US Commerce Secretary Howard Lutnick announced that tariffs will start on August 1, with no extensions available. For President Trump to reconsider the 30% reciprocal tariffs, the European Union must open its markets to U.S. exports. Lutnick mentioned that Trump is open to a deal, but the chances are even at 50-50, depending on what the EU offers. President Trump is set to meet with European Commission President Ursula von der Leyen before the tariff deadline. It is estimated that tariff revenue could reach $700 billion each year, totaling around $7 trillion over the next decade. Recent estimates from Scott Bessent forecast this year’s revenue at $300 billion, with June collections reaching $27 billion.

Revenue And Tariff Impact

To reach the $700 billion revenue goal with expected imports of $3.295 trillion in 2024, the average tariff rate will need to be about 21.24%. Mexico, China, Canada, Germany, and Japan account for over 50% of U.S. goods imports, showing their significant trade impact. As of August 1, the actual tariff rates will clarify if reaching the $700 billion revenue target is realistic. It is still unclear who will pay the tariff costs—foreign exporters, U.S. importers, or consumers through higher prices. We believe that traders should prepare for increased market volatility as the August 1 deadline approaches. Lutnick’s stated 50-50 chance of a deal creates significant uncertainty, which tends to spook financial markets. During the 2018-2019 trade tensions with China, the CBOE Volatility Index (VIX) jumped over 50% in one month, and we expect a similar effect if a deal with the EU does not happen.

Market Strategies And Considerations

We suggest buying long-dated options to protect against or profit from sharp price changes in major indices like the S&P 500. Purchasing call options on the VIX is a direct way to profit from increased fear, especially since the index is currently trading near 13, much lower than its historical averages. This strategy defines risk while offering significant upside if the meeting between Trump and von der Leyen fails to result in an agreement. We expect increased volatility in the foreign exchange markets, especially with currencies from the top U.S. trading partners. If tariffs are imposed, currencies like the Euro, Mexican Peso, and Japanese Yen may weaken against the U.S. dollar, reflecting potential economic stress on their export-driven economies. Traders might want to position themselves for a stronger dollar against these currencies as the deadline approaches. Opportunities also exist in sector-specific derivatives, especially in industries most affected by international trade, as indicated by the import data. The automotive sector, with Germany and Japan among the top five importers, may be particularly sensitive to new import duties. Buying put options on automakers or related ETFs could help protect against negative news from the negotiations. We should also think about the inflationary effects since the potential revenue estimate implies higher costs for consumers and businesses. Recent U.S. CPI data already indicates persistent inflation at around 3.3%, and new tariffs may complicate the Federal Reserve’s decisions. This could add more uncertainty to interest rate futures as the market adjusts to the combined effects of trade policies and monetary responses. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The United States and China are likely to extend their tariff pause for another three months. This decision is expected during trade discussions starting Monday in Stockholm. The current tariff pause was set to end on August 12. In this third round of talks, both countries plan to discuss major issues, such as the U.S. concerns about China’s excess industrial production, without expecting immediate solutions.

Chinese Delegation’s Focus

The Chinese delegation also plans to ask the U.S. trade team about tariffs related to fentanyl. They want to understand the thresholds the U.S. wants to establish in this area. With the expected three-month extension of the tariff pause, traders might consider selling near-term volatility. The CBOE Volatility Index (VIX) usually goes down during stable periods; for example, it often dipped below 15 during past trade negotiation breaks. This situation allows for strategies like selling short-dated straddles or iron condors on broad market indexes, as premium decay speeds up. However, the absence of immediate solutions to major issues suggests that uncertainty may return. This makes it wise to buy longer-dated volatility, such as options that expire beyond the new three-month extension. The ongoing concerns about industrial overcapacity could lead to a rise in volatility as the new deadline approaches.

