Today, there are a few FX option expiries worth noting. For EUR/USD, the main levels to watch are 1.1400 and 1.1475-90. The pair is under pressure from developments in the US-EU trade deal and a strengthening dollar. The expiry at 1.1400 might help stabilize price movements as traders react to recent trends. This is happening amidst month-end flows and significant US data, with tomorrow’s focus on non-farm payrolls.

AUD/USD Expiry

There is also an expiry for AUD/USD at 0.6465. This level isn’t linked to any technical support, but the pair is finding backing from its 100-day moving average at 0.6426. For more insights and details on these figures, additional information is available online. Looking back to 2018, EUR/USD faced levels around 1.1400, largely affected by US-EU trade disputes. Today, the scenario is different, with the pair trading near 1.0950 as the market reacts to different central bank policies. This shift shows how key themes can change over time. The European Central Bank is taking a cautious approach on rates, especially after Eurozone inflation hit 1.8%, which is just below the target. Meanwhile, the US Federal Reserve is being careful, with Core PCE data remaining stubbornly at 2.7%, above their target. This gap in policies supports the dollar, keeping the euro below the crucial 1.1000 level. For derivative traders, large option expiries around the 1.0900 strike are likely to act as a short-term price floor. Today is also the end of the month, so portfolio rebalancing could lead to some fluctuations in price. These shifts, alongside the upcoming US PCE data, are the main focus before tomorrow’s non-farm payroll report.

Echoes of the Past in AUD/USD

We can also see memories of the past in AUD/USD, which was once around the mid-0.6400s. Now, as the pair approaches 0.6800, the discussion has moved from simple technical levels to the health of the Chinese economy. The Australian dollar’s value is closely linked to demand for industrial commodities. Recent industrial production data from China showed a slight rebound, providing some support for the Aussie. However, this is countered by declining iron ore prices, which have fallen from over $110 to approximately $102 per tonne in July. This makes the currency sensitive to changes in global risk sentiment, making the upcoming global manufacturing PMI data crucial for future direction. Create your live VT Markets account and start trading now.

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A recent trade idea suggested taking a short position on crude oil futures based on several technical indicators. Light Crude Oil Futures were priced around $69.84 and displayed a bear flag pattern after touching a previously broken upward channel, indicating potential resistance. Volume Profile analysis indicated that the price was testing the Value Area Low, which added to the resistance. The significant psychological level of $70 often serves as a partial profit-taking point, further establishing resistance. Historical patterns also hint at price pullbacks following recent surges of nearly 9%, suggesting a likely downturn ahead.

Sentiment Influences

The sentiment from NASDAQ and S&P futures, driven by earnings from Meta and Microsoft, had an impact on crude prices. However, such sentiment increases are usually short-lived. The trading strategy recommended a stop-loss and take-profit set at 1.5%, which was later adjusted to 1%. Half of the position was closed at $69.64 to secure a risk-free trade. China’s slowing economy, highlighted by a PMI drop to 49.3, suggests reduced oil demand since China is the largest oil consumer. Even though GDP grew in Q2, weaknesses are becoming clearer, especially with the shift towards electric vehicles. Additionally, increased oil output from non-OPEC+ countries may lead to oversupply. Geopolitical factors can also unexpectedly affect oil prices. The current sentiment appears bearish due to higher oil production than demand; however, this situation can change quickly. Traders should keep an eye on China’s economic data, OPEC+’s strategies, and geopolitical developments for better-informed decisions. As of July 31, 2025, crude oil is struggling around the crucial $70 per barrel mark. The recent rally seems to be losing strength, creating a potential opportunity for bearish positions in the weeks ahead. Traders should be cautious not to get swayed by lingering bullish sentiment from the broader stock market.

Market Analysis

From a technical viewpoint, the oil price is hitting a resistance level that was previously a support level. This retest of a broken upward channel on the 4-hour chart indicates that sellers are entering at this resistance spot. Additionally, we are monitoring trading activity around the $70 mark, which adds to this resistance. The most significant challenge for oil prices is the economic slowdown in China. The official manufacturing PMI for July came in at 49.3, indicating contraction in factory activity. This is further supported by recent import data that showed a decrease to 10.8 million barrels per day, which is significantly lower than last year’s peaks, raising concerns about future demand. On the supply side, there is an ample amount of oil available in the market. The latest EIA report shows U.S. production reaching a record 13.5 million barrels per day, and OPEC+ has been steadily increasing output. The upcoming OPEC+ meeting in early August will be crucial to see if they adjust their production plans in response to China’s economic weakness. Reviewing the price action over the past year, we have frequently seen sharp rallies of 5% or more quickly fade away. The recent 9% rise seems excessive, especially since it was fueled by excitement from tech earnings rather than solid oil fundamentals. A pullback appears likely based on these historical trends. For traders in derivatives, this environment may favor strategies that profit from price drops or sideways movement. This could involve buying put options for a possible move down to the mid-$60s with defined risk. More cautious traders might consider selling out-of-the-money call credit spreads above the current resistance levels near $71-$72. Nonetheless, it is crucial to remain alert for sudden market changes. Geopolitical tensions in the Middle East or surprises from the upcoming OPEC+ meeting could easily send prices upward against the current trend. Managing risk with tight stop-losses on any short positions is essential. Create your live VT Markets account and start trading now.

