China has issued rare earth export licenses to select companies, but the number of licenses granted is unclear, and it’s uncertain if any went to U.S. firms. The Chinese commerce ministry announced that they approved “a certain number” of applications in their latest round. They plan to improve their approval process for compliant applications and are willing to communicate with other countries about export controls. This announcement indicates that China is carefully resuming the issuance of rare earth export licenses after a period of strict review and limited approvals. While the specifics of the approvals remain vague, this suggests a cautious return to licensing rather than a major policy change. The uncertainty about whether American companies received licenses raises questions about trade relations and points to a careful approach instead of a complete lifting of limits. The commerce ministry’s openness to dialogue should not be viewed as an indication of quick regulatory changes. Instead, it reflects an ongoing strategy to maintain control over rare earth production and its global distribution. By aiming to “enhance” the license approval process, regulators are emphasizing compliance with domestic standards and selectively screening exports based on political and supply chain factors. Practically, this suggests that materials from Chinese producers will be available, but only under strict conditions and to those approved by the state. This is not a broad reopening, and expectations for uniform trade normalization should be set aside until there is more consistency in future licensing batches. In the coming weeks, we anticipate tighter spreads and fewer opportunities in rare earth contracts, as uncertainty around Chinese supply has caused greater market volatility. Any unclear updates from Beijing or a lack of U.S. deals could affect pricing. Given the unpredictable nature of these updates, it’s wise to avoid heavily relying on expected easing, particularly for long-term positions. Instead, a balanced strategy that is short-to-medium term is preferable, with flexibility where possible, especially for investments sensitive to raw material supply from Asia-Pacific. It may also be prudent to diversify toward producers outside mainland China, especially in cases where supply alternatives are strong. Keeping track of detailed customs data might provide better insights than official announcements, which are likely to remain vague and infrequent. Jiang’s department’s tendency to continuously adjust regulations means pricing around policy changes could fluctuate. There is often little advance notice or structured communication, so don’t expect typical transparency. As always, flexible trade structures, which can be adjusted if conditions shift, tend to be more resilient than strict directional positions.

here to set up a live account on VT Markets now

The Bank of England has kept its interest rate steady at 4.25%. This decision meets market expectations as financial players react to the news. The GBP/USD pair faced resistance at 1.3450, showing slight positive momentum in response to the Bank of England’s decision. Meanwhile, the EUR/USD remains stable around 1.1480, supported by a steady US Dollar.

Gold Fluctuations

Gold’s price fluctuated, dropping initially to $3,350 before bouncing back to around $3,370. In the world of digital currencies, Bitcoin hovers near the 50-day Exponential Moving Average (EMA) at $103,100, facing possible downward pressure due to geopolitical tensions. Inflation in the Eurozone is influenced by monetary aggregates, which are important to the European Central Bank’s focus. On the investment side, brokers that offer competitive spreads and efficient trading platforms are highlighted for 2025. Investing in foreign markets or currencies involves risks. Careful consideration of your investment goals and experience is essential. Be aware of the possibility of complete investment loss and seek guidance from financial advisors when needed. With the Bank of England maintaining the interest rate at 4.25%, the monetary policy signal remains consistent for now. This serves as a reference point for evaluating fixed income and currency derivatives. Bailey’s team is closely monitoring inflation, especially in terms of wage growth and underlying service inflation, which are not showing clear signs of slowing. However, the pause indicates that the market should not expect a quick shift towards easing, despite pressure on other central banks to cut rates. Sterling’s resistance around 1.3450 against the US Dollar is noteworthy. As it approached this level, there was a slight increase in buying interest, though not enough for a strong breakout. This suggests traders may be cautious and focused on short-term positions rather than long-term investments. The GBP remains tied to interest rate differences and economic data surprises, so it’s crucial to pay attention to UK Consumer Price Index (CPI) and US employment figures for future strategies. In comparison, the EUR/USD pair remains stable around 1.1480. Lagarde and her colleagues continue to emphasize the importance of monitoring monetary aggregates, which supports a balanced fiscal outlook. However, without new catalysts, the pair may not provide many short-term directional signals until macro indicators for Q2 emerge. Therefore, focusing on volatility expectations is more important than making simple directional bets.

