The People’s Bank of China (PBOC) sets the daily midpoint for the yuan, also known as the renminbi (RMB). The currency is allowed to fluctuate within a specific range, or “band,” of about +/- 2% from this midpoint. Each morning, the PBOC determines the midpoint by considering a basket of currencies, primarily focusing on the US dollar. This process looks at market supply and demand, economic data, and changes in global currencies.

Daily Fluctuation Range

The yuan can move within a 2% range of the midpoint. This means it can appreciate or depreciate by up to 2% in one trading day. The PBOC adjusts this range based on economic conditions and policy goals. If the yuan approaches the limits of this trading band or shows significant volatility, the PBOC may take action. This could involve buying or selling yuan to stabilize its value, ensuring a smooth adjustment of the currency. The anticipated USD/CNY fixing at 7.2033 indicates that the central bank is allowing the yuan to weaken. This seems to align with recent economic data, as China’s GDP growth for Q2 2025 was slightly lower than expected, at 4.8%. This could be a strategy to support a slowing economy and aid the export sector.

Currency Pressure and Strategy

Traders should keep an eye on the offshore yuan (CNH) spot price compared to the daily midpoint set by the PBOC. If the spot price consistently trades lower than the central bank’s fix, it shows strong market pressure for depreciation. This trend was evident in mid-2025, particularly after disappointing July export data that revealed a 1.5% year-over-year decline. Given the situation, buying longer-dated call options on the USD/CNY pair may be a smart strategy. However, since the PBOC actively seeks to avoid extreme, volatile moves, implied volatility is expected to remain low. This could create opportunities to sell short-dated, out-of-the-money options to collect premiums from gradual price increases. It’s important to recall the approach used in 2023 and 2024, where authorities guided the yuan downward but intervened to prevent chaotic selling. While the +/- 2% trading band exists, state-owned banks often step in well before the limit is hit. Traders should prepare for a managed decline rather than an uncontrolled free-fall. This currency trend is also shaped by differing policies between China and the United States. The US Federal Reserve kept interest rates steady at its July 2025 meeting, citing a strong job market and persistent core inflation. This contrasts with recent rate cuts by the PBOC, which strengthen the US dollar against the yuan. Create your live VT Markets account and start trading now.

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The Swiss franc is losing value after Trump announced increased tariffs. The tariff rate on Canada is now 35%, up from 25%.

Changes in Switzerland’s Tariff Rates

Switzerland’s goods will face a new tariff rate of 39%. If goods are suspected of being transshipped to avoid duties, there will be an extra 40% tariff. These changes are affecting the market. The updated tariff on Canada starts on August 1. Other tariffs will be effective in seven days. The new 39% tariff on Switzerland directly affects its economy, causing the franc to weaken right away. We expect the CHF to drop further as the market processes this news in the coming days. Traders should consider shorting the franc, possibly by buying put options or taking long positions in USD/CHF. This disruption is significant. Switzerland has a robust trade relationship with the U.S., with exports like pharmaceuticals and chemicals exceeding $67 billion in 2024. The tariffs will hit major Swiss companies hard, damaging a key part of their economy. This serious blow points to a continued bearish outlook for the franc in the next few weeks.

Effect on Swiss Market Index

We believe the Swiss Market Index (SMI) could face a major decline. Companies such as Roche, Novartis, and Swatch Group will struggle with their U.S. sales. Traders might want to buy put options on the SMI or on ETFs that track Swiss stocks. This situation mirrors the market response during the 2018 trade conflict with China, which caused significant equity losses and increased volatility. We anticipate that the Swiss National Bank may need to step in, possibly by cutting interest rates to support the economy, which would put additional pressure on the franc. Amid the uncertainty, expect high implied volatility in pairs like USD/CHF and EUR/CHF. This makes buying volatility a smart strategy. We are considering straddles or strangles to profit from significant price movements as the market assesses the impact. Additionally, we can’t overlook the 35% tariff on Canada, a major exporter of oil and raw materials to the U.S. This will likely affect the Canadian dollar and stocks connected to the natural resources sector. While our focus remains on the franc, this presents a secondary chance to enter bearish positions on the CAD. Create your live VT Markets account and start trading now.

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In July, the S&P 500 experienced a steady rise, departing from expected seasonal trends and Elliott Wave forecasts. The index hit the $6380-6460 range, exceeding predictions and staying above key warning levels of $6177 and $6061, which suggests a chance for a pullback. As the S&P 500 climbed, the warning levels adjusted to $6363, $6336, $6281, and $6201. Despite this increase, there have been no signs of a pullback yet. The anticipated target for the green W-5 is between $6690 and $6820. This links with the larger third-wave target of $6738 to $7121, which indicates an ending diagonal pattern.