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Trump shared updates on trade tariffs, highlighting some challenges ahead. He noted that reaching a trade deal with Canada would be tough. He also criticized India’s high tariffs and mentioned the possibility of imposing 25% tariffs, indicating that trade talks with India may be stalled. Additionally, Trump announced that 50% tariffs on copper pipes and wiring will start on Friday. However, he relaxed tariffs on Brazil by excluding certain sectors, such as energy, aircraft, and orange juice, from the higher levies. For South Korea, the US will introduce 15% tariffs following an agreement focused on shipbuilding.

Suspending The De Minimis Exemption

The White House confirmed that they will suspend the ‘de minimis’ exemption, which previously allowed duty-free entry for low-value shipments into the US. Starting August 29, packages valued at $800 or less will now face all applicable duties. This suspension is a significant change. Logistics companies and e-commerce platforms, particularly those relying on low-value Chinese imports, will be affected. Before tensions escalated in 2023, over two billion packages entered the US under this rule, meaning many will now experience tariffs and added costs.

Implications Of Copper Tariffs

With the 50% tariffs on copper pipes and wiring set to take effect tomorrow, we expect global copper prices to fall immediately, while costs for US construction and manufacturing will rise. In similar situations during the 2018 trade disputes, copper futures dropped nearly 20% in six months, and we might see a similar trend now. After-hours trading already shows a decline in September COMEX copper futures, reflecting market worries. The negative comments toward India hint at a weaker rupee and lower sentiment on the Nifty 50 index. The potential for a 25% tariff marks a significant escalation from earlier discussions. One-month forward contracts for the USD/INR currency pair are already showing increased hedging costs due to this uncertainty. Uncertainty about the Canadian trade deal is likely to raise volatility in the USD/CAD exchange rate. Since Canada is one of our largest trading partners, with monthly bilateral trade exceeding $70 billion, any disruptions could pose risks. It may be wise to consider options strategies that benefit from larger price fluctuations rather than predicting a specific direction. On the brighter side, the softer approach toward Brazil and the new agreement with South Korea provide some relief. The exemptions for Brazilian energy and aircraft sectors could create specific buying opportunities for stocks related to those industries. The resolution of the shipbuilding dispute with South Korea could also help stabilize the Korean won. Create your live VT Markets account and start trading now.

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US President Trump has confirmed he will attend the ASEAN Summit in Malaysia this October, as announced by Malaysian Prime Minister Anwar Ibrahim. An update on new tariffs for Malaysian goods is expected soon. The summit will take place from October 26 to 28, just before a 90-day trade truce extension announcement between the US and China. This timing suggests important discussions may happen at the event.

China’s Influence in ASEAN

China’s influence in ASEAN is on the rise, which could attract many high-profile attendees to the summit in Malaysia. Chinese President Xi Jinping, who visited ASEAN in April, might be there as well. This setting increases the chances for a meeting between Trump and Xi at the end of October, which could affect trade discussions. Observers should keep a close eye on developments. With the upcoming tariff announcement for Malaysia, we can expect immediate changes in the Malaysian Ringgit (MYR). The currency market will react first, making options on the USD/MYR pair very active. Looking back at early 2023, Malaysia’s trade with the US exceeded $40 billion, so any tariff changes will greatly impact the currency. The potential Trump-Xi meeting in October creates eight weeks of uncertainty in the markets. We should expect increased volatility in major indices like the S&P 500 and the Hang Seng. We witnessed similar patterns during the 2018-2020 trade tensions, where the VIX steadily rose before high-level talks.

