The US has recently completed a $39 billion auction of 10-year notes, with the yield set at 4.033%. This is slightly lower than the previous rate of 4.046%. The auction showed a 1.3 basis point stop through. As a result, yields have started to decrease, putting pressure on the USD/JPY exchange rate.

Strong Demand Hints at Lower Rates

Today’s 10-year Treasury auction saw strong demand, clearing at a yield of 4.033%, which was lower than expected. This suggests that we might see interest rates fall even further. Many investors believe that the Federal Reserve’s cycle of rate hikes is finished and want to lock in current yields. It could be a good time to think about buying calls on Treasury bond futures or related ETFs. This shift in yields also affects currency markets, particularly the USD/JPY pair. Lower US rates mean the dollar offers a smaller yield advantage over the yen, leading to a drop in the pair right after the auction results. In the next few weeks, we might explore strategies that benefit from a lower USD/JPY, such as buying puts or selling futures contracts. Looking back at the bond market rallies from late 2023, we often saw a rush towards government debt before increased stock market volatility. The CBOE Volatility Index (VIX) has already risen to 16.2 from its summer lows, and this auction result could push it even higher. It might be a good time to buy protective puts on major stock indices like the S&P 500.

Economic Data Influences Markets

The bond market’s appetite is shaped by recent economic data, which we should monitor closely. Last week’s Non-Farm Payrolls report indicated job growth slowed to 150,000, falling short of expectations and suggesting a cooling economy. Now, all eyes are on the Consumer Price Index (CPI) report set for next Tuesday. A lower inflation reading could support our view and likely accelerate the decline in yields. Create your live VT Markets account and start trading now.

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The US Treasury will auction $39 billion in 10-year notes today at 1 PM ET. This is the second of three auctions happening this week. In the previous auction, strong interest was shown in 3-year notes, particularly from international investors. **Key Metrics** Here are some important metrics to compare with six-month averages: – Tail: -0.8 basis points – Bid-to-cover ratio: 2.56X – Domestic buyers: 17.4% – International buyers: 71.1% – Dealers: 11.4%

Current Yield Overview

Yields for US Treasuries are currently low: – 10-year yield: 4.0492% (down 2.5 basis points) – 2-year yield: 3.531% (down 1.1 basis points) – 30-year yield: 4.697% (down 2.0 basis points) The 10-year yield, which influences consumer borrowing costs, has fallen about 30 basis points since it peaked at 4.347% in August. The 30-year mortgage rate has dropped sharply from 7.0% to 6.49%, a decrease of 51 basis points. So far this year, the 10-year yield has fallen 76 basis points since its peak. However, mortgage rates for 2025 are still about 15 basis points higher than expected. Today’s auction at 1 PM is crucial for determining future interest rates. Yesterday’s strong international demand for 3-year notes could carry over, potentially pushing the 10-year yield below 4.00%. This follows last week’s softer inflation report, where the August Consumer Price Index (CPI) indicated that core inflation is moderating at 2.8%, increasing expectations for lower rates.

Impact on Yield Curve and Market Volatility

Attention is on how the auction affects the yield curve, especially the spread between 2-year and 10-year yields, which is currently 52 basis points. A successful auction could flatten this curve as traders anticipate the Federal Reserve might ease policies by early 2026. The Fed has held rates steady for the past nine months, and futures markets are now pricing a 60% chance of a rate cut by March 2026. We are also monitoring the spread between mortgage rates and Treasury yields, which has widened for most of 2025. Although this spread has narrowed by about 15 basis points since mid-August, it is still above the historical average from 2015-2019. This suggests that mortgage-backed securities could continue to outperform Treasuries, making this a potentially attractive relative value trade. Due to the uncertainty surrounding the auction’s results, bond market volatility may increase. The MOVE Index, which tracks Treasury market volatility, has declined from its highs earlier this year but remains around 110, well above its pre-2022 average. This creates opportunities to use options on Treasury futures to prepare for significant moves in yields in either direction over the next few weeks. Create your live VT Markets account and start trading now.

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The Atlanta Fed’s GDPNow forecast for Q3 has been updated to 3.1%, up from the previous 3.0%. This change reflects the seasonally adjusted annual rate of real GDP growth for the third quarter of 2025. Recent information from the US Bureau of Labor Statistics and the US Census Bureau contributed to this update.

Increase In Nowcasts

Nowcasts for real personal consumption expenditures growth have risen from 2.1% to 2.3%. Similarly, growth in real gross private domestic investment increased from 6.0% to 6.2%. However, the contribution from net exports to GDP growth slightly decreased, from 0.28 to 0.23 percentage points. The initial estimates for this quarter started at 2.1% and peaked at nearly 3.5%. The next update for the GDPNow forecast is scheduled for September 16.