Opportunities in Sector Specific Plays

There are opportunities in specific sectors, especially in technology and industrials, which are very sensitive to trade news. With U.S.-China trade exceeding $575 billion in 2023, even a temporary calm can slightly boost these stocks. Traders might use strategies like bull put spreads on semiconductor ETFs to take advantage of this short-term stability while managing their risk. The Chinese delegation’s interest in fentanyl-related tariffs adds a complex factor that could make future talks harder. This highlights the fragile nature of the core relationship, so any positive market response should be seen as temporary. We recommend keeping an eye on currency derivatives linked to the yuan, as its stability will be a key sign of market confidence in the truce amid pressure from the trade team. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The EUR/USD pair ended the week up nearly 1%. This increase came even with U.S. economic data falling short of expectations, balanced by positive trade updates.

Economic Data Highlights

Optimistic trade news between the U.S. and the EU helped improve market sentiment. U.S. durable goods orders dropped 9.6% in June after a 16.5% rise in May, heavily influenced by transportation. Core orders saw a small increase of 0.2%, showing some signs of steady business investment. President Trump mentioned progress in trade deals with Japan and possible agreements with the EU and China. However, EU countries plan to vote on counter-tariffs against U.S. goods if a trade deal isn’t reached. The European Central Bank (ECB) kept interest rates steady at 2% due to uncertainties within the region. Looking ahead, next week will feature the FOMC meeting, U.S. GDP data, EU inflation rates, and employment figures. Technical analysis shows EUR/USD is stabilizing around 1.1750. If it rises above 1.1800, it could approach the yearly high of 1.1829. However, if it falls, 1.1556 is a possible support level. The Euro’s value depends on economic data and trade balances. We believe the recent rise in the currency pair is unstable since it relies more on trade optimism than solid economic data. The mixed signals from weak U.S. statistics and hopeful trade news point to a market without a clear path. This uncertainty can often lead to increased volatility.

Federal Open Market Committee Meeting

The upcoming Federal Open Market Committee meeting will be crucial for the dollar’s direction. With U.S. inflation recently at 3.1% in June, we expect a more aggressive stance compared to the European Central Bank, which faces a lower Eurozone inflation rate of 2.4%. This difference in policy typically strengthens the dollar against the euro. Next week’s U.S. GDP figures are also important, with predictions around 2.1% growth for the second quarter. A better-than-expected result could boost confidence in the U.S. economy and strengthen the dollar. We are preparing for increased volatility around these key releases. While former President Trump’s comments on trade deals can cause short-term boosts, underlying tensions continue to pose risks. The ongoing threat of EU counter-tariffs if a deal falls through makes for an unpredictable environment. In the past, such trade disputes have led to sudden and sharp moves in the currency market. We see the current stability around 1.1750 as a chance to set up for a breakout using options. Buying straddles or strangles can let traders profit from big moves in either direction, which seems likely given the upcoming risks. Low implied volatility before major data releases often makes this strategy appealing. A strong move above 1.1800 would prompt us to consider call options aimed at the yearly high. On the flip side, if the support holds and moves toward 1.1556, put options could be worthwhile. We recommend avoiding large, unhedged positions until after next week’s central bank meeting. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

President Trump shared news about a preliminary trade deal with Japan, with a planned $550 billion investment in U.S. businesses. However, Japan seems to have a different view. They want profit-sharing to reflect the contributions from both countries, instead of the proposed 90-10 split favoring the U.S. The deal aims to lower U.S. tariffs on Japanese imports from 25% to 15%. However, Japanese officials indicate that discussions on investment terms are still happening, which contradicts Trump’s claim that Japan will accept smaller profits.

Japan’s Negotiator Speaks

Japan’s lead negotiator stated that Japan won’t just give the U.S. $550 billion, which goes against earlier claims. This comes as there are broader expectations for U.S. businesses to invest in infrastructure projects within the U.S. This idea could challenge traditional industry practices. Tariffs are taxes on imports that help local markets by increasing the costs of foreign goods. While some view tariffs as protective, others worry they might lead to increased prices and trade conflicts. President Trump plans to use tariffs strategically against countries like Mexico, China, and Canada that represent a significant share of U.S. imports. He aims to use the revenue from these tariffs to lower personal income taxes. The difference between what the White House announced and what Japanese officials said creates a lot of uncertainty. Such differences can lead to market volatility, which traders can capitalize on. We believe traders should expect sharp price changes as the final deal terms are clarified in the upcoming weeks.

