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Various FX option expiries on Friday include multiple levels for EUR/USD, USD/JPY, AUD/USD, and USD/CAD.
The yen strengthened as positive Japanese data emerged, while Asia-Pacific stocks rose amid mixed signals from the U.S.
The dollar fell as traders waited for the U.S. jobs report, and Fed’s Goolsbee hinted that the September meeting is busy. The yen gained strength after Japan released better wage and spending data, raising hopes for a Bank of Japan interest rate hike. Japanese auto stocks rose thanks to U.S. tariff relief.
Chicago Fed President Austan Goolsbee showed uncertainty about a possible rate cut at the September FOMC meeting. Key Japanese data exceeded expectations: real wages climbed for the first time since December, cash earnings grew at their fastest rate in seven months, and household spending increased for the third straight month.
OpenAI and Market Dynamics
In other news, OpenAI plans to work with Broadcom to make AI chips by 2026. U.S. Treasury yields fell, and equities in the Asia-Pacific region climbed, with Japan’s Nikkei 225 rising by 0.9%. Looking at specific markets, Hong Kong’s Hang Seng grew by 0.5%, the Shanghai Composite increased by 0.25%, and Australia’s S&P/ASX 200 rose by 0.3%. Gold prices went above $3,550. With the U.S. jobs report coming out today, we should expect considerable market movement. Using options straddles on major currency pairs like EUR/USD can help us make money on big price shifts, no matter the direction. History shows that surprises in Non-Farm Payrolls data can cause a 1% change in these pairs within the first hour.Federal Reserve and Bank of Japan Dynamics
The difference in direction between the Federal Reserve and the Bank of Japan is an important focus. Japan’s recent strong wage data, built on the high settlements seen in the 2024 Shunto negotiations, suggests a BoJ rate hike is becoming more likely. This makes it a good time to buy put options on the USD/JPY pair, expecting further yen strengthening in the coming weeks. In the stock market, tariff relief gives a clear boost to Japanese automakers. We might consider buying call options on certain auto exporters or a related sector ETF. For broader U.S. indices, the uncertainty around the September Fed meeting calls for a cautious stance, like using bull call spreads on the S&P 500 to reduce risk. Gold’s strong position above $3,550 is especially notable with a weak dollar and falling Treasury yields. This situation is similar to late 2023 and early 2024, which led to a big rally in gold as the market began to expect Fed rate cuts. We should view this as a supportive environment for long positions, potentially using call spreads to help manage entry costs. Create your live VT Markets account and start trading now.Japan’s wage increase in July raises expectations for a possible Bank of Japan rate hike
In July, wages in Japan saw a significant increase, marking the first positive real earnings in seven months. Data from the Bank of Japan showed that nominal wages rose by 4.1% compared to last year. This was an improvement from the revised 3.1% increase in June and above the 3% forecast from economists. This rise in wages is the largest since December. Real cash earnings grew by 0.5%, contrary to expectations of a 0.6% drop.
Positive Outlook for Japan’s Economy
The increase in wages paints a hopeful picture for Japan’s economy, hinting that domestic demand may stay strong despite global challenges. With rising earnings from regular pay and bonuses, incomes are gradually increasing, which can lead to higher consumer spending. This wage growth may prompt the Bank of Japan to raise interest rates. Some analysts are even predicting a rate hike as soon as October due to this upward trend. However, there are still concerns regarding potential political risks and tariffs that could affect the Bank’s outlook. We are seeing clear signs of ongoing wage pressure in Japan. In July, nominal pay surged by 4.1%, resulting in a 0.5% increase in real earnings—the first positive change in seven months. This trend indicates that domestic demand could prove stronger than expected, despite possible external shocks. The robust wage growth raises the chances of a Bank of Japan rate hike, possibly at the meeting on October 28th. Current market expectations suggest there’s about a 60% likelihood that the Bank will end its negative interest rate policy at that time. If this happens, it will be the first rate increase since 2007, signaling a major shift in monetary policy.Impact on Inflation and Financial Markets
The inflation data from late August backs this view, showing the core CPI steady at 2.9%, which is above the Bank’s 2% target for the 17th month in a row. For foreign exchange traders, this suggests preparing for further strength in the yen. We’ve already seen the USD/JPY pair fall from 152 to around 148.50, making buying call options on the yen a potentially good strategy to take advantage of this trend. In the stock market, this scenario leads to a more cautious approach for the wider Nikkei 225 index. The Nikkei Volatility Index has increased to 19.5, indicating growing investor anxiety over potential interest rate hikes. However, traders might find opportunities in Japanese banking stocks, which tend to gain from rising interest rates. The Japanese government bond (JGB) market is also likely to see significant changes. The possibility of a rate hike suggests that JGB yields will rise, making short positions on JGB futures appealing either as a hedge or a speculative move. We are keeping a close eye on the 10-year yield to see if it breaks above the Bank of Japan’s current policy range. Create your live VT Markets account and start trading now.Automakers’ electric vehicle sales targets in Canada postponed to 2026 to ease pressure
Canada is delaying the requirement for automakers to achieve minimum electric vehicle (EV) sales targets by 2026. This change is aimed at easing pressures on the car industry affected by tariffs.
