled workers’ productivity proportionately more. He adds that if gains are uneven and mainly help workers with mid-level education, the US could be at a disadvantage compared with other major economies.

He argues that education systems and the spread of skills across workforces in the US, key European economies and the UK may shape how competitive each becomes as AI adoption grows. The article says it was produced with an AI tool and reviewed by an editor.

The market is shifting its focus from the theoretical potential of artificial intelligence to its real-world application. We are now questioning which economies have the right structure to actually use AI to boost efficiency. This suggests trading opportunities based on the educational makeup of different countries.

The United States may be at a disadvantage due to its polarized workforce, which has large numbers of high-skill and low-skill workers but a smaller middle. In contrast, key European economies, especially Germany, have a deep pool of mid-level skilled workers who are best positioned to have their productivity enhanced by AI. A late 2025 report from the OECD already noted early signs of this, with German manufacturing SMEs showing a 15% higher rate of AI tool integration for process optimization than their US counterparts.

Trading Implications For Europe Versus Us

For currency traders, this points to potential long-term strength in the euro relative to the U.S. dollar. Recent data from the first quarter of 2026 shows Eurozone labor productivity edging up by 0.4%, while U.S. productivity growth has flattened after its post-pandemic surge. We should consider buying EUR/USD call options or building long positions to capitalize on this emerging economic divergence.

This same logic applies to equity index derivatives, favoring European markets over the U.S. in the near term. While the S&P 500 has risen only 2% year-to-date, the German DAX index is up over 5%, reflecting strength in its industrial base as AI begins to streamline operations. A pair trade involving long DAX or Euro Stoxx 50 futures against short Nasdaq 100 futures could hedge against broad market moves while capturing this specific trend.

Uncertainty about the speed of AI adoption will likely create volatility, a lesson we learned from the sharp market corrections in 2025 when expected earnings failed to materialize quickly. The U.S. Bureau of Labor Statistics recently reported that while AI created new high-skill jobs, it has not yet translated into broad productivity gains across the service sector. This uncertainty suggests that buying VSTOXX futures or call options could be a prudent strategy to profit from expected swings in European market sentiment.

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Silver prices rose more than 4% on Friday, moving back above $81.00 per troy ounce as the US Dollar weakened. The Strait of Hormuz reopening and a second round of US–Iran talks coincided with the rise, with XAG/USD at $81.82 at the time of writing.

Silver notched a fourth straight weekly gain and reached a five-week high of $83.06 before easing back towards $81.00. A daily close above $81.00 would leave $90.00 in view in the near term.

Momentum Turning Higher

The Relative Strength Index (RSI) moved above a prior peak, indicating stronger upward momentum. Near-term resistance levels are $85.44, $87.43 and $89.42, followed by $90.00.

If price drops below the support trendline around $77.65–$77.85, further falls may follow. Supports after that are the 100-day simple moving average (SMA) at $77.24 and the 20-day SMA at $73.77.

Silver prices are influenced by factors such as geopolitical risk, interest rates, and moves in the US Dollar, since the metal is priced in dollars. Demand from electronics and solar sectors, mining supply, recycling, and economic conditions in the US, China and India can also affect prices.

Silver’s strong move above $81.00 is a significant signal for us, driven by a weakening U.S. Dollar following positive geopolitical news. With momentum turning bullish, we see a clear path for further gains in the coming weeks. The rally marks the fourth consecutive week of advances, suggesting a solid underlying trend.

Strategy And Risk Levels

The dollar’s weakness is underpinned by the latest US CPI report for March 2026, which came in slightly cooler than expected at 2.8%. This reinforces the view that the Federal Reserve will likely hold interest rates steady, creating a favorable environment for non-yielding assets like silver. This fundamental support makes the current technical breakout more credible.

Given this bullish setup, we should consider positioning for a move towards the $90.00 mark. Buying call options with strike prices at $85.00 or $87.00 could offer leveraged exposure to this potential rally. The technical picture suggests these resistance levels, which are previous highs from last month, could be tested soon.

Gold has been consolidating near its highs, and the Gold/Silver ratio has now fallen to 75:1 from 82:1 earlier this year, indicating silver may have more room to run. Adding to this, the Global Solar Energy Council’s Q1 2026 report showed a 15% jump in panel installations, boosting silver’s industrial demand outlook. This dual support from both investment and industrial sectors is a powerful combination.

We should remember the pattern we saw in the third quarter of 2025, when a similar period of geopolitical de-escalation triggered a dollar sell-off. That move resulted in a 12% rally for silver over the following six weeks. A repeat performance is certainly on the table if current conditions hold.

However, we must remain disciplined and watch the key support trendline around $77.65. A decisive break below this level would invalidate the bullish thesis and could trigger a slide towards the 100-day moving average. Traders could use this level as a clear stop-loss or consider buying puts for protection if the market turns.

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China’s GDP growth rose to 5.0% year-on-year in Q1 2026, up from 4.5% in Q4 2025. Growth was supported by strong external demand and steady industrial output, while domestic demand in consumption, investment and credit remained weak.

Exports increased 14.7% year-on-year in Q1, despite slower growth in March linked to disruptions connected to the Middle East. Industrial production rose 6.1% year-on-year in Q1, with output supported by export demand even as measures to curb excess capacity continued.

