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Analysts note that the Euro is weakening slightly against the US Dollar as the week progresses.
The Euro is slightly dipping against the US Dollar but is staying above the 1.17 support level this midweek. Traders are looking forward to the upcoming CPI data from Germany and France, while ECB council member Vujcic has made neutral statements, suggesting that interest rates should remain unchanged due to concerns about short-term targets.
The difference in interest rates helps support the Euro, especially as US yields stabilize after the Non-Farm Payroll report. Ongoing trade talks between the US and EU also provide a positive outlook for the Euro. However, recent pullbacks have slowed momentum. Traders are spotting potential support between 1.1650 and 1.1680, with resistance beyond 1.1780.
Major US indices open higher as Nvidia approaches a $4 trillion market capitalization and record price.
The US stock market started with small gains following mixed results the day before. The Dow Jones fell by -0.37%, the S&P 500 slipped by -0.07%, and the NASDAQ edged up by 0.03%. The Russell 2000 small-cap index rose by 0.66%.
In today’s trading, major indices showed improvement. The Dow added 234 points, up 0.52% to 44,470. The S&P gained 32 points, also up 0.52% to 6,258. The NASDAQ increased by 146 points or 0.73% to reach 20,567. The Russell 2000 rose by 14.32 points or 0.64%, closing at 2,242.98.
Market Highlights
Apple’s stock went up despite worries about tariffs. Nvidia hit a new trading high, helping the market approach a $4 trillion total value, closing up $3.53 or 2.23%. In the bond market, the yield on the 10-year treasury declined by -2.8 basis points before an upcoming auction. The 2-year yield fell by 2.9 basis points, the 5-year by 2 basis points, the 10-year by 2.8, and the 30-year yield dropped by 2.6 basis points. Overall, market sentiment is shifting toward cautious optimism. We see broad buying that lifts major averages from their recent downtrend. Although gains are small, there’s a clear preference for risk in large-cap, tech-focused sectors. With Nvidia reaching new highs and Apple managing concerns over trade, there’s a sense of resilience. This isn’t exuberance yet, but it shows that big investors are staying engaged. The focus on big companies suggests more than just reacting to headlines; it reflects a careful increase in prices that were once seen as too high. Yields fell again, supporting the idea of stable expectations for interest rates leading up to the government auctions. When the 10-year and 30-year yields drop by more than 5 basis points, investors typically don’t expect significant changes in inflation-adjusted returns. This trend favors cash-sensitive sectors and longer-term assets, reducing pressure on volatility.Potential Strategic Moves
The bond market has also experienced active adjustments. The decline in yields across the 2-year, 5-year, and 10-year notes creates opportunities for carry trades, especially among leveraged investors. This environment usually helps maintain steady premium collection and lowers implied volatility. In the coming days, we should consider that price extremes may not just hold but could reset. The combination of a strong equity market and slight rate reductions allows for the possibility of upside in less popular sectors. We can plan accordingly, and if main risks remain low, strategies that benefit from time decay should continue to attract interest. This trend is also evident in market data, where sellers of volatility feel more secure. Recent falling yields provide reassurance to buyers and make it easier to manage investment risks. Any sudden market movements are likely to come not from economic data, which is mostly priced in, but from liquidity issues or sudden changes in future guidance. Until then, we’ll monitor the calendar carefully for important expiry dates and quiet periods, which often lead to technical overextensions. While technology stocks are in the spotlight, the stability in fixed income markets gives traders room to maneuver. Keep an eye on where liquidity is building, especially in popular sectors this week. The most reliable strategies will likely come from those focusing on trading structures rather than just the stories behind them. Create your live VT Markets account and start trading now.The USDCHF hits new lows, testing key moving averages and offering important options for traders.
The USDCHF currency pair is under pressure and hitting new lows for the session. It is testing the 200-hour moving average at 0.7948 and has dropped below the 100-hour moving average at 0.79568, which indicates a short-term selling trend.
Traders face a crucial choice. If the price drops below the 200-hour moving average and the nearby level at 0.7942, it may lead to more declines. This could mean a bigger pullback after the recent recovery.