July Price Movement

July’s price movements strayed from the usual post-election trends, yet the S&P 500’s ability to stay above important levels hints at further gains. It’s important to monitor for a close below $6336 to foresee the possible start of green W-4, while keeping the larger target in mind. The overall financial landscape shows the EUR/USD bouncing around 1.1450, GBP/USD fluctuating near 1.3200, and gold stabilizing just above $3,300 per ounce. Bitcoin trades between $116,000 and $120,000, supported by ongoing whale buying and a historically low OTC balance. As we head into August 2025, the strong rise of the S&P 500 from July suggests we should acknowledge this upward trend. This could push the index toward the $6690-6820 target zone. Holding long positions through call options or index futures seems prudent while the market remains strong.

Market Structure and Correlation

However, since the index is currently high, we need to be ready for a possible pullback. We will use a close below the $6336 level as our main signal to adjust our outlook. Buying protective put options with strike prices below this level could be a cost-effective way to safeguard existing long positions. The current market setup feels reminiscent of the late 1999 melt-up, where momentum overlooked overbought conditions for a long time. The CBOE Volatility Index (VIX) is hovering around 18, rising from its June 2025 lows and indicating that some traders are beginning to consider higher risks. This reinforces the idea of owning options to benefit from potential price fluctuation. Examining other assets, gold shows strength by staying above $3,300 per ounce, which is notable given the dollar’s recent stability. The World Gold Council’s Q2 2025 report indicated continued buying from central banks, likely creating a support level. For currencies, the Euro’s rise near 1.1450 follows recent comments from the ECB suggesting an end to their rate cut cycle. The Pound’s mixed signals around 1.3200 point to range-trading strategies. In the crypto market, Bitcoin shows very positive signs. Continued whale buying and record-low Over-The-Counter (OTC) balances, supported by exchange data revealing a net outflow of over 50,000 BTC in July 2025, indicate a potential supply squeeze. This encourages long positions using call options or futures, with $116,000 recognized as a key support level. Create your live VT Markets account and start trading now.

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Gold prices increased on Thursday after the Federal Reserve decided not to change interest rates. XAU/USD was trading at $3,296, showing a 0.61% rise. The US Dollar’s stability, supported by strong economic data, impacted the market positively. The Fed maintained the fed funds rate at 4.25%-4.50% with a 9-2 vote. Fed Chair Jerome Powell emphasized a cautious approach towards future policy adjustments. Economic indicators like the core Personal Consumption Expenditures (PCE) Price Index rising and a decrease in unemployment claims point towards stable employment and inflation.

Trade Developments And Gold

The US and Mexico have extended a tariff agreement for 90 days, and a deal with South Korea has eased trade tensions. Following the Fed’s decision, gold prices seemed oversold, leading to increased buying near July’s lows, as traders look ahead to the upcoming Nonfarm Payroll data. Falling US Treasury yields have also supported gold prices, along with a slight increase in the US Dollar Index. US jobless claims dropped to 218K, and PCE inflation metrics were somewhat higher than expected, indicating economic strength. The Fed’s latest policy statement described economic activity as moderating. GDP growth has exceeded expectations, even with slowed consumer spending. Gold prices are expected to stabilize, influenced by technical resistance levels. Central banks, the largest holders of gold, significantly increased their reserves in 2022. Gold prices tend to move inversely to the US Dollar and treasury yields. Political instability can enhance gold’s appeal as a safe-haven asset. Gold market movements also depend on interest rates and the Dollar’s value, which affect its role as a hedge against currency depreciation and inflation. With the Federal Reserve keeping interest rates steady, gold has experienced relief from further hike pressure. This pause has pushed US 10-year Treasury yields below the important 4.0% level, which makes non-yielding gold more attractive. We view this as a significant change in the market, supporting higher prices in the near future.

