Gold is trading in a narrow range due to economic data, easing trade tensions, and a weak US Dollar. Currently, Gold is priced around $3,310 per ounce, down from a high of $3,345.
A new US–EU trade deal has reduced tariff risks by lowering most EU goods tariffs to 15%. This agreement enhances US access to EU markets in digital services, agriculture, and clean energy, similar to the recent US–Japan trade deal.
Impact of a Strengthening US Dollar
The US Dollar has strengthened because of new trade deals before the FOMC meeting, leading to less demand for safe havens like Gold. The agreement promotes cooperation on key minerals, allowing EU exporters to benefit from IRA incentives in the US.
Gold continues to trade close to $3,340 as optimism about global trade stability grows, decreasing safe-haven demand. A strong US labor market eases pressure on the Federal Reserve to cut interest rates, supporting the Dollar and resulting in higher yields, which typically is negative for Gold.
The FedWatch Tool shows a 59.5% chance of a rate cut in September, with a 38.9% chance of rates remaining the same. Ongoing trade talks with China are crucial; failure could lead to increased tariffs and inflation.
Gold’s technical chart displays a symmetrical triangle pattern, indicating potential breakout opportunities. Immediate support is at $3,350, while resistance is around the 23.6% Fibonacci retracement level near $3,372, highlighting important price points for future movements.
Though historically a store of value, Gold serves as a hedge against inflation and falling currencies. Its inverse relationship with the US Dollar and US Treasuries means it often rises when the Dollar weakens and during global instability.
Trends in Central Bank Purchasing
Central banks have become major Gold buyers, adding 1,136 tonnes worth about $70 billion to their reserves in 2022. This marks the highest yearly purchase since records began, showing Gold’s ongoing role in economic strategies.
Gold is currently trading around $2,330 per ounce, caught between mixed economic signals and a weak US Dollar. Recent strength in the Dollar, aided by the US-EU trade agreement, is limiting potential gains. This has reduced interest in Gold as a safe haven for now.
A strong US labor market added an unexpected 272,000 jobs in May, lowering the urgency for the central bank to cut interest rates. Consequently, the likelihood of a September rate cut has dropped below 50%, according to the latest FedWatch data. This supportive outlook for higher interest rates traditionally affects Gold negatively.
From a technical perspective, we are observing a consolidation pattern that hints at an upcoming significant move. Immediate support for Gold is near $2,300, and breaking below this level may lead to further declines. Resistance is forming around $2,375, which is crucial to break to maintain the prior uptrend.
Despite short-term pressures, strong demand from global central banks provides a solid foundation for Gold prices. These institutions added 290 tonnes to their reserves in the first quarter of 2024, continuing a trend of historic buying. This strategic accumulation highlights Gold’s role as a key reserve asset against currency depreciation.
Given these mixed signals, traders should consider strategies that could benefit from potential volatility. Buying straddles or strangles allows traders to profit from significant price moves in either direction, which seems likely given the current tension between negative economic data and strong institutional demand. This approach protects against the uncertainty of what may drive the next major trend.
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The White House will release a crypto policy report on July 30. This report, which was originally expected on July 22, is now confirmed. It comes from the President’s Working Group on Digital Assets after a 180-day review following an executive order from January.
Strategic Bitcoin Reserve
A key part of the report is the Strategic Bitcoin Reserve, a proposed stockpile of Bitcoin held by the U.S. government. The report is expected to disclose how much Bitcoin the government owns, primarily gained through legal seizures. It will likely outline the reserve’s role in the country’s digital asset strategy.
The report may also suggest a federal regulatory framework for the issuance, management, and use of digital assets in financial markets. The crypto industry is watching closely, as these recommendations could significantly shape future policies and market structures.
The report’s release on July 30 is a big event, likely leading to increased market volatility. Implied volatility for Bitcoin options set to expire in early August is expected to rise as traders react to the news. This scenario is favorable for strategies that benefit from large price movements, such as buying straddles or strangles.
The Strategic Reserve proposal is crucial, especially since government wallets already contain over 214,000 BTC from seizures. If the policy establishes this as a long-term holding instead of something to sell, it would reduce future selling pressure—an encouraging sign for the market. We could see a spike in call option buying and more long futures positions if there are leaks suggesting this outcome.
Government And Regulatory Actions
We’ve seen similar reactions to significant government and regulatory actions before. When the spot Bitcoin ETFs were approved in January, the market experienced a brief sell-off followed by a sustained rally, since the news was largely anticipated. A “sell-the-news” reaction could happen again, so traders should be cautious of initial market shocks.