Gold Trade Setup

Gold offered a clear trade setup this week. After an initial dip to $3,350, there was defensive buying that pushed the price back to around $3,370. These price movements indicate strong interest at lower levels, making them ideal for setting conditional orders or spreads. Bitcoin remains uncertain. It has stabilized around the 50-day EMA at $103,100 for now, but it could face downward pressure if investor confidence wavers. Geopolitical instability tends to weigh on riskier assets like cryptocurrencies. It’s important to analyze more than just the spot price; we recommend examining options skew and changes in term structure to gauge sentiment, which will influence whether holding gamma exposure is worthwhile in upcoming sessions. Regarding European inflation, the focus on monetary aggregates indicates ongoing concerns about medium-term price pressures. This means the central bank is basing its decisions on long-term data rather than immediate market conditions. Understanding this backward-looking approach is beneficial when considering rates or euro-denominated futures. Finally, attention is increasing towards competitive brokers, especially those offering tight spreads and effective execution tools through 2025. This is crucial for spreads or synthetic derivatives that depend on efficient order routing. It’s wise to review broker infrastructure and setups, particularly focusing on latency and slippage during high-impact releases. As the upcoming weeks progress, we have a stable base in monetary policy, but external uncertainties may lead to increased volatility. This is useful when structuring complex positions or considering carry trades. Let’s stay alert for data releases and trends in open interest—the next move in the market could be less obvious than it seems. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The Eurozone faces the possibility of stagflation if the Middle Eastern crisis continues, posing a global threat that extends beyond the Eurozone. Economic stability depends heavily on what happens in the Middle East, especially in the Strait of Hormuz. We are closely monitoring the situation because it affects both Europe and the world economy.

Oil Market Pressures

Recent economic data show signs of disinflation in key Eurozone countries. However, oil market pressures could quickly reverse this trend. Brent crude prices have risen in recent weeks, not due to local supply issues, but because of concerns over shipping routes and potential retaliation from regional players. If disruptions continue in the Strait of Hormuz, we can expect a sharp increase in energy costs across the Eurozone. Last month, Lagarde noted that any external cost shocks may lead to a reassessment of current monetary policy. While interest rates remain stable, inflation expectations could still rise, regardless of the European Central Bank’s public messages. This disconnect between what the bank communicates and what markets expect might create opportunities for longer-term investments, as yield curves respond more realistically to commodity-driven inflation rather than growth-driven demand. Traders should not only rely on short-term FX fluctuations for conclusions. Earlier this week, we observed that option-implied volatilities on euro currency pairs have increased, yet not to panic levels. Instead, a consistent repricing is happening. This indicates that businesses exposed to international trade and energy-dependent sectors are increasing their hedging strategies. Two weeks ago, Schaeuble warned that core capital spending in the Eurozone might decrease if operational costs remain unpredictable. Credit markets reacted quickly, widening spreads on mid-grade corporate debt beyond one-year averages. This led to reduced activity in corporate bond derivatives, with fewer issuers hedging at recent volumes as they wait for energy premiums to stabilize. However, this cautious approach limits liquidity for certain contracts.

Inflation and Interest Rate Expectations

We are now watching how long European policymakers will endure external inflation pressures without taking action. With the core economy showing low growth and moderate demand, the European Central Bank finds itself in a difficult position. Tightening rates could suppress output further, while inaction raises risks for price stability. The market is gearing up for increased rate volatility, reflecting the expectation of more price uncertainty. Looking ahead, inflation swaps can indicate market sentiment before official economic reports are released. We have seen a slight increase in two-year breakevens, driven by hedging demand rather than straightforward expectations. This trend often predicts upward surprises in CPI data three to six weeks in advance. If this pattern holds, the current hedging suggests that traders are already bracing for energy-induced pressure on consumer prices in the next quarter. The differing monetary policies of central banks now create opportunities in cross-currency basis products. The Federal Reserve, for instance, has more flexibility to maintain high rates longer due to the stability of US service-led inflation. This difference in expectations makes relative value trades on euro-dollar swaps more appealing than outright directional bets. We interpret the pricing changes not as speculative errors but as reasonable adjustments to the logistical and political risks involved. With uncertainty revolving around supply disruptions rather than macroeconomic data, traditional indicators become less reliable. Consequently, momentum in derivatives will depend more on actual volatility changes than sentiment shifts. Our view is that optionality has become the primary strategy for the near future. Given the many event-driven factors affecting energy prices, outright long or short positions provide poor risk-adjusted returns. Instead, using calendar spreads and skew builds to capitalize on volatility changes is a better approach. This positioning allows for adaptability while remaining responsive to sharp market moves. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The New Zealand Dollar is struggling due to the country’s current account deficit, which stood at -5.7% of GDP in the first quarter. This situation is made worse during times when global investors are more cautious, leading to a decrease in foreign capital inflows. In Q1, New Zealand’s GDP grew by 0.8%, beating expectations and up from 0.5% in Q4. This growth, driven mainly by business services and manufacturing, supports the Reserve Bank of New Zealand’s choice to pause interest rate cuts.

