USD/CHF fell to near 0.7985 in the Asian session on Tuesday, ending pressure to extend a five-day rise. The US Dollar softened after reports that US President Donald Trump is willing to seek peace with Iran without forcing the reopening of the Strait of Hormuz. At the time of reporting, the US Dollar Index (DXY) hovered around 100.40. It was described as subdued against six major currencies.

Dollar Weakness And Geopolitical Developments

The Wall Street Journal reported that Trump is ready for peace with Iran after Washington damaged its military infrastructure. He said the US would pursue diplomatic routes for a Hormuz reopening, as using force could extend the conflict beyond his four to six week timeline. Market risk appetite increased, pushing demand towards riskier assets. S&P 500 futures were almost 1% higher, above 6,400. Oil prices corrected sharply amid easing Middle East tensions. This may reduce expectations for tighter Federal Reserve policy that had risen with higher energy prices and inflation concerns. The Swiss Franc edged up against most peers. The currency has faced pressure after the Swiss National Bank said this month it is ready to intervene against excessive CHF appreciation.

Positioning Implications For Traders

We remember how the de-escalation in the Strait of Hormuz during 2025 triggered a significant risk-on sentiment, punishing safe-haven currencies like the US Dollar. That period serves as a crucial playbook for how quickly markets can pivot on geopolitical news rather than just economic data. This dynamic remains highly relevant for positioning in the coming weeks. Given the Swiss National Bank’s recent statements reaffirming its commitment to prevent excessive franc strength, traders should be cautious about being aggressively long the CHF. The memory of the SNB’s readiness to intervene, which we saw in 2025, creates a ceiling for the currency’s appreciation against the dollar. Selling out-of-the-money call options on the CHF could be a viable strategy to capitalize on this capped upside. That period in 2025 was a stark reminder of how geopolitical headlines directly impact market volatility, causing it to collapse on news of a truce. With the CBOE Volatility Index (VIX) currently subdued near 14, purchasing cheap, long-dated call options on the index could serve as an effective hedge against any unforeseen flare-ups. This strategy offers asymmetric upside if tensions unexpectedly return. Crude oil’s rapid fall following the 2025 diplomatic breakthrough should guide our current thinking, with WTI now trading above $85 a barrel amid ongoing supply concerns reported by the EIA last week. This historical precedent suggests that any sign of diplomatic progress in global conflicts could trigger a sharp correction from these elevated levels. Therefore, buying puts on oil futures offers a defined-risk way to position for a similar, sudden price drop. The surge in S&P 500 futures we saw in 2025 is a pattern we anticipate will repeat, as capital quickly flows into equities when geopolitical risk subsides. With the index having gained over 4% this year to trade near 6,700, a positive geopolitical catalyst could easily fuel the next leg up. Traders could position for this by buying call spreads to lower the cost of entry while targeting further gains. Create your live VT Markets account and start trading now.

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China’s official NBS non-manufacturing PMI was 50.1 in March. This was above expectations of 49.9. A PMI reading above 50 indicates expansion, while below 50 indicates contraction. The March result was just above the 50 threshold.

Services PMI Signal Stabilization

This slight beat in China’s non-manufacturing PMI suggests a potential stabilization in the services sector, which is a fragile positive. After the persistent weakness we saw throughout 2025 tied to the property market, this number is just enough to challenge the most bearish narratives. In the immediate term, we should anticipate a modest strengthening of the Chinese yuan against the dollar. Given this data, we should consider positioning for a short-term rally in commodities sensitive to Chinese demand. Copper, which has been hovering around $8,200 a tonne on weak industrial sentiment, could see a bounce. We can look at buying near-term call options on copper futures or on major mining stocks that have been underperforming. The positive surprise could also provide a lift to Chinese equity indices like the FTSE A50 and Hang Seng. These markets have been depressed since the fourth quarter of 2025, and this data could spark a relief rally driven by short covering. Selling out-of-the-money puts on China-focused ETFs is a viable strategy to collect premium on this shift in sentiment. However, we must temper this optimism with the reality that the expansion is marginal and other recent data, like retail sales figures from February, have been soft. The People’s Bank of China has been in an easing cycle for over a year, so this small improvement may already be priced in. This warrants a cautious approach, perhaps using bull call spreads rather than outright long positions to limit downside risk.