On the other hand, if the price reverses and rises above the 100-hour moving average of 0.7956, it could ease the downward pressure and give buyers some hope.
Here are the key levels to watch for future market movement:
– 100-hour moving average: 0.79568
– 200-hour moving average: 0.7948
– Nearby support level: 0.7942
We see price movements that suggest momentum is fading. The pair has fallen below both the 100-hour and 200-hour moving averages, with the 200-hour average now acting as a strong barrier. If it breaks below this level—especially if it also pushes through the previous swing level just below—it could signal further loses. These two levels, one a moving average and the other a former turning point, now mark where downward moves could pick up speed.
What seemed like a bounce is now showing signs of weakening. We tend to notice this pattern when upward movements lose strength without enough bullish support. The current breaches aren’t hesitant; they are holding under levels that used to attract buyers. Traders are likely aware that momentum is shifting, with pressure building in the opposite direction. In this scenario, trailing stops often become more active, which can accelerate price movements.
If the price can reclaim the broken averages—especially the 100-hour one—that would suggest the recent dip was weak because it didn’t extend. Any such move would need to be quick and sustained. Without that force, there’s a risk of falling into another cycle of lower highs, which can be frustrating for those hoping for clear up or down movements.
Instead of making large directional bets right now, it’s wiser to focus on how price behaves around these moving averages. If the price returns to test them and fails again, we should stay cautious. However, if it starts to form higher lows above these levels, we may see it as a sign of rebuilding.
In summary, it’s not just about breaking price levels—it’s how the market acts afterward. We are closely observing whether sellers become bolder near these averages or if confident buying returns. Over the next few sessions, each close above or below these lines will likely impact how derivatives are positioned, especially for those tied closely to volatility shifts.
During times like this, where direction seems reliant on familiar hourly markers, this level-focused approach provides clarity when broader momentum isn’t yet clear. For now, we will stick to what’s measurable: former support becoming new resistance, and whether this shift attracts more selling pressure. The sharp reactions around these small ranges often reveal whether short-term traders are still confident or if the market is just biding its time for the next trigger.
Chinese vice premier highlights economic resilience and promotes foreign investment growth
China’s Vice Premier, He Lifeng, says the country’s economy remains strong and has room for growth, even with challenges from the changing world around it.
On Wednesday, He met with the chairman of BASF, a German company. He highlighted China’s willingness to welcome more investment and collaboration with such businesses.
China’s Strategic Partnerships
By inviting BASF, China aims to strengthen ties with non-U.S. companies. This is part of a broader strategy to diversify its international relationships and economic connections. He’s comments serve two purposes: to reassure the Chinese people about economic stability and to comfort foreign partners, especially those outside the U.S. This isn’t just a diplomatic gesture; it suggests where investment might flow and how China plans to engage with the global economy in the near future. China’s focus on major firms like BASF indicates a desire to attract long-term partners in sectors that go beyond just short-term trends. He’s openness signals an opportunity for medium-term contracts and cross-border investments with global manufacturers.Implications on Global Markets
This situation also affects global economics. China is facing slower GDP growth than before and is addressing this by emphasizing international industrial integration. By encouraging broader investments, it aims to maintain production and stabilize jobs, both domestically and through trade. It seems Chinese officials will continue to seek out large non-American companies, especially those that can introduce technology and improve supply chains in China. Importantly, these efforts are focused on joint ventures and private investments rather than state-driven projects, which usually require clearer regulations. Traders should watch for regulatory changes in the Shanghai and Shenzhen exchanges, especially in the chemicals, electronics, and machinery sectors—areas where foreign partnerships may flourish. Recent movements in derivative markets show growing interest in hedging related to these partnerships, especially in contracts for metals and raw materials. This aligns with expected infrastructure and pipeline projects. Politically, this strategy from Chinese officials serves as a reminder not to overly stress themes of separation seen in Western media. It highlights China’s aim for strategic balance and diversification. Traders engaged in sovereign or currency derivatives linked to the yuan must consider how these new partnerships could stabilize, or even strengthen, the currency, depending on the nature of incoming capital. He’s firm and focused tone during the discussion with Brudermüller suggests that negotiations were planned and not spontaneous. As a result, upcoming economic meetings—whether G20-related or regional—could be important for market-sensitive announcements. Look for shifts in risk premia in short-term interest rate futures, as these often signal changing sentiments among overseas investors in response to geopolitical developments. Create your live VT Markets account and start trading now.Sefcovic confirms ongoing daily remote trade negotiations with the US, focusing on a balanced agreement
EU trade negotiator Sefcovic has informed the EU Parliament that trade talks with the US are ongoing and happening daily via remote communication. The main goal is to reach a negotiated solution, with good progress reported on the agreement’s draft.
