Oil prices fell just over 1% when trading opened on Globex on Sunday evening in the US. This drop came after OPEC+ announced an unexpected rise in production for August. The group plans to increase output by 548,000 barrels per day, up from their earlier commitment of 411,000 bpd. This decision highlights OPEC+’s goal of regaining control in the global energy market and increasing competition with US shale producers. The added supply could help lower tight global inventories, but it also raises concerns about oversupply amid uncertain demand. Despite these worries, OPEC+ remains hopeful about demand levels. In related news, a vessel was attacked in the Red Sea, forcing the crew to abandon ship due to a fire and flooding. The Israeli military stated it will target Yemeni ports and has issued an evacuation warning. Israel confirmed it has struck multiple terrorist targets in Yemen. Following OPEC+’s announcement, futures traders quickly adjusted their positions. The 1% drop at the open shows how rapidly the market reacts to unexpected changes in supply. The production rise—over 100,000 barrels more than originally planned—signals that the group believes the market can handle more output, despite recent signs of weaker consumption. This change doesn’t just shift the balance; it introduces enough uncertainty to disrupt pricing models based on inventory levels and shipping routes. When inventories are low, prices usually rise as buyers compete for the limited barrels available. However, if supply increases faster than demand, futures positioning can shift dramatically. At the same time, unrest in the Red Sea adds a layer of risk. The abandonment of a ship due to fire and flooding is not an isolated event. If vessels change course to avoid danger, transit times will increase, leading to higher time and insurance costs. This is particularly critical for energy logistics—delays or disruptions can cause futures prices to rise, even while the broader outlook leans toward oversupply. Israel’s strikes on Yemeni targets—and their clear intention to target port infrastructure—puts significant focus on shipping continuity. Traders must consider not only how many barrels are being produced daily but also how many can reliably reach the market on time. Hedge strategies may adjust to provide more upside protection. We are currently experiencing a tug-of-war between supply enthusiasm and geopolitical risks. The timing of the production increase complicates directional trading. Generally, more oil should drive prices down, but real or perceived threats to transport routes can support prices. Looking ahead over the next two weeks, we expect ongoing volatility in energy futures. Short-term strategies should prioritize adaptability over certainty. Options markets may provide clearer exposure, where changes in skew can signal institutional sentiment more effectively than price changes alone. Monitor adjustments in risk pricing, especially if premiums increase for options that are close to the market price. This can indicate market reactions more quickly than waiting for open interest data. Finally, if oversupply does arise, it usually develops slowly, contrary to what news headlines suggest. Inventories must support the idea of oversupply. Until then, we remain sensitive to news and changes in shipping routes. We are actively monitoring not only official OPEC+ announcements but also satellite tracking and shipping rates, as these often reveal signals before official numbers are released.

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Commerce Secretary Howard Lutnick announced that new tariffs will begin on August 1. He mentioned that President Trump is finalizing the rates and agreements. Back in April, Trump introduced a base tariff of 10%, with some rates possibly reaching 50%. Many of these increases were delayed until July 9, and Lutnick’s latest update shows an additional three-week delay. Trump has confirmed that some trade deals are already completed. Additionally, on Monday, 12 to 15 letters will be sent to other countries, informing them about the upcoming higher tariffs.

Concrete Timeline Shift

Lutnick’s announcement represents a concrete timeline shift, moving the tariff start date to the beginning of August. This gives market players a bit more time than expected. The earlier delays, which were supposed to start in early July, made traders rethink their pricing models and hedging strategies. This new extension should be treated the same way. The proposed tariffs, ranging from 10% to as high as 50%, are still being worked out. The extra waiting time serves as a chance to reevaluate positions, especially when it comes to cross-border impacts and medium-term yield curves. While immediate volatility might seem low, it probably won’t stay that way, so stay alert. Trump has mentioned that several agreements have been finalized. For those trading contracts in import-sensitive sectors, this suggests some markets may be less affected, while others will face more challenges. The letters being sent to over a dozen countries will officially notify them and are expected to prompt quick reactions, possibly leading to countermeasures and short-term currency shifts and equity volatility.