Tactical Positioning And Risk Control

The key takeaway is that while this single data point is not a game-changer, it disrupts the overwhelmingly negative consensus. It suggests that downside risks may be slightly less severe than previously thought, creating tactical opportunities for traders. We should watch for confirmation in upcoming credit and trade data before building larger, longer-term positions. Create your live VT Markets account and start trading now.

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China’s official NBS non-manufacturing PMI was 50.1 in March. This was above expectations of 49.9. A PMI reading above 50 indicates expansion, while below 50 indicates contraction. The March result was just above the 50 threshold.

Services PMI Signal Stabilization

This slight beat in China’s non-manufacturing PMI suggests a potential stabilization in the services sector, which is a fragile positive. After the persistent weakness we saw throughout 2025 tied to the property market, this number is just enough to challenge the most bearish narratives. In the immediate term, we should anticipate a modest strengthening of the Chinese yuan against the dollar. Given this data, we should consider positioning for a short-term rally in commodities sensitive to Chinese demand. Copper, which has been hovering around $8,200 a tonne on weak industrial sentiment, could see a bounce. We can look at buying near-term call options on copper futures or on major mining stocks that have been underperforming. The positive surprise could also provide a lift to Chinese equity indices like the FTSE A50 and Hang Seng. These markets have been depressed since the fourth quarter of 2025, and this data could spark a relief rally driven by short covering. Selling out-of-the-money puts on China-focused ETFs is a viable strategy to collect premium on this shift in sentiment. However, we must temper this optimism with the reality that the expansion is marginal and other recent data, like retail sales figures from February, have been soft. The People’s Bank of China has been in an easing cycle for over a year, so this small improvement may already be priced in. This warrants a cautious approach, perhaps using bull call spreads rather than outright long positions to limit downside risk.

Tactical Positioning And Risk Control

The key takeaway is that while this single data point is not a game-changer, it disrupts the overwhelmingly negative consensus. It suggests that downside risks may be slightly less severe than previously thought, creating tactical opportunities for traders. We should watch for confirmation in upcoming credit and trade data before building larger, longer-term positions. Create your live VT Markets account and start trading now.

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The People’s Bank of China set Tuesday’s USD/CNY central rate at 6.9194. This compared with the prior day’s fix of 6.9223 and a Reuters estimate of 6.9209. The PBoC’s main monetary policy aims are price stability, including exchange rate stability, and economic growth. It also works on financial reforms such as opening and developing financial markets.

Pboc Governance And Ownership

The PBoC is owned by the state of the People’s Republic of China. The Chinese Communist Party Committee Secretary, nominated by the Chairman of the State Council, has key influence over management and direction, and Pan Gongsheng holds both Secretary and governor roles. The PBoC uses several policy tools, including a seven-day Reverse Repo Rate, the Medium-term Lending Facility, foreign exchange interventions, and the Reserve Requirement Ratio. The Loan Prime Rate is China’s benchmark rate and affects loan, mortgage, and savings rates, as well as the Renminbi’s exchange rate. China has 19 private banks, a small share of the financial system. The largest include digital lenders WeBank and MYbank, backed by Tencent and Ant Group, and rules introduced in 2014 allowed fully privately funded domestic lenders to operate. The recent stronger-than-expected fixing of the yuan signals the central bank’s clear intention to manage currency weakness. This comes as we see continued policy divergence, with the US Federal Reserve now signaling fewer rate cuts in 2026 due to persistent services inflation, which we saw hovering around 2.8% in the latest PCE data. Meanwhile, China’s Q1 growth figures from last week came in at 4.8%, just missing the official target and confirming the need for domestic support.