Recent Upward Revision

The upward revision of the third-quarter growth estimate to 3.1% indicates a strong economy, supported by high consumer spending and business investment. This resilience makes it less likely that the Federal Reserve will cut interest rates soon. Traders may need to adjust their strategies that were based on a slower economy forcing the Fed to act. In the bond market, yields are reacting to this positive data. For example, the 10-year Treasury yield has increased to around 4.6%, suggesting that borrowing costs will stay high. According to Fed funds futures, the market now sees only a 30% chance of a rate cut by December 2025, a sharp decrease from the 50% probability observed just weeks ago. In equity derivatives, this creates a mixed situation. Strong growth is balanced by high interest rates. The implied volatility index (VIX) remains steady at around 17, indicating uncertainty but not panic. In this climate, strategies such as selling covered calls on existing stock positions or setting up iron condors (which profit when stocks stay within a specific range) may be favorable. This scenario feels similar to the economic climate in 2023, where growth consistently exceeded expectations, even amid one of the most aggressive rounds of interest rate hikes ever. Back then, many faced losses betting on a hard landing. This historical comparison suggests that buying deep out-of-the-money puts on broad market indices like the S&P 500 may not be a wise investment in the coming weeks. With a strong economy and a cautious Fed, the US dollar is likely to stay strong. The Dollar Index (DXY) is testing recent highs near 106.50, a level not seen since spring. Options traders might consider bullish positions on the dollar against currencies with central banks adopting a more dovish approach. Create your live VT Markets account and start trading now.

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Technology Stocks Gains

Technology stocks are on the rise. Nvidia gained 4.16%, Broadcom climbed 9.43%, and AMD rose 3.58%. Other significant increases included Arm at 7.40%, GameStop Corp at 5.26%, Taiwan Semiconductor at 4.76%, and Super Micro Computer at 4.56%. US Treasury yields fell ahead of a 10-year note auction. The 2-year yield dropped to 3.527%, the 5-year yield to 3.581%, the 10-year yield to 4.047%, and the 30-year yield to 4.698%. In commodities, crude oil increased by $1.23 to $63.86, gold rose by $23.90 to $3,647.56, and Bitcoin jumped by $2,388, reaching $113,919. The strong rally in tech stocks, especially in semiconductors like Nvidia and Broadcom, suggests that we should stay positive on the NASDAQ 100. Buying call options on tech-focused ETFs can capture this growth. With Oracle’s strong outlook, this sector’s strength is likely to continue in the coming weeks. However, the contrast between the rising NASDAQ and the falling Dow Jones Industrial Average shows a narrowing market. This pattern, where tech outperforms industrials, has been common since the AI boom of 2023-2024 and often signals broader market volatility. We should consider buying put options on industrial or small-cap ETFs to protect against weakness outside the tech sector.

Opportunities For Volatility Trades

This market split is creating chances for volatility trades, as the VIX has been increasing and recently reached 19. A pairs trade, buying NASDAQ futures and selling Dow futures, could capitalize on this divergence. This strategy benefits from technology outperforming older economy stocks. The decrease in US Treasury yields, despite rising crude oil prices, signals growing worries about economic growth. Recent comments from the Fed suggest a pause, and last week’s August CPI report showed core inflation stubbornly high at 3.8%. Options on long-duration Treasury ETFs can be used to bet on further yield declines if the market anticipates an economic slowdown. The rise in gold to over $3,600 an ounce, along with a climbing Bitcoin price, indicates traders are looking for inflation hedges and alternative assets. This demand is likely to continue as long as inflation remains a concern. We can use call options on gold and oil ETFs to capitalize on this trend in commodities. In Europe, the mixed performance—with Germany’s DAX falling while Spain’s Ibex rises—suggests a confusing outlook. It’s wise to avoid broad European index bets. Instead, we could use derivatives to focus on individual country trends, like shorting the export-heavy DAX while staying neutral on southern European markets. Create your live VT Markets account and start trading now.

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Oracle shares soared by 42% today due to an unexpected forecast predicting $144 billion in cloud infrastructure revenue. This spike increased Oracle founder Larry Ellison’s net worth by about $100 billion, bringing it to around $400 billion and putting him ahead of Elon Musk in wealth rankings. The surge also boosted Oracle’s market cap by over $250 billion. Despite personal challenges like four divorces, Ellison’s financial success keeps growing. Today’s 42% jump in Oracle is a wake-up call. We just saw a trillion-dollar company trade with meme stock-like volatility, which changes how we should view risk in large tech firms. This event shows our old ideas about large-cap stability are outdated. As a result, the market might be mispricing options across the tech sector. Even though the VIX remains calm at around 17, the CBOE Skew Index, which assesses demand for tail-risk protection, just rose above 150 for the first time in 2025. This suggests that implied volatility for giants like Microsoft and Amazon may be too low, especially before major announcements. A similar situation unfolded in 2023 and 2024 with NVIDIA’s rapid growth driven by AI expectations. Back then, traders who purchased far out-of-the-money call options saw big rewards as the market consistently underestimated the potential. Today’s Oracle move seems to follow that pattern, but accelerated. In the coming weeks, a smart strategy is to buy volatility in other cloud and enterprise software companies. Setting up long straddles or strangles on competitors can help us profit from significant price swings, as Oracle has shown is possible. Data from the options market indicates that the cost of 90-day options on the XLK technology ETF rose only 8% today, indicating the market hasn’t fully accounted for this new potential for big moves. However, we also need to keep in mind that such explosive rallies can signal excessive market enthusiasm. The last time one company’s announcement sparked such excitement across a sector was Cisco in late 1999, just before the dot-com bubble burst. Therefore, adding some inexpensive out-of-the-money puts on the Nasdaq 100 as a hedge for our portfolio is a wise step.

