US President Trump’s announcement of a 50% import tariff on copper has shaken the market. The price of copper on Comex rose to nearly 590 US cents per pound, which is about $13,000 per ton. Meanwhile, prices on the London Metal Exchange (LME) dropped, creating a 30% premium in the US compared to global prices. These high tariffs are likely to tighten US copper supply. Last year, the US imported 45% of its copper, with 65% of those imports coming from Chile. This situation makes it challenging to almost double domestic production in a short time. Additionally, secondary production only adds a small 4% to US copper output.

Projected Market Changes

The new tariffs are expected to lower the demand for copper in the US. The aluminum sector is also anticipating similar effects, which may increase copper availability outside the US, thus impacting LME prices. Many may rush to import copper before the August 1 deadline, possibly boosting LME prices initially. However, forecasts predict a decline to $9,500 per ton once tariffs take effect. There are risks with these market changes. It’s important to do thorough research before making investments. Be aware of the risks, uncertainties, and potential losses involved in market activities. This situation is a clear example of how policy changes can impact commodity markets. With the announcement of steep tariffs on copper, the market felt an immediate impact. The Comex price spiked, but LME prices fell, resulting in a 30% price difference. This isn’t just theory. The US relied on imports for almost half of its copper usage last year, predominantly from Chile. Once the tariffs are enforced in August, supply could become very tight. Domestic production isn’t going to increase quickly, and secondary production is minimal, leaving the US in a tricky position.

Impact on Supply and Demand

We expect tighter copper supply in the US will push domestic prices higher while lowering global benchmarks. The aluminum market may also face similar shifts, freeing up more copper for international buyers and likely depressing LME prices over time. Leading up to August 1, companies might ramp up imports, temporarily increasing LME copper prices, but this won’t last. Once the tariffs are fully in place, projections suggest prices will fall to $9,500 per ton. Volatility is returning. For traders, this could mean larger spreads and greater price differences. While arbitrage opportunities might look appealing, they will be short-lived. Pricing mechanisms are changing rapidly, and swift execution is vital. These developments resemble past supply-driven policies and highlight the global consequences of US decisions. Being conscious of timing is crucial now, especially regarding futures contracts for deliveries post-August. There could be less liquidity in contracts most affected by US delivery, which might widen bid-offer spreads. Short-term mismatches between physical and paper contracts often happen in policy-driven environments. Traders adjusting to new pricing structures, especially regarding funding and collateral needs, are also advised to stay cautious. Margin requirements may change as volatility drives risk higher. Monitoring metal flows and warehouse inventories in the coming weeks will provide clearer insights. LME inventories might increase slightly as supply adjusts. However, if physical shipments are redirected too quickly, this could lead to unexpected supply shortages in Asia and Europe. With any significant change, timing is critical. Premature moves, betting on price equality returning across exchanges, could backfire. Those who remain focused on actual customs schedules, rather than just shipping volumes, will likely benefit. This situation is no longer just about copper. The effects will spill over into other metals, particularly those involved in shared refining processes or multi-commodity contracts. Contracts for physical delivery, especially in the Gulf Coast, may show unforeseen disparities. We have entered a phase where relative value strategies might outperform direct price bets. Any new political developments or hints at countermeasures from large exporters could add more unpredictability. Keeping an eye on shipping delays, storage demand, and insurance costs for high-tariff cargo will provide operational insights. What’s needed now is discipline—active monitoring and hedging strategies. Cross-market correlations remain unstable. Create your live VT Markets account and start trading now.

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The GBPUSD has been falling because of weak UK economic data and a strong US dollar, which is influenced by inflation worries related to high U.S. tariffs. Concerns about slower global growth have also pushed more investors into the dollar, putting additional pressure on the pound. Currently, GBPUSD is in a critical swing area between 1.3411 and 1.3514, hitting a low of 1.3495 today before bouncing to 1.3504. The hourly chart shows a decline that has dropped below the 61.8% retracement level of 1.3529, moving away from the 100-hour moving average.