Market Strategy Implications

We expect the central bank will avoid aggressive cuts to the Loan Prime Rate (LPR) in the near term to prevent rapid capital outflows and further pressure on the currency. Looking back at how they managed the yuan throughout 2025, the preferred strategy was to use the daily fixing and state bank actions to slow, but not halt, depreciation against a strong dollar. This suggests traders should consider buying low-cost USD/CNY call options to profit from a gradual upward grind in the pair, rather than expecting a sharp breakout past the 7.30 level. Given the currency constraints, any upcoming monetary easing will likely come through a cut to the Reserve Requirement Ratio (RRR) instead of the main policy rates. This creates an opportunity in the interest rate swap market, as an RRR cut would inject liquidity and push down short-term funding costs without directly hitting the yuan. We believe positioning to receive fixed rates on shorter-dated swaps could be a prudent way to anticipate this liquidity-focused easing. The central bank’s consistent intervention keeps a lid on day-to-day currency movements, which has been compressing short-term implied volatility on the yuan. Selling short-dated option straddles on USD/CNH could be a viable strategy to collect premium from this expected range-bound trading in the immediate weeks ahead. However, this managed stability increases the risk of a sharp, sudden move later in the quarter, making longer-dated volatility options an attractive hedge. Create your live VT Markets account and start trading now.

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The People’s Bank of China set Tuesday’s USD/CNY central rate at 6.9194. This compared with the prior day’s fix of 6.9223 and a Reuters estimate of 6.9209. The PBoC’s main monetary policy aims are price stability, including exchange rate stability, and economic growth. It also works on financial reforms such as opening and developing financial markets.

Pboc Governance And Ownership

The PBoC is owned by the state of the People’s Republic of China. The Chinese Communist Party Committee Secretary, nominated by the Chairman of the State Council, has key influence over management and direction, and Pan Gongsheng holds both Secretary and governor roles. The PBoC uses several policy tools, including a seven-day Reverse Repo Rate, the Medium-term Lending Facility, foreign exchange interventions, and the Reserve Requirement Ratio. The Loan Prime Rate is China’s benchmark rate and affects loan, mortgage, and savings rates, as well as the Renminbi’s exchange rate. China has 19 private banks, a small share of the financial system. The largest include digital lenders WeBank and MYbank, backed by Tencent and Ant Group, and rules introduced in 2014 allowed fully privately funded domestic lenders to operate. The recent stronger-than-expected fixing of the yuan signals the central bank’s clear intention to manage currency weakness. This comes as we see continued policy divergence, with the US Federal Reserve now signaling fewer rate cuts in 2026 due to persistent services inflation, which we saw hovering around 2.8% in the latest PCE data. Meanwhile, China’s Q1 growth figures from last week came in at 4.8%, just missing the official target and confirming the need for domestic support.

Market Strategy Implications

We expect the central bank will avoid aggressive cuts to the Loan Prime Rate (LPR) in the near term to prevent rapid capital outflows and further pressure on the currency. Looking back at how they managed the yuan throughout 2025, the preferred strategy was to use the daily fixing and state bank actions to slow, but not halt, depreciation against a strong dollar. This suggests traders should consider buying low-cost USD/CNY call options to profit from a gradual upward grind in the pair, rather than expecting a sharp breakout past the 7.30 level. Given the currency constraints, any upcoming monetary easing will likely come through a cut to the Reserve Requirement Ratio (RRR) instead of the main policy rates. This creates an opportunity in the interest rate swap market, as an RRR cut would inject liquidity and push down short-term funding costs without directly hitting the yuan. We believe positioning to receive fixed rates on shorter-dated swaps could be a prudent way to anticipate this liquidity-focused easing. The central bank’s consistent intervention keeps a lid on day-to-day currency movements, which has been compressing short-term implied volatility on the yuan. Selling short-dated option straddles on USD/CNH could be a viable strategy to collect premium from this expected range-bound trading in the immediate weeks ahead. However, this managed stability increases the risk of a sharp, sudden move later in the quarter, making longer-dated volatility options an attractive hedge. Create your live VT Markets account and start trading now.

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USD/JPY extended a late rebound from the 159.35–159.30 area and rose in the Asian session on Tuesday. Gains followed softer Tokyo inflation data, but the move paused before 160.00. Tokyo’s headline CPI eased to 1.4% in March from 1.5% the prior month, the lowest reading since March 2022. Core CPI excluding fresh food rose 1.7% versus 1.8% in February, while core CPI excluding fresh food and energy slowed to 2.3% from 2.5%.