The government will announce these adjustments as part of a broader plan to support industries hit hard by trade policies. Previously, a target was set for at least 20% of new car sales to be zero-emission by the 2026 model year.
Review of the Electric Vehicle Availability Standard
Instead of sticking to the sales target, the government will review the electric vehicle availability standard. This review will help ensure it doesn’t create unnecessary challenges for car manufacturers. This policy shift benefits traditional automakers like Ford, General Motors, and Stellantis, which have strong operations in Canada. The delay in the 20% EV sales rule reduces immediate financial pressures from the expensive transition to EVs and the U.S. tariffs reinstated earlier in 2025. We might consider buying short-term call options on these legacy manufacturers, as this news gives them more operational flexibility. The impact will also likely affect the auto parts supply chain, especially for companies focused on internal combustion engine components. Canadian suppliers like Magna International, which have faced challenges this year due to tariffs and retooling efforts, might experience a temporary bounce in their stock prices. This development could be a good opportunity to explore bullish option strategies on these suppliers, as their traditional business lines benefit from an extended lifespan. For commodities, this news is negative for battery metals that are already struggling. Global lithium carbonate futures have dropped over 30% from their late 2024 peaks due to weak demand. A delay in one of the G7’s EV mandates will likely add to this negative sentiment. There may be a chance to short lithium futures or buy puts on lithium mining ETFs, as we expect Canadian demand to be slower than previously expected.Support for Canadian Oil and Gas Producers
On the other hand, this decision helps Canadian oil and gas producers by ensuring stronger gasoline demand than anticipated. We have observed steady fuel consumption in Canada throughout 2025, and this policy reinforces that trend. This makes call options on Canadian energy companies like Suncor Energy an appealing hedge against declines in the green energy sector. This government action seems to respond to market realities rather than completely reversing long-term policies. Recent data from Statistics Canada revealed that new zero-emission vehicle registrations accounted for just 12.1% of sales in the second quarter of 2025, showing a slight decrease from the previous quarter. Thus, our trading approach should be tactical and short-term, focusing on relief for traditional industries instead of betting against the entire EV transition. Create your live VT Markets account and start trading now.US dollar weakens broadly during Asian trading as many currencies gain against it
The US dollar is losing value in Asian trading. This is due to lower US yields, expected interest rate cuts by the Federal Reserve, and worries about the US economy’s health.
The dollar is dropping against several currencies, including the euro, Australian dollar, New Zealand dollar, and British pound. While the Japanese yen is influencing the market somewhat, the dollar’s weakness is not mainly the result of the Bank of Japan or the yen.
Market Conditions Favoring A Lower Dollar
Right now, market conditions favor a weaker dollar, with many international currencies gaining against it in this trading session. The dollar is significantly weakening as traders expect the Federal Reserve to cut rates before the year ends. The Non-Farm Payrolls report from August 2025 came in under expectations at just 110,000, reinforcing this belief. As a result, the 10-year Treasury yield has fallen below the crucial 3.75% level. Traders may want to consider positions that benefit from a further decline in the dollar, such as buying call options on the euro (EUR/USD). The most recent core PCE inflation data for July 2025 showed a modest 2.9% annual rise, giving the Fed enough leeway to ease its policies. This strategy offers a low-risk way to take advantage of the anticipated shift.Potential For Choppy Trading
The dollar’s weakness is widespread, prompting us to look at long positions in currencies like the Australian dollar, which tends to benefit from a weaker dollar. Given the likelihood of volatile trading around upcoming Fed announcements, using options can help manage risk. Implied volatility in major currency pairs has increased, indicating that the market is preparing for larger fluctuations. We’ve seen a similar situation in the past, particularly during the Fed’s policy shift in early 2019. Back then, transitioning from raising rates to pausing and eventually cutting rates led to a period of dollar weakness. This historical context suggests that the current trend could persist into the final quarter of 2025. Create your live VT Markets account and start trading now.ING expects a possible BoJ rate hike due to wage growth amid political and trade concerns.
Recent data from Japan supports the expectation that the Bank of Japan (BoJ) will raise interest rates in October. Real wages climbed 0.5% year-on-year in July, the first positive change since December. Household spending grew by 1.4% year-on-year, but this was below the expected 2.3% increase.