In addition to the stockpile, the proposed federal regulatory framework carries its own risks. Vague or overly strict regulations could unsettle the market, possibly causing a sharp downturn. To prepare for this, it may be wise to hedge long positions by buying protective put options.
As the date approaches, we will monitor derivatives data such as funding rates on perpetual swaps and open interest on CME. A significant rise in open interest would suggest that institutional investors anticipate a major price movement. The clarity sought since the last administration’s executive order is nearing, and we expect to see confidence first in the derivatives markets.
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The economic calendar for Asia on Tuesday, July 29, 2025, is quite empty, featuring only a few data points and events. The UK’s BRC inflation indicator for shop prices in July is expected to have minimal effect on the market.
Japan’s Ministry of Finance will auction 2-year Japanese Government Bonds (JGBs) at 2335 GMT, which is 1955 US Eastern Time. This auction may attract bond traders, as yields in Japan have settled for now.
Opportunity In Sparse Event Schedule
With the light calendar, as noted by Sheridan, we see this as a chance rather than a time to tune out. Fewer scheduled events often lead to lower implied volatility, making options contracts more affordable. This is a great time for us to position ourselves for future market movements at a bargain before the next big event.
The phrase “for now” regarding the stabilization of Japanese bond yields is essential for derivative traders. The Bank of Japan’s gradual shift from its very loose monetary policy has created some tension. Historical data indicates that calm periods in USD/JPY frequently precede sudden market shifts. With 3-month implied volatility for this currency pair currently around 8.5%, it’s wise to buy long-dated strangles to prepare for the upcoming changes.
While the BRC report from the UK may seem minor, the broader trend of ongoing inflation and central bank reactions is still the main driver of the market. Even small reports can lead to significant market reactions if they disrupt the prevailing narrative, especially when trading volume is low. We can take advantage of this quiet time by setting up cost-effective calendar spreads on FTSE 100 options, selling cheaper front-week options while buying positions in the following month.
Market Volatility Observations
The current state of low realized volatility is reflected in major indices like the S&P 500, which has a 10-day historical volatility of under 10%. This situation is unusual and usually doesn’t last long. Periods of low activity have often preceded sharp market corrections, as seen in late 2019 before the crash in 2020. Therefore, we view this as an ideal time to build a portfolio of inexpensive out-of-the-money puts on major indices or to purchase VIX calls as a hedge.
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As the Federal Reserve (Fed) keeps interest rates between 4.25% and 4.5%, it’s important to understand how this affects Individual Retirement Accounts (IRAs). These accounts, including Traditional and Roth IRAs, benefit from tax advantages and are influenced by the Fed’s monetary policies.
When interest rates rise, bond fund values in IRAs may drop in the short term. However, higher-rate bonds can increase income over time. On the flip side, when rates fall, stocks might do better, as companies can borrow money at lower costs, which can improve equity-focused IRA portfolios.
Market predictions suggest the Fed may lower rates in September due to stable inflation and a slowing economy. For IRA holders with bonds, it’s essential to pay attention to how interest rates impact asset values. Falling rates could make bonds more valuable, so it may be wise to include high-yield bonds or extend bond durations in your strategy.
It’s also crucial to have a diverse mix of IRA investments, including stocks, bonds, and other assets. This planning is especially important for those close to the age for Required Minimum Distributions (RMDs), as market conditions can influence withdrawals. Unlike 401(k) plans, IRAs allow for a wider range of investment options, enabling more personalized financial strategies. However, market ups and downs can pose risks to IRA portfolios, so diversification is a smart way to protect investments.
Currently, the market expects a significant possibility of a rate cut by September. This view is supported by the CME FedWatch tool, which shows a greater than 60% chance of a rate cut. This anticipation is crucial for the market, meaning we should focus on the volatility that may come with this policy change. Our strategies should be ready to take advantage of the market’s reactions, whether the Fed meets expectations or surprises everyone.
With the CBOE Volatility Index (VIX) around a low 13, we think that the current option premiums may not fully reflect potential sharp price movements. This calmness, in a time of slower economic growth and a Consumer Price Index reading of 3.3%, presents a chance for us. We can set up positions using options on major indices to benefit from an expected rise in volatility as the meeting date approaches.
Discussions about bond sensitivity can also be traded through interest rate futures and options. Historically, the first rate cut in a cycle often leads to a rally in government debt, as yields drop in anticipation. Therefore, we are considering long positions in Treasury note futures to profit from this expected decline in yields.