Investment Opportunities Amid Uncertainty

This uncertainty doesn’t seem fully accounted for in the market. The CBOE Volatility Index (VIX) is currently trading at a calm level of 13. We see this as a chance to buy protection or speculate on rising volatility using options on major equity indices. If negotiations take a sudden negative turn, the VIX could rise significantly, making these positions profitable. The planned reduction in U.S. tariffs on Japanese imports is quite beneficial for Japan’s auto and manufacturing sectors. Traders might find opportunities by selling puts on major Japanese exporters, as the tariff relief offers a safety net against major losses. On the other hand, if any portion of the $550 billion investment is officially confirmed for U.S. infrastructure, American industrial and materials companies could benefit greatly. We are considering call options on ETFs that focus on these sectors as a way to take advantage of the potential upside without risking a bet on the broader market direction. The administration’s overall tariff strategy toward major trading partners, including Mexico, China, and Canada, is key. In 2023, U.S. Census Bureau data shows these three countries make up over $2 trillion in total trade, meaning any trade issues could have significant consequences. These ongoing trade tensions, which have historically affected currency rates, indicate that the USD/JPY currency pair will be particularly volatile, presenting opportunities for strategies that profit from large price shifts in either direction. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The Dow Jones Industrial Average (DJIA) bounced back from a small decline, even though it faced challenges from major stocks. Q2 earnings mostly beat expectations, sending major indexes to record highs, but the Dow struggled with downward pressures. In June, Durable Goods Orders dropped by 9.3%, the largest two-month decline since the pandemic, yet it was better than the anticipated decrease of 10.8%. Orders, excluding vehicles, increased by 0.2% month-over-month, even though the automotive sector faced issues from global tariffs and high import taxes.

Trade Agreement Rumors

Rumors about a potential trade agreement between the US and EU continue, but concrete details are lacking. The Trump administration aims to secure trade deals by August 1. While some announcements have been made, there is little substantial documentation. The Dow’s recovery brings it close to all-time highs, although it lags behind tech-heavy indexes. The US Census Bureau’s Durable Goods Orders data is essential for measuring US production activity, with high numbers usually being good for the USD. This information carries risks and uncertainties and is meant for guidance only. Readers should thoroughly investigate before making investment decisions, as there are no guarantees, and the risks—including total investment loss—are the investor’s responsibility.

Market Signals

Given the mixed signals from the market, we recommend that traders pay attention to the low cost of options. The CBOE Volatility Index (VIX) is currently under 15, a historically low level that indicates some complacency in the market. This makes it a good time to buy protective puts or arrange hedged positions, like collars, at a lower cost. We notice a significant gap in performance between the industrial average and tech-focused indexes, and this trend has gotten stronger this year. As of early June 2024, the Nasdaq 100 has risen over 12% year-to-date, while the Dow is up only about 3%. This divide suggests that strategies like pairs trading, which capitalize on tech outperforming industrials, might be beneficial. Although the recent durable goods data exceeded low expectations, there are signs of weakness beneath the surface. The latest report from the US Census Bureau showed that orders for non-defense capital goods excluding aircraft, a key measure of business investment, were unchanged. This stagnation in core business spending signals caution in the industrial sector, supporting a negative outlook for related stocks. Ongoing uncertainty regarding trade policy adds extra risk that we believe is not fully appreciated. The possibility of wide-ranging new tariffs, as mentioned by figures like Trump, could disrupt supply chains more significantly than the market currently anticipates. Using long-dated options to hedge against potential volatility spikes during major political events appears wise. The current positioning in the options market raises concerns for us. The equity put-call ratio is hovering around two-year lows, below 0.60, indicating an overwhelming preference for bullish call options over bearish puts. Such one-sided sentiment has often led to market pullbacks in the past, serving as a contrarian signal to prepare for a possible downturn. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