Crucial Resistance Levels

The pound has slipped below a swing area between 1.3505 and 1.3514, with a low of 1.3495 now setting this range as resistance. A rise above 1.3514 and the 61.8% level at 1.3529 would challenge the current downtrend. The 61.8% retracement level is key; staying below it suggests more downside ahead. However, if the price goes above this level, the short-term outlook may improve. The market is reacting strongly to policy changes and economic indicators, especially from the U.S. The pound’s drop below the significant 1.3514 level indicates bearish control in the short term. The breach of the 1.3529 retracement line shows that the earlier rebound is losing strength.

Key Technical Supports

Since the 1.3495 level has been reached, there isn’t much immediate technical support until the earlier monthly lows around 1.3430 to mid-1.34s become relevant. These lower areas were tested last quarter, but the speed of the current drop is different. Previous recoveries faced smaller dips and clearer rebounds, which is not the case now. Attention should be on failed attempts to push back through the resistance of 1.3514–1.3529. This range previously supported buyers, but now that it has flipped to resistance, retests from below are likely to lead to selling instead of buying. Once support breaks, it becomes a ceiling. For now, any rallies into this area are seen as pressure points rather than reversal points. Momentum traders will keep pushing lower unless a strong catalyst for reversal appears, and currently, there isn’t much on the calendar to suggest that. Another factor to watch is the dollar’s strong position in global trade. With tariffs being discussed again and inflation data remaining high, the dollar remains strong against other currencies, impacting the pound. Tighter spreads may appear intermittently, but they haven’t changed the trend. Prices are showing a heavy tone below the 100-hour moving average, indicating sellers remain in control. The volume supporting this drop shows it’s a motivated move, not just a slow decline. Until there’s a significant push back through the retracement levels, attempts to rise may stall. We’re not anticipating a long-term bullish trend while prices stay below their hourly range. The critical point is if the price drops below 1.3480. If it does, short-term stops could push the price down to 1.3450 and then 1.3411, levels that showed stability previously but may struggle given the current sentiment. In the upcoming sessions, we’re looking for a clear structure. More lower highs at resistance will reinforce the downward trend. Conversely, a strong close above the retracement area, with continued momentum in the next hour, could suggest a pause. However, without follow-through, these counter-moves will likely fade. Always focus on ranges rather than isolated levels. Watching for retests and failed breakouts can provide cleaner opportunities than trying to predict direction. Let the levels speak for themselves. Create your live VT Markets account and start trading now.

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Gold exchange-traded funds (ETFs) saw a significant rise in the first half of the year, with holdings growing by 397 tons. This is the largest increase in five years, mainly due to uncertainty around US President Trump’s tariff policy. Most of the influx happened in February, March, and April. More than half of these ETF inflows were linked to US Gold ETFs. This strong demand helped push Gold prices to a record high in April. However, by the end of June, the influence of ETF purchases on Gold prices lessened, and prices fluctuated without maintaining those record highs.

Market Conditions And Investment Decisions

It’s important to understand the changing market conditions that impact Gold investments and to gather all necessary information before making decisions. The impressive ETF inflows and Gold price movements earlier this year highlight the need for ongoing awareness of market changes. The quick rise in gold-backed ETF inflows corresponded with increased geopolitical tensions and changes in trade discussions from Washington. Investors looking for safer assets adjusted their strategies. Much of this demand came from the US, where uncertainty often leads to a higher demand for safe havens. This was not just speculation; it reflected caution about the future. These inflows quickly boosted gold prices to new highs by April, driven by economic caution and increased long positions. However, by June, gold had lost some of its gains and reflected a market fatigue from the earlier excitement. The impact of ETF momentum began to wane, even though buying continued. We should focus on what this shift means. It’s crucial to consider not just the capital flows into gold funds but how they affect prices. This relationship weakened in late Q2, indicating that speculative excess may have peaked or paused. There is still interest in metals, but the connection between ETF demand and price response has loosened, at least for now. We should track net inflows and the declining price reaction. If ETF activity rises again in late Q3 or early Q4, its effect on spot prices may be muted unless accompanied by real-world events like inflation surprises, policy changes, or unexpected volatility in key markets.