Dealing in Derivatives

When managing derivatives, we cannot view announcements like these as background noise. Pricing mechanisms reflect not just the current situation but also forecast future decisions. With this three-week extension in place, implied volatility—especially in energy and industrial sectors—may increase as everyone anticipates potential retaliatory actions. Although the exact tariffs and targeted countries are still under discussion, we now have clearer information: we have a start date, letters being sent out, and guidance from Lutnick. This suggests that forward-looking positioning will likely be beneficial. It’s wise to adjust delta exposures before mid-July, especially if we’re net long in the affected areas. Time-based spreads could also offer opportunities for contracts settling before or after August. We recommend aligning expected tariff levels with the entire delivery calendar for Q3. Execution may need to be more efficient in the coming two weeks, as pricing pressure is likely to rise in correlated instruments. Manage risks carefully with gamma-heavy instruments and consider rolling key positions earlier. Expect policy news to directly influence realized volatility. Create your live VT Markets account and start trading now.

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Trump plans to send 12 to 15 letters about tariffs on Monday, aiming to finalize trade deals or letters with most countries by July 9. He indicated that setting tariff rates is easier than negotiating with over 170 nations, showing a preference for fixed tariffs instead of complicated discussions. As these developments unfold, US representative Bessent warned that tariffs could increase if trade agreements aren’t completed by August 1. Trump shared his thoughts on several issues: he opposed Musk starting a third political party, mentioned potential deals with Netanyahu regarding Iran, and hinted at possible agreements with Hamas within the week. He also planned a visit to Texas after recent flooding and discussed the future of FEMA. Commerce Secretary Lutnick confirmed that the tariffs will take effect on August 1. Trump reported a positive conversation with Zelenskiy but expressed disappointment in his dealings with Putin. He suggested that hostages might be released soon, highlighting ongoing international engagements and concerns. The original article highlights a surge of political and economic activity focused on unilateral tariff actions. Trump plans to issue 12 to 15 letters about new trade tariffs on Monday. He aims to set trade terms—either through agreements or preliminary letters—with most countries by July 9, showing a preference for quick, simple solutions over lengthy negotiations. This strategy avoids the challenges of reaching agreements among more than 170 different national interests, favoring fixed tariffs instead. Bessent’s warning adds pressure, stating that tariff rates will likely rise if no trade agreements are finalized by August 1. This tactic is meant to prompt other countries to act quickly or face higher duties. Commerce Secretary Lutnick reiterated that the current tariff structure will be enforced starting August 1, regardless of negotiation progress. This sets a clear deadline and raises short-term uncertainty. In addition to trade, Trump also spoke on foreign and domestic issues. He opposed Musk launching a third political party, which may affect future elections. On the foreign policy side, he suggested upcoming negotiations with Netanyahu about Iran and potential progress with Hamas soon. These comments point to behind-the-scenes changes, but depend on outcomes that are still unconfirmed. He also mentioned plans to visit Texas after recent floods and hinted at possible changes in FEMA. Additionally, he described a positive phone call with Zelenskiy but expressed disappointment regarding relations with Putin. He hinted at the potential release of hostages, reinforcing a somewhat chaotic but intentional international strategy. Currently, a deadline-focused approach seems to be taking precedence. Given the circumstances, asset price volatility—especially in currency and commodity contracts—will likely increase as we approach early August. A range of geopolitical statements, which could impact oil supply routes and international finance flows, adds to this volatility. With tariffs set to begin on August 1, we are quickly moving from speculation to action. For traders involved in options and futures related to raw materials or global trade, the next three weeks are crucial. It would be wise to consider July 9 and August 1 as key dates. For instance, open positions in industrial metals, semiconductors, or agricultural products—markets sensitive to global tariff changes—might need reassessment with strategies to guard against swings in implied volatility. Fixed-income positions, particularly in US markets, should also account for potential supply chain disruptions and inflation discussions. Keep an eye on trade partners that could be significantly affected by new duties, especially those connected to Asia-Pacific routes or high-volume manufacturing. As direct communications have already begun with many nations, and given the evolving tone, retaliatory measures may arise without warning. Lastly, the overall economic direction seems to rely less on global consensus and more on executive actions. This means the gap between policy announcements and market impact is narrowing. What is announced on Monday could start affecting prices by Tuesday. Considering this, it may be prudent to shorten exposure windows and use liquidity strategically as market players adjust before the tariff deadline approaches.