Sefcovic hopes to achieve satisfying results soon. Although the aim is to secure a favorable deal, some adjustments will be necessary, suggesting that both sides may need to make concessions. However, the EU’s regulatory framework remains nonnegotiable.
The Commission is currently focused on protecting the EU from trade diversions caused by other countries. Additionally, diversifying trade is a priority. It is essential to maintain unity within the EU on these issues.
Sefcovic’s comments to the European Parliament confirm that the EU is actively engaged in structured discussions with Washington, not just on occasion, but daily. This indicates a serious effort to advance talks that have previously stalled. We are moving toward concrete agreements that can become binding commitments.
His intentions are clear: the goal is a workable agreement in principle. This phrase indicates that while the parties may agree on broad objectives, not every detail may be finalized. The progress made suggests we are moving from vague goodwill to concrete draft texts, where positions will become more fixed.
While Sefcovic aims for a deal soon, it will come at a cost. The mention of “rebalancing” suggests that both sides are preparing to make compromises. For those monitoring derivative markets, this signals the need to start considering what these concessions might entail, particularly regarding potential changes to tariffs, quotas, or compliance costs. Timing is crucial; if an agreement is reached quickly, prices may adjust sooner than expected.
However, not everything is up for negotiation. Sefcovic emphasizes that Brussels’ regulatory standards will not change, serving as a firm guideline in the discussions. Thus, when planning scenarios, we should assume that European compliance remains constant, even if enforcement practices shift.
There is also concern about indirect effects. As the US-EU trade landscape adapts, attention is drawn to third-party countries. The EU fears that trade routes may shift to avoid restrictions, potentially creating vulnerabilities in sectors like energy and automotive parts, where tracking their origin can be problematic. When the Commission discusses “diversion,” it is likely preparing for monitoring mechanisms and policy adjustments, such as real-time customs checks or origin-certification updates. Any tightening around these measures could impact hedging costs or net margins.
Von der Leyen’s team is also considering larger structural changes. Although diversification may seem abstract, it likely means increasing procurement from non-transatlantic producers, especially for high-volume goods like lithium compounds and semiconductor parts. We can expect new bilateral agreements and more involvement from regional players, such as Brazil, Indonesia, or South Korea, which could introduce volatility to long-term contracts.
Unity, as mentioned towards the end of the briefing, is vital for internal coherence. Given recent disagreements among member states regarding subsidies and foreign policy, a unified trade approach sends a stabilizing message. This means no single member state is likely to push for unilateral tariffs or diverge from agreed solutions. For forecasting purposes, this reduces the risk of unexpected tariffs or fragmented regulatory actions.
Looking forward, we need to adjust our models regarding medium-term tariff directions and import timelines. Incorporating these changes into pricing assumptions can prepare us for sudden shifts when an agreement is finalized. If concessions are mutual, those watching currency movements may want to reassess euro-dollar trade spreads, especially in sectors highly affected by rebalancing. Keeping margin collateral flexible will help absorb quick announcements, which are likely to increase once agreement terms are confirmed.
Nagel suggests the ECB should remain flexible on interest rate cuts due to increasing market expectations.
The market isn’t expecting a rate cut from the European Central Bank (ECB) during their meeting on July 24. However, the chances of a cut rise to 42% for the meeting on September 11. By next March, the market fully anticipates a rate cut. After that, expectations suggest that the direction of rates may change.
