Insights 
VT 
Initial jobless claims in the US drop from a four-week average of 229.5K to 224.5K
The four-week average of initial jobless claims in the U.S. dropped to 224.5K as of July 18, down from 229.5K. This decrease suggests a slight improvement in the job market.
The EUR/USD pair moved around 1.1770 as traders reacted to the European Central Bank’s recent decision and mixed economic data from both regions. Similarly, the GBP/USD pair dipped, testing the low-1.3500s due to mixed economic signals from the UK.
In May, Canada’s retail sales excluding autos decreased by 0.2%, which was slightly better than the expected decline of 0.3%.
Canada’s retail sales, excluding vehicles, fell slightly by 0.2% in May compared to the previous month. This decline was better than the expected drop of 0.3%.
The EUR/USD pair was around 1.1770 as markets reacted to the recent ECB meeting. There’s optimism about a possible trade deal between the US and EU.
GBP/USD Movement
GBP/USD has come under renewed pressure, dropping into the low-1.3500s due to mixed economic data from the UK. Gold prices bounced back a bit after falling below $3,350, but they remain under $3,400. The price fluctuations are influenced by favorable movements in the USD and rising US yields. In the crypto market, Bitcoin regained $118,000, while Ethereum and XRP showed signs of weakness. Ethereum is now at $3,630, down 6% from its recent high of $3,858. During the first half of Trump’s second term, there were unpredictable policy changes but the market remained strong. His “America First” agenda influenced trade and national priorities.Canadian Retail Sales Data
The recent Canadian retail sales report indicates a 0.9% increase in January 2024, reflecting consumer strength. This could temporarily support the Canadian dollar. We are preparing for potential currency volatility and using options to guard against sudden changes in central bank policies. The Euro is performing weakly against the dollar at around 1.0850, as the European Central Bank seems poised to cut interest rates before the U.S. Federal Reserve. This difference in policy suggests the EUR/USD may continue to decline, leading us to consider put options to benefit from this trend. The British pound is facing difficulties due to persistent high inflation in the UK, currently at 4.0%. This situation raises uncertainty for the Bank of England and has capped the pound’s value around 1.2600. Given the challenges ahead, we are cautious about holding long positions. Gold is having trouble staying above $2,200 per ounce, pressured by US 10-year Treasury yields that are above 4.2%. Historically, high yields and a robust dollar reduce the appeal of gold, which doesn’t yield interest. We think selling call options could be a wise strategy to benefit from what appears to be limited upside. In the cryptocurrency market, a significant shift is happening as Bitcoin nears $70,000 while altcoins like Ethereum show weakness. Bitcoin’s market share has risen above 52%, its highest since April 2021, indicating a trend towards safety. This suggests a trading strategy of buying Bitcoin while selling less stable altcoins could be effective. The market should brace for potential shocks due to Trump’s unpredictable policy agenda. The possibility of a universal 10% import tariff could lead to market volatility similar to the trade tensions of 2018. As a precaution, we are increasing our exposure to VIX futures to hedge against sudden market downturns driven by political decisions. Create your live VT Markets account and start trading now.GBPUSD tests key support at the 100-hour MA, creating potential buying opportunities for traders
The GBPUSD fell to a new low, hitting the rising 100-hour moving average at 1.3503, near the swing zone of 1.3505–1.3514. This combination of support levels gives traders a chance to either take profits or buy the dip.
If the price remains above this area, we could see a bounce back, especially if it breaks the 38.2% retracement level at 1.35263. This could lead to positive momentum. On the other hand, if the price drops below this support zone, it might indicate a bearish trend, causing buyers to exit and potentially leading to further declines.