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Japan’s recent economic data has shown strong results. In May, household spending rose by 4.7% compared to a year earlier, beating predictions of 1.2% and improving from last year’s -0.1%. The Bank of Japan is carefully watching trends in consumption and wages to assess the economy’s health. Today, Japan will release important wage data. This year, workers have seen significant nominal wage hikes, with companies agreeing to a 5.25% increase. However, rising inflation is affecting real wage growth, which is crucial for spending power. The unexpected rise in household spending in May is not just a one-time event. Compared to the modest forecasts, the robust figures suggest a surge in domestic demand that was not fully anticipated. With spending increasing by 4.7% against a forecast of 1.2%, it seems consumers are either confident enough to dip into their savings or that wage increases, despite inflation, are giving them the means to spend. The previous decrease of -0.1% highlights how sudden this change has been, marking a shift in behavior after a slow period earlier in the year. In this context, the upcoming wage data is especially significant. The agreed nominal pay raise of 5.25% is the largest in decades, driven by government encouragement and strong labor negotiations. However, ongoing inflation—especially in essential items like energy and food—means real wages are crucial for determining spending power. If wage increases do not consistently outpace the rising cost of living, higher consumption may not last long. For those in the market dealing with Japanese assets, it is important to think about how robust spending and squeezed real income could influence expectations for monetary policy. The Bank of Japan is closely monitoring these factors, and any further increase in consumption—especially with signs of real wage growth—could shift expectations regarding interest rates. Most analysis has focused on nominal wage increases, but persistent inflation in services and strong employment figures may influence the Bank’s future guidance. The market could adjust yields in the coming weeks if new wage data shows more resilience than expected. This could affect pricing volatility in rate derivatives or change preferences for short versus long-term investments. Additionally, it’s essential to keep an eye on corporate earnings revisions. These will indicate whether businesses are managing their profit margins amid rising wage costs. If profit margins stay under pressure, volatility in local equity derivatives could reflect not just macro shocks but also weakening profitability expectations. Finally, with Japanese government bond (JGB) yields rising recently, especially in the middle of the curve, there is increased pressure on funding rates that may call for more cautious strategies. In summary, those operating in this area should prepare for multiple scenarios, particularly as forward guidance may remain conditional and local demand data continues to defy expectations.

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US Treasury Secretary Scott Bessent announced that President Trump will notify trading partners about reinstating higher tariffs starting August 1, if no agreements are made by April 2. This will be done through formal letters. The US is close to finalizing several trade deals, with big announcements expected before the July 9 deadline when paused tariffs could return. In addition, around 100 smaller countries, many of which have not talked with the US, will receive fixed tariff rates. The original deadline of July 9 has now been extended to August 1 for more negotiations. Trump has found it tough to negotiate with over 170 countries, preferring fixed tariffs instead of lengthy discussions. He describes the strategy of announcing and then delaying tariffs as a smart negotiating tactic. These statements suggest a clear tactic by US leadership: using potential tariff hikes as leverage to push for cooperation or concessions before the deadlines. Bessent’s comments, along with the new August 1 implementation date, highlight a strategic time frame aimed at speeding up bilateral negotiations without entirely dropping them. By moving the tariff deadline from July 9 to August 1, the US is not backing down but rather allowing a bit more time for last-minute negotiations. However, the delays shouldn’t be seen as weakness. The formal notification serves as both a diplomatic alert and a legal precursor, giving partner countries and others limited time to adjust, respond, or comply based on their current situations. The fixed tariffs for around 100 countries create a scenario where cooperation is not essential but is rewarded. For those who either can’t or won’t engage in talks, the fixed rates leave no room for negotiation—there’s no reason to delay. We should pay close attention to how interest rates can shift over the next few weeks. The timeline is clear, and pricing around certain options will likely reflect a lower chance of last-minute deals, especially for countries that haven’t started discussions. As we approach the third week of July, trading volumes in long-term hedges may start to decline, particularly where risks are stabilizing. This approach of setting deadlines and firming up from the President isn’t new, but the commitment to enforce tariffs after August confirms that discussions won’t extend beyond that point. Derivatives related to customs exposure or currency fluctuations with secondary partners to the US might see more activity than direct pairs, depending on how quickly negotiations in Geneva gain momentum. Before the July deadline, we should focus more on calendar adjustments and reducing gamma loads as mid-July approaches. We’ve seen this pattern before: initial threats, a pause, and then a decisive action at expiration. Participants need to shift their attention to the decay curves of those linked to stable midpoints instead of expecting that more talks will lead to reversals. They won’t. The strategy is clear: set a timeline, then act. There are no signs of another extension. Those without exposure should stay that way.