Investor Sentiments and Market Predictions
In simple terms, investors and institutions dealing with interest rate contracts don’t believe the ECB will change its policy soon. There’s little expectation of a rate cut in July. But as we look to September, the odds have increased to 42%. While this isn’t a majority, it’s enough to lead to price changes if the situation shifts even slightly. As we get closer to March next year, the market becomes more certain about a rate reduction. There’s no doubt; traders have included this in their models. After March, expectations about rates may change depending on inflation data and economic reports in the year’s last quarter. Traders in rate-linked derivatives should know that the market expects most easing to happen by early 2025. This means opportunities might come from strategies that consider the current timelines indicated by swap prices. With the first expected cut by March and subsequent moves flattening, there’s limited upside for those betting on further easing soon. Lagarde’s team hasn’t changed their future guidance, keeping things steady for now. Incoming data—like wage trends, core inflation updates, and retail consumption patterns—will influence models and can adjust probabilities, especially as the September meeting approaches. Even a small change in forecasts could significantly alter September pricing.Market Implications and Forward Strategies
It’s important to note that the market isn’t in a hurry; the easing is gradual and balanced. This affects anyone holding macro positions, making it more about relative value than direction. We’re also monitoring changes in market liquidity and bid-ask spreads. Any sudden shifts in September expectations could lead to imbalances. Hedging strategies should remain active during the summer, as trading volumes can decrease, increasing the risk of sharp price movements. Now isn’t the time to assume that policy will stay stable through the fall. The September meeting could see rapid price changes. Therefore, it would be wise for participants to carefully adjust their gamma exposure when dealing with expiring front-end instruments across euro-denominated benchmarks. Create your live VT Markets account and start trading now.Trump is expected to announce more tariff letters, but the market remains skeptical.
Donald Trump plans to reveal at least seven letters targeting countries with high tariff rates, with a deadline set for August 1. These details are expected to be shared today, and more countries might face tariffs later on.
However, the market largely views this as an empty threat that is unlikely to happen by the deadline. Investors and analysts are doubtful about these tariffs being enforced in the current economic situation.
Trump’s move to issue formal warnings about tariff changes seems more about gaining political attention than having immediate economic effects. The August 1 deadline is treated with skepticism in the market, as similar announcements in the past have often lacked follow-through.
As a result, the markets have reacted. Equity volatility is low, and implied volatility in equity index options remains near recent lows. There has been no significant adjustment in calendar spreads or skew, indicating that option traders are not expecting immediate disruptions. This suggests that thoughts on economic retaliation or trade restrictions are minimal for now.
Overall, the uncertainty in policy, especially from such targeted threats, does not cause immediate shifts in the derivatives market. It’s only when those threats are confirmed, or when similar signals continue, that we may see movement in rates, credit, or FX volatility.
For those tracking rate-sensitive products, it appears that global trade flows will not prompt changes in monetary policy in the coming weeks. Swap spreads and Eurodollar options do not reflect any protective measures related to tighter liquidity or altered rate expectations. This shows that participants are waiting for a real policy change before reacting.
In the meantime, cross-asset risk measures, especially in high-yield spreads and short-term rates, are neutral. This perspective is beneficial for short-term options, as traders are focusing more on daily data and energy trends rather than macro concerns. The front end of the curve indicates no domestic inflation risk from tariffs that hasn’t already been accounted for.
Looking further out in time, there may be early adjustments in volatility strategies. Positioning for three- to six-month tenors could be wise if retaliatory duties are announced, not because they’re certain, but because this period might coincide with post-election adjustments when rhetoric can quickly turn into policy.
Weekly skew in rates is almost flat and modest in FX, likely because no particular region is seen as a main target yet. This situation allows focus on carry trades and stable trades, requiring limited downside hedging. Buying volatility now would be costly and premature unless there’s a real expectation of sharp drops in trade flows.
It’s important to watch daily positioning data, especially dealer gamma, to see if sentiment changes towards hedging any unexpected announcements. For now, it’s reasonable to consider this situation as mere noise. Structured product issuance is back to normal levels, and credit default swaps on regional exporters have not increased. Overall sentiment is stable, not defensive.
As we analyze moves from large asset holders, keep an eye on fund flows and changes in open interest, particularly in global index futures and commodity-related currencies. These metrics will indicate whether short-term hedging is happening below the surface. Historically, unfulfilled letters and threats have quickly faded from market perception, overshadowed by payroll data, CPI, or central bank updates.
