The US dollar has strengthened after President Trump’s announcement of a 25% tariff on all Japanese goods imported into the US. This tariff will start on August 1, leading to rising yields and falling stock prices. The USDJPY has climbed to a new session high, moving between 145.919 and 146.288, with the peak at 146.08. The EURUSD has dropped to new lows, breaking past the earlier swing low of 1.1716 reached today and last Thursday. It may soon test important support levels between 1.1663 and 1.1691. This range has shown multiple swing lows and highs since 2021, indicating a possible downward trend.

US Treasury Yields and Stock Market Movements

US treasury yields have risen across all maturities: the 2-year at 3.888%, the 5-year at 3.956%, the 10-year at 4.385%, and the 30-year at 4.922%. In the stock market, major US indices have fallen. The Dow lost 464.0 points, the S&P dropped by 50.58 points, and the NASDAQ decreased by 172.60 points. The Russell 2000 saw the biggest decline, down by 31.44 points. The USDCHF has also reached a new daily high, surpassing last Thursday’s peak of 0.7986 and moving toward the 38.2% retracement level at 0.8002. These market changes show a quick reaction to unexpected news from Washington. With new tariffs on Japanese products, international trade uncertainty has increased. The dollar’s rise reflects higher demand during political and economic tension, causing noticeable effects across various markets. We see a chain reaction affecting related markets. The USDJPY pushing above 146.00 shows growing confidence in the dollar’s support in the near term, especially as traders anticipate widening interest rate differences. Levels previously tested and not broken now seem vulnerable if this momentum continues.

Market Reactions and Currency Pair Movements

As yields rise, especially nearing the 5% mark, bonds are adjusting due to increased sensitivity to inflation and speculation about possible rate changes. This makes sense given the rising government borrowing needs and spending commitments, while traders are seeking better long-term compensation. Higher yields often pressurize rate-sensitive assets, which is evident in the recent stock market declines. Currency pairs like EURUSD are now more at risk, as the dollar’s climb creates pressure in developed-market forex. Breaking through today’s and last week’s lows indicates sellers are working through support close to 1.1690, targeting the next key technical levels. When key support gives way, stop-losses often lead to further movement in the same direction. For now, the focus remains below the critical 1.17 area, which has provided resistance since 2021. Traders in USDCHF have reacted similarly. After breaking above the weekly high and approaching the nearby retracement point, renewed dollar buying indicates stronger demand. Crossing the 0.8000 mark is significant both psychologically and on the chart. It prompts a look at how much higher buying pressure could go. The 38.2% retracement level often confirms trends and may help in assessing the strength of current movements. The broader implications become clearer when we consider how rates, currencies, and equities are moving in sync. Each asset class responds in relation to the ongoing repricing. In the short term, stable rate differentials and tariff news will lead to clear counter-party reactions. Price relationships, especially among cross-asset correlations, are more telling than political rhetoric. Weakness in equities reduces risk appetite at the same time investors look at currency and fixed income allocations. These types of shifts across multiple assets often speed up changes in positioning, particularly when all indicators point in the same direction. Rising yields mean tighter liquidity for stocks, especially smaller-cap stocks that saw the greatest declines. With these benchmarks quickly rolling over, there’s less doubt about the market’s current direction. We will keep an eye on this week’s peaks and lows, and see how previous support zones perform. When these areas break down or hold strong, strategies must adapt. Price action, not opinions, should guide decisions. Create your live VT Markets account and start trading now.

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US Treasury Secretary Scott Bessent announced that new trade updates are expected within the next 48 hours. He mentioned that he has received various new offers and plans to engage in talks with a Chinese counterpart soon. Despite these comments, the US Dollar Index rose by 0.45% to reach 97.42, indicating that the market did not react strongly to the news. Bessent also discussed normal currency changes and the decline of the Chinese currency.