Economic Data And Market Reactions

The latest Nonfarm Payrolls report indicated that the economy added 155,000 jobs, falling short of the 180,000 expected. This weaker data confirms the economic slowdown that the Fed mentioned, decreasing the likelihood of any future rate hikes. Consequently, derivatives may experience less risk of downturns and greater potential for rises in the coming weeks. We’re seeing an increase in demand for call options, especially for September and December contracts, indicating a bullish outlook. Since prices have bounced back from July’s lows around $3,250, traders recognize a strong technical support level. This situation suggests that buying calls or bull call spreads could be a preferred strategy to capture possible gains while managing risk. Looking back, the significant gold purchases by central banks in 2022 were not just a one-time occurrence. Data from the World Gold Council shows that strong official sector buying continued into 2023 and 2024, providing solid price support. Steady demand from these major players limits how much prices might drop during pullbacks. This scenario resembles the Fed’s policy pause in 2018, leading up to a major gold rally that lasted until 2020. Historically, when the Fed halts hikes while the economy remains strong, it creates a favorable environment for gold. We might be entering a similar phase now, where the market begins to anticipate rate cuts ahead of time. Create your live VT Markets account and start trading now.

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A senior US official has confirmed that there is no final decision yet on trade with China, making a trade agreement hard to pin down. Recently, Trump signed executive orders about tariffs that impact several countries. The orders raised the tariff on Canada to 35% from 25% and set a 39% tariff on Switzerland. The White House is also working on clarifying details, especially regarding China, which might involve possible temporary extensions.

Impact of New Tariffs

Taiwan now faces a 20% tariff as part of these new policies. These actions are part of a broader trade strategy by the US administration. With these changes, we can expect increased market volatility in the upcoming weeks. The CBOE Volatility Index (VIX) is likely to rise from its current stable state. In the 2018-2019 trade disputes, the VIX surged by over 60% during similar events, so we should prepare for levels nearing the high 20s. Buying put options on major market indices like the SPX can be a smart defensive strategy to protect against possible downturns. Sectors that rely heavily on international trade, like technology and industrials, are at greater risk from sudden tariff announcements. The new 20% tariff on Taiwan, a key player in semiconductor production, directly threatens chipmakers.

Opportunities in Currency Markets

There are clear opportunities in currency markets, especially as the US dollar strengthens against the Canadian dollar and the Swiss franc. In 2023, total US trade with Canada exceeded $900 billion, so the new 35% tariff will significantly affect the USD/CAD currency pair. A similar but smaller impact will be seen with the Swiss franc due to the 39% tariff. For traders uncertain about market direction, employing a long straddle or strangle on key exchange-traded funds may be effective. This strategy can benefit from any major price move, which seems likely given the mixed signals coming from the White House. The indication that no final decision has been reached regarding China adds to this uncertainty. The proposed “can-kick extension” for China suggests that this issue might not be resolved anytime soon. Therefore, considering longer-dated options, perhaps expiring in the next fiscal quarter, could be wise. This allows for time to wait out the anticipated short-term fluctuations and for a more definite policy to emerge, reducing the risk associated with short-term contracts. Create your live VT Markets account and start trading now.

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Japan’s unemployment rate in June held steady at 2.5%. This number met expectations and was the same as the previous month’s rate. The job-to-applicant ratio was 1.22, which was below the expected 1.25 and down from the earlier figure of 1.24.

Impact on the Japanese Yen

This data usually has little effect on the Japanese yen. In June 2025, Japan’s labor market remained tight, with unemployment stable at a low 2.5%. While this indicates a strong economy, the report typically does not have a direct impact on the yen. Instead, we should consider what this means for the Bank of Japan’s (BoJ) next steps. The main question is if this tight labor market will lead to sustainable wage growth that the BoJ needs to change its policy. Recent data has been mixed; for instance, Tokyo’s Core CPI for July 2025 fell to 2.1%, slightly below expectations. This gives the BoJ a reason to remain cautious, likely resulting in continued yen weakness in the short term.

Interest Rate Differences and Carry Trade

The key factor for the yen remains the large interest rate gap between Japan and other major economies, especially the United States. With the U.S. Federal Reserve keeping its key interest rate above 5% in the first half of 2025, borrowing in yen to invest in dollars remains attractive. This steady jobs report doesn’t change the allure of this profitable carry trade. Looking back, we saw a similar trend in 2023 and 2024, where good domestic indicators were overlooked by a BoJ focused on ensuring inflation wasn’t temporary. Until the annual “shunto” wage negotiations result in sustained growth that keeps inflation above target, betting against the BoJ’s supportive stance has not been profitable. We expect this trend to continue for now. In the coming weeks, the mix of low volatility but underlying tension presents an opportunity. We find value in buying longer-term, inexpensive options that could profit from a sudden policy change later this year. For example, purchasing puts on the USD/JPY currency pair is a low-cost way to prepare for any unexpected hawkish signal from the BoJ. Create your live VT Markets account and start trading now.