Analyzing Physical Demand And Derivatives

Physical demand, though less visible day-to-day, may soon become important again. Increased interest in gold accumulation by Asian central banks could balance out any cooling enthusiasm from ETF investors. However, immediate responsiveness is not guaranteed, especially in derivative markets driven by leveraged interest rather than straightforward purchases. Derivative traders should not rely solely on ETF flows for direction. Earlier this year showcased a clear example of price action driven by flows, followed by price corrections as sentiment changed. A balanced approach is now essential—considering technical signals, macro events, and inter-market spreads in tandem. Seasonal patterns in gold markets also matter. The early-year influx—often due to fiscal year strategies and hedging—typically declines in summer, as seen so far. If risk-averse sentiment resurfaces due to monetary tightening or fiscal challenges, the scale and speed of inflows will determine short-term margins, not just their presence. In the coming weeks, we will monitor if gold’s price stability can be sustained without new ETF enthusiasm. There is a clear need to focus on futures open interest, funding rates, and positions from managed money. These indicators will more accurately signal shifts in exposure, rather than trailing fund flows, which are now more reflective than predictive. It’s crucial not to assume that past ETF-driven rallies will happen again. Current pricing is driven more by structure than sentiment, so we need to pay close attention to positioning data rather than just flow headlines or previous highs. We will remain alert to any signs of renewed interest in precious metals, especially contracts scheduled for December delivery. For now, staying responsive is the safer approach. Create your live VT Markets account and start trading now.

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The euro is in the spotlight as Trump prepares to send a tariff letter to Von Der Leyen, likely detailing tariff rates with an expected deadline of August 1. Markets predict a 20% headline rate, in line with earlier announcements. However, any figure announced today is seen as more of a negotiation tool than a final decision. It’s unclear how the euro will respond to this announcement. In the past, the Canadian dollar bounced back in under an hour, while the Brazilian real took about three hours. These differing reactions show how quickly currencies can adjust to trade news. Although this potential tariff aims to impact the euro, the immediate effects might differ. So far, it appears we are in the early stages of a trade strategy, with tariffs being suggested rather than set in stone. The mention of dates and rates suggests a calculated approach, more strategic than punitive—for now. The 20% figure isn’t new and seems to align with what markets have already anticipated. However, the formal delivery of the letter adds drama. While it doesn’t change laws or policies yet, it could influence perceptions, and perceptions often move prices faster than final decisions. Past examples of the Canadian dollar and Brazilian real provide insights—not predictions—on how currencies adjust. It’s about tone, timing, and the players involved. The euro’s response won’t exactly mirror those currencies, but traders should observe how quickly different markets react to these political signals. If the White House’s letter follows the expected route, the markets may view it as an opening for discussions rather than an immediate change in trade relations. Much depends on how the letter is framed. If it sounds too definitive, traders may quickly adjust their strategies. But if the language is softer or conditional, the news might be dismissed as mere noise—at least until further steps are taken. We’re closely monitoring option volumes and changes in open interest over shorter time frames. Leverage can amplify even small shifts in positions, so tracking volatility expectations in common expiry periods can offer clearer signs of building pressure. A sharp rise in implied volatility around the euro before the letter is delivered would suggest more traders are positioning for a significant change. Traders involved in euro-related instruments should consider exposure to short-term price swings. If the announcement aligns with expectations, markets may behave similarly to the past, but uniformity across FX isn’t guaranteed. We’re not reacting based on headline numbers alone. We’re also considering structural differences between now and past trade events, especially how crowded current euro positions are and whether volume imbalances exist at key technical levels. Price movements in the next sessions will indicate if speculative flows are caught off guard, which could lead to quick corrections. The euro’s political sensitivity makes the timing of communications from both sides even more crucial. Traders should observe the relationship between the tariff letter and any EU responses, both official and unofficial. Talk of strong retaliation often leads to currency repricing before it becomes official policy. We’re also looking for anomalies in European cross-pairs, particularly where liquidity might dip after major headlines. Those monitoring derivative pricing should check if shifts in out-of-the-money options occur alongside or ahead of spot movements. If they move first, it indicates savvy traders are hedging before the wider market reacts. Lastly, to understand actual trader behavior rather than just expectations, we recommend comparing realized and implied volatilities over different time windows. When one significantly spikes before the other, it typically shows that fear has turned into action, making positioning more important than policy at that moment.

