Canadian companies are investing less in industry than ever before, with spending on industrial machinery and equipment hitting its lowest level since 1981. Since 2015, Canada and the US have diverged in their investment trends, creating a growing gap each year. Economists point to a few reasons for this decline. Heavy regulations, a lack of government support for transforming natural resources domestically, and protectionist policies from the US are all factors hurting Canada’s manufacturing sector.

Increasing Military Spending

There are suggestions that boosting military spending could benefit Canadian industry. However, experts argue for a broader strategy that includes a more competitive tax system, reduced regulations, and clear laws for natural resource development to truly solve these issues. The ongoing weakness in Canadian industrial investment compared to the US is a significant problem for our economy. This trend sharply diverged after the oil price drop in 2015 and has continued to negatively impact the Canadian dollar. The most recent manufacturing PMI report for August 2025 shows a contraction at 48.5, meaning there’s little reason to expect a reversal of this long-term currency weakness. For derivative traders, this indicates a bearish outlook on the Canadian dollar against the US dollar. Strategies like buying USD/CAD call options or selling CAD futures could be effective, as the lack of decisive action from Ottawa fails to provide a catalyst for change. The current exchange rate of around 1.41 seems at risk of further decline, especially as the US benefits from earlier industrial policies. This underperformance also affects Canadian stocks, particularly in industrial and manufacturing sectors. Implied volatility for options on the S&P/TSX 60 index is higher than for similar US options, making protective puts a wise choice for anyone invested in Canadian equities. Most capital entering Canada is likely to focus on the resource sector, which is also hindered by limited domestic processing investments.

Potential Policy Announcements

We should keep an eye out for any government announcements regarding tax competitiveness or deregulation, as these could be potential turning points. However, years of inaction mean that any new policy promises may just serve as a chance to “sell the news.” A brief rally in the Canadian dollar or the TSX following such news could provide a better opportunity to reinstate bearish positions. Create your live VT Markets account and start trading now.

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US stock indices are up due to positive expectations for a US-China trade deal. Both the S&P 500 and NASDAQ Composite have reached new all-time highs. The Dow Jones Industrial Average has also increased but is still below its previous peak of 46,137.20. In early trading, the Dow Jones rose by 93 points to 45,926.77, up 0.20%. The S&P 500 gained 30 points, a rise of 0.46%, ending at 6,614.50, just shy of a new all-time high. The NASDAQ Composite increased by 140 points, a 0.63% gain, reaching 22,281.47, close to its record high.

Tesla’s Stock Performance

Tesla is in the spotlight with a significant rise in its shares. The stock is up $22.79, or 5.78%, now valued at $418.90. This comes after a breakout last week when shares closed above the previous resistance level of $367.71. This upward trend is fueled by news that Elon Musk bought about $1 billion in Tesla stock. This news has created a strong positive momentum, with target prices now at $420 and $440, which are important levels for Tesla shares. While the market is reaching all-time highs due to hopes of a trade agreement, we should remain cautious about a “sell the news” scenario. We experienced similar situations during the 2018-2019 trade disputes, where initial optimism faded if no solid deal was made. Given that the VIX volatility index might be low, around the 13 level seen in mid-2024, buying protective puts on the S&P 500 could be an affordable way to protect against a potential decline. This environment is a good opportunity to think about strategies that could benefit from a slowdown in momentum or a minor decline. Selling out-of-the-money call credit spreads on indices like the SPX or NDX allows us to gather premiums while the market processes this news. This strategy bets that the initial enthusiasm won’t push the indices much higher in the short term.

Trading Strategies for Tesla

Shifting focus to Tesla, the surge driven by Elon Musk’s stock purchase is a strong, news-fueled momentum play. The stock is reacting vigorously, breaking key resistance levels. Such movement attracts speculation, pushing prices toward psychological targets like $420. For traders looking to take advantage of this momentum, implied volatility on Tesla options is likely spiking, making them quite pricey. History shows, like with the major volatility swings in August 2018 after Musk’s tweets, that high option costs can eat into profits even if the stock moves favorably. A recent analysis from early 2025 revealed that Tesla’s 30-day implied volatility averaged over 60%, much higher than other large-cap stocks. Due to these high costs, a more defined-risk approach is advisable, such as a call debit spread. For instance, buying a $420 strike call while selling a $440 strike call can cap potential gains but significantly lower initial costs. This strategy allows for upside participation while shielding against the typical drop in volatility that follows major news events. Create your live VT Markets account and start trading now.