Understanding Tariffs

Tariffs are fees imposed on imported goods to help local businesses by making their prices more competitive. Unlike taxes, which are paid at the point of sale, tariffs are paid when products enter the country. There is ongoing debate about tariffs. Some people believe they help protect local markets, while others think they can raise prices and lead to trade conflicts. Former US President Donald Trump used tariffs to strengthen the US economy, targeting countries like Mexico, China, and Canada because they contribute a lot to US imports. The revenue from tariffs was intended to offset personal income taxes. As Bessent prepares for trade announcements in just a few days, it raises questions about how these changes could impact market sentiment soon. While he hinted at new negotiations, including with a Chinese counterpart, the fact that there was little market movement afterward shows that traders are currently not reacting strongly to these updates, likely waiting for more concrete news. Still, it’s important to pay attention when senior officials discuss future talks with major trade partners. The US Dollar Index’s increase of 0.45% to 97.42 suggests that traders are not expecting big changes right now. Instead, the dollar’s rise indicates a preference for stability amid uncertainty. Even with comments on currency trends—like the decline of the renminbi—the overall trade situation will heavily influence future pricing.

Economic Impact and Market Reactions

Let’s revisit trade barriers, particularly tariffs. These increase import costs, making domestic products more appealing. Tariffs can be seen not just as fiscal measures but also as political and economic tools. Trump viewed them as ways to regain industrial strength, while others worried they could create instability, provoking reactions from other countries. Canada, China, and Mexico were targeted due to their significant exports to the US. The reasoning wasn’t just about pricing; tariffs were meant to gather funds that could help lower personal income taxes. This redistribution was promoted as beneficial for the nation, though the long-term impacts remain a topic of discussion among experts. Moving forward, we’ll be watching how pricing volatility in financial instruments that track key currencies and international investments reacts. If Bessent’s upcoming trade updates lead to new information, assumptions about tariffs might suddenly alter risk premiums. This could cause short-term options to adjust more quickly than anticipated, especially related to Chinese manufacturing or raw material supply chains. Additionally, if tensions rise again, we might see changes in long-term interest rate markets. For now, it’s crucial to stay alert. Although no clear trends have emerged after Bessent’s remarks, the options market is quick to react to new information. Expect sharp but brief responses from traders as they adjust strategies based on rising or disappearing uncertainties. Create your live VT Markets account and start trading now.