**Gold Market Dynamics** The CFTC GBP net positions in the United Kingdom dropped to £0.6K from £29.2K. This change highlights shifts in the market that may impact the British Pound’s performance. The EUR/USD currency pair is trading above 1.1700 but is facing mild pressure due to US-China relations and domestic economic factors. The GBP/USD is nearing the 1.3400 support level, affected by a stronger US Dollar and weak retail sales in the UK. Gold prices have fallen to weekly lows of around $3,330 per troy ounce. This decrease is driven by a renewed interest in the US Dollar, fluctuating US Treasury yields, and trade developments. The cryptocurrency market is recovering after a sharp decline, with Bitcoin hitting a low of $114,723. Despite the ups and downs, Ethereum and XRP are holding their ground and maintaining key support levels. The Federal Reserve is under scrutiny for postponing interest rate cuts. While trade issues and a strong economy support this decision, there are worries about possible weaknesses in the labor market. **Traders’ GBP Strategies** With the sudden drop in positive sentiment for the British Pound, traders should consider bearish strategies. Recent data from the Commodity Futures Trading Commission shows net short positions on GBP futures growing to over 51,000 contracts in early June 2024—a significant shift. Given that retail sales fell by 2.3% in April, purchasing put options on GBP/USD could offer downside protection or speculative chances. The differences in policies between central banks are driving the strong dollar narrative, putting pressure on other major currencies. The European Central Bank reduced interest rates in June, while the Federal Reserve remains steady, giving the dollar a yield advantage. Selling out-of-the-money call options on EUR/USD could be a good strategy to earn income, betting that the pair won’t rise significantly. We advise caution with precious metals as long as the US Dollar remains strong. Gold has historically been negatively correlated with the Dollar Index (DXY), which is climbing above 105. Traders with long positions may want to use a collar strategy, which involves buying a protective put and selling a call option to finance it. The volatility in the cryptocurrency market offers unique chances for derivative traders. With Bitcoin stabilizing in the $65,000-$70,000 range and recent outflows from Bitcoin ETFs creating uncertainty, we believe employing straddles or strangles could be effective. These strategies allow profit from large price movements in either direction without needing to guess the direction. The Federal Reserve’s updated “dot plot” now indicates only one expected interest rate cut this year, down from three projected in March. This hawkish outlook supports the strong dollar and suggests continued weakness in assets priced against it. Until we observe clear signs of a softening labor market, we will focus on strategies that benefit from ongoing economic strength. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

United States CFTC S&P 500 net positions have dropped slightly from $-167.8K to $-168.5K. This change reflects the current unpredictable market conditions.

Foreign Exchange Insights

The EUR/USD pair is trending downward, staying above 1.1700, due to a strong US Dollar and hopes for better US-China relations. On the other hand, GBP/USD is approaching the 1.3400 support level, affected by a rising dollar and weak UK retail sales data from June. Gold prices are falling, reaching weekly lows of around $3,330 per troy ounce. This drop in gold prices is related to a renewed interest in the US Dollar, as well as mixed performances in US yields and trade developments. In the cryptocurrency market, there are signs of stabilization after a decline, with Bitcoin hitting an intraday low of $114,723. While Bitcoin faces some challenges, Ethereum and XRP are managing to hold their critical support levels. There is an ongoing discussion about the Federal Reserve’s choice to delay rate cuts. Uncertainties with tariffs and a steady economy are keeping the Fed from acting, but worries about new challenges in the labor market linger. Given the increased net short positions in the S&P 500, traders might consider using put options to hedge their long portfolios. This cautious approach is backed by a US jobs market that, despite adding jobs, saw the unemployment rate rise to 4.0% in May. Historically, rising speculative shorts often lead to increased market volatility, making protective strategies wise.