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The USDCHF fell today due to disappointing US Empire manufacturing data. This push brought the pair down to a low of 0.7945, sparking new buying interest. This level sits within a swing area that stretches from 0.79382 to 0.79471. This zone has previously attracted buyers and provided support once more, leading to a slight bounce.

Key Reference Point

The range from 0.79382 to 0.79471 is essential for market players: – If the price drops below 0.79382, it could lead to more declines, potentially reaching 0.7910 to 0.79209. – On the upside, short-term resistance is found at 0.79556, which is a former swing low from September 5, close to today’s Asian session low. A steady move above 0.79556 might shift focus upward, specifically toward the 100-hour moving average at 0.79698. Right now, the market is stuck between these key levels, with traders waiting for a clear break to decide the next trend. The US dollar is weakening against the Swiss franc due to the New York Empire State Manufacturing Index, which reported a disappointing -8.5. This suggests the US economy is slowing down, raising concerns about the Federal Reserve’s next steps and putting pressure on the dollar. For those expecting further US economic decline, the 0.79382 level is crucial. A break below this level would indicate a stronger downward trend. A good strategy could be to buy put options with a strike price around 0.7925, aiming for profit-taking in the 0.7910-0.7920 range.

Market Positioning and Strategy

On the other hand, the Swiss National Bank has already cut its policy rate to 1.00% earlier in 2025. Any surprising strength in upcoming US data could lead to a sharp reversal. Traders betting on a dollar rebound should look for a move above 0.79556. Buying call options with a strike near 0.7970 would be a sensible approach to target the 100-hour moving average. The market is currently signaling uncertainty, caught between contrasting central bank views. Reflecting on similar periods of consolidation in late 2024, implied volatility typically decreased before a big breakout. This environment might be perfect for strategies like selling a short strangle or an iron condor to collect premium while the pair stays between key support and resistance levels. Overall, price movement is confined within a narrow range of about 0.7940 to 0.7970. We will be watching the upcoming US jobless claims data later this week for the next catalyst. Until one of these key levels breaks, taking large directional positions carries significant risk. Create your live VT Markets account and start trading now.

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Tesla shares have risen by 7% for the third day in a row. This increase follows Elon Musk’s purchase of $1 billion in shares, significantly boosting the value of his investment. Analysts expected a technical breakout after the shares climbed above May’s high and showed a pattern of higher lows. This upward trend aligns with a broader market context, highlighted by a 40% jump in Oracle shares, signaling caution for those betting against tech companies. Tesla’s stock is now nearing last year’s high of almost $488. The market seems less focused on traditional metrics, instead concentrating on momentum, particularly around full self-driving and robotics. At this moment, auto sales, profit margins, and earnings appear to be secondary. The current trend shows how powerful narratives and market sentiment influence share prices. The breakout above May’s high is the strong bullish signal we anticipated, and it’s materializing. With the stock price climbing, momentum is the primary concern, so we should prepare for further gains. Traders in derivatives should concentrate on bullish strategies in the coming weeks. Elon Musk’s recent share acquisition is driving this surge, proving that the current rise is more about his vision than vehicle sales data. The market is favoring the narratives of full self-driving and robotics, meaning traditional fundamentals can be overlooked for now. This positive sentiment is visible in the options market, where call option volume has spiked by over 150% from the August 2025 average, reaching more than 2 million contracts daily. This surge in speculation can lead to a short squeeze. Notably, the latest report from the Bureau of Economic Analysis showed a small 0.2% drop in U.S. auto sales last month, further illustrating the disconnect from fundamental data. This situation resembles the meme stock rallies of 2021, where stocks strayed from reality for long periods. Historically, attempting to short such strong, narrative-driven momentum has proven to be a costly misstep. The easiest path forward seems to be upward toward last year’s peak of about $488. With implied volatility in near-term options exceeding 80%, buying calls outright has become quite pricey. Instead, we should consider using call debit spreads to lower entry costs and manage risk. This approach allows us to benefit from further gains while safeguarding against volatility if the rally loses steam.