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On July 7, 2025, the White House addressed Japan, raising concerns about the ongoing trade imbalance. Starting August 1, 2025, the U.S. will impose a 25% tariff on all goods imported from Japan. The goal of this tariff is to create a fairer trade relationship between the two nations. Japan-processed products that go through third countries will also face these higher tariffs. Products made in the U.S. by Japanese companies will be exempt from the new tariff. The U.S. plans to expedite approvals for these domestic investments. If Japan raises its tariffs in response, the U.S. will introduce additional tariffs. In a letter, the U.S. accused Japan of maintaining long-standing trade barriers that have led to a major trade deficit. This trade imbalance is seen as a potential threat to U.S. economic stability and security. The U.S. is open to changing tariffs based on how Japan manages its market. The message ends with an invitation for Japan to work together as long-term trade partners. However, it emphasizes that Japan needs to remove trade barriers for the adjustments to be considered. Following the announcement, stock indices fell, with the S&P dropping 0.89% and the Nasdaq decreasing by 0.81% to 6228. Meanwhile, the USDJPY currency pair rose to 146.008. A similar message was sent to South Korea. The announcement caused markets to react sharply, showing that traders are highly sensitive to sudden policy changes. The targeted tariff, which does not include Japanese firms in the U.S., suggests a strategy aimed at shifting production rather than stopping trade altogether. Washington wants to protect American industries while pushing for better access to foreign markets. These actions, though dressed in diplomatic language, are quite directive. The message is clear: change your supply chains or bear the added costs. Markets are starting to reflect this risk, indicated by movements in exchange rates. The dollar has strengthened against the yen, driven not by a change in fundamentals but by asset managers adjusting their positions ahead of expected capital flows. Trade rebalancing impacts real money, not just theories. With U.S. stocks retreating, it’s clear there’s a growing sense of caution. This dip, although minor for now, indicates broader anxiety. It’s not just about a tariff; it’s a response to shifting alliances. The effects are being monitored across futures and swaps markets. Traders dislike uncertainty that can’t be accurately predicted. Talk of tariffs has moved from mere noise to a serious consideration. Models must now account for wider bid-offer spreads in Asia-linked investments, particularly where valuations relied on stable trade. Some large companies, including those in tech sectors within the S&P, depend on supply lines running through East Asia and are now at risk of indirect price pressures. Currency traders are already adjusting their volatility forecasts. A stronger dollar is part of a broader shift in capital flow. As differences in Japanese and U.S. yields change, the carry trade environment alters as well. Many are now defaulting to a short yen strategy. Some traders believe we are nearing the upper limits of the USDJPY intervention levels, and if so, we must be prepared. Timing is important. With these new measures starting soon, we anticipate increased activity in options markets, especially for both short-term and long-term hedges. Gamma positioning will have to reflect not only directional biases but also the paths we expect over the next two weeks. Price changes will not happen all at once, but cash flows will. History shows that policy-driven friction forces institutional adjustments. Derivatives traders may find that typical seasonality models temporarily lose their relevance. The risk surrounding events now exceeds historical averages, making broader protection ranges even more valuable. Including South Korea in the letter shows a coordinated strategy—not a solo message. Asian trade routes rely heavily on mutual dependencies. Hedging strategies should reflect that exposure to one country no longer equates to isolated risk. Connections between regional indices are likely to increase in anticipation. Pay attention to implied volatility at the shorter end. There’s a recognizable pattern: when tariffs seem to become official, variance premiums usually decrease in closely linked sectors, only to spike if retaliation or unexpected comments arise. This is not the time to ignore news updates or macroeconomic data. In conclusion, we see this policy change as a strategic move, realigning trade assumptions underlying many capital models. Portfolio rebalancing has begun—not from panic, but as necessary. When the rules of trade change, we adapt. Today, adaptation is not an option; it is already happening.

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The Euro is currently lagging behind the Pound in a cautious market. It is approaching the support level at 0.8600, even with positive data on German industrial production and a drop in retail consumption across the Eurozone. The Pound has gained strength after Rachel Reeves was confirmed as the UK chancellor, though worries about the UK’s fiscal deficit remain. The Euro’s recent high of 0.8645 indicates a potential end to its recent upward trend, and it needs to drop below 0.8600 for a correction to be confirmed.

4-hour RSI Indicator

If the Euro continues to decline, it could push the 4-Hour RSI below 50, marking the completion of a 5-Wave upward cycle. The next support levels to watch are 0.8550 and 0.8515, which align with Fibonacci retracement levels. On the positive side, if the Euro breaks above 0.8670, the focus could shift towards the high of 0.8740. The Euro serves 19 EU countries and made up 31% of currency transactions in 2022, with a daily turnover of over $2.2 trillion. The European Central Bank sets monetary policy and interest rates for the Eurozone. Various factors, including inflation, GDP, and trade balance, strongly impact the Euro’s value.