Labour cash earnings jumped 4.1% year-on-year in July, beating last month’s 3.1% rise and the forecast of 3.0%. Bonus pay increased by 7.9%, and base pay rose by 2.6%. Following this data, the yen strengthened, making a rate hike more likely.
Minimum Wage Rise
Japan’s minimum wage will rise to ¥1,121 from ¥1,055, which boosts wage growth. ING predicts that the BoJ will raise rates by 25 basis points in October, thanks to strong wage growth and solid GDP progress in the first half of the year. Despite these promising economic signs, political and trade risks remain. A 15% tariff agreement between the U.S. and Japan adds external pressure. Plus, Prime Minister Shigeru Ishiba may face challenges within the ruling LDP, which could create political uncertainty in financial markets. The recent jobs and spending data, as seen on September 5th, 2025, strongly points to a likely BoJ rate hike next month. With real wages finally showing positive growth, the BoJ has good reasons to act. This is an important development we should prepare for in the upcoming weeks. Given the immediate rise of the yen following this news, traders might want to consider opportunities that benefit from a stronger currency. This could mean buying call options on the JPY or put options on the USD/JPY pair before the October meeting. Implied volatility in yen options is already increasing, indicating that the market is anticipating a significant movement.Policy Normalization
This potential rate hike would continue the normalization of policy that started when the BoJ ended its negative interest rate policy in March 2024. Core inflation has been above the central bank’s 2% target for over two years, reinforcing the argument for tighter policy. This is happening while the yen is trying to recover from the multi-decade lows seen in 2023 and 2024. For those trading interest rates directly, now is a good time to look at futures on Japanese Government Bonds (JGBs). Positioning for rising short-term rates could be lucrative, as the market has already priced in a 25 basis point increase. We are also seeing more activity in derivatives tied to the short end of the yield curve. This outlook has clear implications for Japanese equities, especially the Nikkei 225. Higher borrowing costs usually pressure stocks, so we should be ready for possible weakness in the index. Hedging long equity portfolios with Nikkei put options or setting up short positions via futures could be a smart strategy. However, we must keep in mind the external risks, like the new 15% U.S. tariff and potential political instability in Japan’s ruling party. These factors could lead to unexpected volatility and suggest using strategies like straddles to trade on the uncertainty. These risks could slow the yen’s rise or even trigger a reversal if they worsen. Create your live VT Markets account and start trading now.PBOC sets USD/CNY rate at 7.1064, injecting liquidity while also withdrawing a large amount
The People’s Bank of China (PBOC) has set the yuan’s daily midpoint at 7.1064 against the US dollar, lower than the estimated rate of 7.1390. The previous close was at 7.1401. The PBOC uses a managed floating exchange rate that allows for a fluctuation of plus or minus 2%.
Additionally, the PBOC injected 188.3 billion yuan into the market through 7-day reverse repurchase agreements at an interest rate of 1.40%. However, the net result was a withdrawal of 594.6 billion yuan. Earlier reports hinted that the PBOC might increase liquidity in the money markets this month.
Yuan Withdrawal Strategy
This week, the PBOC completed a net withdrawal of 1.2 trillion yuan from the banking system. This is the largest withdrawal in two months, carried out through open market operations. Today’s yuan fixing at 7.1064 is much stronger than expected, showing a clear aim to support the currency. This decisive action indicates that authorities are determined to prevent further yuan depreciation. For traders, this suggests that the USD/CNY rate is unlikely to rise in the short term. This strategy is further supported by recent data: China’s August exports unexpectedly grew by 1.5% year-over-year, contrary to predictions of a decline. With the US Federal Reserve hinting at a pause last week, the global situation favors a stronger yuan. This gives the central bank a solid reason to justify its actions beyond just market reactions.Impacts on Financial Conditions
Meanwhile, the significant liquidity drain of 1.2 trillion yuan this week is making borrowing more expensive in China. This discourages bets against the yuan and adds extra support for the currency. We should see this as a tactic to push short sellers out, even as reports of possible future injections create some uncertainty. We’ve seen this approach in the past, especially during the pressures of 2023 when the central bank often used the daily fixing to counter market weaknesses. This history shows a strong commitment to stability, suggesting that this isn’t just a temporary measure but a strategic move. It boosts our confidence that the 7.15-7.20 range will be a solid ceiling for now. Given these conditions, consider option strategies that could profit from limited upside in the US dollar against the yuan. Selling out-of-the-money USD call options against the offshore yuan (CNH) is an effective way to earn premium, assuming the currency pair stays within a cap. This is a more cautious strategy compared to buying puts since it benefits from both stability and yuan strength. Create your live VT Markets account and start trading now.Eric Trump hints at a major announcement about the family’s cryptocurrency profits
Eric Trump will make a “big announcement” on Friday, sparking speculation about what it might be, particularly the possibility of it relating to cryptocurrency.