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OPEC+ plans to increase oil production by 550,000 barrels per day in September, with a pause afterward. This plan is in line with the gradual lifting of voluntary cuts and an additional increase for the United Arab Emirates. Previous production limits, which total 3.66 million barrels per day, will remain until the end of 2026. OPEC+ may review these limits at their meeting in November when they discuss strategies for 2026.

Market Oversupply Risks

The risk of oversupply could prevent OPEC+ from reversing production cuts next year. Market forecasts carry uncertainties, so it’s important to be cautious. Make sure to do thorough research before making investment decisions. This information is for educational purposes and is not a recommendation. Investing carries risks, including the chance of losing your entire investment. OPEC+ is taking a careful approach to ease its earlier production cuts. Increasing output by 550,000 barrels per day in September signals a shift away from the deeper cuts made since the pandemic. This move relieves some of the supply pressure that has been intentionally held back over recent years. This increase also includes a special allowance for the UAE, agreed upon in earlier discussions. However, OPEC+ still plans to maintain most of its restrictions—3.66 million barrels per day—until the end of 2026. This commitment aims to limit supply growth. Future decisions may depend on outcomes in the fourth quarter, especially during the next OPEC+ meeting planned for November. At this future meeting, changes could happen if pressures increase from within the group or due to demand changes. With Brent prices softening and global inventories rising, concerns about potential oversupply are growing. Rapid supply increases in a weak demand environment could lead to sharp price declines, which is something traders should consider.

Strategic Considerations

Key questions arise: How flexible will certain producers be with this new agreement? Will larger producers stick to their commitments, or will pressures on budgets or politics lead to changes? We are also watching how future market trends develop. If the forward curve steepens, it could signal that traders expect more supply than demand can handle. This dynamic may lead to higher volatility in futures markets and make relative value strategies more attractive. This involves examining the calendar spreads as September approaches and keeping an eye out for any decline in speculative positions. Historically, shifts in sentiment among money managers can indicate larger market movements if inventories start to trend negatively. Current macroeconomic signals are a mixed bag—global growth is not stalling, but it’s not speeding up either. Adding more supply at this time could disrupt the market balance. Fed Chair Powell’s recent comments showed that the Fed is cautious, lowering the chances of sudden increases in demand for oil products. Coupled with a rising dollar, this creates short-term challenges for energy commodities. For traders, it’s wise to monitor open interest at near-term downside levels. A surge in demand for put options, especially in a limited timeframe, could indicate worry ahead of inventory data and global demand updates. For strategies utilizing options, consider calendar and butterfly spreads, as they may provide clearer setups if spot prices approach crucial support levels without urgent catalysts. We believe that taking large positions, particularly in the short term, increases risks unless there’s clarity on supply regulations and demand growth. As always, closely monitor news—from regional politics to connections across commodities—as these factors will remain critical. With OPEC+ policy changes likely months away, market expectations could change dramatically with minor developments. Create your live VT Markets account and start trading now.