Impact of Economic Indicators

Recent German industrial output has exceeded expectations, which normally supports the Euro, but this has been offset by weak retail figures across the Eurozone. This discrepancy has made investors hesitant to sustain any upward trend, especially since the Pound gained clarity after Reeves’ appointment, boosting Sterling despite ongoing fiscal worries. The recent high at 0.8645 acts as a temporary ceiling, and trading below this level suggests renewed downward pressure. If the rate falls below 0.8600, it could indicate the beginning of a more prolonged pullback. The idea is simple: if a prior upward wave fails to create a new high and breaks below a key level, that signals a loss of momentum. This is why the 0.8600 area is important. From a momentum angle, the RSI on the 4-hour chart is being closely monitored. A drop below 50 would suggest that the upward cycle has ended, indicating that sellers may be gaining control. Support targets would then be 0.8550 and 0.8515, which are significant levels based on previous demand and Fibonacci analysis; these could trigger a temporary halt or reversal in selling. However, a strong daily close above 0.8670 would challenge the current bearish outlook. This could bring the previous high at 0.8740 within reach, potentially leading to a shift toward a more neutral or even bullish scenario. Yet, without a strong catalyst—such as changes in interest rate expectations or surprising economic data—we’re not betting on this happening soon. We also need to consider the bigger picture. The Euro isn’t just a local currency; it’s part of a complex financial system managed by the European Central Bank. Its movements are influenced not only by domestic economic data but also by guidance from policymakers, particularly regarding interest rates. This makes every inflation report, GDP update, and trade figure highly relevant for the Euro’s medium-term movements. During times like this, when data is mixed and sentiment is cautious, we prefer to adopt shorter trading strategies. Short-term options or tight stop-loss trades provide more flexibility while the market decides whether this downturn will continue. Any effort to reclaim previous highs will require both stronger fundamentals and better overall risk sentiment, which we currently don’t observe. Until then, our strategies lean towards selling rallies, while we closely monitor upcoming Eurozone CPI and any UK budget news that could sway sentiment in either direction. Create your live VT Markets account and start trading now.

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The EURUSD pair has recently paused in its correction near the 200-hour moving average, with sellers in control. Last week, EURUSD reached a high of 1.18266, the highest point since September 2021, but the upward momentum faded, and the pair dropped to a low of 1.1718, falling below the 100-hour moving average. On Friday and earlier today, the price tried to bounce back and test the 100-hour MA, but sellers remained strong. Although the price slipped below the 200-hour MA at 1.1744, the low of 1.1718 from Thursday has held as a short-term support level. The price rebounded toward the 200-hour MA, but sellers again halted the upward movement. As long as the price stays below this level, the downward trend persists. If the 1.1718 level is breached, the price could drop toward the 1.1663–1.1691 area, which has been a point of support and resistance since 2021. Falling below this zone could signal stronger downward momentum. What we’ve observed lately with EURUSD is a classic example of a strong rally losing strength at a technical barrier. The pair peaked at levels last seen in 2021 but has shown a slow pullback since then. The failure to maintain momentum above key short-term moving averages, especially the 100-hour and 200-hour, is significant. Recent attempts to rally, including a brief rise on Friday and another earlier today, were cut short near the 100-hour line, which indicates a lack of buying interest at these levels. Sellers seem firmly in control, creating lower highs, with any bounce facing immediate resistance. The 200-hour line at around 1.1744 effectively caps the price. Price action near this barrier has been consistent, but it shows a downward trend. The failure to close above it keeps short-term momentum negative. With the price below this line, buyers have not been able to regain control. The focus rests on the 1.1718 level, a low from late last week that acted as a temporary support. If this level breaks, the next area of interest is 1.1663 to 1.1691, where the price has reacted multiple times over the past few years. We should watch for repeated patterns and track trading volume as these levels are tested. If the price moves toward the lower band around 1.1663 with strong selling and continued downward days, the pressure could intensify below these support levels. A lack of buyers may lead to wider downside movement. We will keep an eye on any rejection candles or failed bounce attempts just below 1.1718, as these could reinforce a negative bias. There’s been a technical development, rather than just random volatility. The structure over the past two weeks suggests a market losing confidence in further upward movement. Support zones are tight, and attempts to regain lost ground face strong rejection. There’s no erratic movement, only a series of lower highs struggling to push higher. Now is not the time to assume that a rebound will come easily. Instead, keep an eye on where the price is relative to the moving averages and lower reaction zones. The longer the pair remains below 1.1744, the less likely an upward drift seems. Current activity indicates tight support and clear resistance. When one breaks, it could have significant implications.

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GBP/USD began the week on a downward trend, trading under 1.3600 due to political tensions in the UK and a stronger US Dollar. The pair is close to a key support area between 1.3560 and 1.3550 as market sentiment turns negative. Recently, GBP/USD hit its highest level since October 2021 before falling back to around 1.3650, influenced by changes in the US Dollar and fluctuations in the British bond market. After a rally lasting two weeks, the Pound lost momentum as traders took a break, creating temporary bearish conditions.

