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EUR/USD expiries from 1.1550 to 1.1600 may impact price action during European trading hours
Expiring foreign exchange options for August 4 are important for the EUR/USD pair, especially between 1.1550 and 1.1600. The US dollar weakened after last week’s job report revealed significant downward revisions to payroll figures.
Additionally, the dismissal of the BLS chief and shifts in Fed funds futures toward a potential September rate cut further contributed to the dollar’s decline. Consequently, EUR/USD is currently trading between 1.1497 and 1.1610, its major hourly moving averages.
Gold futures gain bullish momentum due to lower interest rates and positive trader sentiment.
Gold prices are climbing, driven by speculation about rate cuts and demand for safe investments. Gold futures are currently at $3,411.8, up by 0.35% today. Over the last year, gold has surged by 36.98%, nearing the top of its long-term range.
Several factors are behind this rise. A weaker U.S. jobs report has raised the chances of a Federal Reserve rate cut, now over 80%. Lower interest rates make gold more appealing since holding it costs less. Concerns about geopolitical tensions, trade policies, and inflation also make investors favor gold.
Trading Perspective on Gold
From a trading standpoint, the current trend supports buyers. Gold’s stability above $3,400 indicates strong support, particularly with prices hovering around $3,406-$3,409. Recent changes in market sentiment show increased buying activity, maintaining levels above key indicators like VWAP and POC. Order Flow Intel indicates a bullish trend, suggesting a potential move towards $3,440. However, traders may want to wait for a price pullback to enter, aiming for better risk-reward ratios. This analysis offers helpful insights for trading decisions but is not a direct trade recommendation. The outlook for gold remains positive, especially after the weaker U.S. jobs report heightened expectations for a Federal Reserve rate cut in September. After a long period of high rates, the market now sees an over 80% chance that the Fed will change its stance. This makes non-yielding assets like gold more attractive. This anticipation of lower rates comes as inflation remains a concern, a situation that has been difficult to manage since 2024. There has been a strong move toward safer investments amid ongoing geopolitical tensions and uncertainty in global trade policies. This persistent demand has pushed gold’s year-to-date performance above 29%.Market Dynamics and Trader Strategy
Currently priced near $3,411, gold is building on a significant rally that began with the all-time highs in 2024. We are also witnessing record purchases from global central banks, which added over 1,037 tonnes in 2023 alone and continues to rise. These substantial buyers provide solid support for gold prices. Recent order flow shifts show a transition from sellers to buyers, indicating that upward momentum is likely to persist. It’s not advisable to chase the market at the current price. A more strategic approach is to wait for a price pullback for a better entry point. A support zone is forming between $3,406 and $3,409, which aligns with key indicators such as the Volume Weighted Average Price (VWAP). Placing entry orders for long positions within this range can offer a good risk-to-reward opportunity. This strategy allows traders to join the bullish trend without buying at the highest point of the current move. If this support level holds and the trend continues upwards, the next target could be around $3,440. Traders should use stop-loss orders to manage risk in case the market suddenly changes direction. Patience is key; wait for the market to reach your desired price. Create your live VT Markets account and start trading now.Citi raises its gold forecast, predicting prices between $3,300 and $3,600
Citi has raised its gold price forecast to $3,500 for the next three months. This is an increase from the previous estimate of $3,300, with a new trading range set between $3,300 and $3,600, up from $3,100 to $3,500.
Citi’s adjustment comes as they see a weaker US economy and growing inflation concerns in the second half of 2025. Coupled with a declining dollar, these factors could drive gold prices to new record highs.