BoJ Rate Rise Expectations Fade

The figures reduced expectations for an immediate Bank of Japan rate rise amid concerns linked to the Iran war, weighing on the yen. A firmer US dollar also supported USD/JPY as markets have ruled out further Federal Reserve rate cuts. Markets have increased expectations for a Fed rate rise by the end of this year, citing war-related inflation pressures, and the dollar reached a new year-to-date high. Japanese officials also warned about rapid currency moves, which limited further yen selling and restrained USD/JPY gains. Japan’s Vice Finance Minister for International Affairs, Atsushi Mimura, said on Monday that authorities are ready to take decisive action if speculative moves persist. BoJ Governor Kazuo Ueda said the central bank will closely watch FX moves, adding to talk of possible intervention. We remember this time well in March 2025, as softer Tokyo inflation data and concerns over the Iran war kept the Bank of Japan on the sidelines. The US Dollar was strong, fueled by a hawkish Federal Reserve, pushing the USD/JPY pair right up against the 160 level. This created significant tension in the market as traders weighed the clear trend against government warnings.

Volatility Strategies Around Level 160

This setup is reminiscent of the interventions we saw back in late 2022, when Japanese authorities spent over 9 trillion yen (approximately $60 billion) to defend their currency. The sharp, sudden drops in USD/JPY that followed those actions show that official warnings must be taken seriously. That history provides a clear playbook for how officials are likely to react when a level like 160 is threatened. Now, as we approach April 2026, the pair is again testing the high 159s due to continued policy divergence between the US and Japan. The US just posted a core PCE inflation figure of 2.9%, still well above the Fed’s target, while Japan’s latest national CPI remains stubbornly below 2.5%. This fundamental pressure makes another test of the 160 level feel almost inevitable in the coming weeks. This environment is ideal for long volatility strategies. The risk of a sudden, sharp move is high, making the purchase of at-the-money straddles or strangles on USD/JPY an attractive proposition. Such positions would profit from a major price swing, whether it’s a breakthrough of 160 or a rapid reversal caused by intervention. Given the very credible threat of intervention, selling out-of-the-money call options with strike prices above 160 could be a prudent way to generate income. The ceiling created by officials makes a sustained move much past this level unlikely in the short term. This strategy bets that the 160 mark will hold, allowing us to collect the premium as the options expire worthless. Conversely, anyone holding long USD/JPY positions should consider hedging their downside risk. Buying put options with strike prices around 158 or 157 can act as a cheap insurance policy. If Japanese authorities do step in, these puts will limit losses from the resulting sharp drop in the currency pair. Create your live VT Markets account and start trading now.

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USD/JPY extended a late rebound from the 159.35–159.30 area and rose in the Asian session on Tuesday. Gains followed softer Tokyo inflation data, but the move paused before 160.00. Tokyo’s headline CPI eased to 1.4% in March from 1.5% the prior month, the lowest reading since March 2022. Core CPI excluding fresh food rose 1.7% versus 1.8% in February, while core CPI excluding fresh food and energy slowed to 2.3% from 2.5%.

BoJ Rate Rise Expectations Fade

The figures reduced expectations for an immediate Bank of Japan rate rise amid concerns linked to the Iran war, weighing on the yen. A firmer US dollar also supported USD/JPY as markets have ruled out further Federal Reserve rate cuts. Markets have increased expectations for a Fed rate rise by the end of this year, citing war-related inflation pressures, and the dollar reached a new year-to-date high. Japanese officials also warned about rapid currency moves, which limited further yen selling and restrained USD/JPY gains. Japan’s Vice Finance Minister for International Affairs, Atsushi Mimura, said on Monday that authorities are ready to take decisive action if speculative moves persist. BoJ Governor Kazuo Ueda said the central bank will closely watch FX moves, adding to talk of possible intervention. We remember this time well in March 2025, as softer Tokyo inflation data and concerns over the Iran war kept the Bank of Japan on the sidelines. The US Dollar was strong, fueled by a hawkish Federal Reserve, pushing the USD/JPY pair right up against the 160 level. This created significant tension in the market as traders weighed the clear trend against government warnings.