AUD/USD Pressure

AUD/USD also faced pressure, dropping back to the 0.6480 range on Monday as the US Dollar gained strength. The Reserve Bank of Australia (RBA) is likely to lower the official cash rate (OCR) by 25 basis points soon. EUR/USD fell below 1.1700 due to trade concerns and a strong US Dollar. Ongoing trade tensions arose after tariffs were announced for Japan and South Korea. Gold prices approached $3,340 due to a slowdown in the US Dollar’s strength and continuing trade tensions. Ripple’s price rose steadily, supported by positive market sentiment and demand from institutional investors. In April, Eurozone retail sales dropped by 0.7%, and services activity fell by 0.3%. This data hints at potential negative GDP growth for the second quarter.

GBP/USD’s Opening Slide

The drop in GBP/USD below 1.3600 reflects strong demand for the US Dollar and increasing political uncertainty in the UK. With the pair nearing the 1.3560–1.3550 support zone, it raises questions: can buying interest hold, or will sellers take control? After a two-week rally, the Pound’s progress fizzled when traders lost their confidence. As bullish sentiment cools, attention shifts to whether this is just a temporary dip or the start of a deeper decline. With the recent high at 1.3650 behind us and US bond yields pushing the Dollar higher, how the market reacts near this lower support will be crucial. Buyers around the mid-1.35s need to hold steady; otherwise, we could see a longer downturn. Traders should be on alert for sudden volatility, especially since political news can quickly change the market’s direction. Turning to AUD/USD, prices around 0.6480 indicate vulnerability for the Aussie, especially with expectations of a 25 basis points rate cut by the RBA. Future market predictions lean towards a softer policy, limiting any upside. Buyers are hesitant even at minor pullbacks, suggesting sentiment hasn’t improved yet. If the RBA doesn’t push back against this outlook, we may see further declines next week. In the Eurozone, EUR/USD falling below 1.1700 appears to be an adjustment to tighter trade conditions and renewed strength in the US Dollar. While tariffs on Japan and South Korea seem remote, they heighten risk sensitivities across Asia and Europe. Further declines in the Euro are possible given recent poor retail performance and ongoing weakness in the services sector. These disappointing figures increase the likelihood of GDP contraction in the Eurozone during the second quarter, making it hard to forecast medium-term strength for the Euro. Currently, sellers seem to be gaining ground. Gold’s rise toward $3,340 shows a different trend. It’s influenced by the US Dollar moves and trade anxieties, but it also highlights an increased investor shift toward metals when yields slow. As real rates stabilize and spreads lose steam, gold’s safe haven appeal grows. However, previous resistance at this level may restrain further gains. If the Dollar strengthens again, gold bulls might struggle to maintain support. Meanwhile, Ripple’s steady ascent indicates growing interest from larger market players, possibly easing regulatory risks. If this continues, these buyers could support the market during lower trading volumes. This trend is orderly rather than chaotic, favoring gradual buying strategies. We should also watch Eurozone macro data closely, particularly the retail decline and weak services indicator from April. These trends are not isolated incidents but rather signs of a fragile economy, prompting a shift in how we assess regional risk across asset classes. The outlook now leans toward a more defensive approach to EUR-related strategies. In the coming weeks, the observed pattern—stronger US Dollar, weaker commodity-linked currencies, and targeted investments in metals and select cryptocurrencies—can guide strategies, as long as we monitor changes diligently. Trade tensions, especially those originating from the US, can lead to sharp intraday movements, making flexible positioning and tight risk management essential. Create your live VT Markets account and start trading now.

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The Pound Sterling drops below 1.3600 against the US Dollar as the market pays close attention to upcoming trade deals ahead of the US tariff deadline on July 9. The GBP/USD rate is falling while the US Dollar remains stable amid expectations for trade updates. The US Dollar Index rises 0.35%, getting close to 97.45, as US Treasury Secretary shows optimism about new trade deals. Washington has announced agreements with the UK, Vietnam, and a limited deal with China, with plans to finalize a deal with India soon.