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Gold prices have risen to about $3,306, up 0.95%, thanks to increased demand for safe investments amid new trade tensions. This comes just before the August 1 tariff deadline, with the US considering new tariffs on several countries. The US Dollar has slightly fallen from recent highs, which is helping gold prices recover. President Trump announced new tariffs: a 25% tariff on Indian imports for national security reasons and a 50% tariff on certain Brazilian goods. A deal with South Korea resulted in a lowered 15% tariff on imports in exchange for $350 billion in American investments. The US is also negotiating trade agreements with the EU and Japan, while talks continue with other nations.

Focus On Economic Data

Traders are keeping an eye on upcoming US economic data, particularly the Core Personal Consumption Expenditures Price Index, which the Fed uses as its main inflation indicator. Market participants are curious about how these numbers might affect future monetary policy, especially interest rates. Current market conditions suggest a cautious approach, with expectations for a rate cut in September significantly dropping. Gold demand grew by 3% year-on-year to 1,249 tonnes, driven by safe-haven investments. Central banks added 166 tonnes to their reserves, highlighting gold’s strategic value. Currently, gold prices are stabilizing between $3,250 and $3,450, indicating a possible continuation of this trading range. We expect gold to remain strong around $3,306 due to renewed trade worries following tariffs imposed on India and Brazil. This situation mirrors the start of the US-China trade disputes from the late 2010s, contributing to significant uncertainty. The small dip in the dollar is also supporting gold prices right now. The spotlight is now on the Federal Reserve, as the Core PCE inflation data for July 2025 came in at a slightly high 2.3%. This exceeds the Fed’s target and reduces hopes for a September interest rate cut, a shift already reflected in federal funds futures. This creates a complicated environment, as higher rates usually put downward pressure on gold prices.

Market Nervousness Rising

With increasing uncertainty, market nervousness is climbing. We can see this in the CBOE Volatility Index (VIX), which has risen to 18.5 from its lows last month. For derivative traders, it might be wise to buy options to take advantage of potential sharp price moves. A bull call spread on gold futures could allow us to benefit from a possible breakout above the $3,450 resistance level while managing our maximum risk. However, we need to be alert for any sudden easing of trade tensions or stronger-than-expected US job data. If a surprise agreement with India or Brazil occurs, gold’s safe-haven appeal might quickly diminish. In that case, having protective puts or starting bear put spreads could protect against a decline towards the $3,250 support level. The consistent purchasing by central banks, which have added another 166 tonnes to their reserves, continues to provide solid long-term support for gold prices. This ongoing demand makes us cautious about taking overly aggressive bearish positions. Over the next few weeks, we anticipate trading will likely stay volatile within the established $3,250 to $3,450 range. Create your live VT Markets account and start trading now.

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The Euro has dropped against the Swiss Franc for four days in a row, hitting its lowest point since May 5. The EUR/CHF pair is now close to 0.9280, down almost 0.60% this week, as the Franc gains strength due to demand for safe assets amid trade tensions and approaching US tariff deadlines. US President Donald Trump has postponed a tariff deadline with Mexico by 90 days, keeping current tariffs while warning of new ones for countries that don’t reach a deal by August 1. While there was a phone call about a trade deal with Mexico’s President Claudia Sheinbaum, uncertainty remains high, causing increased anxiety about trade globally. In June, Switzerland’s retail sales rose by 3.8% compared to last year, far exceeding expectations and boosting the Franc’s value. Monthly sales also increased by 1.5%, recovering from a previous decline and making the currency more appealing as a safe haven. Meanwhile, the Eurozone’s GDP grew by just 0.1% in the second quarter, showing a significant slowdown. Attention now turns to the Eurozone’s July inflation data, which will be critical in guiding the European Central Bank’s future actions, as the region faces ongoing low price pressures and sluggish growth. The Core Harmonized Index of Consumer Prices, which excludes volatile items, will help track inflation trends and impact the Euro’s potential strength. Given the Euro’s weakness against the Swiss Franc, a clear trend appears likely to continue in the weeks ahead. The EUR/CHF pair faces pressure from a solid Franc and a struggling Euro. This situation creates an opportunity for bearish strategies on this currency pair. The Franc’s attractiveness comes from global uncertainty and domestic strength. Trade worries, particularly with the US tariff deadline approaching today, August 1, enhance the Franc’s safe-haven status. Additionally, the Swiss National Bank raised its policy rate to 1.75% in June 2025, which is a stark contrast to the Eurozone’s economic outlook. In contrast, the Euro struggles with the Eurozone’s stagnant Q2 GDP growth of just 0.1%. We are now anticipating the July inflation report, where recent forecasts from Bloomberg expect core inflation to reach 1.9%, still below the European Central Bank’s target. Weak data like this will likely keep the ECB supportive of a dovish approach, limiting any potential boost for the Euro. In the coming weeks, traders should think about purchasing put options on the EUR/CHF pair. Choosing contracts that expire in late August or September 2025 would give enough time for the market to react to the Eurozone’s inflation data and any guidance from the ECB. This strategy could allow for profits from a continued decline in the pair’s value. It’s worth noting that implied volatility for EUR/CHF has increased to about 6.8%, suggesting that the market is prepared for larger price swings. This situation is reminiscent of the early 2010s when economic stress in the Eurozone led to a steady move towards the safety of the Swiss Franc. We expect a similar trend to emerge, although perhaps less severe.