Therefore, recent announcements should be viewed more as political drama than actual trade intentions. Watch for significant shifts in option volumes that might indicate real repositioning, but don’t expect them to happen suddenly. Unless there’s confirmation, the savvy investors are staying light and focused on data, not distractions.
De Guindos hopes for exchange rate stability to prevent negative economic impacts
An ECB policymaker hopes that the exchange rate will stabilise soon to avoid more negative effects. There are concerns about the euro rising too fast, especially if it goes above $1.20, which could create challenges.
The policymaker is stressing the importance of preventing a rapid rise in the euro’s value. Stable exchange rates are crucial for economic planning and adjusting policies.
Policymaker Concerns
The comment shows that policymakers are worried about fluctuations in currency, particularly how quickly the euro is gaining value. By asking for stability, the policymaker implies that a continued rise could disrupt monetary policy goals—especially price stability and supporting exports. If the euro exceeds $1.20, it could tighten financial conditions for eurozone exporters and limit inflation when the central bank is trying to manage consumer prices. From a trading view, this suggests that there’s growing anticipation for either verbal or direct actions if the euro keeps rising. Market players can reasonably assume that policymakers are closely monitoring the currency and might change their tone or even policy if the appreciation continues. For traders, this means we should be cautious about positions that rely on the euro continuing to increase in value. There may be more volatility around central bank statements as they attempt to balance a strong currency with domestic price pressures. Comments like these could indicate the start of coordinated messages from the council to control the euro’s strength.Rhetorical Interventions
We will likely see more rhetorical interventions in the near future—carefully timed statements in line with currency movements, perhaps reiterated during press briefings or speeches. The market often tests limits set by such remarks, making the $1.20 level a key reference point. Right now, this is not just a number; it reflects policymakers’ tolerance. We should also pay attention to inflation data. If the euro keeps appreciating and inflation falls short in major economies, we might hear stronger warnings. That could go beyond just rhetoric. Derivatives traders need to consider the increasing impact of currency movements on broader rate strategies. The options market may adjust if further tightening occurs alongside euro strength. Hedging near crucial technical levels is wise, especially with trend-following volatility strategies, which could be affected by abrupt shifts in policy tone. These comments come after stronger-than-expected data from the euro area, indicating growing discomfort with the speed of currency changes—not just the direction. A month or two ago, such a comment might have been overlooked, but not now. The policymaker’s previous attitudes suggest that if these concerns are voiced repeatedly, they might influence pricing in rate futures. This pressure could affect short-term interest rates faster than long-term ones. Therefore, we should be ready to act quickly when similar comments arise, especially if they coincide with the euro reaching expected levels. Create your live VT Markets account and start trading now.Mortgage applications in the US increased, while the market index and mortgage rates experienced minor fluctuations.
US MBA mortgage applications rose by 9.4% for the week ending July 4, following a prior increase of 2.7%, according to the Mortgage Bankers Association.
The market index went up to 281.6 from 257.5. The purchase index increased to 180.9 from 165.3, and the refinance index grew to 829.3, up from 759.7 the week before.
The average rate for a 30-year mortgage decreased slightly to 6.77%, down from 6.79%. Usually, mortgage applications and mortgage rates move in opposite directions.
The recent data shows a significant rise in mortgage applications, likely a reaction to the small drop in borrowing costs. The decrease of two basis points in the average mortgage rate to 6.77% may have encouraged more people to apply for new loans and refinance.
The overall market index reflects heightened activity in the mortgage sector, increasing from 257.5 to 281.6. Purchase applications increased sharply to 180.9, and refinance applications surged to 829.3. This week clearly indicates a responsive approach from borrowers when rates fluctuate.
These changes suggest that even small tweaks in rates can significantly influence borrower behavior. U.S. Treasuries and fixed-income yields are linked to consumer actions—when rates drop slightly, people seek to secure better terms. Despite uncertainties in long-term rates, there’s cautious optimism in household finance.
For those trading while considering rate fluctuations, this data is important. It reveals that borrowers are still responsive and not fatigued by high rates. It also signals that small rate drops still prompt buying behavior.