Impact on Markets and Currencies

This setup presents a classic scenario for trading the Chinese Yuan and the US Dollar. The offshore yuan (CNH) is likely to reflect trade sentiment, while the dollar may gain strength if tensions escalate. Just last month, in June 2023, the CNH weakened significantly on rumors that the current trade truce might end, highlighting its sensitivity. The summit’s location in Malaysia also puts regional markets in the spotlight. The ASEAN economy is now the fourth largest in the world, with a combined GDP expected to reach $4.5 trillion by the end of 2025. A positive outcome from the summit could boost ASEAN-focused ETFs and currencies from key trading partners like Singapore and Vietnam. For the next few weeks, it’s wise to focus on trading the anticipation instead of the event itself. This means considering buying options now, such as straddles on the Hang Seng Index, to prepare for significant price swings as October approaches. Acquiring this volatility exposure in August is likely to be cheaper than waiting until late September when the event risks are already priced in. Create your live VT Markets account and start trading now.

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The Bank of Japan has kept its short-term interest rate at 0.5% and has raised its inflation forecast for the fiscal year to 2.7%. As a result, the yen has slightly strengthened, with the USD/JPY rate dropping below 149.00 and then further down to under 148.65 after the announcement. In China, the Manufacturing PMI fell to 49.3, showing contraction for the fourth month in a row. The Non-Manufacturing PMI stayed in expansion at 50.1, but this is the lowest it has been since November.

Australian Economic Data

June retail sales in Australia exceeded expectations, growing by 1.2% month-on-month. Additionally, building permits soared by 11.9%. RBA Deputy Governor Andrew Hauser spoke positively about the labor market and CPI data, but this did not change expectations for a potential rate cut. US Commerce Secretary Lutnick announced new trade agreements with Thailand and Cambodia. There is also a new trade deal with South Korea that includes a 15% US tariff, with South Korea promising to invest US$350 billion in the US. Stocks in the Asia-Pacific region showed mixed results: Japan’s Nikkei 225 rose by 0.9%, while Hong Kong’s Hang Seng fell by 1% and the Shanghai Composite dropped by 0.7%. Gold prices firmed but stayed below USD 3300.

Chinese Economic Slowdown

The ongoing contraction in China’s Manufacturing PMI, now at 49.3 for the fourth month straight, indicates a significant slowdown. This trend mirrors the difficulties in the property sector and weak domestic demand observed throughout 2023 and 2024. We should prepare for further weakness in assets tied to Chinese growth, like the Australian dollar and industrial commodities such as copper. The Bank of Japan is taking a more hawkish stance by raising its inflation forecast to 2.7% and keeping rates at a historically high 0.5%. This continues the policy normalization that started with the end of negative interest rates in 2024. With strong Japanese industrial production and retail sales data, we should expect further yen strength and seek opportunities to sell USD/JPY, especially during any rallies. New US trade agreements with South Korea, Thailand, and Cambodia indicate a return to the targeted trade policies of the late 2010s. The South Korean KOSPI index reacted positively to this news, rising by 0.65%. These agreements create specific winners and losers, suggesting pair trades such as going long on the South Korean won against currencies from countries still facing trade uncertainty. Australia presents a mixed picture: retail sales are booming (+1.2%), but terms of trade are declining. This creates uncertainty around the Reserve Bank of Australia’s rate decision in August, even though officials are cautiously optimistic. We can use options to trade the expected volatility in the AUD/USD pair leading into this meeting. Signs of risk aversion are emerging, with Hong Kong’s central bank repeatedly intervening to support its currency peg. Combined with China’s new restrictions on precious metals purchases, it appears that capital is becoming uneasy. The recent rise in gold prices, nearing $3,300 an ounce, is likely a response to these regional pressures. Create your live VT Markets account and start trading now.

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The Bank of Japan (BOJ) is carefully looking to return to normal policies, hinting at possible interest rate increases if economic and inflation forecasts are met. Although current underlying inflation is below the target, the BOJ expects it to rise gradually due to increased spending, higher wages, and better inflation expectations. The BOJ emphasizes that it will adapt its policies based on incoming data, as interest rates are still historically low. It also notes risks from uncertain global trade policies, the persistent impact of higher food prices, and weak export and production trends. While fiscal growth in the US and Europe could boost global demand, trade protectionism may slow it down.

Outlook and Timelines

Overall, the BOJ is not rushing to tighten its policies but is getting ready for possible rate increases by late 2025 or early 2026, depending on stable economic conditions and achieving inflation targets. The BOJ’s cautious stance indicates that the yen carry trade will likely be appealing for the next few months. We see little chance of an interest rate increase before the year ends, creating a good opportunity for traders. With the U.S. Federal Reserve keeping its policy rate near 4.75%, the significant interest rate gap favors betting against the yen in favor of the dollar. We need to monitor the data closely, just as the central bank does. The recent June 2025 numbers revealed core inflation at 1.8%, still below the 2% target, supporting a wait-and-see approach. Spring 2025 wage negotiations resulted in a solid 3.9% average raise, but this hasn’t yet fully led to the sustained inflation the BOJ wants to see.