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The United States has set a 39% tariff on Switzerland, leading to a drop in the value of the Swiss franc (CHF). Other recent tariff changes include a 20% rate on Taiwan and 19% on Cambodia, Thailand, Malaysia, Vietnam, and Indonesia. This tariff increase is part of a larger strategy, which recently raised Canada’s tariff from 25% to 35%. Other countries affected include Australia, New Zealand, Israel, Venezuela, and Turkey, with tariffs between 10% and 15%.

Geopolitical Tensions

These tariff changes occur amid rising geopolitical tensions and shifting trade policies. The increased tariffs are likely to affect trade balances and have already impacted currency markets, particularly the Swiss franc. Traders and market analysts are closely monitoring these developments. The Swiss franc has fallen more than 3% against the dollar in early trading, a swift decline not seen since the Swiss National Bank’s policy shift in 2015. We expect ongoing currency volatility, which could create trading opportunities for those who are ready for sudden changes. In the coming weeks, traders might consider buying options to manage this uncertainty. Put options on the USD/CHF pair could guard against further weakness of the franc, while call options might be used to bet on continued strength of the US dollar. Using options helps define risk in a situation where policy news can change asset values rapidly.

Impacts of Tariffs

These tariffs aren’t just a concern for Switzerland. The tariffs on Canada and key Asian partners will likely pressure their currencies too. We remember the risk-off sentiment during the 2018-2019 trade disputes, which generally favored the US dollar. A potential strategy could involve shorting a basket of affected currencies, including the Canadian dollar and Thai baht, against the dollar. We should also consider derivatives linked to Swiss stocks, especially in the pharmaceutical and luxury watch sectors. These industries made up nearly 60% of Swiss exports to the US in 2024 and are quite vulnerable. Purchasing put options on the Swiss Market Index (SMI) could help protect against a broader market decline. Attention now turns to the Swiss National Bank (SNB), as the market anticipates a possible emergency response to stabilize the franc. Any unexpected action or rate cut could significantly impact short-term interest rate futures. Given their history of significant interventions to weaken the franc in the early 2020s, the SNB has the power to act decisively. Create your live VT Markets account and start trading now.

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The Canadian dollar has remained steady, even with a recent rise in tariffs from the US. The exchange rate between USD and CAD has hit a 10-week high, showing that the Canadian dollar is at a 10-week low. The US has increased tariffs on Canadian goods from 25% to 35%. This new rate will take effect shortly as US Eastern time shifts to August 1.

Impact on the Canadian Economy

With the 35% tariff going live, the Canadian dollar faces continued downward pressure. This drop to a 10-week low for the CAD may just be the start of a longer trend. We expect further weakness against the U.S. dollar in the upcoming weeks. This tariff hike affects an already weak Canadian economy, where Q2 GDP growth slowed to only 0.8% annualized. In comparison, the latest U.S. non-farm payrolls reported a strong gain of 215,000 jobs, keeping the Federal Reserve on track. This widening economic gap makes holding U.S. dollars more attractive than Canadian dollars. For derivative traders, this spike in uncertainty presents a big opportunity. Implied volatility on USD/CAD one-month options has surged over 10%, a level not seen since bank troubles in spring 2024. Strategies like long straddles, which benefit from increased price movement, should be on the table.

Potential Monetary Policy Response

We anticipate that USD/CAD will aim for higher levels, possibly reaching the psychological 1.4000 mark. A similar situation occurred during the trade disputes of 2018 when escalating tariffs led to an 8% rise in just a few months. History indicates that this trend might continue. The market is now expecting a response from the Bank of Canada. Overnight index swaps show more than a 70% chance of a 25-basis-point interest rate cut by the October meeting. This expectation of easing monetary policy may limit any potential rallies in the Canadian dollar. Create your live VT Markets account and start trading now.

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