External Demand Leading Growth

Price data improved, with PPI turning positive at 0.5% year-on-year in March after 41 months of contraction. The rise was linked to higher raw material prices tied to supply disruptions associated with the Strait of Hormuz and ongoing capacity adjustments.

With improving PPI and CPI readings, the need for aggressive monetary easing has eased. DBS reduced its 2026 forecast for a 1-year loan prime rate cut to 10 basis points, from 20 basis points previously.

Given China’s Q1 GDP growth hit 5.0%, we see a clear split between strong external demand and a weaker domestic economy. This divergence suggests traders should favor companies with high international exposure over those reliant on local consumption. This is a time to be selective rather than broadly bullish on the entire Chinese market.

The resilience in exports, which grew 14.7% in the first quarter, points towards continued strength in manufacturing sectors. Recent data from the General Administration of Customs on April 12th showed a particular surge in high-tech exports, including electric vehicles and renewable energy components. We believe buying call options on export-oriented tech and industrial ETFs is a viable strategy for the coming weeks.

Domestic Weakness And Hedging

Conversely, persistent weakness in the property sector and subdued credit growth signal ongoing domestic strain. New home prices in China’s 70 major cities fell again in March, marking the 12th straight month of declines according to the latest figures. This suggests that put options on real estate and banking sector indices could serve as an effective hedge against domestic risks.

With inflation firming up, the likelihood of aggressive monetary easing from the central bank has diminished significantly. This reduced expectation for rate cuts, down to just 10 basis points for the year, should provide support for the Yuan. This is a notable shift from the sentiment we saw throughout much of 2025, suggesting it may be time to unwind bearish positions on the currency.

The return of producer price inflation to positive territory for the first time in over three years is a major development for industrial profits. Driven by higher raw material costs, this trend supports a bullish view on commodities like copper and iron ore futures. This reminds us of the early stages of the industrial recovery cycle we witnessed back in the early 2020s.

Geopolitical factors, such as the mentioned disruptions in the Middle East, add a layer of volatility that cannot be ignored. The cost of shipping insurance has already ticked up 5% this month, reflecting these tensions. Traders should consider using options to hedge against sudden supply chain shocks, especially in energy and logistics sectors.

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US CFTC data showed S&P 500 net positions fell to -115.8K. The prior level was -45.7K.

We are seeing a significant increase in bearish bets against the S&P 500. Net short positions among speculators have more than doubled, a clear signal that conviction for a market downturn is growing. This is the most aggressive short positioning we have seen in over six months.

Speculative Positioning Turns More Bearish

This shift in sentiment follows last week’s inflation data, where the March 2026 CPI came in hotter than expected at 3.8%, dampening hopes for a summer interest rate cut from the Federal Reserve. We also saw that retail sales for March unexpectedly contracted by 0.4%, pointing to some weakness in the consumer. This combination of stubborn inflation and slowing growth is fueling market anxiety.

For derivative traders, this suggests a period of heightened volatility in the weeks ahead. The VIX, a measure of expected market volatility, has already jumped from 15 to over 19 in the past ten days. This makes protective put options more expensive, but also potentially more necessary for those with long equity exposure.

Given this backdrop, traders should consider hedging strategies. Buying puts or implementing put debit spreads on indices like the SPX or SPY can provide downside protection. For those looking to initiate new positions, the increased bearishness suggests waiting for a clearer market direction or a significant price drop before buying.

It is important to remember what happened in the fall of 2025 when similar bearish positioning became extremely crowded. That situation eventually led to a sharp market rally into the end of the year as short-sellers were forced to cover their positions. While the current economic data justifies the caution, such one-sided sentiment can make the market vulnerable to a sudden reversal on any piece of good news.

Risks Of Crowded Shorts

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US Commodity Futures Trading Commission (CFTC) data showed net positions in oil for non-commercial traders rose to 206.5K. The prior figure was 202.2K.

This represents an increase of 4.3K positions from the previous reporting period. The data relates to CFTC oil non-commercial net positions in the United States.

Net Long Positions Extend Gains

We are seeing speculators increase their bets that oil prices will rise, as net long positions grew to 206.5K. This indicates a growing bullish sentiment among large traders in the oil market. This is the fourth consecutive week of increases, building on the momentum we saw at the end of the first quarter.

This optimism is likely tied to expectations of strong summer demand in the coming months. Recent travel forecasts suggest consumer travel could hit the highest level since the mid-2020s, and the latest jobs report from March showed continued economic strength. This robust economic activity underpins expectations for higher fuel consumption.

On the supply side, OPEC+ has maintained the production discipline they established back in late 2025. Furthermore, the most recent Energy Information Administration (EIA) data shows that U.S. crude oil inventories fell by 2.1 million barrels last week, which was more than anticipated. This tightening of physical supply provides a fundamental reason for prices to move higher.

This is a notable shift from the uncertainty we faced in the fourth quarter of 2025, when prices saw a significant dip due to recessionary fears. The current build in long positions suggests the market has moved past those concerns. We are seeing a sustained recovery built on stronger fundamentals.

Trade Ideas And Risk Framing

For traders, this suggests positioning for upward price movement in the near term. Buying call options on June or July WTI futures could be a prudent way to capture potential gains. This strategy allows for participation in a rally while clearly defining the maximum risk.

Given that net positions are not yet at extreme historical highs, there may still be room for this trend to run. Traders could also consider bull call spreads to reduce the initial cost of entry. This approach benefits from a steady rise in prices over the next several weeks, aligning with the current sentiment.

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