Official Cash Rate Outlook

Governor Christian Hawkesby explained that further cuts to the Official Cash Rate are not guaranteed. Current market indicators show a 17% chance of a rate cut at the July 9 meeting and expect a 25 basis point reduction over the next year, potentially lowering the policy rate to 3.00%. This analysis contains forward-looking statements with inherent risks and uncertainties. The markets and instruments mentioned are for informational purposes only and do not serve as investment recommendations. Please evaluate the potential risks, including the possibility of investment losses, before making financial decisions. This summary reflects the authors’ perspectives and does not represent official views. All content lacks personalized recommendations and may contain errors or omissions. The New Zealand Dollar’s recent struggles are linked to a growing current account deficit of -5.7% of GDP in Q1. Simply put, the country is spending much more on imports than it makes from exports. This situation generally puts downward pressure on the currency, especially when global investors become more risk-averse—a typical response during bad market conditions. Meanwhile, New Zealand’s economy showed stronger growth than expected. The GDP rose by 0.8% in Q1, up from 0.5% in the previous quarter. This positive performance was largely driven by solid activity in services and manufacturing, indicating healthy domestic demand. As a result, the central bank has a solid reason to delay any interest rate cuts, feeling comfortable waiting before considering new reductions.

Trading Opportunities and Risks

Hawkesby, a key figure at the Reserve Bank, has downplayed the idea of immediate rate cuts. This view aligns with market expectations, as the probability of a cut in July remains low at just 17%. Analysts anticipate only modest easing of around 25 basis points over the next year. If fully realized, this would likely bring the official rate down to 3.00%, assuming no unexpected changes occur. However, the mixed signals create tension for traders. On one side, strong growth data suggests holding onto investments. On the other hand, the substantial external deficit—especially during risk-averse times—could weaken foreign demand for local assets. Consequently, the Dollar may find itself in a delicate balance, supported by domestic strength while facing challenges from capital flow issues. For those trading based on interest rate expectations or managing yield curve exposure, volatility may now appear skewed. Positive surprises in inflation or growth could lead to speculation about longer holds, raising short-term yields. Conversely, a worsening external situation or signals from policymakers may reinforce expectations for earlier cuts. It’s important to closely monitor positioning in the swaps market and options data leading up to the July meeting. Price misalignments may emerge here. Despite relatively low market-implied volatilities on the NZD, which suggest limited expectations for sharp movements, any surprises could lead to significant price shifts. Keeping an eye on how the cross-currency basis changes, particularly during cautious global sentiment periods, will be crucial for assessing capital pressures. Any widening would signal growing difficulties for domestic firms to secure offshore funding, which historically has negatively impacted the Dollar. From the perspective of interest rate differentials, it’s important to watch the policy stance of New Zealand compared to larger economies. If external central banks maintain tight policies longer than anticipated, the attractiveness of the NZD could decline further. This scenario might open up opportunities for repositioning in longer-term rates, especially if hedging costs become less favorable. In summary, the current economic data offers some leeway for officials, but market expectations still lean toward easing in the medium term. This disconnect between the central bank’s stance and market pricing could create trading opportunities, especially if upcoming data dampens growth optimism or highlights funding vulnerabilities. Staying alert to changes in policymakers’ tones along with global risk appetite indicators will be crucial in the coming weeks. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