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Indicative rates at the start of the new FX week show little change from late Friday. Here are the current rates: – EUR/USD: 1.1781 – USD/JPY: 144.46 – GBP/USD: 1.3644 – USD/CHF: 0.7944 – USD/CAD: 1.3644 – AUD/USD: 0.6559 – NZD/USD: 0.6060 Monday mornings usually have low market liquidity. This should improve as more Asian centers open, which may lead to some price fluctuations, so it’s best to be cautious. During the early Asian hours, liquidity remained thin. Initial rates show limited price movement, but updates from regional economies could impact short-term positions. As trading sessions in Tokyo, Singapore, and Hong Kong overlap, activity will increase, and spot rates may start to respond more strongly to macro factors. With EUR/USD near 1.1780 and dollar pairs generally steady, there’s noticeable hesitance to break recent technical levels. This suggests that many traders are waiting for directional cues from upcoming data later this week. Volumes should rise as more institutional investors return after the weekend, meaning those with leveraged bets might react sharply to even minor news. Friday’s close still holds influence, especially since quarter-end rebalancing flows have mostly passed. This allows current levels to shift based more on expectations rather than sheer flows. For instance, GBP/USD remains in the mid-1.3600s, with no significant change in front-end rate pricing, indicating that the pair is more affected by external sentiment than significant domestic news. We should also closely monitor Yen pairs, especially USD/JPY. With the rate around 144.50, near a key resistance level, any signs of intervention rhetoric from Tokyo or changes in US yield direction could lead to significant reactions. We should be cautious of narrow ranges, as low liquidity can lead to short squeezes or profit-taking pullbacks that may be hidden. In commodity-linked currencies, AUD/USD has stayed above 0.6550, even with weaker risk indicators in equity futures. This suggests that former sellers may hesitate to push for further declines without robust data or shifts in commodity prices. Similarly, USD/CAD is closely tracking GBP/USD, indicating that broader dollar positioning is currently more influential than local factors. At this stage of the week, we’re focusing on short-term option pricing to assess implied volatility. If pricing deviates from last week’s trend, traders might begin to position around upcoming central bank speakers or inflation data from North America. The CHF and JPY are sensitive to relative rate movements, and while USD/CHF is at 0.7944, even small changes in yield expectations could alter its pace. It’s important for us to monitor futures open interest and any changes in speculative net positioning. This helps us see if major players are leaning towards continued movement or just temporary adjustments. As Asia transitions into Europe’s market, patterns in cross flows will become clearer, and any sustained divergence from last night’s indicative levels could provide scalping or momentum opportunities. It’s wise to be careful with stops and avoid closely anchoring trades to early Monday rates. False breakouts during low liquidity often attract frustrated volume, leading to quicker reversals once more players enter the market.