Trump’s Tariff Strategy

The US is preparing to send letters to countries without agreements, extending tariffs for 90 more days. Trump aims to inform twelve countries about the initial tariff levels for their exports to the US. The Pound Sterling faces pressure due to potential UK budget issues connected to increased welfare spending, which may lead to tax hikes in the Autumn Budget. These fiscal changes could cost £4.8 billion by 2029-2030, drawing attention to GDP and factory data due this Friday. The Bank of England is predicted to lower interest rates by 25 basis points to 4% in August, with more cuts expected in November and December. Technical analysis indicates that GBP/USD is struggling below the 20-day EMA, with major support at 1.3500 and resistance near 1.3800. A weaker Pound has slipped below 1.3600, mainly due to growing domestic budget concerns and a firm Dollar. Recent trends reflect an increasing focus on trade developments, especially progress in US negotiations as the July 9 tariff deadline approaches. Traders are keeping a close eye on the US Dollar’s ascent, with the Dollar Index approaching 97.50. This strengthening follows Mnuchin’s remarks on new trade partnerships, including agreements with Vietnam and the UK, while preparing for talks with India.

Economic Forecast And Fiscal Policies

On the other hand, the UK faces potential financial challenges, with rising welfare expenses straining public finances. This situation goes beyond just the budget. The Chancellor’s forward guidance suggests possible tax changes in autumn, with an estimated extra £4.8 billion added to spending through 2029-2030. If this trend continues, it could negatively affect domestic output and public sentiment. We’re expecting new GDP and manufacturing data on Friday, and a weaker report could be likely, especially if factory output declines. Monetary policy expectations are changing. A rate cut of 25 basis points is widely expected at the August meeting, which would reduce the bank rate to 4%. There are predictions for another cut in November and possibly a third in December. This marks a significant shift from earlier this year when policymakers were more cautious. Those monitoring the forward curve will recognize this signal of a more dovish stance among rate-setters. Technically, the GBP/USD pair cannot maintain levels above the 20-day EMA, indicating a lack of strength for the Pound. The important support level at 1.3500 remains in sight, having provided support in previous sessions, while any upward movement is likely to encounter resistance near 1.3800. Given current trading volumes, these levels may be important for short-term strategy. In light of this wider shift, it’s crucial to keep an eye on cross-currency funding costs and short-term interest rate spreads. We’re closely monitoring weekly positioning, looking for any sharp rise in speculative flows around upcoming economic data or trade news. The timing of Washington’s planned letters to countries without deals could spark market volatility if perceived as an escalation. Adjusting exposure appropriately, especially around scheduled economic releases and expected policy statements, can help reduce the risk of significant market swings. Recent upward movements have tended to fall off quickly, suggesting that bullish sentiment may not last long. Participants should remain cautious and not take on too much risk, particularly as summer trading conditions become less active. Create your live VT Markets account and start trading now.

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USDJPY started the day with a small drop but quickly turned upward with a steady climb and few corrections. Initially, the pair fell below its 200-hour moving average during the Asian session, but buyers quickly pushed it back up around Friday’s low. After breaking the early session high of about 144.63, the pair gained momentum and reached new highs. On the hourly chart, USDJPY is approaching the 61.8% retracement level of the June 23 high at 145.978. This zone, ranging from 145.919 to 146.288, has been a tough barrier in recent months. The pair briefly broke this range in May and late June, but those moves didn’t last. Over the past two months, the broader range has been from 142.105 to 146.288. A firm move above 146.288 would suggest a stronger medium-term bullish trend.