European stocks opened the day with caution, suggesting possible weekly losses. Major indices like Eurostoxx, Germany’s DAX, France’s CAC 40, and Spain’s IBEX all fell by 0.6%. The UK FTSE dropped by 0.4%, and Italy’s FTSE MIB declined by 0.5%. Uncertainty remains high due to concerns about a potential US intervention in the conflict between Iran and Israel. Since US markets are closed today, European markets are reacting independently. Currently, there’s a cautious mood in equities across the region, as several indices decline ahead of the weekend. Eurostoxx and other European indices are gradually falling, with no signs of recovery. The lack of strong drivers keeps every move subdued, and risk appetite seems to be fading, especially without guidance from Wall Street. The FTSE appears slightly weaker than its European counterparts, indicating that the downturn is shared across the board rather than caused by local issues. Investors are especially focused on geopolitical tensions, driven by fears of a US response to recent events in the Middle East. The absence of US market activity adds to the uncertainty, leaving participants without direction from the largest equity market. Fridays usually lean toward risk aversion, but this caution feels more like a deliberate retreat rather than just routine defensiveness. We’ve noticed an increase in hedging activity. Despite lighter trading volumes due to the US holiday, option pricing suggests a stronger desire for downside protection rather than betting on upward moves, particularly in near-term options. Implied volatilities have slightly increased, indicating a more defensive stance among traders. Traders should pay attention to near-term options, which are still holding high premiums despite a recent stabilization in realized volatility. This gap suggests unease about unexpected news events and indicates that participants are willing to pay more for flexibility. Calendar spreads between April and May expirations show mild steepness, highlighting a short-term focus on protection or quick tactical moves. On the bond side, futures have been steady, with rates largely unchanged since no major macro data is expected. This should help keep volatility moderate in the fixed income market. The simultaneous drop in equities without a rally in core government bonds points to a cautious approach or reluctance to increase exposure. With this context, premiums for end-of-week index options remain higher than usual for similar intraday ranges. There’s a reduced interest in selling short-dated puts, indicating that others share the same views on price dynamics and prefer not to take directional risks. While long-gamma positions might support price reversal during calmer weeks, today’s trading suggests any reversal could be muted until US markets reopen. As we move forward, keep an eye on short-term implied options for insights. We’re monitoring how next week’s option chains are shaping up, especially around key index levels. Right now, positioning reflects an expectation for volatility but not a significant downturn. This aligns with current price patterns, where traders are willing to pay for volatility, but recent price movements haven’t justified those costs—at least not yet. This indicates that concerns are real but not extreme. This type of asymmetric protection, which is common during times of geopolitical uncertainty, often highlights worries about timing rather than the direction of the market. It allows participants to remain flexible without making strong commitments, especially when key market triggers might emerge while markets are closed.

here to set up a live account on VT Markets now

The Australian Dollar has dropped in value due to tensions in the Middle East and weak job data from Australia. Recent comments from Fed Chair Powell have also strengthened the US Dollar, which has affected the Aussie. The conflict between Israel and Iran has pushed investors towards safer assets, causing the Australian Dollar to fall by 0.6% and nearing a critical valuation point. Unemployment figures in Australia showed no change in the jobless rate, but employment numbers dropped.

Impact of Federal Reserve Policies

The Federal Reserve decided to keep interest rates steady, which initially helped support the Australian Dollar. However, Powell’s comments about tariff effects strengthened the US Dollar instead. Several factors influence the Australian Dollar’s movement, including RBA interest rates, Iron Ore prices, and China’s economic health. The Trade Balance is also important; a positive balance tends to support the Australian Dollar. When China’s economy is doing well, it increases the demand for Australian resources, boosting the Dollar. However, changes in Iron Ore prices can directly affect the currency’s value, supporting it when prices rise and putting pressure on it when they fall. It’s not surprising that the Australian Dollar experienced a decline given recent events. Rising tensions in the Middle East have led investors to move their money into safer currencies, pushing risk-sensitive currencies like the Aussie lower. While the overall unemployment rate remained steady, job numbers fell, indicating instability and reducing confidence. At the same time, Powell’s comments created uncertainty. While the Federal Reserve held its policies steady and indicated possible rate cuts earlier this year, his recent statements raised doubts. His suggestion that tariffs could affect inflation, along with strong US economic data, gave the US Dollar an extra boost, making other currencies, especially commodity-linked ones, less attractive.