Concerns Over US Economic Data
There are concerns about US labor market data from the second quarter as well as doubts about institutions like the Federal Reserve and the Bureau of Labor Statistics. Despite these issues, investment demand for gold remains strong, and moderate buying from central banks is expected to keep gold in a good position in the market. We maintain a bullish outlook on gold for the next three months, aiming for a price target of $3,500 and a possible trading range up to $3,600. Traders in derivatives might consider strategies that benefit from rising gold prices, such as buying call options or creating bull call spreads that expire in October or November 2025. This outlook is encouraged by the worsening US economic conditions. The recent Q2 GDP report revealed a growth rate of just 0.8%, which fell short of expectations. Additionally, the June Non-Farm Payrolls report showed much lower job creation compared to what we saw in 2024. This slowdown highlights the challenges facing the US economy.Impact of Economic Pressures and Trade Tariffs
At the same time, new trade tariffs are raising inflation concerns, with the July Consumer Price Index climbing to 3.9%. These pressures are contributing to a weaker dollar, as shown by the Dollar Index (DXY) dropping from around 105 in May to its current level of 101.5. A weaker dollar typically makes gold more appealing to foreign buyers. Strong demand for gold acts as a solid foundation for any bullish strategy. Q2 2025 reports indicate that central banks, especially in Asia, continued to increase their gold reserves, adding over 200 tonnes. This ongoing buying helps cushion any price drops. Lastly, there are worries about the Federal Reserve’s credibility after its dovish stance in July. Some traders believe this shift was due to political influence rather than just economic conditions. This kind of uncertainty usually boosts demand for gold as a safe-haven asset. Create your live VT Markets account and start trading now.Deteriorating job figures challenge Trump and impact Fed rates, undermining market trust in data integrity
The recent jobs data has shaken up the markets, raising hopes for a Federal Reserve rate cut in September from about 39% to 81%. The main concern wasn’t the headline number but the significant downward revisions to previous reports.
President Trump criticized Fed Chair Powell, calling for immediate rate cuts. He also blamed BLS Chief Erika McEntarfer for what he viewed as inaccurate job numbers, which led to her dismissal. Trump insisted that the US economy is doing well and demanded better data.
Impact On The Trump Economy
The flawed job numbers complicate the perception of the “Trump economy.” Strong numbers would support the Fed’s decision to hold off on cuts, which would upset Trump. In contrast, weak figures could lead the Fed to act, disrupting his economic story. This situation also risks both the independence of the central bank and the credibility of the statistics in the US. Accurate data is crucial for sound policymaking. If the data gets politicized, it undermines the trustworthiness of US financial information. The integrity of Treasury Inflation-Protected Securities (TIPS), which depend on accurate BLS inflation data, might be at risk. This could harm the credibility of the dollar and US financial assets. After a disappointing jobs report on August 1st, the market quickly shifted to price in a September rate cut. The non-farm payrolls report showed a gain of only 50,000 jobs, far less than the expected 150,000, with major downward revisions for prior months. Data from the CME FedWatch Tool indicated that the chance of a cut surged from around 39% to over 80% within hours.Chaos In The Markets
The weekend firing of the Bureau of Labor Statistics chief has added more chaos. This attack on the independence of government data is generating enormous uncertainty in the markets. We can see this in the market’s fear gauge, with the VIX index, which measures expected volatility, rising from a calm 16 to over 24, warning traders to prepare for larger price fluctuations and to think about purchasing protection. This political upheaval puts pressure on the US dollar, which has weakened significantly against other major currencies. The Dollar Index (DXY) dropped sharply from over 105 to around 103.5 as global confidence in US institutions faces scrutiny. This scenario suggests that traders may consider buying put options on the dollar, possibly against traditionally safe currencies like the Swiss franc or Japanese yen. A similar pattern of political pressure on economic institutions occurred in 2018 and 2019. During that time, constant criticism of the Federal Reserve led to unpredictable market movements and sustained higher volatility. History indicates that this environment favors strategies that profit from instability, such as straddles or strangles, rather than taking a strong position on economic direction. The most pressing concern is the integrity of inflation data, which poses a serious issue for certain financial products. Instruments like Treasury Inflation-Protected Securities (TIPS) and the inflation swaps market are now facing a major credibility crisis. Traders should be extremely cautious with these instruments, as their pricing models heavily rely on government data that is now being openly challenged. Create your live VT Markets account and start trading now.China plans to tax bond interest, surprising investors and impacting financial market demand
China plans to tax interest income from government and financial institution bonds, ending a long-standing tax exemption in its bond market. This new tax will start on 8 August and will affect nearly 70% of China’s bond market by total amount.