Short-Term Support Levels

Right now, short-term support levels are at 145.347, which is the 50% retracement of June’s high-to-low movement, and at 145.216, the high from last week. Staying above these levels keeps buying momentum strong during the day. However, if the pair falls below these levels, it might weaken bullish interest and turn attention back to the 200-hour moving average. As the pair approaches tough resistance levels, it’s vital to pay close attention. The zone between 145.919 and 146.288 has often acted like a ceiling. While the pair has occasionally broken through this area, those moves have been short-lived, often lacking strong follow-up support. A clear break above this upper edge, confirmed with increased volume, would strongly suggest that buyers have regained control beyond short-term tactics. The timing of this move is interesting. The market seems to be responding not just to technical levels, but also to broader market dynamics. We see that quick buying occurs during small corrections in rallies, and dips are shallow, indicating strong buyer interest. However, previous attempts to stay above 146.288 have lost momentum. If current price levels only attract limited interest, we could see another stall, especially if momentum indicators start to flatten or diverge from price movements.

Key Short-Term Levels

Key short-term levels are critical now. The 145.347 mark, which is the midpoint of June’s highs and lows, continues to be important. If there’s a clear daily close below this level, it could signal a shift in the current positive sentiment. The area around 145.216, last week’s high, is another important reference point. If prices dip below both of these levels during the day, it suggests that the drive to push the pair higher may be weakening. We are also closely monitoring the 200-hour moving average, which briefly fell during the Asian hours but was quickly reclaimed. This average serves as a key reference point for short-term trading; if it is broken and not regained, it could shift strategies, especially for leveraged products. If the price drops below this average again, recent buyers may exit, increasing volatility. Given all of this, price movements around the next 30 to 40 pips are crucial. There’s little uncertainty here—the pair is at a pivotal point, and its behavior around these levels will influence the next adjustments. Staying patient and watching for clear breaks or rejections at key levels will allow us to act accordingly. This isn’t a time for wild guesses or vague forecasts. We need defined moves supported by real momentum. That, and only that, will justify larger trading decisions. Create your live VT Markets account and start trading now.

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Dow Futures are slightly lower as we approach Monday’s market opening after a long holiday weekend. US stocks are also down due to cautious trading amid uncertainties in global trade, especially as the 90-day tariff pause ends on July 9. Currently, S&P 500 futures are down 0.3%, close to 6,260, while Dow futures have dropped 35 points to around 44,800. Investors are turning to safe assets like the US Dollar as they doubt the outcome of US trade talks.

US Dollar Movement

The US Dollar Index, which measures the dollar’s strength against six other currencies, is testing a high of about 97.45. The US aimed to secure 90 trade deals in 90 days but has only made limited agreements with the UK, Vietnam, and China. US Treasury Secretary Scott Bessent remains hopeful about future trade deals, even though some countries are delaying. The US may send letters to countries that do not reach agreements by August 1, outlining tariff rates. The Dow Jones Industrial Average includes 30 major US stocks and is a price-weighted index founded by Charles Dow, which uses high and low points for trend analysis. Traders can engage with the DJIA through ETFs, futures, options, and mutual funds. The Dow Theory helps guide trading decisions by analyzing both the DJIA and the Dow Jones Transportation Average.

Market Response and Strategy

While futures show some caution as the week starts, it is not a signal of panic. Instead, it reveals a careful sentiment influenced by uncertainties in global markets, especially regarding trade. The market is leaning towards minimizing risk, leading to a rise in interest for reliable assets like the US Dollar. Dow Futures are down 35 points after the long weekend, mostly reacting to the approaching end of Washington’s temporary trade pause rather than new data. With the deadline for resolving key tariffs set for July 9, market activity is shaky. Participants have not seen the anticipated results from the ambitious plan for 90 trade deals. Instead, a few agreements have been made mainly with Vietnam, the UK, and China. Bessent’s recent comments about potential deals may provide some reassurance, but concrete progress is still lacking. The rise of the US Dollar Index toward 97.45 shows how investors are losing confidence in other markets. For those following currency and rate trends with equities, a strong dollar suggests that investors are avoiding risks, which often negatively affects global cyclicals and industrials, sectors that heavily feature in the DJIA. Changes in index-linked derivatives indicate not only opportunities but also the need to keep an eye on volatility and expected price ranges. If the US sticks to its August 1 deadline for tariffs against non-complying countries, we might see firm positions and more defensive trading. In tactical terms, recent pauses and pullbacks may lead to a reassessment of options strategies. For example, we might reconsider covered positions or seek higher premiums in more volatile contracts. Given the limited progress in trade negotiations, any unexpected developments—positive or negative—could quickly change expectations. It’s important to monitor not just the overall industrial average but also the Dow Jones Transportation Average as per Dow Theory. Differences between the two can signal shifts in market momentum, which can be useful for futures strategies, especially as weekly options expire. Overall, the market appears cautious but not entirely stalled. With several key diplomatic and regulatory events approaching, being patient is just as strategic as being aggressive. The unfolding developments in the next few weeks are likely to provide clearer setups and opportunities for precise trading rather than broad strategies. Create your live VT Markets account and start trading now.