Market Implications and Strategies

This outlook suggests that implied volatility for the yen is likely to remain low in the short term but will increase as we approach late 2025. Traders should think about buying longer-dated options on USD/JPY, especially options that expire in early 2026, to prepare for a potential policy change at a relatively low cost now. Looking back at the policy changes in late 2023 and 2024, we noticed that volatility surged in the weeks before the Bank made its moves, a trend we anticipate will continue. The mentioned risks from global trade and weak exports are crucial for strategy. Any sudden downturn in the global economy, especially in China or the U.S., could push back the BOJ’s timeline even more and boost the yen as a safe-haven currency. This reinforces the strategy of using options, as they provide limited risk while still allowing exposure to a potential rate hike. Create your live VT Markets account and start trading now.

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The Bank of Japan (BOJ) has decided to keep its short-term interest rate steady at 0.5%. This decision was unanimously supported by all members. Along with this, the BOJ has updated its inflation forecasts, revealing that they expect inflation to be higher. The new forecast for the core Consumer Price Index (CPI) for fiscal 2025 is 2.7%, an increase from the previous 2.2%. For fiscal 2026, the forecast went up to 1.8% from 1.7%, and for fiscal 2027, it is now projected to be 2.0%, up from 1.9%. The core-core CPI also saw similar updates, with forecasts for fiscal 2025, 2026, and 2027 changing to 2.8%, 1.9%, and 2.0%, respectively.

BOJ Inflation and Economic Outlook

The BOJ suggests that underlying inflation might start slow, but it is expected to gradually rise, aiming for a 2% target from fiscal 2025 to 2027. While risks to inflation and the economy appear balanced, they lean slightly downwards. There is also uncertainty regarding trade policies and their effects on the global economy and prices. Japan’s economy is showing moderate recovery. Inflation expectations are rising, accompanied by a gradual increase in wages and prices. Trade policy progress, especially with the Japan-U.S. trade agreement, is evident, but uncertainties still linger over future economic and trade conditions. The Bank of Japan has kept rates at 0.5% as anticipated. The key point is the significantly higher inflation forecast, with core inflation now estimated at 2.7% for this fiscal year. This suggests the bank may become more serious about future rate increases. This decision seems justified, especially since Tokyo’s core CPI for June 2025 unexpectedly reached 2.9%. Additionally, this year’s spring wage negotiations have resulted in an average increase of 4.5%, the highest in over 30 years. These figures indicate that the wage-price cycle the BOJ aims for is starting to take shape.

Strategies for Traders

For those trading derivatives, it’s important to consider interest rate swaps and futures. The market will likely begin pricing in a higher chance of a rate hike before the end of 2025 rather than waiting until 2026. We might want to adjust our positions for a steeper yield curve, anticipating that short-term policy rates will increase faster than expected. We should also brace for more volatility in Japanese government bonds (JGBs). We remember how small policy signals led to significant market fluctuations when the BOJ first began to change its yield curve control in 2023 and 2024. Buying options like straddles on JGB futures might be a smart strategy to profit from the anticipated market swings in the coming weeks. The yen’s situation is a bit more complex for option traders. Despite the BOJ’s shift towards a stricter approach, the yen has remained weak against the dollar, with USD/JPY recently trading above 165. This indicates that the popular carry trade, where traders borrowed yen at low rates, is slowly unwinding. Given this uncertainty, buying yen call options could be a good idea, acting as puts on the USD/JPY pair. A longer-term option, perhaps for late 2025, could allow us to profit from a sudden strengthening of the yen if the BOJ takes bolder actions than expected. However, there is a risk that these options could expire worthless if the bank continues to delay. Create your live VT Markets account and start trading now.

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The yen is gaining strength as traders await the Bank of Japan’s upcoming announcement amidst light trading. The statement and its updated outlook will likely be released soon, probably between 02:30-03:30 GMT or 22:30-23:30 US Eastern time. The yen’s rise has led to lower values for yen crosses, indicating a stronger currency. A good example is the USD/JPY currency pair. Earlier updates discussed the economic calendar and expectations regarding the Bank of Japan’s interest rate decision.

Current Market Trends

Today is July 31, 2025, and the yen is showing strength as we approach the next Bank of Japan (BoJ) meeting in August. This is normal behavior, as traders prepare for what might be a more aggressive policy change. There has been cautious optimism in the market for several weeks. This situation is influenced by a significant policy change in March 2024 when the BoJ moved away from negative interest rates. Japan’s national core inflation was reported at 2.5% in June 2025, staying above the bank’s 2% target. This ongoing pressure raises the possibility of another small rate increase. For those trading derivatives, expect an increase in implied volatility for USD/JPY options in the coming weeks. This uncertainty can make options more expensive, creating chances for strategies that benefit from big price changes, such as long straddles. The market anticipates larger price swings, and traders can leverage options to profit from this.