This change has caused a quick reevaluation of fixed income investments, mainly due to worries about lower after-tax returns. Demand for Chinese government and policy bank bonds may drop, especially among institutions that previously enjoyed tax-free benefits.
Implementation Details
Details about how this will be implemented are still unclear, but it shows China’s goal to expand its tax base. Analysts predict that the new 6% value-added tax on bonds will raise investment costs and create a yield gap of about 5-10 basis points between old and new bonds. Since this policy starts in just four days, we can expect increased volatility in China’s fixed-income markets. Traders might consider buying options on Chinese government bond (CGB) futures or related ETFs. This approach could help us profit from the large price movements expected as the market adjusts to this unexpected tax. We should anticipate bond prices to drop and yields to rise. Establishing short positions in 10-year CGB futures contracts on the China Financial Futures Exchange is advisable. This bets that the new tax will lower demand and, thus, the value of future government debt.Impact on Global Markets
This tax change affects a huge amount of capital since China’s bond market is the second largest in the world, valued at over $21 trillion. By the second quarter of 2025, foreign institutions held around ¥3.2 trillion in Chinese bonds. A significant sell-off from these investors could weaken the yuan. Traders can also look for opportunities in the 5-10 basis point yield gap between old and new bonds. A basis trade that goes long on existing tax-exempt bonds while shorting futures contracts related to the new taxed bonds could capture this difference. This strategy takes advantage of the new tax inefficiency. This situation recalls the “Taper Tantrum” of 2013 when an unexpected announcement from the US Federal Reserve led to a sell-off in emerging market bonds. Although this tax is a domestic policy, it could shock investors who relied on tax-free bonds for years, creating a similar risk-off mood. This past incident serves as a helpful reminder of potential outcomes now. With the chance of capital outflows, we should also monitor currency markets. Hedging or betting on a weaker offshore yuan (CNH) in the coming weeks seems wise. Using options or forward contracts on USD/CNH would be an effective strategy. Finally, for those with bond portfolios, interest rate swaps (IRS) are a crucial defensive measure. By entering a swap to pay a fixed rate and receive a floating rate, we can guard against the risk of rising bond yields that are likely to affect all holdings. Create your live VT Markets account and start trading now.Japanese stocks see biggest drop in four months due to geopolitical concerns and economic data
Oil futures started the week lower after OPEC+ announced an increase in output of 548,000 barrels per day beginning in September. However, despite the initial drop, oil prices bounced back during the session.
In currency markets, the USD/JPY pair was active, rising just above 147.00 before dipping back below 148.00. Japan’s trade negotiator raised concerns about the US-Japan trade agreement, calling it non-binding, which raises questions about its effectiveness.
Market Reactions in Japan
Japanese government bond yields went down, indicating concerns about demand ahead of the 10-year JGB auction. Japanese equities also faced challenges, with the Nikkei index seeing its largest drop in four months. In contrast, Asia-Pacific equities showed mixed results. In the broader G10 foreign exchange market, the US dollar regained some stability, although the trading ranges were narrow. There was little news, but inflation data from Australia showed a sharp rise in July, marking the fastest increase in 19 months. In geopolitical news, President Trump announced that envoy Steve Witkoff will visit Russia next week before new US sanctions are implemented. Trump is also set to meet with Canadian Prime Minister Mark Carney to discuss ongoing trade tensions. OPEC+’s production increase for September caused a temporary dip in oil prices before the market steadied. Last week, Brent crude futures for October delivery settled around $81 per barrel, which may act as a ceiling. Selling call options could be a strong strategy, betting that the rise in supply will prevent significant price increases in the coming weeks.Trading Strategies and Opportunities