External Influences on the Australian Dollar

We’ve seen this pattern before: global uncertainty increases demand for safe assets. Weak domestic data adds further pressure. Plus, a US central bank that remains hawkish adds to this tension. The situation in China is still a significant external factor. Iron Ore is Australia’s biggest export, and how well China manages its industrial growth directly affects our currency. When China’s growth is stable and demand for construction materials rises, our trade numbers improve, which typically leads to positive speculation. However, if growth slows, as suggested by recent weak manufacturing data, the demand shifts considerably. Traders should also watch the Trade Balance, which is a vital source of strength but only if net exports remain high. A strong surplus generally supports the Australian Dollar. If commodity prices fluctuate and foreign demand falls, we may not rely on this surplus for long. In the short term, market positioning seems tied to two things: how US interest rate expectations change and how effectively China can stabilize its recovery. For now, markets are likely to stay anxious, and volatility is likely due to ongoing geopolitical tensions and uncertain growth among key partners. With this level of uncertainty, decisions about rates or risk must be based on data, not sentiment. Keeping an eye on bond yield spreads between the US and Australia will provide valuable clues about the market direction. Additionally, monitoring Chinese industrial production and Australian export figures will offer more useful insights than outdated inflation data or currency headlines. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The USDJPY pair is currently trading within a range, as economic conditions remain stable. Traders are looking for new factors to influence the market. Recently, the Federal Reserve decided to keep interest rates steady but predicted two rate cuts for 2025. This led to a small strengthening of the USD, but overall, the impact was minimal. Market participants expect further rate cuts as new data becomes available. On the other hand, the Bank of Japan held its interest rates at 0.5% and adjusted its bond-buying plans for 2026, which was expected by the market. These decisions did not cause significant market changes, and current volatility levels are low as traders await news that could shift predictions.

Technical Analysis Overview

Looking at the daily chart, the USDJPY pair is trading between 142.35 and 146.00. The price is close to 146.00, indicating a possible breakout or a bounce back to support. On the 4-hour chart, a bounce from the 144.30 zone shows potential upward momentum, targeting around 146.28. Sellers might be poised for a good opportunity at this resistance level. The 1-hour chart reveals the pair is trading mid-range between key levels, encouraging patience for better positioning. As the week wraps up, focus will turn to the upcoming Japanese Consumer Price Index (CPI) release, which may impact the market. The initial section highlights a consolidation phase for the USDJPY pair, with both central banks maintaining current interest rates. The Federal Reserve kept its rate unchanged but hinted at two cuts next year. This minor change didn’t significantly move the market, though the dollar saw a slight uptick as traders processed the news. Overall, currency markets reacted mildly, suggesting expectations had already been factored in.

Outlook and Preparations

At the same time, the Bank of Japan decided to keep its rate at 0.5% and made slight adjustments to its bond-buying schedule—actions that matched market expectations. This caused little immediate reaction, and volatility remains low. This situation shows that many traders are hesitant to make big moves without new information. From a technical viewpoint, the daily chart remains tightly confined within the 142.35 to 146.00 range. With price movements nearing the higher end, the market is at a point where it might either break above this level or face a rejection due to decreased buying interest. On the four-hour chart, a bounce at 144.30 gave early indications that bullish momentum may return, with targets just above 146. The hourly chart indicates indecision. The pair is straddling key levels, with neither buyers nor sellers willing to commit without a clearer direction. This uncertainty suggests that entering positions prematurely could be risky, especially without new data. Looking ahead, we anticipate volatility could arise from inflation developments, particularly the upcoming Japanese CPI data. If there are unexpected changes in core inflation, traders might have to quickly adjust their strategies. With the pair near resistance, sellers might find opportunities, especially if buying momentum decreases. For buyers, waiting for a confirmed breakthrough above resistance might be wiser to ensure participation in the next upward move. Trade setups in a sideways market often need macro data or a significant price shift to drive them. Until that occurs, a cautious approach is advisable. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

AUD/USD has dropped toward the lower end of the 0.6440-0.6550 range this month. In May, Australia’s labor market showed a decrease, with a loss of 2.5k jobs instead of the expected gain of 21.2k jobs. Full-time jobs increased by 38.7k, but part-time jobs fell by 41.1k. The unemployment rate held steady at 4.1% for the fifth month, which is slightly better than the Reserve Bank of Australia’s (RBA) prediction of 4.2%.