Focus on USD/JPY Pair

The spotlight is on the USD/JPY pair, which is very sensitive to the interest rate differences between Japan and the U.S. It’s worth remembering that the pair surged toward the 160 level in 2024, prompting currency intervention. Any sign of hesitation from the BoJ could send the pair rising again. However, we must also consider the BoJ’s challenging position amid Japan’s fragile economic recovery. After poor economic performance in much of 2024, recent GDP figures show only slight improvement. This economic weakness is why the BoJ might not meet market expectations and could keep its current policy unchanged for now. Create your live VT Markets account and start trading now.

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China Enforces Stricter Regulations

Starting this Friday, we’ll see how new Chinese rules on cash transactions for precious metals impact the market. This policy targets specific buyers in the world’s largest gold-buying country. The important question is how much of China’s physical gold demand depends on these large, now-reportable cash transactions. It’s important to consider that consumer demand in China reached 210 tonnes in the second quarter of 2025. This adds more uncertainty to the situation, especially since the People’s Bank of China halted its gold purchases in May and June after a long buying trend. This new rule could be another challenge for gold demand. The most straightforward interpretation is that these regulations will reduce physical demand from cash-heavy buyers. With illegal or grey-market purchases becoming harder, we might see a short-term decline in spot gold prices. This could present opportunities for traders looking to take short positions on gold futures in the coming weeks. However, we don’t know the true size of this cash-based market, which creates uncertainty and can lead to price swings. This uncertainty makes options strategies that profit from price movements, regardless of direction, especially appealing. Keeping an eye on implied volatility in gold ETFs will be crucial to understanding market anxiety. In the past, we noticed similar market reactions when India imposed stricter gold import and transaction rules in the mid-2010s, which caused initial price fluctuations. Those incidents showed that disrupting a major source of gold demand, even briefly, can open up short-term trading opportunities. History indicates that such regulatory changes often have a significant immediate effect on market sentiment. Traders should also watch the price difference between the Shanghai Gold Exchange and the London Bullion Market. A large drop in Chinese demand could shrink the typical premium on Shanghai gold or even turn it into a discount. This shift could create arbitrage opportunities for those able to trade across different exchanges. Create your live VT Markets account and start trading now.

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In June 2025, Australia’s private sector credit rose by 0.6% compared to the previous month, beating the expected 0.5% increase. In May, credit had also increased by 0.5%. Over the year, private sector credit grew by 6.8%, which is a slight decrease from the previous 6.9%. Business credit dipped a bit month-over-month, while housing and personal credit both went up.

Reserve Bank Of Australia Data

The Reserve Bank of Australia released this data. They also noted that recent CPI data was well-received. As of today, July 31, 2025, the better-than-expected private sector credit data shows the economy is still strong. The 0.6% monthly increase, fueled by housing and personal loans, indicates strong consumer demand. This typically suggests that the Reserve Bank of Australia (RBA) might keep a hawkish stance. However, we need to consider the RBA’s recent comments. Deputy Governor Hauser called the latest CPI data “very welcome,” which signals a dovish approach. This means the central bank is more focused on easing inflation rather than the positive credit numbers. This situation is reminiscent of late 2023, when the RBA kept its cash rate at 4.35% while monitoring falling inflation. Recent data showed that the CPI for Q2 2025 eased to 3.4%, suggesting that the bank’s strict policies are working. Therefore, traders should view this credit data as less important for the RBA’s immediate decisions.

Market Implications

For interest rate derivatives, the chances of a rate hike in August are very low. We believe traders should prepare for an extended pause, with expectations for RBA rate cuts likely moving to early 2026. This is supported by rising prices in ASX 30 Day Interbank Cash Rate Futures for December 2025 and March 2026 contracts. This likely limits the strength of the Australian dollar. With the RBA appearing less aggressive than the US Federal Reserve, the interest rate edge for the AUD is diminishing. Options traders might look for strategies that hedge against or take advantage of potential AUD weakness against the USD in the coming weeks. Given the mixed signals from strong credit growth and dovish central bank talk, we expect implied volatility to stay high. This market environment isn’t about making clear predictions but rather managing fluctuations in prices. Traders may want to consider strategies that thrive in range-bound markets until the RBA offers clearer guidance. Create your live VT Markets account and start trading now.

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