The Nikkei 225 index saw its largest drop in four months, losing over 2% in one session. This risk-averse sentiment suggests that buying put options on the Nikkei could be a smart move to protect against further losses. This strategy would help shield portfolios if worries about global trade and domestic growth continue to pressure Japanese stocks. The mixed signals surrounding the USD/JPY pair provide a unique chance for volatility traders. The uncertainty about the new trade deal might strengthen the yen as a safe haven, while the Bank of Japan is expected to continue its loose monetary policy, which could weaken it. Traders might consider buying straddles on USD/JPY, which would benefit from significant price movements in either direction as the situation unfolds. In Australia, the uptick in the private inflation gauge is a key indicator for the local dollar. This surge, the fastest in 19 months, suggests that the Reserve Bank of Australia may have to adopt a more aggressive stance, especially after recent Q2 2025 CPI data showed a 3.9% annual inflation rate. This situation makes buying call options on the Australian dollar a compelling choice, anticipating a shift in the central bank’s policy. The ongoing trade tensions between the US and Canada, along with renewed attention on Russia, contribute to global uncertainty. Historically, during similar geopolitical tensions, like the tariff disputes of 2018-2019, we often observed a movement toward safer investments. This supports maintaining defensive positions, such as long positions in gold futures or options to protect against unexpected market shifts. Create your live VT Markets account and start trading now.Akazawa questions the enforceability and binding nature of the US-Japan trade agreement
Japan’s chief trade negotiator, Ryosei Akazawa, said the recently announced trade agreement with the United States is not legally binding. This brings up questions about how enforceable and comprehensive the deal really is.
Akazawa advised caution, stating that not everything said by U.S. officials should be trusted completely. His comments highlight uncertainty about the agreement’s details and show a divide between political statements and actual commitments.
Ongoing Negotiation Challenges
This clarification comes as both countries look to strengthen their economic ties in a changing global trade environment. Akazawa’s remarks suggest that there are still challenges in the negotiations and signal Japan’s desire to manage expectations as talks progress. Since this trade agreement isn’t a legal commitment, we should expect more volatility. The gap between political statements and formal policies creates uncertainty for important Japanese assets. Traders may need to rethink their strategies that depend on a stable trade relationship between the U.S. and Japan. The USD/JPY currency pair will attract attention in the weeks ahead. The yen weakened to around 160 against the dollar in mid-2025, but this new uncertainty might drive a flight to safety, possibly strengthening the yen. Traders might consider buying call options on the yen, expecting a pullback in the USD/JPY rate from its recent highs.Market Sensitivity and Strategic Hedging
In terms of equities, the Nikkei 225 index seems especially exposed to this news. The index, which is close to 41,000, is heavily made up of exporters who feel the impact of any trade tensions. Since Japan’s Q2 2025 GDP growth was just 0.2%, traders might think about buying put options on Nikkei futures to protect against a downturn. We have seen similar market reactions during the U.S.-China trade negotiations in the late 2010s, where official comments often led to sharp, short-term market fluctuations. This past behavior suggests that it’s wiser to hedge rather than make large bets on outcomes. Japan’s lack of a firm commitment indicates that any positive news could quickly be undone. Therefore, traders with interests in Japanese automakers or technology companies should reevaluate their strategies. Options strategies, like creating collars or buying protective puts, can offer a cost-effective way to guard against sudden market drops. This approach allows for potential gains while minimizing risks from ongoing negotiation issues. Create your live VT Markets account and start trading now.Wells Fargo expects the BoJ to keep interest rates steady while considering future adjustments based on economic data.
Wells Fargo believes that the Bank of Japan (BoJ) will keep interest rates steady in September. However, there’s a chance they might raise rates later this year if the economy continues to perform well.
Analysts at the U.S. bank are considering a possible rate hike of 25 basis points to 0.75% in October. This is based on Japan’s economy remaining strong and a moderate global slowdown, especially in the U.S.