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US stock markets are ready for a strong start to the week. S&P 500 futures rose by 20 points, or 0.3%, after a flat close on Friday. Recent positive news in US-China relations, such as a deal on TikTok and a scheduled call between President Trump and Xi Jinping, has boosted optimism.

Federal Reserve Survey and Tesla Performance

The New York Federal Reserve’s manufacturing survey feels weak, but many see it as a sign that interest rates may be cut rather than a warning of an upcoming recession. Tesla stands out in pre-market trading, with shares up 7%. This increase follows Elon Musk revealing he bought $1 billion worth of Tesla shares, his largest purchase yet. A similar trend is emerging in the markets this week. Reflecting on the sentiment during the Trump administration, with its emphasis on US-China relations, reminds us that geopolitical news can create short-term volatility in trading. As of September 2025, news about technology export controls is causing sharp market reactions, similar to the TikTok discussions in the past. Market reactions to economic data also resemble previous patterns, where disappointing numbers were often viewed positively for stocks. The August 2025 Consumer Price Index (CPI) report shows core inflation stubbornly at 2.9%. Traders are now closely watching for signs of an economic slowdown and positioning themselves for a potential dovish shift from the Federal Reserve. They are buying calls in interest-rate-sensitive sectors ahead of upcoming unemployment data.

Market Dynamics and Hedging Strategies

Single-stock movers like Tesla remain a significant part of the market. While a major insider purchase was the catalyst before, today it’s fueled by advancements in autonomous driving and new battery technology announcements. Tesla’s 30-day implied volatility is near 55%, much higher than the S&P 500’s VIX reading of 16, making options strategies like straddles popular ahead of major company events. In this environment, traders are using options on broad indexes like the SPX to protect against surprises from the Federal Reserve or geopolitical events. The cost of protection is moderate, and many traders are selling credit spreads to earn premiums from expected range-bound trading around significant data releases. This reflects a cautious but opportunistic approach, taking advantage of volatility in specific companies while managing overall market risk. Create your live VT Markets account and start trading now.

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The USDCAD currency pair is falling, mainly due to strong Canadian manufacturing sales and a weaker US Empire manufacturing index. Right now, the pair is testing important moving averages: the 100-bar at 1.3814 and the 200-bar at 1.38067. The lowest point this session reached was 1.38144. This area is crucial for both buyers and sellers. Buyers hope to bounce back from this level, while sellers want to break below it to push prices down. Even with the downtrend, the pair has struggled to stay above last week’s swing range of 1.3878 to 1.3917.

Moving Average Support Level

The 200-bar moving average remains a key support level. Watching this area is essential as both buyers and sellers contest control, which can influence future price movements. USDCAD is testing a vital support zone around 1.3810, which has turned into a battleground. This decline is driven by today’s strong Canadian manufacturing data and disappointing numbers from the US. Recent trends show Canadian data holding up well, while US figures are weakening. Sellers are focusing on Canada’s strong August jobs report, which added 45,000 jobs and kept the unemployment rate steady at 5.7%. As a result, the Bank of Canada is keeping a hawkish tone, suggesting that interest rates may remain high. This environment supports a stronger Canadian dollar.

US Market Conditions

In the US, conditions are weaker, affecting the pair negatively. The latest Non-Farm Payrolls report showed only 155,000 new jobs, falling short of expectations. Additionally, inflation data revealed a slight drop to 3.4%. This suggests that the Federal Reserve may pause its interest rate hikes for now. This difference highlights the importance of the 200-period moving average at 1.3806 for traders. If the price breaks below this area, put option volume could increase as traders aim for the 1.3700 mark. On the other hand, a strong rebound could encourage bullish strategies, betting that this long-term support will hold. This 1.3800 level has acted as a solid floor multiple times, especially during the volatility seen in early 2024. A daily close below this support in the next few weeks could signal a strong bearish shift and change the medium-term trend. Additionally, the failure to break above the 1.3900 resistance last week suggests that upward momentum is fading. Create your live VT Markets account and start trading now.