Central Bank Policy and Market Impacts

The differences in central bank policies are significantly influencing currency pairs, benefiting the dollar. The European Central Bank has already cut rates, which is likely to keep the EUR/USD pair pressured below 1.0800. Selling into any strength seems like a good strategy for the coming weeks. The British Pound is also at risk, especially since recent data shows UK inflation has dropped back to the Bank of England’s 2% target. This may increase the chances of a rate cut later this summer, suggesting the GBP/USD pair could have trouble holding the 1.2700 support level. We expect that further weak economic data will create chances to initiate short positions. For gold, the primary challenge is the dollar’s strength and high US Treasury yields, with the 10-year note staying above 4.2%. This situation raises the opportunity cost of holding gold, which may struggle to stay above $2,300. We recommend avoiding large long positions until there are clear signs of falling yields. The cryptocurrency market is trying to stabilize after nearly $15 billion in net inflows into spot Bitcoin ETFs since their launch in January. As Bitcoin hovers around $67,000, ongoing institutional interest provides a long-term support level. Traders might consider selling cash-secured puts below key support levels to earn premium while waiting for a clearer trend. The Federal Reserve’s decision to keep rates steady shows a cautious approach, as highlighted by its chairman. According to the CME FedWatch Tool, there’s over a 90% chance that rates will stay the same for the July meeting. Powell’s focus on data means we should expect increased market sensitivity to upcoming inflation and employment reports. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The report shows that Japan’s CFTC JPY net positions rose from ¥103.6K to ¥106.6K. This change suggests a shift in market positions and trader sentiment. EUR/USD is facing slight negative pressure but remains above the 1.1700 level. The US Dollar is stable, supported by optimism about US-China relations, despite ongoing tensions involving policymakers.

GBP/USD and Gold Trends

The GBP/USD pair is trending downward, nearing the 1.3400 support level. This decline is due to a stronger Dollar and disappointing UK retail sales for June. Meanwhile, Gold has faced pressure for the third straight day, dropping to weekly lows around $3,330 per ounce. In the cryptocurrency market, Bitcoin’s price hit a low of $114,723. However, there are signs of recovery as traders work to stabilize after a bearish trend. The Federal Reserve is under scrutiny for deciding to delay rate cuts. It is attempting to balance uncertainties about tariffs with a strong economy. There are worries that this decision may be too late, given the challenges in the labor market.

Market Outlook

The rise in CFTC net long positions indicates that the extreme bearish sentiment on the Yen may be lessening. Considering that speculative shorts against the currency reached a 17-year high earlier this year, this shift suggests we should look at call options on the Yen to prepare for a possible short squeeze. This could be expedited if Japanese authorities intervene, which remains a risk for the market. The slight negative pressure on the EUR/USD appears justified. We should be careful about any potential rallies while it stays below 1.0800. The European Central Bank cut rates in early June, while the U.S. central bank remains firm, creating a monetary policy divergence that favors the dollar. We see the 1.0700 level not as a strong buying opportunity, but rather as a potential floor for selling puts to earn income, anticipating it will hold in the short term. The downward trend in GBP/USD is expected to continue as long as the Dollar remains strong. Although UK inflation recently met the Bank of England’s 2% target, high services inflation is likely to delay any rate cuts. We suggest traders should focus on selling rallies in this pair, possibly using futures contracts, as the powerful dollar trend prevails. Gold’s weakness is directly linked to the strong Dollar and solid Treasury yields. The clear inverse relationship is illustrated by the U.S. Dollar Index (DXY), which recently hit a two-month high above 105.8. This makes gold more expensive for those holding other currencies. Traders in derivatives should consider buying put options on gold ETFs or shorting futures as long as the “higher for longer” interest rate view remains in place. Bitcoin’s price drop below $65,000, followed by a tentative recovery, shows the extreme volatility of the market. Recent data indicates significant outflows from U.S. spot Bitcoin ETFs, exceeding $500 million in one week, suggesting a decrease in institutional interest for now. In this market environment, we recommend using strategies like straddles with options to profit from large price swings in either direction, rather than making a firm directional bet. The Federal Reserve’s choice to delay rate cuts signals a “hawkish hold” approach, which we expect to keep supporting the Dollar. According to their June projections, policymakers forecast only one rate cut in 2024, a significant drop from the three cuts they anticipated in March. Thus, we should align our positions to benefit from ongoing dollar strength against most major currencies and pressure on interest-rate-sensitive assets. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Eurozone CFTC Euro net positions have dropped to €125.5k from €128.2k. This decline comes with risks and uncertainties related to future expectations. The market insights provided here are for information only and should not be seen as advice to buy or sell assets. It’s important to do personal research before making any investment decisions to reduce risks. Investing in open markets can lead to significant financial loss and emotional stress. All risks tied to investments, including the total loss of your initial investment, are your own responsibility. The author does not own shares in any companies mentioned and has no business relationships with them. No compensation was received for writing about these companies. The slight decrease in Euro net long positions indicates that large speculators may be reducing their bullish bets. This could mean they are taking early profits or showing caution about the Euro’s strength in the short term. Derivative traders should see this as a possible, though minor, change in market sentiment. This change coincides with recent data showing Eurozone inflation unexpectedly increased to 2.6% in May, complicating things for the European Central Bank. Even with this rise in inflation, markets still expect a high chance of an interest rate cut in June. Lagarde’s comments about needing data for future decisions add to the uncertainty surrounding the currency. In comparison, the US economy seems stronger, prompting the Federal Reserve to likely maintain higher interest rates for longer. This difference in policy generally strengthens the dollar against the Euro, which is a challenge for the shared currency. We believe this mismatch in fundamentals may lead to a more cautious or bearish outlook in the coming weeks. Historically, when net speculative positions peak, like in 2020, they are usually followed by a period of price stabilization or drop. While current positioning isn’t extreme, it suggests that high bullish sentiment increases the risk of a pullback. We should keep this trend in mind when planning new trades. For traders who currently have long Euro futures or call options, considering hedging strategies would be wise. Buying protective put options can help lock in recent gains and reduce downside risk from possible policy changes. This strategy lets you stay involved if the market surprises with a rise, while also limiting possible losses. On the other hand, if you expect limited gains, selling out-of-the-money call options to earn premiums is a good strategy. This can benefit from the Euro staying flat or decreasing in value. Given the mixed economic signals, strategies that profit from weak upward movement seem suitable.