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Next week, key events will include US President Trump’s trade deadlines and various monetary policy meetings. We will see rate decisions from the RBA, RBNZ, and BoK, along with important economic data such as UK GDP and the Canadian Jobs Report. OPEC+ is planning to approve a 411k bpd output increase for August. This shift focuses on market share, but compliance levels among members vary. There is a possible risk of oversupply in the second half of the year, especially with US shale production reaching new highs. Swedish CPIF inflation has decreased, prompting a rate cut from the Riksbank. June’s inflation data may affect future policy, although another cut in 2025 is not certain. The RBA is expected to lower rates to 3.60%, as inflation slows and unemployment forecasts rise. The RBNZ might keep rates steady, but uncertainty is high. The US and EU are negotiating trade tariffs with a deadline of July 8th. Four possible outcomes range from a complete breakdown to a framework deal. The FOMC currently plans to keep interest rates steady, with potential cuts later in the year. China’s inflation data could continue to show negative trends. Weak Korean exports are impacting the BoK’s rate decisions, while Norwegian CPI adjustments are influencing Norges Bank predictions. The UK GDP is anticipated to show a slight recovery, while the Canadian Jobs Report could affect BoC easing expectations. The job market and trade relations remain under close watch. We are entering a phase where scheduled decisions and economic indicators will directly influence prices. Monetary committees in the Asia-Pacific region are finalizing their rate assessments, shifting focus to what comes next. The decisions made next week may not change overarching themes, but they will clarify the paths already forming. The Reserve Bank of Australia is expected to cut its policy rate again due to signs of weak wage growth and softening employment figures. With inflation falling, market participants are anticipating a cycle of monetary easing, which may create a divergence with more hawkish rate-setters elsewhere. In New Zealand, policymakers are taking a cautious approach. No immediate changes are expected, but every word of the forward guidance will be scrutinized. The same goes for the Korean central bank, as recent export data has weakened and confidence indicators are dropping. Manufacturing pressures are rising, influenced by hesitance in regional demand, leaving room for adjustments when inflation stabilizes. Norwegian consumer prices are drawing attention, leading to updated forecasts. Norges Bank may not play a significant role compared to larger economies, but any tone changes will be seen as a measure of credibility concerning guidance timelines. In Canada, employment statistics are set to be released, where volatility could be greater than anticipated. Any significant deviations in participation or wage growth could alter rate cut timelines. The implications of these figures for the Bank of Canada’s timeline must not be underestimated, especially as global peers hint at easing. Meanwhile, trade relations between the US and China remain tense. The known tariff negotiation deadline is less important than how both sides express their red lines. The four potential paths, ranging from a complete breakdown to a full framework deal, suggest a greater likelihood of delays rather than breakthroughs. From a political perspective, energy markets are adjusting to decisions made by oil-producing nations. The plan to boost oil output in August reflects a shift from coordination to competition. Although official quotas indicate restraint, actual shipments may differ, particularly as US shale continues to break records. The risk of oversupply remains present, adding pricing pressure in future contracts—a trend already seen in certain parts of the futures market. In Sweden, last week’s unexpected inflation adjustment triggered a quick rate cut, but whether this will become a trend remains uncertain. Next month’s inflation data will be crucial for rate path expectations into 2025. This change marked a departure from previous caution, allowing the krona to weaken with less resistance and impacting regional rate differentials for multi-currency portfolios. In the UK, modest gains in GDP are expected. After a slight contraction, even a small recovery offers political and policy relief. The market is keen not only on the overall figure but also on the underlying components. Consumer categories will face heightened scrutiny as discretionary spending patterns influence inflation forecasts. The Federal Reserve plans to keep rates steady for now, with mentions of a possible softening later in the year. Labour market indicators will guide timing, rather than inflation alone; job claims and wage data are likely to be more significant than CPI in shaping terminal rate views. In summary, we are preparing for a period when central bank divergence will become more apparent. The weeks ahead will demand portfolio flexibility rather than a singular direction. Options markets seem well-positioned for volatility, while short-dated strategies are favored over longer commitments. Managing risk now requires focusing on broader environmental shifts rather than solely tracking isolated data sets. Fiscal policies and trade decisions are closely intertwined with monetary credibility assessments. Rates, commodity prices, and rebalancing flows are starting to align—not towards uniformity, but towards greater visibility. This clarity is welcome.

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Silver prices remained steady, closing at $36.84 with low trading volumes as US markets were closed for a holiday. The ongoing US trade war created a cautious vibe in the market. Technically, silver is on an upward trend, forming a double-bottom pattern. However, a doji pattern indicates a temporary pause. Traders are keeping an eye on important resistance levels, with the highest price this year at $37.31.

Bullish Momentum Indicator

The Relative Strength Index (RSI) suggests a positive outlook, indicating the potential for price increases. Key resistance levels include $37.00 and $37.49, with a target of $38.00. If silver drops below $36.00, it could test $35.82 and possibly $35.00 before approaching the 50-day simple moving average (SMA) at $34.39. Silver is a favored asset because of its history as a store of value and a medium of exchange. Silver prices often react to geopolitical events, interest rate changes, and the strength of the US Dollar. Demand from industries like electronics and solar power also impacts prices. The Gold/Silver ratio serves as a measure of relative value and can indicate future price movements. With US markets closed, silver’s stable price around $36.84 was expected. Ongoing trade tensions between major economies caused participants to be cautious, leading to a “wait-and-see” approach. Thin liquidity likely added to this restraint instead of promoting active price discovery. From a technical view, the double-bottom pattern is significant. It usually indicates a potential rebound. However, the doji suggests some uncertainty and possible fatigue after the recent price increase. While the overall sentiment remains positive, expectations should be tempered. Resistance levels will play an essential role in the near-term direction. The $37.00 mark is the first hurdle and a psychological barrier supported by past price movements. The high at $37.31 and the level at $37.49 are also of interest as potential targets if momentum continues. Attention may also shift to $38.00, where selling interest could increase.