Potential Volatility Strategy
Right now, there’s an opportunity for traders to profit from potential volatility. The GBPUSD is sitting at a key support level, which often signals a big price move is on the horizon. Strategies like buying straddles or strangles may work well since they profit from large movements in either direction. A rebound seems possible, especially with important economic data on the way. Recent UK inflation hit a 30-year high of 7.0% in March 2022, pressuring the Bank of England to keep raising interest rates. This hawkish approach could be a strong boost for the pound, making call options appealing if the support holds. However, the strong US dollar is a significant opposing force. The Federal Reserve is planning aggressive rate hikes to manage its own inflation. If there are any signs of weakness in the UK economy, the dollar might take charge. A drop below the current support level would signal that we should consider put options or short futures positions.Historical Context and Market Sentiment
Looking back, when both central banks are tightening policies, it often leads to choppy and volatile price movements instead of a clear trend. We saw similar fluctuations during the 2017-2018 period when both banks raised rates. This historical pattern suggests that traders should be ready for sudden reversals and avoid locking into a single direction. Additionally, the latest positioning data provides insights into market sentiment. The most recent Commitment of Traders (COT) report shows that while large speculators are still net short on the pound, they’ve recently cut back on those positions. This indicates that some major players are less confident about further declines, supporting the idea of a potential bounce from this crucial technical area. Create your live VT Markets account and start trading now.The President’s visit to the Federal Reserve: questions about its purpose and potential outcomes
President Trump plans to visit the Federal Reserve construction site. Details about the visit are unclear, including whether he will meet any officials or if it’s just an observation trip.
Some believe this visit could be part of his efforts to influence the Federal Reserve Chair. However, the President has stated he does not plan to fire the current chair.
Potential Implications
The outcome of this visit may affect the President’s goals, but specific intentions have not been clarified. The visit highlights ongoing tensions between the President and the Federal Reserve. We think the visit to the Federal Reserve construction site is not focused on architecture but on creating headlines that could impact the markets. This political drama brings uncertainty, which traders can capitalize on. It’s less about monetary policy and more about predicting how the market will respond to this manufactured situation. This pressure can lead to increased market volatility. Lately, the VIX index has been relatively low, around 13. A single provocative image or statement could cause a sharp rise in this “fear gauge,” similar to previous events where geopolitical news led to one-day spikes over 20%. This situation suggests that option prices, which are linked to expected volatility, might be lower than they should be right now.Central Bank’s Focus
While the President’s motives are political, the central bank concentrates on hard data, not publicity. The latest Consumer Price Index indicates inflation is still above 3%, with over 272,000 jobs added in May. These economic indicators are the real basis for current monetary policy. Traders need to prepare for a possible short-term shock while remembering that the focus will return to these economic realities. Historically, the President has publicly challenged the Federal Reserve’s independence, which he did frequently during his term. The market has learned to somewhat ignore his comments, but the potential for unexpected actions keeps volatility levels elevated. His tactics are designed to create doubt about the Federal Reserve’s resolve, which we can leverage. One effective response is to buy volatility ahead of such events. We can do this by purchasing options on major indices, like SPY puts, or VIX call options that benefit from a spike in expected market movements. This strategy profits from significant market shifts, regardless of the direction, making a bet on instability itself. On the other hand, if we believe this visit will be a non-event and the market will not react, selling premium becomes appealing. Using strategies like credit spreads allows us to profit from the inevitable time decay if the visit turns out to be uneventful, leading to decreased volatility. The key is deciding if you are betting on the event or the non-event. Create your live VT Markets account and start trading now.In May, Canada’s retail sales decreased by 1.1%, matching predictions.
In May, Canada saw a 1.1% drop in retail sales compared to the previous month, which was in line with expectations. This decrease follows market trends.
Meanwhile, the European Central Bank (ECB) decided to keep its Deposit Facility Rate at 2.00%. As a result, the euro remains weak against the US dollar. Gold prices are also down, nearing $3,360, due to a stronger dollar and rising US Treasury yields.