In this environment, we need a strategy that can benefit from increased market fluctuations while managing risk. Past experiences show that the time before a major policy change tends to be more volatile than afterward. Thus, we won’t wait for the official announcement. Using strategies like straddles or strangles on key stock indices can help us profit from significant price movements, no matter which direction they take.
While diversification is key, we also want to diversify our derivative strategies. We are looking at currency markets too, as a policy change will likely impact the U.S. dollar directly. A rate cut could weaken the dollar, creating clear opportunities in currency futures and options against the Euro or Yen.
Market Volatility Trends
The US Dollar (USD) is bouncing back thanks to reduced global trade tensions and expectations that the Federal Reserve will keep interest rates steady. New trade deals, particularly between the US and EU, are boosting the USD as the August 1 tariff deadline approaches, making the market cautious.
The US Dollar Index (DXY), which measures the USD against six major currencies, has risen for three consecutive days, reaching about 98.60—the highest level in a week. The recent US-EU trade deal includes a 15% tariff on certain EU imports but provides exemptions in key sectors. Additionally, the EU has committed to purchasing $250 billion worth of US liquefied natural gas annually.
EU-US Energy Investment
The EU has also pledged $600 billion to invest in the US, focusing on clean energy and other vital areas. While existing tariffs on steel and aluminum continue, a quota-based system may be introduced later. Discussions between US and UK leaders echoed similar views, with tariffs remaining unchanged for the UK.
Oil prices are rising due to geopolitical tensions, making the economic situation more complex. However, trade developments are bringing optimism, as reflected by S&P 500 futures rising 0.4%. Caution still exists as we await the Federal Reserve’s decision on interest rates.
The current recovery of the dollar signals important trends for the upcoming weeks, especially with the US Dollar Index staying strong above 105. This scenario suggests that traders should position themselves for continued dollar strength against other major currencies.
Monetary Strategy and Dollar Strength
Recent data shows strong job growth, with over 272,000 jobs added in May and inflation steady at around 3.3%. This supports the idea that the central bank will remain steady. The CME FedWatch Tool indicates that there is over a 90% chance that interest rates will stay the same soon. This certainty encourages strategies that benefit from low volatility and a strong dollar.
While optimism from trade is present, we must also be cautious, as indicated by the Volatility Index (VIX) staying in the low teens. Buying call options on the dollar can offer a way to take advantage of its potential upside while keeping risks defined. This allows for a flexible response to positive market feelings without overcommitting.
Historically, times when central banks keep rates high to tackle inflation lead to lasting currency strength. We believe that selling out-of-the-money put options on the dollar could be an effective strategy, generating income from the premium collected and benefiting if the dollar remains stable or gets stronger.
High oil prices, with WTI crude recently trading above $80 a barrel, further strengthen the case against quick rate cuts. This inflationary pressure suggests that the central bank is likely to hold its current stance, which is beneficial for the currency. The announced energy purchase commitments will also maintain consistent demand for the dollar.
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Mexico’s trade balance in June was $0.595 billion, a significant improvement from the previous $-0.059 billion. This indicates a positive shift in Mexico’s economic activities.
The AUD/USD pair is in a downward trend, approaching the 0.6500 level, as the US Dollar gains strength. Meanwhile, the EUR/USD pair has faced significant losses, slipping below 1.1600 due to the Dollar’s robust performance following trade agreements.
Gold And Ethereum Prices
Gold prices have fallen to about $3,300 per troy ounce as trade confidence rises after new agreements between the US and EU. Ethereum is currently valued at $3,803, with a recent peak of $3,941, buoyed by positive movements in the digital asset market.
The Federal Reserve is under scrutiny for delaying rate cuts amid ongoing tariff uncertainties and a seemingly stable economy. There are worries the Fed may have missed its chance, especially as signs of weakness appear in the labor market.
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Federal Reserve’s Market Influence
The Federal Reserve’s reluctance to cut rates is a key factor impacting the markets. Recent inflation data shows the Consumer Price Index at 3.3% for the 12 months ending May 2024, which supports the Fed’s decision and keeps the US Dollar strong. This suggests that derivative positions favoring the Dollar are appealing for now.
The differences in central bank policies make shorting the EUR/USD pair an attractive option, especially since the European Central Bank has started to ease with a recent rate cut. We also see the Australian Dollar as vulnerable due to its sensitivity to global risk and the Dollar’s strength. Therefore, buying put options for these currencies may be a wise strategy.
However, we should remain alert for signs of economic weakness, as evidenced by US job openings dropping to 8.1 million in April 2024—a three-year low. If the labor market worsens, this could lead to a quick policy reversal, weakening the Dollar and boosting safe-haven assets. In this case, call options on gold, which is currently around $2,300 per ounce, might provide effective protection against a sudden shift in monetary policy.