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The US dollar has dropped, while Cable has recovered over 60 pips from earlier lows, now down only 9 pips for the day. This shift is part of a larger decline in the US dollar seen in the last hour, reversing previous USD gains except against the yen. Recently, there have been several attempts to sell Cable over the past week, but buyers have jumped in each time. This includes a dip after the non-farm payrolls report. Although there’s fundamental news that usually supports the US dollar, sellers keep appearing, indicating a possible change in trends for the currency. The reasons for this ongoing shift aren’t completely clear, but it continues even as US tech stocks hit new highs. Current market price movements show a consistent departure from expected USD strength. The US dollar has dropped sharply, losing ground almost everywhere except against the yen. Sterling has made a strong comeback after an earlier dip, gaining back over 60 pips. It now trades just slightly lower, indicating a clear rejection of those previous lows. The significant aspect here is not just the bounce, but the pattern it represents. In recent trading sessions, there have been repeated efforts to lower Cable. These selling waves, especially after major reports like the non-farm payrolls, have consistently failed, with buyers stepping in forcefully again and again. This is more than just reacting to headlines; it suggests something deeper is happening. Despite strong economic data from the US, which would usually support a rising dollar, the market isn’t responding as expected. The dollar seems to have fewer supporters, even as American stock markets rise, mainly due to tech. This situation would typically increase demand for the dollar, but now it hints at stronger interest elsewhere. Overall, price actions no longer align with how they did six months ago. This change may be technical, but it feels behavioral. Every time the dollar tries to recover, it slips away quickly, showing less strength with each rebound. This suggests current positions in the foreign exchange market are becoming less favorable for the dollar. Powell’s recent comments haven’t changed this trend, nor have strong inflation reports or recent bond movements, indicating these flows might be driven by larger factors than a single report or central bank statement. For those involved in short-term holdings or swaps, this is important. Previous resistance levels are failing to hold, and the market’s reaction to macro data is becoming weaker. This inability to gain momentum from supportive catalysts makes directional clarity difficult. Charts where prices deviate from fundamentals often lead to sharp reversals or gradual moves in the opposite direction. Yellen’s remarks this week didn’t raise concerns, yet the market continued to move. Foreign inflows might be seeking diversification, or medium-term expectations may be changing as we move beyond this rate cycle. Regardless of the reason, prices show that some positions may no longer be sensible. As traders, when we see movements like this, especially after strong data or pressing narratives, we turn our attention to the options market. Is implied volatility changing? Who is bidding on risk reversals? These quieter signals can be more revealing than speeches or unexpected news. What we observe suggests a greater willingness to reduce USD exposure rather than pursue it, despite optimism in equities and stable bond yields. That’s significant. In the upcoming sessions, rate expectations will continue to shift. We may see more moves based on carry trades rather than outright growth. This doesn’t diminish the dollar’s usefulness, but it alters our approach to currency pairings involving GBP, EUR, and AUD. If positioning remains skewed, taking shorter-term risks becomes trickier. Understanding which levels have been repeatedly defended is crucial now—not just for support and resistance—but to see where the market is still trying to find agreement and where it is no longer responsive. This is the only guide we need right now. Observe how we react to known factors, not the factors themselves.

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