Volatility Strategies Around Level 160

This setup is reminiscent of the interventions we saw back in late 2022, when Japanese authorities spent over 9 trillion yen (approximately $60 billion) to defend their currency. The sharp, sudden drops in USD/JPY that followed those actions show that official warnings must be taken seriously. That history provides a clear playbook for how officials are likely to react when a level like 160 is threatened. Now, as we approach April 2026, the pair is again testing the high 159s due to continued policy divergence between the US and Japan. The US just posted a core PCE inflation figure of 2.9%, still well above the Fed’s target, while Japan’s latest national CPI remains stubbornly below 2.5%. This fundamental pressure makes another test of the 160 level feel almost inevitable in the coming weeks. This environment is ideal for long volatility strategies. The risk of a sudden, sharp move is high, making the purchase of at-the-money straddles or strangles on USD/JPY an attractive proposition. Such positions would profit from a major price swing, whether it’s a breakthrough of 160 or a rapid reversal caused by intervention. Given the very credible threat of intervention, selling out-of-the-money call options with strike prices above 160 could be a prudent way to generate income. The ceiling created by officials makes a sustained move much past this level unlikely in the short term. This strategy bets that the 160 mark will hold, allowing us to collect the premium as the options expire worthless. Conversely, anyone holding long USD/JPY positions should consider hedging their downside risk. Buying put options with strike prices around 158 or 157 can act as a cheap insurance policy. If Japanese authorities do step in, these puts will limit losses from the resulting sharp drop in the currency pair. Create your live VT Markets account and start trading now.

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AUD/USD ended a five-day decline and traded near 0.6860 in Asian hours on Tuesday. The move followed the Reserve Bank of Australia (RBA) releasing its March meeting minutes. The minutes said board members agreed further policy tightening would likely be needed, but they differed on timing. They noted that oil near $100 per barrel could lift June-quarter CPI to around 5%, and most members were concerned inflation expectations could become unanchored without quick action.

Rba Minutes And Market Reaction

Australia’s private sector credit rose 0.6% month-on-month in February, up from 0.5% in the prior month and matching forecasts. Annual growth edged up to 7.8% from 7.7% in January. The pair also gained as the US Dollar softened after five straight days of rises. The US currency may strengthen if demand for safe-haven assets rises as Middle East tensions increase, alongside concerns about inflation and growth. On Monday, Federal Reserve Chair Jerome Powell said long-term US inflation expectations remain well anchored despite Middle East uncertainty. He said current Fed policy allows officials to assess the economic effects of the Iran conflict. Looking back to this time last year, we remember the Reserve Bank of Australia was discussing the need for further rate hikes. This hawkish stance was driven by concerns over inflation, which they feared could hit 5% as oil prices pushed towards $100 a barrel. This environment provided solid support for the Australian dollar at the time.

Policy Divergence And Trade Implications

The situation today is quite different, as the RBA has held its cash rate at 4.35% for the last four meetings. The latest quarterly CPI data showed inflation has cooled significantly to 3.1%, easing the pressure that existed in 2025 for more tightening. This shift from a hawkish to a neutral stance suggests the next rate move is more likely to be a cut than a hike, fundamentally changing the outlook for the AUD. In contrast, the US Federal Reserve remains more resolute, with the Fed Funds Rate holding at a 25-year high of 5.50%. Recent data shows US core inflation is proving sticky at 2.8% and the latest non-farm payroll report added a robust 215,000 jobs. This economic resilience gives the Fed little reason to consider cutting rates soon, creating a clear policy divergence against the RBA. This growing gap between central bank outlooks points toward continued strength for the US dollar relative to the Aussie dollar. We should consider positioning for a lower AUD/USD exchange rate in the coming weeks. Derivative strategies such as buying AUD/USD put options or establishing bear put spreads could be effective ways to gain downside exposure while managing risk. Commodity prices, a key driver for the AUD, also reflect a weaker outlook than in 2025. WTI crude oil is now trading closer to $82 a barrel, not the $100 level that fueled inflation fears last year. More importantly for Australia, slowing industrial demand has seen iron ore prices fall below $100 per tonne, further weighing on the currency’s prospects. Create your live VT Markets account and start trading now.