While Powell’s team chose to maintain current rates in their latest announcement, households show that even minor rate changes impact real-life choices. This could indicate a strategy of acting quickly before any further surprises regarding rates.
Therefore, this week’s increase is not just isolated data; it forecasts how sensitive the market remains to rate changes. There may be active trades anticipating that refinancing activity will continue to closely follow yield shifts, especially as summer volumes increase.
As for forward positioning, the uptick in activity, particularly in refinancing, should be observed closely. Fixed-income instruments already show reaction through adjustments in hedging, and this data could further shift expectations as traders gauge consumer responses.
The response gap between mortgage rates and borrower behavior is still open, even in this long-term high-rate environment. Tracking this data against long-term Treasury futures and options interest is essential. Viewing this as a momentum signal could provide insights into future trends, emphasizing volatility and how quickly consumers adapt.
Position sizing should reflect these shifts in borrower decisions, not just actions from central banks.
Lane emphasizes the ECB’s ongoing data-dependent strategy, taking into account various factors affecting inflation and uncertainty.
The chief economist of the European Central Bank (ECB), Philip Lane, emphasized the need to look at changes in both international and domestic policies for future inflation. The ECB’s goal is to ensure that unexpected economic events do not push medium-term inflation away from their targets.
Recently, there has been a clear drop in energy prices and a strong rise in the euro’s value. Currently, there is uncertainty about the future of international trade, leading the ECB to make decisions based on the latest data during each meeting.
The ECB’s decisions on monetary policy are made after careful consideration of inflation trends, economic situations, risks, and uncertainties. For more information on Lane’s comments, you can visit the ECB website.
Lane highlighted that monetary policy needs to be flexible because global and regional conditions are changing. This means that policymakers are not following strict schedules or set outcomes. Instead, they are closely analyzing incoming data and adjusting their strategies at each meeting. Traders should not expect clear and predictable direction from the ECB during this time.
We have already observed important changes, particularly in energy prices and exchange rates. A significant drop in energy costs reduces inflation pressure in the short term. Meanwhile, a stronger euro makes imports cheaper, which helps lower imported inflation—a vital factor affecting prices of goods.
Lane indicates that while inflation has decreased partly due to these changes, the ECB is not making any firm assumptions. We have to consider the global context—especially how sensitive the trade system is to disruptions. Rising fears about protectionism or slower trade flows could influence both growth and price levels in the euro area. This is why they stress being “data-dependent.”
His message suggests that we are entering a period where expectations about policy may become more volatile. Changes can occur quickly if international events or domestic challenges change. So now, it’s wise to focus more on uncertainties—whether they come from currency shifts, energy markets, or trade barriers.
The ECB is looking beyond just headline inflation figures. They are paying attention to the larger picture, including core inflation, wages, and whether current easing price pressures are more permanent for consumers. There is still a chance that medium-term inflation could rise again if second-round effects happen, such as higher wage settlements or persistent supply issues.
Lane’s focus on “medium-term” risks indicates we shouldn’t get too relaxed about just the short-term numbers. Forward guidance won’t be clear in these conditions. Instead, we will receive hints gradually, and we’ll need to analyze standard communications carefully.
Right now, there’s no sign of a sudden shift in policy. However, with new data each month, especially concerning wages and core price figures, expectations may need frequent adjustments. Reactions to the same data could change depending on earlier comments or global tensions. There’s no room for complacency; everything is more reactive than before.
As participants in the financial market, we should be prepared for greater risk during ECB meetings, especially if headline figures contradict underlying trends. A one-month decrease in inflation might not be trusted unless multiple factors support it. Similarly, a surprising increase in employment or service prices might entirely stop any plans for easing policies.
The uncertain trade situation that Lane mentioned means that there will be more focus on geopolitical events, sanctions, tariffs, and regional supply chain issues. It’s not just about central bank policy anymore, but the overall economic dynamics—whether they continue to function smoothly or face disruptions from cross-border conflicts.
The conclusion is clear: in the near future, we will be balancing soft data interpretations and firm policy changes, with no single piece of information carrying the final weight on its own.