Mexico’s recent trade surplus highlights its economic resilience, a quality not always found in emerging markets. This strength presents an opportunity for long positions in the Mexican Peso compared to currencies facing greater challenges. We believe this could be a good relative value trade in the coming weeks.
The digital asset market is showing its own dynamics, with Ethereum displaying notable strength. Historically, cryptocurrencies have sometimes acted as a hedge during periods of uncertainty in fiat currencies, a trend we are closely observing. Therefore, we will manage crypto derivatives separately from our broader macroeconomic approach.
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Mexico’s seasonally adjusted unemployment rate dropped to 2.6% in June, down from 2.7%. This change reflects shifts in the job market.
The EUR/USD currency pair decreased to multi-day lows around 1.1630, mainly due to a strong US Dollar. The Euro is struggling after the European Central Bank’s recent decisions and a new EU-US trade agreement.
Volatility in GBP/USD Pair
The GBP/USD pair is experiencing fluctuations, trading just above 1.3400. The strength of the US Dollar affects the pair, while capital exiting the Euro is helping support the Pound Sterling.
Gold prices have fallen to about $3,320 per troy ounce. The stronger US Dollar and progress in US-EU trade talks are impacting the demand for Gold.
The US faces a deadline for a trade deal or tariffs on August 1. The Federal Reserve is likely to keep interest rates steady, and Nonfarm Payrolls are expected to stay stable.
There are concerns regarding the Federal Reserve’s delay in lowering interest rates. Ongoing tariff issues and a strong economy are influencing this decision.
Trading Strategies for EUR/USD
When trading EUR/USD, choose brokers that offer competitive spreads and quick execution. This is key for successfully navigating the changing Forex market.
The European Central Bank began its rate-cutting cycle in June 2024, moving ahead of the US Federal Reserve. This difference in policy may keep the Euro under pressure against the Dollar. Strategies that take advantage of a lower EUR/USD, like buying put options or short futures positions, should be considered.
UK inflation was 2.3% in April 2024, still above the target. As a result, the Bank of England is expected to hold interest rates steady, which could give the Pound Sterling a strength advantage over the Euro. We view the volatility in GBP/USD as a trading opportunity, possibly using straddles around important economic data releases.
Gold prices have declined from recent highs above $2,400 per ounce and are now around $2,330. The strong US Dollar and high interest rates are pressuring the price of this non-yielding metal. However, central banks worldwide added a net of 1,037 tonnes in 2023, the second highest annual total on record, which should help support prices in the long run.
The latest US Nonfarm Payrolls report showed an increase of 272,000 jobs in May, much higher than expected. This strong labor market data supports the Federal Reserve’s cautious stance on interest rate cuts. Therefore, we expect continued strength in the Dollar in the coming weeks, impacting all major asset classes.
Mexico’s low unemployment rate indicates a strong domestic economy. However, recent political events have caused significant volatility in the peso, which weakened past 18 to the dollar for the first time since 2023. Traders should exercise caution and consider using options to manage risk when speculating on this currency’s direction.
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France is urging EU nations to use the so-called “trade bazooka” against the US because it feels the trade deal is unfair.
The EU Anti-Coercion Instrument, Regulation 2023/2675, is a useful tool for the EU to identify and respond to economic pressure from outside countries.
Focus of Regulation 2023/2675
Regulation 2023/2675 concentrates on trade, investments, services, public procurement, and intellectual property rights. It ensures responses are appropriate, reasonable, and comply with international law.
With the French president pushing to use this trade weapon against the US, traders should brace for increased market volatility. His strong statements about “unfair” trade practices add new geopolitical risks. This uncertainty can lead to turbulence in cross-asset derivatives.
We should expect more fluctuations in the EUR/USD currency pair, which directly reflects this tension. Traders might think about buying straddles or strangles on this pair, allowing them to profit from big moves in either direction. Historically, just the threat of trade sanctions between these regions has led to sharp price swings.
Impact on Major Sectors and Market Volatility
The stakes are very high, with US-EU trade in goods and services exceeding $1.3 trillion in 2022. Key sectors like automotive, aerospace, and luxury goods are in the crosshairs. We recommend considering protective put options on exchange-traded funds for European automakers or the broader CAC 40 index.
This scenario mirrors the trade disputes from 2018-2019, which caused high volatility and risk aversion. During that time, implied volatility for major indices spiked even before any tariffs were introduced. We anticipate a similar pattern now, where fear of the “anti-coercion” tool being applied could shake up the markets.