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AUD/USD ended a five-day decline and traded near 0.6860 in Asian hours on Tuesday. The move followed the Reserve Bank of Australia (RBA) releasing its March meeting minutes. The minutes said board members agreed further policy tightening would likely be needed, but they differed on timing. They noted that oil near $100 per barrel could lift June-quarter CPI to around 5%, and most members were concerned inflation expectations could become unanchored without quick action.

Rba Minutes And Market Reaction

Australia’s private sector credit rose 0.6% month-on-month in February, up from 0.5% in the prior month and matching forecasts. Annual growth edged up to 7.8% from 7.7% in January. The pair also gained as the US Dollar softened after five straight days of rises. The US currency may strengthen if demand for safe-haven assets rises as Middle East tensions increase, alongside concerns about inflation and growth. On Monday, Federal Reserve Chair Jerome Powell said long-term US inflation expectations remain well anchored despite Middle East uncertainty. He said current Fed policy allows officials to assess the economic effects of the Iran conflict. Looking back to this time last year, we remember the Reserve Bank of Australia was discussing the need for further rate hikes. This hawkish stance was driven by concerns over inflation, which they feared could hit 5% as oil prices pushed towards $100 a barrel. This environment provided solid support for the Australian dollar at the time.

Policy Divergence And Trade Implications

The situation today is quite different, as the RBA has held its cash rate at 4.35% for the last four meetings. The latest quarterly CPI data showed inflation has cooled significantly to 3.1%, easing the pressure that existed in 2025 for more tightening. This shift from a hawkish to a neutral stance suggests the next rate move is more likely to be a cut than a hike, fundamentally changing the outlook for the AUD. In contrast, the US Federal Reserve remains more resolute, with the Fed Funds Rate holding at a 25-year high of 5.50%. Recent data shows US core inflation is proving sticky at 2.8% and the latest non-farm payroll report added a robust 215,000 jobs. This economic resilience gives the Fed little reason to consider cutting rates soon, creating a clear policy divergence against the RBA. This growing gap between central bank outlooks points toward continued strength for the US dollar relative to the Aussie dollar. We should consider positioning for a lower AUD/USD exchange rate in the coming weeks. Derivative strategies such as buying AUD/USD put options or establishing bear put spreads could be effective ways to gain downside exposure while managing risk. Commodity prices, a key driver for the AUD, also reflect a weaker outlook than in 2025. WTI crude oil is now trading closer to $82 a barrel, not the $100 level that fueled inflation fears last year. More importantly for Australia, slowing industrial demand has seen iron ore prices fall below $100 per tonne, further weighing on the currency’s prospects. Create your live VT Markets account and start trading now.

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Japan’s unemployment rate was 2.6% in February. This was below the expected 2.7%. The stronger-than-expected jobs data for February supports the view that the Bank of Japan has room to tighten policy further. With the unemployment rate at a low 2.6%, wage pressures are likely to build, pushing inflation towards the central bank’s target. We are therefore positioning for a more hawkish stance from the BOJ in the second quarter.

Yen Strength Outlook

This outlook strengthens the case for a stronger Japanese Yen in the coming weeks. We anticipate the USD/JPY pair, which has been hovering around the 151 level, could test support lower towards 148 as interest rate differentials narrow. Derivative traders should consider buying JPY call options or selling USD/JPY futures to capitalize on this expected move. Conversely, we see potential headwinds for Japanese equities. A stronger yen directly impacts the profitability of Japan’s large exporters, which make up a significant portion of the Nikkei 225 index currently trading near 40,500. This is especially relevant after the index’s powerful rally over the past year, making it vulnerable to a pullback on currency strength. Given this, we are looking at buying put options on the Nikkei 225 as a hedge or a direct bearish bet. Implied volatility has already risen by about 5% over the last week, suggesting the market is beginning to price in more uncertainty. This makes acting sooner rather than later a more cost-effective strategy. Looking back, we saw a similar reaction in late 2025 when the BOJ first signaled a definitive end to its most aggressive easing policies, causing a sharp but temporary spike in the yen. The current solid economic data suggests the follow-through this time could be more sustained.

Key Trade Implications

This reinforces our view that the primary trades will revolve around yen strength and equity market weakness. Create your live VT Markets account and start trading now.

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