There is growing interest in the Trump family’s involvement in cryptocurrency and what financial activities they could be pursuing. However, specific details about Eric Trump’s announcement remain undisclosed.
The Trump family is known to have made significant money from various ventures, raising questions about whether Eric Trump will discuss their financial interests.
Such announcements often signal potential market volatility, especially in speculative areas. Investors should consider buying options contracts on crypto assets that react to news, as this strategy allows for profit from large price swings without needing to predict the direction. The focus should be more on market reactions than on the project itself.
Ahead of this potential announcement, we see trends similar to the rise of “PoliFi” tokens in 2025. Recent data shows that wallets associated with tokens like $TRUMP have experienced a 60% increase in trading volume in the past 72 hours. This suggests that savvy traders are already preparing for a significant market shift.
We also recall the Trump NFT drops from 2022 and 2023, which led to huge but brief price increases. Traders who anticipated the volatility were able to make substantial profits by buying ahead of time and selling after the initial surge. Historical trends indicate that the excitement about the announcement often has a bigger impact than the announcement itself.
For the coming weeks, a good strategy might be to set up a long straddle on Bitcoin or a related asset by purchasing both a call and a put option. This approach can yield profits if the price moves sharply, regardless of the news’s specifics. The risk lies in a lackluster announcement leading to insignificant market reaction, which could decrease the value of our options.
After Friday’s initial response, we should keep an eye out for a quick decline in implied volatility. Data from last month showed that implied volatility on crypto derivatives rose by 20 points before an event but dropped by half within 24 hours afterward. This offers an additional chance to sell options to traders who miss the early opportunity.
Oil prices decline slightly for three straight sessions as OPEC+ output talks approach and U.S. inventory surprises increase
Oil prices dropped for the third day in a row on Friday as traders looked ahead to an OPEC+ meeting. This meeting, which includes eight OPEC nations and partners like Russia, will discuss possibly raising production in October.
The proposed production increase aims to reverse part of the 1.65 million barrels per day cut, which accounts for about 1.6% of global demand and is set to happen over a year earlier than planned.
U.S. Crude Inventory and Its Market Impact
The market also reacted to an unexpected rise in U.S. crude inventories, which increased by 2.4 million barrels last week. This was contrary to the expected decrease of 2 million barrels, as refineries went into maintenance mode. Meanwhile, the API reported a smaller increase of about 600,000 barrels. We are closely monitoring the OPEC+ meeting this weekend. A decision to raise production by 1.65 million barrels per day could push prices down heading into October. The uncertainty before this significant policy announcement creates chances for volatility-focused trades. The market reflects this, as implied volatility for front-month WTI options has jumped to a six-week high of 39%, showing nerves about potential price shifts. Given the pivotal nature of the weekend’s decision, traders are preparing for price swings using options strangles. A surprise to keep production steady could lead to a sharp price rally, while an expected increase might speed up the current decline. Recently, we saw similar spikes in volatility around late 2023 OPEC+ meetings when the group struggled to reach consensus on production cuts. The unexpected 2.4-million-barrel build in U.S. crude inventories signals bearish trends in the short term. Data from the Energy Information Administration (EIA) shows that refinery utilization has dropped from 93.1% to 89.5% nationwide, highlighting that fall maintenance is fully underway. This decrease in domestic crude demand is likely to last for several more weeks.Market Strategy and Outlook
This short-term supply surplus is weighing on the futures market, and we are observing a possible shift to a deeper contango, where near-term prices are lower than future prices. This scenario benefits traders who set up calendar spread positions, such as selling the October contract while buying the December contract. This strategy profits if the price difference between the two months widens due to immediate oversupply. With both the potential for OPEC+ to increase supply and confirmed weaker U.S. refinery demand, the path forward seems downward in the coming weeks. We are considering buying put options with strike prices near $70 for October expiration on WTI, currently trading around $76.50 per barrel. This provides a defined-risk strategy to profit from a possible decline driven by these bearish factors. Create your live VT Markets account and start trading now.Yields on US Treasuries drop to their lowest levels since May 2023
US Treasury yields have fallen to their lowest levels since May. The 10-year yield is around 4.1569%, while the 2-year yield is approximately 3.5837%. This trend indicates that fixed interest rates in the bond market are decreasing.
The drop in yields mirrors current market conditions and investor sentiment. These yield changes are being closely monitored, as they can signal wider economic trends.