Labor Market Indicators

Leading indicators point to a decline in the labor market. The NAB Employment subindex dropped to 0.4, its lowest since January 2022. Additionally, the Westpac-Melbourne Institute Unemployment Expectations subindex increased by 5% to 127.4, indicating rising unemployment expectations. The RBA may soon have room to cut rates. Futures suggest a 78% chance of a 25 basis point cut to 3.60% in the upcoming meeting on July 8, with predictions of total cuts between 75 and 100 basis points this year. As AUD/USD hovers near 0.6440, reactions in the derivatives market should be sharper this week. The recent employment data from Australia fell short of expectations, showing a loss of 2.5k jobs instead of the anticipated 21.2k gain. This adjustment has influenced market direction. Looking closer, most job losses were part-time roles, which fell by 41.1k. Full-time jobs rose by 38.7k, but this wasn’t enough to counter the overall downturn. Although the unemployment rate remained stable at 4.1% for five months, it’s slightly better than the RBA’s forecast of around 4.2%. Advanced indicators, such as the NAB Employment subindex dropping to 0.4, paint a grim picture. This is its lowest level since early 2022 and reflects a drop in consumer confidence. The Westpac-Melbourne Institute’s unemployment expectations rose by 5%, marking a significant increase. This metric often signals future labor market weaknesses, suggesting households anticipate tougher job conditions.

Monetary Policy Adjustments

Given these trends, the key question isn’t if the central bank can act, but when it will. Money markets have nearly confirmed a 25 basis point cut on July 8, giving it a 78% probability. Further, market predictions suggest up to 100 basis points in cuts by the end of the year. With these developments, there’s clarity on the direction of Australian rates. This will reflect not only through currency trades but also in rate-sensitive products. The ongoing realignment between data implications and futures markets requires careful monitoring. Short-term volatility is likely to become more attractive as we near the July meeting. There may be opportunities for spreads to widen, especially for those with long AUD positions or who expect rates to hold steady. Adding optionality for downside risks—particularly in AUD/USD and AUD/JPY pairs—could be a smart move. Given the labor market softness and futures response, pursuing short gamma strategies could become costly unless well-hedged. Gleaning premiums from those expecting stability worked last month, but sentiments are changing. As traders, we are focusing on signals from local economic weaknesses, not just global dollar flows. Repricing has started, but it hasn’t fully aligned with the likely upcoming policy shift. Traders acting now may find themselves ahead of the risk curve if the rate cuts happen as anticipated. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The Swiss National Bank (SNB) is likely to cut its policy rate by 25 basis points to 0.00%. There’s a 25% chance of a larger cut of 50 basis points, but the central bank is expected to keep the option of negative rates open, even if it’s not the preferred choice. The Bank of England (BoE) is expected to hold its bank rate steady at 4.25%, with a split vote of 7/9. The bank will probably discuss recent weak data while continuing with its plan for quarterly rate cuts, aiming to balance this with inflation control. The decisions from both banks probably won’t change things much, as these moves are largely expected. The focus will be on upcoming data and economic trends over the summer for any significant market changes. In the U.S., there are no scheduled events due to a holiday, but attention is on developments in the Middle East. Some positive news about a potential de-escalation has surfaced, but there are still uncertainties regarding a possible U.S. strike on Iran. If the U.S. intervenes in the Middle East, it could raise geopolitical risks and disrupt oil supplies. However, unless it affects key economic factors like oil prices, the situation may remain contained. The information above summarizes expected actions from three major central banks. While immediate reactions might be limited, upcoming data releases will likely shape market movements more significantly in the coming weeks. Starting with the Swiss central bank, a slight reduction in the policy rate is anticipated, possibly hitting zero. While a more significant half-point reduction is a possibility, the current indications suggest a cautious approach. However, negative rates are not completely off the table should pressures arise. This means policymakers prefer flexibility over solid commitments. For the UK, the central bank appears ready to keep the rate steady, despite signs of recent economic weakness. The expected vote shows that there’s no clear agreement on making changes yet. The bank aims to carefully manage inflation, which isn’t back at target, without risking an economic slowdown. The quarterly adjustments plan remains, but this relies on data trends through the summer. These decisions are crucial, but they are already reflected in the current market levels. Reactions might stay quiet unless the minutes, guidance, or communication tone change significantly. In the U.S., holiday closures have quieted activity, but overseas events continue to draw attention. There’s some optimism about reducing conflict in the Middle East, though the situation remains unstable. If U.S. forces directly engage, it could create market fluctuations, especially in commodities. Energy prices would likely be the first to respond, particularly if key supplier flows are threatened. This week, the focus is less on what central banks announce and more on how markets process and prepare for new data. Short-term rate volatility may remain low unless new developments suddenly emerge. Rather than seeking quick profits, it might be wiser to position for trends that will develop as summer approaches. Options pricing reflects this outlook, with modest implied volatility and no significant pushes at near expirations. Decisions on entry points or protection should consider where broader risk sentiment might genuinely change. Quick trades around central bank announcements, without a shift in real economic data or inflation expectations, may not be worth the cost. Therefore, adjusting exposure should remain closely linked to reports from key economies, as well as how geopolitical events impact trade flows, consumer energy costs, and inflation expectations.