The European VSTOXX volatility index, which has recently been around 13, suggests relative calm. This is an opportunity to buy call options on the index as an inexpensive hedge against a potential breakdown in trade relations. If the French president’s push gains support in the EU, this index might quickly rise.
Since this new legal tool is untested against a partner as significant as the United States, its potential use creates serious uncertainty. This could weigh more heavily on European stocks than on US stocks at first, as markets dislike uncertainty. Therefore, considering positions that are net short on European indices while being long on US ones might be a wise strategy.
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The US Treasury has announced that it needs to borrow a total of $1.007 trillion for the September quarter. This is an increase of $453 billion compared to the initial forecast in April.
The increase in borrowing stems from lower cash reserves at the beginning of the quarter. For the October to December period, the Treasury plans to borrow $590 billion, aiming to have cash balances of $850 billion by the end of December.
Key Factors to Watch
According to Michalowski, the significant rise in government bond supply is crucial. This increase in Treasury bonds is likely to lower bond prices, which will subsequently push interest rates higher. This situation presents a clear opportunity to invest in rising yields.
Typically, this environment is challenging for stocks, especially for growth companies sensitive to higher borrowing costs. After this news emerged, the CBOE Volatility Index (VIX), a major indicator of market fear, jumped from below 14 to over 17 in early August. This suggests it’s wise to consider protective put options on major equity indices like the S&P 500 or Nasdaq 100.
For direct investment, we are focusing on interest rate derivatives. The 10-year Treasury yield increased from about 3.8% before the announcement to over 4.2% recently, surpassing key technical levels. This supports strategies like shorting Treasury bond futures or buying puts on bond ETFs such as TLT.
Impact of US Credit Rating Downgrade
This situation is made more complex by Fitch Ratings’ recent downgrade of the U.S. credit rating due to the rising debt burden. Historically, such downgrades can undermine investor confidence and increase government borrowing costs. This external validation reinforces the case for a higher-yield environment.
Higher U.S. interest rates compared to other countries could attract foreign investment, boosting demand for the U.S. dollar. The U.S. Dollar Index (DXY) has already risen over 2.5% since late July. We expect this strength to continue, making long positions in the dollar against other currencies an appealing strategy.
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Mexico’s unemployment rate stayed steady at 2.7% in June. This number hasn’t changed from last month, showing that the job market is stable.
In the foreign exchange market, the Australian Dollar is under pressure, with the AUD/USD close to 0.6500. The EUR/USD has also dropped, falling below 1.1600.
Gold prices are on a downward trend but are still above $3,300 per troy ounce. Ethereum has shown slight ups and downs, trading around $3,803 after hitting an intraday high of $3,941.
The Federal Reserve is being watched closely for deciding to hold off on rate cuts during a time when the economic outlook is uncertain. Forex market participants should be aware of their risk tolerance due to potential financial losses.
We think the Federal Reserve’s choice to delay rate cuts is a key factor for the coming weeks, which supports a strong U.S. dollar. Current market data suggests that traders do not expect a rate cut until at least September. Because of this, strategies that benefit from a strong dollar, such as buying call options on the U.S. Dollar Index (DXY), may be worth considering.
The pressure on the Australian dollar is connected to the Federal Reserve’s policy and slowing economic data from China, its biggest trading partner. We believe buying put options on the AUD/USD as it approaches the 0.6500 support level could be wise. The euro is also facing challenges, weakened by the European Central Bank’s rate cuts in early June, which creates a policy difference that traders can take advantage of.
Regarding gold, it’s important to note that its price is holding above the critical $2,300 per troy ounce mark, contrary to earlier figures. The downward trend is expected due to high interest rates that increase the cost of holding non-yielding assets. We think selling out-of-the-money call options on gold could generate income, as significant price increases seem unlikely in the short term.
The fluctuations in Ethereum show a market impacted by broad economic pressures and specific factors, like the potential approval of spot Ether ETFs. High implied volatility makes option strategies like straddles appealing, as they allow traders to profit from significant price movements in either direction without needing to predict the outcome. Historically, such regulatory developments have led to unpredictable price changes in cryptocurrencies.
The stability in Mexico’s job market is a positive sign locally, but it is overshadowed by the broader global economic situation. Considering risk tolerance, we recommend using derivatives to hedge against existing exposures. For instance, traders with substantial international stock holdings might consider buying VIX futures to protect themselves from sudden increases in market volatility driven by unexpected U.S. policy changes.
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