UK Currency Movements
In the UK, the GBP/USD exchange rate fell into the mid-1.3500s after climbing for three days. This change was influenced by a stronger dollar. At the same time, the S&P Global PMIs for July indicate that the US private sector is still strong, with expectations that the Federal Reserve will keep interest rates stable at the end of the month. President Trump’s second term has introduced dramatic policy changes focused on “America First.” Despite these changes, markets have remained resilient and responsive. Because of the strong US private sector, we believe traders should pursue strategies that capitalize on the US economy’s strength. The recent S&P Global Flash US Composite PMI, which reached a 25-month high of 54.4, supports this belief. Investing in call options on major US indices could be a good way to participate in this upward trend. The decline in Canadian retail sales, along with the recent news that Canada’s annual inflation has fallen to 2.7%, indicates a growing difference in policy between Canada and the US. This presents a strong case for using derivatives that favor the US dollar over the Canadian dollar. We are considering put options on the Canadian dollar or long positions in USD/CAD futures.EU and UK Market Outlook
With the European Central Bank maintaining interest rates and markets anticipating a high chance of a rate cut later this year, the euro is likely to stay under pressure. The fall in the British pound further demonstrates a broad strength of the dollar. As a result, we believe that buying put options on the EUR/USD and GBP/USD pairs is a sensible strategy for the upcoming weeks. Gold prices are weak due to the strong dollar and rising bond yields, with the US 10-year Treasury yield holding above 4.3%. This trend is expected to keep prices of non-yielding assets down. We see this as a chance to buy put options on gold futures or related ETFs. In his previous term, Mr. Trump’s policy changes often led to sharp spikes in market volatility, as seen with the VIX index. Historical data shows these fluctuations created beneficial opportunities for those prepared. To protect against similar market unrest, we recommend placing a small portion of a portfolio in long volatility instruments. Create your live VT Markets account and start trading now.In June, the Chicago Fed National Activity Index rose from -0.28 to -0.1.
The Chicago Fed National Activity Index in the United States rose to -0.1 in June, up from -0.28. This index measures overall economic activity and inflationary pressure.
EUR/USD stayed around 1.1770 as traders assessed recent ECB announcements and mixed data from Europe and the US. Discussions about a possible US-EU trade deal continue.
GBP to USD Pullback
GBP/USD pulled back to 1.3520, influenced by several days of gains and disappointing UK data. Mixed economic signals put pressure on the British currency. Gold prices recovered from their lows, climbing back from below $3,350 but remaining under the $3,400 mark. This recovery was hindered by a stronger US dollar, rising US yields, and fewer trade worries. Cryptocurrencies, especially Ethereum and Ripple, struggled as Bitcoin hit $118,000 again. Ethereum fell by 6% from its recent peak, settling around $3,630. The first six months of Trump’s second term saw major talks and policy changes, focusing on areas like trade and national defense. While these changes have had an impact, the markets have remained resilient.Chicago Fed National Activity Index
The rise in the Chicago Fed National Activity Index is a slight positive sign, but it isn’t enough to indicate strong economic growth. Given the unpredictable policies of the current administration, we expect continued market volatility. Historically, markets have bounced back after initial policy shocks, but derivative traders should consider options to protect against sudden changes in sentiment. The Euro and the Pound face pressure mainly due to the strong US dollar. This trend is reinforced by the real-world Dollar Index (DXY) recently reaching a 20-year high above 106. Weak data from the UK leaves the British currency open to further declines against the dollar. We suggest either selling futures or buying puts on the GBP/USD pair to position for continued weakness. Gold’s struggle to climb higher is closely linked to the strong dollar and rising government bond yields. With the US 10-year Treasury yield above 4.2%, the appeal of holding non-yielding assets decreases, creating a limit on gold prices. Thus, we recommend bearish strategies, like selling out-of-the-money call options to gather premiums amid these economic pressures. In the crypto market, traders are moving towards Bitcoin for stability. Recent data shows Bitcoin’s market share has risen above 54%, its highest in over two years, while alternative coins lag. One strategy to consider is trading pairs, taking a long position in Bitcoin futures while shorting Ethereum futures to capitalize on this clear difference. Create your live VT Markets account and start trading now.Nvidia shares are rising as moving averages support a continued bullish trend for traders.
Nvidia shares are on the rise, surpassing the previous closing record of $173.00 set on July 17, and are now trading around $173.10. Earlier this week, the shares fell from $173.17 to $164.58 but bounced back when buyers stepped in near the moving averages.