here to set up a live account on VT Markets now

The US Dollar is expected to move between 7.1830 and 7.2030 against the Chinese Yuan. Over a longer period, it should stay within a range of 7.1620 to 7.2200. In the last 24 hours, the US Dollar traded in a narrow range of 7.1855 to 7.1959. It closed at 7.1951, showing a small increase of 0.03%. Current trading suggests that no new trends are forming, and we anticipate continued movement in the range of 7.1830 to 7.2030.

Observation of Earlier Momentum

Earlier this month, it was noted that the downward momentum was weakening, indicating a likely range of 7.1620 to 7.2200. After more than a week, the US Dollar has stayed within these expected limits. Investments come with risks and uncertainties. The information here is for informational purposes only. It is crucial to conduct thorough personal research before making investment decisions, as there are potential risks and losses involved. This should not be seen as a recommendation to buy or sell mentioned assets. The Dollar-Yuan pair continues to show limited movement, trading narrowly without much momentum. Over the past day, it fluctuated within a tight range, briefly touching both ends but not breaking through. The 0.03% rise at the session’s close indicates only a minor adjustment—not the start of a new trend. Wang’s earlier perspective—that decreasing downward momentum would lead to range-bound trading—still aligns with market behavior. We expect the pair to stay within a box. As long as it trades between 7.1830 and 7.2030 in the short term and does not breach 7.1620 to 7.2200 in the longer term, we can assume that there aren’t significant directional triggers.

Limited Movement and Trading Strategies

In this environment, option writers may prefer strategies that involve selling premiums, as the market shows little interest in moving outside set limits. While decreased volatility stabilizes the market, it also reduces opportunities that rely on large directional movements. It’s important to monitor implied volatility and relative skew, especially in near-week structures, where risk-reward may favor mean-reversion over breakouts. Chen’s earlier analysis on declining downward pressure has proven accurate so far. The pair’s inability to drop further or test new lows suggests that the lower limit is currently strong. However, there is still resistance near the 7.2200 mark, which limits chances for rallies unless unexpected events—like policy changes or economic data surprises—occur. For those managing delta exposure, being flexible is likely more effective than holding a strong position bias. Keeping options open and setting stop-loss orders near the outer edges could protect against sudden market shifts. Maintaining tighter gamma profiles may also benefit portfolios while the pair lacks significant momentum. In this trading zone, it’s essential to examine the relationship between implied and historical volatility. If implied volatility stays above the realized, hedging costs could eat into profits from otherwise well-placed structures. Conversely, those selling volatility should carefully assess rollover values against shrinking ranges. We should monitor activity around 7.1830 and 7.2030 closely; real closures above or below these levels would indicate a shift in market dynamics. Until then, the sentiment supports a neutrally moderate view, favoring short-duration trades that benefit from minimal movement. Stop-loss orders should be set thoughtfully—too tight risks being triggered often, while too loose exposes traders to greater risk. Let the range dictate moves, not headlines. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now