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Bitcoin stayed steady, with a slight price decrease of 0.71%. However, trading volume jumped by 94.03%. Its market cap reached $2.29 trillion. Liquidations were higher for long positions at $34.70 million, while shorts saw $10.27 million. Ethereum’s price fell by 2.20%, but trading volume rose by 41.36%, bringing its market cap to $546.07 billion. Long positions faced higher liquidations at $92.52 million, showing strong interest in trading. Solana dropped sharply by 4.06% while volume increased by 29.04%. Its market cap stood at $128.17 billion. Long positions faced liquidations of $28.18 million, indicating continued trader interest despite the decrease. XRP experienced a small dip of 1.78%, with a market cap of $178.51 billion and a modest volume increase of 7.05%. Liquidations were balanced, with longs at $14.21 million. Dogecoin had the largest price drop at 7.45%, along with a 17.56% reduction in volume and a market cap of $39.83 billion. Long positions faced significant liquidations at $29.11 million, highlighting a tough trading day for Dogecoin. With Bitcoin’s stable price amidst high trading volume, we should monitor for signs of accumulation by large investors. This situation is similar to the build-up before the ETF approvals in 2024, where substantial funds entered quietly before prices surged. Data from major exchanges indicates that wallets holding over 1,000 BTC have increased their balances by 3% this month, a sign of institutional confidence. For Ethereum, the rise in open interest on a down day suggests traders are preparing for a big move, likely in anticipation of the upcoming “Cancun-Prague” network upgrade in Q1 2026. While over $92 million in long positions were recently liquidated, this often clears out weak hands before a recovery. This pattern is similar to what we saw after the Merge in 2022. Solana’s sharp decrease suggests traders are focusing on short-term profits or cutting losses rather than establishing new long-term positions, especially since open interest is falling. This high involvement during a dip is typical for SOL, as witnessed during network stability concerns in 2023. The key will be whether support holds around the $220 level, a critical pivot point throughout the year. XRP is showing weakness as traders shift towards assets with more immediate triggers. The drop in open interest signals capital is leaving, likely due to the fading influence of its long-standing legal issues as a speculative driver. Unless a significant new development occurs, XRP may continue to lag behind market leaders. Dogecoin’s significant decline in price, volume, and open interest is a major concern. Recent on-chain data reveals a 20% drop in active daily addresses, indicating that retail interest is quickly diminishing. This is a classic sign that speculative excitement has waned, making attempts to trade in this scenario risky.

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The U.S. Trade Representative has hinted that the U.S. might take further action regarding the pause on tariffs if talks with China go well. This comes before an upcoming meeting between President Trump and President Xi, with not much hope for major breakthroughs. President Trump posted on Truth Social, saying a trade meeting in Europe between the U.S. and China is going well and is close to finishing. He mentioned a deal involving a company popular with young Americans, which has created a positive mood. President Trump will talk more with President Xi on Friday and insists that the U.S.-China relationship is strong.

Optimistic on Tariffs

There’s a sense of optimism about the possibility of pausing tariffs, which often causes short-term fluctuations in the market. However, history shows that initial positive comments don’t always lead to real policy changes. Therefore, traders should be careful not to take on too much risk based solely on headlines. The ongoing economic tensions are still crucial to consider. The U.S. trade deficit in goods with China hit a record $382 billion in 2022 and is expected to exceed $350 billion in 2025. This indicates the significant structural imbalance remains, suggesting that any political goodwill may be short-lived, making long-term optimistic bets on a trade resolution risky. We think the technology sector, especially semiconductors, will see the most price swings due to this news. In recent years, the Philadelphia Semiconductor Index (SOX) has often moved more than 2% in one day based on trade news. Consider using options on major tech ETFs to manage or speculate on these sharp, short-term price changes in the weeks ahead.

Currency Derivatives Outlook

Currency derivatives, especially for the offshore yuan, offer a direct way to trade this sentiment. The USD/CNH has been trading in a narrow range lately, but it spiked significantly during past trade tensions, such as in 2019 when it surpassed 7.0 for the first time in over a decade. If talks break down, we could see it rise again, while a successful agreement could strengthen the yuan significantly. Given that the market tends to react strongly to rumors and then settle as more details come out, we see value in strategies that take advantage of increased implied volatility. Buying straddles on broad market indices like the S&P 500 before any confirmed meetings allows traders to benefit from big price moves in either direction. This strategy recognizes the high level of uncertainty surrounding the actual outcomes of these discussions. Create your live VT Markets account and start trading now.