The hourly chart shows a trend where price dips consistently find support at the 50-hour moving average. If that level is breached, the 100-hour moving average also serves as a support line. These moving averages help traders stay optimistic as long as prices remain above them.
Traders must recognize when market sentiment shifts. The bullish trend remains as long as prices are above the moving averages. If prices fall below these levels, it would signal a shift toward a bearish outlook in the short term. The analysis emphasizes the need to understand risks rather than just chasing potential profits. Traders should reconsider their positions if support levels fail.
For more insights, traders are encouraged to regularly check trading websites for new ideas and analyses.
Given the ongoing upward trend, there is a chance to use derivatives to manage risks while benefitting from gains. With the stock soaring over 150% year-to-date, using moving averages as a guide for trades is crucial. This approach helps traders stay in the trend and provides a clear exit signal.
Based on the trend of finding support during dips, selling cash-secured puts or put credit spreads is a solid strategy. By setting the short strike price near the 50-hour or 100-hour moving average, traders can collect premiums while clearly defining their risks. This strategy works well if the stock price bounces back, moves sideways, or even drops slightly, as long as it stays above the chosen level.
It’s important to watch for the upcoming earnings report expected in late August, as it will likely cause a spike in implied volatility. This makes buying options pricier but creates a good opportunity to sell options. Volatility usually drops right after the earnings announcement. Historically, the stock’s movement after earnings is often less than what the options market predicts, benefiting those who sold the higher premium.
The analysis correctly highlights that a drop below the moving averages would indicate a bearish shift. For those trading derivatives, this is a clear sign to exit bullish positions like long calls or short puts. It might also be a good time to start bearish positions, such as buying puts, to take advantage of a potential correction.
This bullish sentiment is further supported by strong backing from major institutions. Firms like Rosenblatt Securities have recently raised their price targets to $200 after accounting for the split. This confidence supports staying with the trend as long as the price holds above the discussed technical support levels. As long as we are not overly exposed to risk, there is still a reason to maintain a bullish derivatives strategy.
European indices show mixed results as France’s CAC and Italy’s FTSE MIB decline
European stock indices had mixed results today. The French CAC and Italian FTSE MIB fell, while the Spanish Ibex and the UK’s FTSE 100 rose. Here are the details:
– **German DAX:** +0.23%
– **France’s CAC:** -0.41%
– **UK’s FTSE 100:** +0.5%
– **Spain’s Ibex:** +1.34%
– **Italy’s FTSE MIB:** -0.24%
As European markets closed, US indices showed mixed results as well. The Dow industrial average neared its record high from December 2024, but ended slightly down. The S&P and NASDAQ posted small gains. Here’s how they finished:
– **Dow:** -207 points to 44804.60
– **S&P:** +10.9 points to 6369.50
– **NASDAQ:** +32.3 points to 21052.25
– **Russell 2000:** -22.78 points to 2260.35
Notable Stock Performances
Alphabet shares rose 1.36% to $192.79, and Nvidia shares went up 1.22% to $172.86. Both companies are investing in AI. Broadcom reached a new high, increasing 1.75% to $288.70. Additionally, OpenAI has plans to release GPT-5 by August. Given the mixed signals from European markets, we suggest that traders refrain from broad bets in the region. The strong performance in Spain and the UK contrasts with the declines in France and Italy, indicating that specific country factors are at play. Therefore, trading options on individual country ETFs could provide a more targeted approach. In the US, the difference between tech-heavy indices and the overall market signals important trends for the upcoming weeks. The 1% drop in the Russell 2000 suggests underlying weakness, supported by recent data showing the top 10 S&P 500 stocks now account for over 34% of its value. We recommend a pairs trade: going long on NASDAQ 100 futures while shorting Russell 2000 futures to take advantage of this trend.Market Cautions and Recommendations
The momentum in artificial intelligence continues, with leading companies reaching new highs. With events like OpenAI’s August launch on the horizon, we encourage traders to consider bullish options strategies for these tech leaders. Buying call spreads can help you capture potential gains while managing risk. However, the Dow’s struggle to maintain a new record and general market weakness suggests a cautious approach. The latest Consumer Price Index (CPI) reading of 3.3% indicates that the Federal Reserve is unlikely to lower interest rates soon, posing challenges for the broader economy. We recommend buying protective puts on broad market ETFs to guard against a possible downturn. This narrow market leadership often results in increased volatility. We witnessed a similar situation in the late 1990s, before the dot-com bubble burst, where a few major companies dominated the market. So, we advise adding positions in VIX futures or call options to prepare for potential spikes in market turbulence. Create your live VT Markets account and start trading now.Gold continues to decline in value due to rising risk appetite and a stronger US dollar.