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The Canadian job market showed surprising strength in June. Total employment jumped by 83.1K, well above the expected 0.0K and the previous month’s increase of 8.8K. Part-time jobs played a major role in this growth, rising by 69.5K, while full-time positions increased by 13.5K. The unemployment rate fell to 6.9% from 7.0%, which is lower than the expected 7.1%. The participation rate ticked up slightly to 65.4% from 65.3%. However, average hourly wages for permanent workers dropped from 3.5% to 3.2% year-on-year. After the employment report, the USDCAD exchange rate dipped from 1.3686 to a low of 1.3651, breaking the earlier low of 1.3652 during the Asian session. Buyers stepped in near this support level, pushing the pair back to a high of 1.3673, close to the 100-hour moving average at 1.3675. If the pair climbs above this moving average, it could challenge sellers. However, if USDCAD stays below this level, sellers may target the session’s low and the rising 200-hour moving average at 1.36424.

Impact On Currency Markets

The earlier part of this report noted an unexpected rise in Canadian employment in June, impacting currency markets significantly. With 83,100 jobs added — mainly part-time — and the unemployment rate dropping to 6.9%, the Canadian dollar gained temporary support. However, the slowdown in wages raised a different concern, suggesting that the Bank of Canada might not feel pressured to change interest rates right away. For now, the market is focusing more on job creation. We saw a reaction in the USDCAD exchange rate following this data release. The slight drop in the pair showed that the Canadian dollar gained strength temporarily, moving below the previously marked level of 1.3652 during Asian trading. Buyers quickly returned around this support, pushing the price back up. The upward movement stalled near the 100-hour moving average, which sits just above at 1.3675. These averages are often respected in short-term trading, and today, they appear to be a barrier for bulls. If we have positions that rely on market direction, this is a critical moment. The uncertainty near a key level, like a moving average, might lead to quick reversals or suggest a lack of confidence among traders. In this case, failing to stay above the 100-hour indicator could keep downside targets active, starting with the day’s low and potentially heading toward 1.3642, where the longer-term 200-hour average is steadily rising.

Looking Ahead

As we move into the next sessions, it’s important to note that the labor data doesn’t completely match the slower wage growth. This gap shouldn’t be overlooked. Typically, strong job numbers encourage central banks to tighten rates, but weak wage growth may delay those decisions. As Canada approaches its next rate decision, we should see options pricing reflect higher volatility, especially in shorter time frames. For now, we are monitoring moves below 1.3650 and any consolidation under the 100-hour average. Such technical hesitation could indicate renewed testing of support. Additionally, initial reactions to these numbers can quickly reverse if they contradict the broader rate expectations. We should scrutinize any significant intraday moves until volume confirms a change in trend. We will stay vigilant for messages from policymakers in the coming days and will track their follow-through in both spot and options markets. The interplay between softer inflation signals and a recovering workforce might lead to unexpected shifts in forward implieds. Keeping an eye on these changes can provide early insights before spot prices adjust. Create your live VT Markets account and start trading now.

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In May, Canadian building permits increased by 12.0%, which was surprising since experts expected a decline of 0.8%. The previous month’s permits were revised to show a slightly worse decrease of 6.8%, instead of the initial 6.6%. Non-residential building permits grew by $1.2 billion, reaching a total of $5.6 billion in May. This growth was primarily driven by Ontario’s institutional sector, which saw a $1.3 billion increase. A major hospital permit in the Niagara area contributed significantly, being valued at nearly seven times the average major institutional permit. This pushed the national institutional total to a record high of $2.5 billion. Residential construction intentions also rose by $169.8 million, bringing the total to $7.5 billion in May. Most of this increase came from British Columbia’s multi-family sector, where permits went up by $687.7 million to $1.5 billion. Although the data looks strong, it is heavily influenced by that specific hospital permit. The prior section highlights that total Canadian building permits unexpectedly rose in May by 12.0%, which was against analysts’ expectations of a slight decline. Revised figures from April showed a slightly larger drop than previously reported. The crucial point isn’t just the overall increase, but what is driving it. Most of the May surge in non-residential permits came from a single massive development in Ontario — the hospital project in Niagara. This significantly inflated the monthly data. Without this permit, the overall numbers would have been much more modest. The unusually large value of this permit suggests the non-residential sector seems more active than it is in reality. Institutional permits hit a national high, but mainly because of this one substantial item. On the other hand, residential intentions rose, especially in British Columbia. Notably, most of the growth was in the multi-family sector — apartments, condos, and similar types. Over two-thirds of this increase came from that province, indicating a regional, rather than a nationwide, boost. For those analyzing market trends, this data implies that the headline figures don’t reflect a genuine shift in the underlying construction strength. The presence of such a large, one-time permit indicates we aren’t witnessing organic growth typically required for trend-following. A single big push can lead to misleading headline figures. We generally interpret this data with caution, as price-sensitive areas are more likely to face reversals when influenced by one event. Relying too much on these headline numbers, without adjusting for their composition, risks being caught off guard when the temporary boost subsides. The activity in British Columbia’s multi-family sector may signal early signs of investment shifts, probably due to changing population patterns and provincial policies. However, regional strength by itself doesn’t ensure the reliability needed for mid-term investments in interest-sensitive assets. Structurally, we see this data point more as an outlier than a turning point. It highlights why price reactions shouldn’t always reflect data size. When underlying spreads fluctuate based on such unusual data, we remain cautious of sustained trends—especially if participation outside the institutional sector is limited. In summary, while the totals appear strong, their distribution suggests a need for caution. We are looking for signs of adjustment in upcoming numbers and expect some normalization once the impact of major projects diminishes. Real direction will depend less on these quarterly spikes and more on consistent performance across various regions and property types.