Economic Momentum And Rate Outlook
Current economic growth, along with rising wages and inflation, supports this outlook. However, if domestic activity declines or indicators for wages and inflation weaken, the BoJ may delay rate changes until early 2026. In March, the BoJ raised rates, ending its long-standing negative interest rate policy. Policymakers are now considering additional increases but are cautious due to Japan’s slow recovery and global uncertainties. Key data on wages, inflation, and household spending will be crucial for the BoJ’s decisions. The weak yen is also a significant factor in policy discussions. The Bank of Japan is likely to keep interest rates unchanged in September, indicating that the yen could face ongoing pressure in the coming weeks. This presents an opportunity for traders to prepare for a stable or weaker yen against the dollar. Options strategies that thrive on low short-term volatility may be beneficial.Volatility And Currency Trading
We are closely monitoring upcoming data releases, as they will influence the central bank’s next move. Recent data shows core inflation remained steady at 2.8% in July, supporting the case for future rate hikes. However, the latest household spending figures for June showed a decline, raising concerns about domestic demand. The potential for an October rate increase brings considerable uncertainty, likely increasing volatility in currency options as the meeting date approaches. We experienced significant yen fluctuations around the March 2025 meeting when the BoJ ended its negative rate policy. This suggests that buying options to trade potential price swings may be a wise strategy as we move into fall. The outlook also depends on wage growth, which is vital for lasting inflation. Although annual wage negotiations this spring resulted in raises over 5%—the highest in 30 years—recent monthly cash earnings have shown slower growth. For now, this calls for a cautious approach, with traders ready to react to new information. For those trading interest rate derivatives, the market is pricing in a low chance of a September rate move. This creates an opportunity if upcoming inflation or wage data surprises positively. Any unexpectedly strong economic data could lead to a swift repricing of Japanese government bond futures. Create your live VT Markets account and start trading now.Japanese shares fall sharply amid US economic concerns and speculation about PM Ishiba’s resignation
Japanese stocks saw their biggest drop in almost four months. The Nikkei 225 Index fell by 1.8%, and the broader Topix decreased by 1.5%.
Concerns are growing about the US economy and the political situation in Japan. Speculation about Prime Minister Ishiba potentially resigning is on the rise, even though he has denied it.
Market Volatility And Options Strategy
The Japanese markets are facing a significant decline due to worries about the US economy and local political stability. This uncertainty has pushed the Nikkei Volatility Index up to nearly 28, a sharp rise from the low 20s we observed in July 2025. For traders, this means that the cost of buying options—used for hedging or speculation—has increased. Given the potential for further declines, buying put options on the Nikkei 225 seems like a wise defensive strategy. This strategy is supported by last week’s disappointing US non-farm payrolls data, which indicated slower job growth than expected. These puts can serve as insurance for portfolios heavily invested in Japanese stocks while the situation with Prime Minister Ishiba remains uncertain. We are also monitoring the USD/JPY currency pair, which has dipped below the 155 level due to the ongoing instability. A weaker yen is usually beneficial for Japan’s large exporters, which may help stabilize the broader market and prevent a severe collapse. This situation suggests that selling out-of-the-money call options could be a good strategy, as a significant rally is unlikely.Historical Context And Future Outlook
We recall the market’s reaction when Prime Minister Abe resigned in August 2020. Initially, the market was shocked, but it quickly stabilized and recovered as investors gained confidence in the policies of his successor. This historical context indicates that although current political issues are causing a decline, a clear outcome could lead to a quick recovery. Looking forward, we are waiting for Japan’s preliminary Q2 GDP data, set to be released around August 15th. If the growth figure is below the expected 0.3%, it will confirm fears of a domestic slowdown and likely put additional pressure on stocks. Traders should also be prepared for the upcoming US inflation report on August 13th, as any surprises there will impact global markets. Create your live VT Markets account and start trading now.Goldman Sachs predicts Brent crude will be $64 in Q4 2025, then fall to $56 in 2026.
Goldman Sachs is maintaining its predictions for Brent crude prices, expecting an average of $64 per barrel in Q4 2025 and $56 in 2026. They are concerned about rising risks to oil demand due to increasing U.S. tariffs, possible new trade actions, and weaker U.S. economic data.
Goldman pointed out that signs of slower U.S. economic growth might raise the likelihood of a recession in the next year. This situation could affect their expectation of global oil demand growing by 800,000 barrels per day each year in 2025 and 2026.