here to set up a live account on VT Markets now

The United States Commodity Futures Trading Commission has reported a drop in oil net positions, which decreased from 162.4K to 153.3K. This information is important for understanding market trends and planning future trades. The EUR/USD currency pair is under pressure, trading just above 1.1700. This is happening amid a positive outlook for US-China relations, even with ongoing political issues. The GBP/USD is weakening and nearing the 1.3400 support level. This decline is due to a stronger US Dollar and disappointing retail sales figures from the UK.

Gold And Bitcoin Trends

Gold prices have fallen to weekly lows of around $2,320 per troy ounce. This decline is influenced by renewed interest in the US Dollar and mixed US yields. Bitcoin’s value also decreased, reaching an intraday low of $66,000, but there are signs of a possible recovery. The Federal Reserve is facing criticism for not cutting rates despite a strong economy and ongoing trade tensions. Although there are signs of stress in the labor market, the Fed remains cautious. Crypto markets are looking for stability, with Ethereum and XRP maintaining important support levels. Traders need to adapt their strategies to navigate these changing conditions while minimizing risks and seizing opportunities. The decrease in net long oil positions suggests that major speculators are losing confidence in a steady price rise. Historically, such drops can indicate a period of price stabilization or even a downturn. The International Energy Agency has recently reduced its 2024 oil demand growth forecast, and with high US production levels, we are considering short-dated put options to protect against potential declines in WTI crude, which is currently priced around $80 a barrel.

Central Bank Policy And Currency Impact

The central bank’s hesitation to cut rates will likely keep the US Dollar strong against other major currencies. This gap in policies is especially evident compared to the Euro, as the European Central Bank lowered rates this month, causing the EUR/USD pair to hover around 1.07. The British pound has been affected by weak retail sales, pushing it towards the 1.27 mark, and we are watching for a potential drop if upcoming UK inflation data does not show significant improvement. Gold’s recent decline to around $2,320 per ounce directly reflects the strong US Dollar and a prolonged high interest rate outlook. As long as US real yields are appealing, the attraction of holding gold, a non-yielding asset, diminishes. We advise traders to be cautious with new long positions and consider using options collars to safeguard the value of their current holdings without limiting all potential gains. In the digital asset markets, Bitcoin’s drop to about $66,000 is testing market resilience. Recent data shows significant outflows from spot Bitcoin ETFs, indicating that institutions are taking profits. This suggests that a period of consolidation might be needed before the next big move. Observing how Ethereum and XRP sustain their critical support levels will help us gauge the overall strength of the market in the coming days. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now