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The U.S. dollar (USD) is gaining strength against the euro (EUR), Japanese yen (JPY), and British pound (GBP) as the U.S. trading session begins. The EUR/USD pair has stabilized after some initial ups and downs. In contrast, the GBP/USD has dropped by 0.44%, impacted by weaker economic data from the UK for May. The UK GDP estimate fell by 0.1%, missing the expected increase of 0.1%, even though it was an improvement from April’s decline of 0.3%. UK Manufacturing Issues UK manufacturing output decreased by 1.0%, falling short of expectations and previous results, which has affected the GBP/USD. Meanwhile, the USD/JPY has increased by 0.47%. The Trump administration has imposed a 35% tariff on Canadian goods, leading to an initial spike in the USD/CAD, although the numbers have since stabilized. Canada intends to defend its interests as trade discussions continue. Canada remains open to cooperation with the U.S. on joint projects. Vietnam was caught off guard by tariffs as high as 20% to 40% on transshipped goods, having expected lower rates. A letter from Trump raises questions about possible tariffs on the EU. Federal Reserve President Austan Goolsbee has warned against interest rate cuts, expressing concerns over uncertainty following the April tariffs. He noted that tariffs have not significantly increased inflation but acknowledged business worries. ECB’s Isabel Schnabel confirmed that there are high barriers to further easing, indicating that the eurozone economy remains robust. ECB and U.S. Market Responses Markets expect the ECB to maintain stable rates throughout the summer, with little chance of cuts in the coming months. ECB’s Panetta mentioned that continued easing might be necessary if disinflationary risks persist. Following tariff announcements, U.S. stocks saw downturns, with declines in the Dow, S&P, and Nasdaq. Yields on U.S. debt rose across 2-year, 5-year, 10-year, and 30-year bonds. The dollar has gained strength against major currencies at the start of the U.S. session, making notable moves against the euro, yen, and pound. The euro-dollar pair has settled down after earlier volatility. On the other hand, sterling is under pressure due to disappointing UK economic data. The latest GDP estimate showed a slight contraction of 0.1%, when a slight growth was expected. While this is better than April’s bigger decline, it suggests fragile momentum in the UK economy. UK manufacturing output dropped more than anticipated, falling by 1.0%. This decline was unexpected and has further weakened GBP confidence. The GBP/USD is feeling the impact of reduced confidence in the UK’s industrial recovery. The USD/JPY pair, however, is gaining as investors seek safer U.S. assets, partly due to a lack of new Japanese policy measures. For traders, this renewed strength in the dollar is noteworthy, especially as short-term U.S. bond yields rise, providing the dollar with a yield advantage. Trade Policy Developments Trade policy is back in focus. The U.S. recently implemented a 35% import duty on Canadian goods, leading to an immediate spike in the USD/CAD pairing. Though the reaction has calmed, the initial jump reflected the surprise at the steep tariff rate. Canada’s response combines disagreement with the measures while continuing discussions, suggesting a more rhetorical approach for now. Tariff surprises also affected Vietnam, which faced much higher tariffs on goods rerouted to the U.S. than expected, with rates reaching as high as 40%. This will likely impact trade flows, particularly for goods re-exported through Vietnam. These changes indicate that future trade adjustments will require closer examination of supply chain routes. Monetary Policy Insights Monetary policy discussions are also gaining attention. Goolsbee has pushed back against short-term interest rate cuts, indicating that while tariffs have complicated things, they haven’t yet resulted in a clear inflation rise. However, he warned of increased uncertainty for the economic outlook, especially for Midwest manufacturers. This suggests the Federal Reserve may hold rates steady in the short term unless inflation rises significantly. Across the Atlantic, Schnabel has emphasized that future policy easing would need strong justification. Her stance indicates that despite some soft eurozone data, the overall economy shows enough resilience to keep current rates unchanged, minimizing expectations for any changes this summer. Panetta hinted at potentially easier conditions should price pressures continue to ease, but this seems more conditional than an active debate within the ECB. We should pay attention to upcoming inflation reports, especially in Southern Europe, where the variation in price trends might become more evident. Finally, in the U.S. stock market, traders reacted sharply to the tariff news. Broad market indices fell—not due to macroeconomic data but because of concerns over corporate earnings and supply chain risks. The Dow experienced the largest losses, followed by declines in tech stocks on the Nasdaq. Yields on U.S. government bonds increased across the board as the market anticipated greater government issuance or a delayed easing cycle. Overall, messages from different asset classes are converging: prepare for trade disruptions, rethink interest rate expectations, and stay alert for shifts in central bank communication as new data emerges. Create your live VT Markets account and start trading now.