Vulnerable Momentum and External Shocks

The RSI still shows a positive outlook, comfortably positioned without signs of divergence or overbought conditions. As long as it remains stable, it suggests that dips in price might be short-lived. While momentum is present, it’s susceptible to external shocks or sudden increases in dollar strength. On the downside, there is a clear support level. Falling below $36.00 might lead to a test of $35.82—this is the first line of defense. If it drops further, $35.00 becomes critical both technically and psychologically. A sustained drop could bring the 50-day SMA into focus, currently around $34.39, indicating a wider unraveling of recent bullish trends. Beyond the technical aspects, silver reacts to broader forces. Global tensions can affect not just market sentiment but also actual demand, especially in sectors like electronics and solar manufacturing. Over time, a strong correlation between industrial demand and forward silver contracts has been observed. Changes in trade policies can quickly impact these demand chains. In the macroeconomic sphere, expectations around interest rates and currency values contribute to daily price fluctuations. The US dollar often acts as a counterbalancing force—its strength tends to limit silver price increases, while its weakness supports gains. This relationship has been consistent over many years, especially during changes in monetary policy. It’s also important to consider relative valuation. The Gold/Silver ratio, a tool used by cross-asset strategists, provides valuable insight. An increase in this ratio may indicate gold is outperforming or silver is undervalued. Conversely, a falling ratio often coincides with silver price rallies, especially when risk appetite improves. Monitoring this ratio alongside absolute price levels adds another layer of understanding. In the upcoming days, low trading volumes and a lack of major economic data may heighten the impact of news-driven shifts. Technical levels are established, but they could be disrupted by external factors. Price adjustments could be quick if large funds change their positions, particularly those that are responsive to momentum and dollar changes. Create your live VT Markets account and start trading now.

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EUR/USD saw a slight increase of 0.18% on Friday, even with low trading volumes due to the US Independence Day holiday. As the week ends, the currency pair stands at 1.1778, marking a 0.53% rise, supported by strong US economic data. Attention turned to tariff issues when US President Donald Trump revealed new tariffs ranging from 10% to 70%, starting August 1. Tensions between Europe and the US grew as Washington imposed a 17% tariff on European food imports.

Trade Agreement Efforts

Efforts to form a trade agreement between EU car manufacturers and the US are underway. This agreement seeks tariff reductions in exchange for increased US investments. The EU is considering a uniform 10% tariff on pharmaceuticals, alcohol, and other sectors. In May, German factory orders dropped by 1.4% month-on-month, unlike the 1.6% rise seen in April. However, there was a slight year-over-year improvement, with the decline softening from 5.8% to 5.3%. Looking ahead, the EU is set to release important data next week, including German Industrial Production, the Eurogroup meeting, ECB speakers, and Retail Sales figures. The technical outlook for EUR/USD indicates potential gains, testing resistance at 1.1800. Should a decline occur, support is around 1.1750. Despite the small rise in EUR/USD amidst light trading—due to the US holiday—the market reaction was calm as the weekend approached. The pair moved up just under 0.2% on Friday, bringing the week’s gain to just over 0.5%. This increase is notable, especially given it followed stronger-than-expected US data, which generally boosts the dollar.