Gold prices have dropped for two days in a row. This decline is due to a shift toward riskier investments and less demand for safe-haven assets. The XAU/USD is currently around $3,363, down from earlier highs close to $3,440, as hopes for a trade deal between the EU and the US develop.
Recent economic data from the US shows that the labor market is strong. Weekly Initial Jobless Claims are at 217,000, which is lower than the predicted 227,000. Continuing Claims are slightly below expectations at 1.955 million. This data suggests that the Federal Reserve may keep interest rates higher for longer, which impacts US Treasury yields and strengthens the US Dollar.
Sector Performance Overview
The S&P Global flash Purchasing Managers’ Index (PMI) for July reveals mixed results. The Manufacturing PMI is at 49.5, indicating contraction, while the Services PMI has risen to 55.2. The Composite PMI also increased to 54.6, showing growth in the services sector. There’s a 60% probability of a rate cut in September, according to the CME FedWatch Tool, as the market expects a stable global trade environment. Gold faces resistance at $3,372, with crucial support levels at $3,338 and possibly $3,292 and $3,228 if prices continue to drop. The Relative Strength Index is at 52, suggesting neutral momentum as we await important macroeconomic data. Gold’s recent drop from highs near $2,360 reflects strong US economic data, creating a challenging environment for traders. The strength in the services sector implies that the Federal Reserve might delay rate cuts. The main focus will be on how this data will influence Treasury yields, since rising yields often put pressure on assets that don’t provide returns.Strong Labor Market
The latest initial jobless claims, at 238,000 for the week ending July 20th, confirm a strong labor market that supports a cautious monetary policy. Federal Reserve Chair Jerome Powell has stressed a data-based approach, meaning the labor market’s strength lessens the need for immediate easing. However, the manufacturing sector is showing weakness, creating mixed signals that may lead to market fluctuations. Even with the strong data, the CME FedWatch Tool shows nearly a 66% chance of a rate cut at the September meeting. This difference between market expectations and recent economic reports creates notable tension. When the Fed pivoted to rate cuts in mid-2019, gold rose over 20% in the following six months, which is why many anticipate a similar outcome. Given the uncertainty, utilizing options may be the best strategy for derivative traders in the upcoming weeks. Buying straddles or strangles allows traders to benefit from significant price changes in either direction—whether it’s a price increase if Powell signals a dovish shift or a decrease if economic strength continues. This strategy effectively bets on volatility, which is likely to increase as major macroeconomic data is released. Traders holding long positions should think about buying put options for protection, especially as gold approaches the key support level around $2,320. If it breaks below this level, it could quickly drop toward the next major support at $2,300. Alternatively, call options can be a way to take advantage of a breakout above resistance near $2,360, providing a cost-effective method to capture potential gains. Create your live VT Markets account and start trading now.Eurozone’s ECB deposit facility rate meets expectations at two percent
The European Central Bank (ECB) kept its Deposit Facility Rate steady at 2.00%, which was expected. After this update, the EUR/USD pair continued to drop, hovering around 1.1750. Now, all eyes are on Christine Lagarde’s upcoming conference.
Gold prices fell to the $3,360 mark after the US Dollar gained strength and US Treasury yields increased. This drop follows a previous day’s decrease, with gold nearing $3,360 per troy ounce.