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Bessent has shared that the United States and China have reached a framework agreement regarding TikTok. Further discussions are expected in the next few weeks, with a meeting between Trump and Xi planned for Friday.

Framework Agreement With China

Greer from the USTR said that talks on broader issues like tariffs will be postponed until Friday’s meeting. Since TikTok is not publicly traded, any market effects will likely come from a potential sale involving a major US tech company. Greer also suggested that the US might consider holding off on tariffs, depending on the outcome of upcoming talks. This news indicates a decrease in US-China tensions, which could reduce market volatility. The VIX, which has been around 18, has dipped below its 50-day average in futures trading following this announcement. Selling VIX calls or buying puts on volatility ETFs for the upcoming weeks seems like a smart strategy.

Potential Market Impact

We should look at this in the context of the trade wars of the late 2010s when any sign of tariff cuts sent markets up significantly. With the Trump-Xi call coming up this Friday, preparing for a potential increase in equity indices makes sense. Buying near-term call options on the S&P 500 or Nasdaq 100 is a good way to take advantage of this possible positive sentiment. The real impact will be on US tech companies with significant exposure to China, especially in the semiconductor sector. The SOX index, which has dropped 4% over the past quarter due to these tensions, is a crucial area to monitor. We suggest looking at call options on major semiconductor ETFs or individual companies that earn over 25% of their revenue from China. While the TikTok agreement itself won’t have a major direct market effect, the news about a possible pause in tariffs is the more significant story. The offshore yuan (CNH) has already strengthened past 7.15 against the dollar, reaching a one-month high and reflecting this optimism. This could support emerging markets and slightly weaken the dollar, which you can trade using currency futures or options. Create your live VT Markets account and start trading now.

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Canada’s manufacturing sales in July increased by 2.5%, surpassing the expected growth of 1.8%. This rise follows earlier declines, boosted mainly by the transportation equipment sector, which grew by 8.6% to reach $11.4 billion. The growth was driven by motor vehicles, which saw an 11.4% rise, and aerospace products, which increased by 6.5%. Sales of petroleum and coal products also rose by 6.2%, recovering from earlier refinery shutdowns.

Signs of Stabilization

Total inventories in manufacturing climbed by 0.8%, and the inventory-to-sales ratio slightly decreased. These developments suggest that the manufacturing sector is stabilizing. The Bank of Canada is set to announce its decision on interest rates soon, and a potential reduction is anticipated. The better-than-expected manufacturing data for July complicates the Bank’s rate decision this week. While the market has been expecting a rate cut, this strong economic performance gives the central bank good reason to wait. As a result, we should foresee increased volatility in Canadian assets as traders consider these mixed signals.

Opportunities and Risks in the Market

For the Canadian dollar (loonie), this situation creates a clear opportunity. The loonie has been trading around $0.73 USD for weeks, but this news might cause a significant shift. We suggest using options strategies like straddles or strangles on the USD/CAD pair to benefit from a big price movement in either direction following the Bank of Canada’s announcement. Interest rate derivatives are at a critical point. After maintaining a policy rate of 5.0% for most of the past year to tackle high inflation in 2023 and 2024, the market is now pricing in nearly an 80% chance of a 25-basis point cut this week. A contrarian move would be to bet on the Bank keeping rates steady due to strong data, which would likely cause a significant change in bond futures. In the equity markets, the data looks very positive for the industrial and manufacturing sectors. We’re considering call options on companies in the transportation equipment and aerospace sectors, which have performed exceptionally well. With core inflation dropping to 2.2% last month, a potential rate cut could further help these cyclical stocks by lowering borrowing costs and boosting economic confidence. The 6.2% increase in petroleum product sales also indicates strong domestic energy demand, benefiting Canadian oil producers. This makes us bullish on front-month futures for Western Canada Select (WCS). Overall, the implied volatility on the S&P/TSX 60 is rising, indicating that the market is preparing for a significant move in the coming days. Create your live VT Markets account and start trading now.

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