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The USD is currently stable against major currencies. Last month’s NFP report made traders rethink the possibility of a third rate cut by the end of the year. Wage growth was not as strong as anticipated, which limited further gains for the USD. Now, all eyes are on the upcoming US CPI report. It’s unlikely that the CPI will lead to a rate cut at the July Fed meeting, although September might be a possibility if the data supports it. A weak CPI could increase chances for a third rate cut later this year, which would negatively affect the USD.

Impact on the USD

If the CPI shows strong results, it may not stop the second rate cut but could reduce expectations for a third, possibly strengthening the USD. The Australian dollar (AUD) has seen some movement due to the RBA keeping the Cash Rate steady while waiting for the new CPI data. On the daily chart, the price is at the top of a broadening wedge formation, suggesting that a significant price movement may occur. Sellers may look to enter at the upper trendline, anticipating a drop to the 0.6350 support zone. Buyers will watch for a breakout that could push prices toward 0.69. On the 1-hour chart, the price is struggling against the upper trendline, indicating selling pressure. Buyers are relying on a minor upward trendline, aiming for a breakout above the major trendline, while sellers are targeting a decline towards the 0.6350 support. This summary captures the current state of market expectations. The US dollar is steady, not moving much against major currencies. The recent non-farm payrolls report showed softer numbers, particularly in wages, causing some to doubt the likelihood of a third rate cut this year. As a result, the dollar has limited strong gains but also avoided significant losses, remaining in a sort of holding pattern.