Market Reactions and Trade Policy

Trade policy shifted unexpectedly with new tariffs confirmed, ranging from 10% to 70%, set to start in August. While not directly affecting EUR/USD yet, this announcement led traders to rethink their expectations, considering possible reductions in transatlantic trade and slower cross-border corporate investments. Additionally, the 17% tariff on European food imports puts more pressure on European exporters, especially in the agricultural sector, which had just begun to recover from past disruptions due to global supply chain issues. Discussions between EU carmakers and US officials continue, focusing on tariff cuts in return for increased US investment in European factories. Brussels has proposed a uniform 10% tariff, especially for pharmaceuticals and alcohol, as part of a strategy to avoid varying tariffs across different sectors. Traders assessing the potential impact of this deal should view it in the larger context of adjusting trade relationships. If successful, the euro could gain support from updated medium-term trade volume forecasts. From an economic data viewpoint, the decline in German factory orders deserves attention. A 1.4% contraction in May follows a positive April with a 1.6% increase. Year-over-year, the decline eased slightly to 5.3% from 5.8%. This may slow momentum, but it does not overshadow the recovery trend since early Q1. Market reactions to upcoming data could become more pronounced, especially as discussions on fiscal rules in the Eurozone intensify in the second half of the year. Next week’s schedule is busy. German Industrial Production figures are expected early, but outcomes may be lackluster based on recent manufacturer order trends. The Eurogroup meeting will draw attention for potential policy coordination regarding inflation targeting. ECB speakers will also provide insights or raise uncertainties around the latest wage growth figures. Retail Sales figures, while possibly quiet, could serve as a decisive factor if results significantly deviate from expectations. From a technical standpoint, EUR/USD is attempting to rise above 1.1800, a level last reached in late spring. If this upward momentum is backed by supportive data or clear ECB guidance, it could break through this barrier, attracting interest from momentum traders and mechanical rebalancing flows. On the downside, a support level exists around 1.1750, which has held during minor sell-offs in previous sessions. If sentiment shifts and risk appetite diminishes, this level might be tested again. For now, the trajectory seems moderately positive, heavily influenced by external news rather than domestic economic strength. Create your live VT Markets account and start trading now.

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The Australian Dollar has fallen against the US Dollar as concerns grow ahead of President Trump’s tariff deadline on July 9. Trading activity was low due to US markets being closed for Independence Day, causing AUD/USD to lose 0.30%, trading just above 0.6550. Recent Australian trade data revealed a 2.7% drop in exports for May, which reduced the trade surplus. Many economists expect the Reserve Bank of Australia (RBA) to lower interest rates, with a 25-basis-point cut likely soon, bringing the cash rate down to 3.60%.

Federal Reserve and US Dollar Strength

The Federal Reserve’s stable interest rates keep the US Dollar strong within the 4.25% to 4.50% range. AUD/USD is stuck in a rising wedge pattern, indicating potential exhaustion as it struggles to break the 0.6590 barrier. If AUD/USD breaks above 0.6600, it could rise towards 0.6722. However, if it fails, it might drop to initial support around 0.6550. In a risk-averse market, currencies like the US Dollar, Japanese Yen, and Swiss Franc typically gain strength as investors seek safe havens. With subdued trade figures and growing worries about global tariffs, it is expected that the Australian Dollar will face more pressure. The 2.7% drop in exports has narrowed the trade surplus, shaking confidence in Australia’s external position and increasing the need for the RBA to adopt looser monetary policy. With ongoing trade struggles, another 25-basis-point rate cut is now largely anticipated by the market. Governor Lowe’s RBA, having already adopted a dovish stance, is increasingly likely to lower rates to 3.60% in response to weak economic signals. This aligns with the trend of declining domestic data and a global shift towards caution. Thus, the next cash rate decision seems more about *when* than *if*.

Contrasting Central Bank Policies

In contrast, the US Federal Reserve, led by Powell, maintains a firm grip on interest rates between 4.25% and 4.50%, boosting the US Dollar’s appeal. Unlike Australia’s situation, the Fed is signaling stability, which is helping to support the Dollar as markets adopt a cautious outlook. Adding to this are heightened geopolitical risks and upcoming tariff discussions, driving demand for safe-haven currencies like the Japanese Yen and the Swiss Franc. In terms of AUD/USD, it remains within a rising wedge pattern, suggesting possible weakness or loss of momentum after a prolonged increase. Attempts to break above 0.6590 have so far failed, indicating seller exhaustion. However, if it can clearly break and hold above 0.6600, we could see a rise to 0.6722, where more selling pressure may appear. Conversely, if it dips below 0.6550, it could invite further downward movement. The AUD has historically reacted strongly to trade sentiment shifts. With lower trading volumes during the US Independence Day holiday, price fluctuations may have intensified. However, thin trading conditions can lead to volatility rather than calm, especially with tariff talks heating up before the July 9 deadline. The timing of the upcoming RBA decision and any announcements from US officials will be crucial. Until then, markets might experience nervousness, with price movements heavily influenced by macroeconomic news and geopolitical situations. This highlights the significance of monitoring technical signals, which could quickly alter market balance as sentiment changes. Given the typical outcomes of rising wedge formations, keeping an eye on price movements near resistance and support levels is advisable. Watch the volume closely once US traders return, and stay alert for any news that might cause significant price changes. Create your live VT Markets account and start trading now.

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