Focus on Inflation Data

With the NFP report behind us, the focus now shifts to upcoming consumer price index (CPI) figures. Inflation will be key for any decision from the Federal Reserve. If the CPI comes in lower than expected, it’s unlikely the Fed will act as early as July. However, September might be possible if inflation slows down and no surprising strong data emerges. If price growth weakens, the case for rate cuts by December strengthens, causing the dollar to weaken. If CPI figures are strong and show persistent inflation, it might not eliminate the chances of a second rate cut, but it could lessen the argument for a third. In that case, the dollar might strengthen, especially if investors doubt the Fed can justify more than one cut. Turning to the Australian dollar, policymakers have left the main interest rate unchanged and are waiting for local CPI data to guide their decisions. The technical setup reflects this uncertainty. On the daily chart, the price is at the top of a broadening wedge, often signaling a strong move when one side loses momentum. This is when traders usually act. We’re watching closely. Bears notice the repeated failure to break the upper trendline, with many setting short positions just below resistance, hoping for a drop back to 0.6350, a level of strong support. This approach is based on patterns and disciplined risk management. Meanwhile, bulls are not giving up. They are eyeing the same upper edge of the wedge, looking for a solid breakout above it. If the price can break that line convincingly, it could target the 0.6900 mark, an important psychological and historical level. Looking at the hourly chart reveals a similar pattern. There’s clear rejection from the upper edge, leading to increased selling. However, the short-term upward trendline still holds, with buyers positioned just above it, likely using tight stops below, aiming for a sharp upward move if conditions shift in their favor. This situation is precarious. Resistance is holding for now, but the foundation remains strong. The market’s direction will be determined when price action takes a decisive turn. Until then, it’s all about preparation rather than prediction. Create your live VT Markets account and start trading now.

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The EU has not reached an agreement with the US on tariffs. EU officials want to steer clear of a trade war. Earlier, EU representatives didn’t expect a letter regarding tariffs. However, President Trump mentioned that both the EU and Canada would soon receive notifications about new tariff rates. Despite the uncertainty, it seems the EU will not retaliate. The focus will be on ongoing negotiations to secure concessions, with a standard expectation of a 10% tariff rate. For traders dealing with the impacts of the EU-US discussions, understanding the tone and direction of the stalled talks is crucial. The EU clearly wants to avoid escalating tensions. Even though officials did not foresee a formal tariff letter, Trump’s recent comments suggest that higher risk premiums should be considered in predictions. The proposed 10% tariff will change the pricing dynamics in the short to medium term, especially regarding transatlantic trade connections. Since Brussels is not expected to implement countermeasures soon, market pricing for euro-dollar pairs, particularly in forwards and swap spreads, may drift as traders adjust their expectations for policy changes. If further meetings between delegates are scheduled soon, volatility might be somewhat contained, but any official documents from Washington could change that optimism. Wilbur Ross’s past comments have been reliable indicators in trade cycles, so we should pay close attention to all public appearances or casual remarks, especially when looking at gamma positioning for upcoming expirations. The timing and content of the official tariff notices will be significant. If they reach the markets within the next three weeks, the impact on exporters will shift notably, affecting calendar spreads. While Europe is more focused on diplomacy than conflict, we shouldn’t assume that sectors like autos and industrial machinery will remain passive. These sectors have considerable exposure in thematic options across regional indices. The strategy should involve dynamic adjustments as positions approach gamma thresholds, given that implied volatility may not fully capture the potential effects of a formal policy change. It’s important to note that value-at-risk models may lag in responding to these gradual changes. This is why using rolling hedges made from outright puts and ratio spreads in dollar-sensitive industries appears to be a smart tactic. In this situation, being prepared is more valuable than merely reacting. As Lighthizer emphasizes compliance benchmarks over consensus discussions, the risk goes beyond just tariff levels—it includes staggered implementation and extensions to secondary categories that should keep us vigilant. The details are important: back-end tenors might not react uniformly if the measures come in gradually. We need to closely watch positioning, considering both momentum pockets and capitulation zones. Specifically, curve steepening in rate markets linked to trade-sensitive GDP forecasts could provide early signals. Therefore, data from preliminary purchasing manager indices in Germany and France may influence option pricing more quickly than typical equity movements—so we should approach those indicators carefully. In summary, our strategy integrates liquidity overlays, earnings dispersion models, and scenario plans focused on tariff developments, activated by real-time public commentary. While Europe prefers diplomatic routes, we prioritize tracking the flow rather than the intentions behind it.

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