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The AUDUSD currency pair has exceeded its July 2025 high of 0.66247, reaching 0.6635, the highest point since November 8, 2024. This increase followed weak U.S. PPI data, which encouraged buyers to push prices higher. The rally began in September when the pair tested and held the 100-day moving average at 0.64808 on September 2. Monday’s low also bounced off the 61.8% retracement level at 0.65489, boosting buyers’ confidence. With the break above the 2025 high, buyers now have the upper hand on the daily chart.

Target Levels and Market Sentiment

Next, the targets to watch are the upward trendline near 0.6676 and the swing high of 0.6687 from November 7, 2024. If these levels are broken, the upward trend may continue. On a 4-hour chart, dropping below the July high could disappoint buyers, but sellers would need prices to fall between 0.6588 to 0.6598, and then 0.6559 to 0.6567, to regain control. Currently, buyers lead in the market, but their influence could fade if the upward movement stops. If they keep their momentum, the bullish trend should carry on. The AUDUSD breaking the 2025 high reflects today’s weaker-than-expected U.S. Producer Price Index (PPI) data. The August 2025 PPI report showed a surprising 0.1% month-over-month decline, raising speculation that the Federal Reserve might ease its approach to interest rates. This supports the recent technical breakout above the 0.66247 level. On the Australian side, strong commodity prices and solid trade data are boosting the currency’s strength. Recent data revealed that iron ore exports to China rose by 4% in August 2025, bringing spot prices to their highest level in nearly a year. This is a contrast to the economic slowdown we see in the United States.

Central Bank Policy Divergence

This mixed economic data hints at possible changes in central bank policies in the coming months. While the Fed may now consider pausing, minutes from the Reserve Bank of Australia’s recent meeting revealed ongoing concerns about domestic wage growth. A similar divergence was seen in late 2023, leading to a significant rally in the AUDUSD pair. In the upcoming weeks, derivative traders should interpret the movement above 0.66247 as a signal for potential gains. Buying call options with strike prices around the next target of 0.6675 could be a defined-risk way to capture ongoing momentum. The increased volatility also makes strategies like bull call spreads appealing for traders looking to lower premium costs. However, we should keep an eye on the old resistance level at 0.66247, which should now offer support. A decisive drop below this level may indicate a failed breakout, prompting traders to hedge long positions or consider speculative put options. The critical area to monitor for a significant shift in bullish sentiment lies between 0.6588 and 0.6598. Create your live VT Markets account and start trading now.

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Oil prices jumped by 50 cents after Donald Trump posted on social media about Russia’s actions in Poland’s airspace. His statement raised concerns about possible geopolitical tensions, influencing the market. Trump’s post asked about Russian drones, which traders interpreted as a sign of potential conflict. This reaction indicates that the market is particularly sensitive to any signs of instability.

Market Reaction to News

The market’s quick response to a news headline shows its sensitivity. Oil prices rose 50 cents based on just one post. This suggests that traders are nervous and reacting to fears about rising tensions in Eastern Europe. However, this small increase is more driven by algorithms and short-term traders rather than any real change in oil supply. Right now, implied volatility is crucial to monitor, as it may increase in the coming days. The CBOE’s OVX index, which tracks crude oil volatility, has already risen from 32 to 37 in the past month due to uncertainty about winter demand. A good strategy might be to sell out-of-the-money options to take advantage of the higher premiums from this nervousness. The basic supply and demand situation hasn’t changed with this tweet. Just last week, OPEC+ announced it would keep production steady, pointing to economic data from China that shows manufacturing activity is declining for the second month in a row. This weakness in demand should limit any price increases driven by headlines. We’ve seen similar patterns before, especially during the tensions in 2024. Since the initial shock of the Ukraine invasion in 2022, the market has learned to differentiate between minor provocations and serious threats to oil supply. A single drone incident is serious but doesn’t immediately jeopardize the daily flow of millions of barrels.

Short-Term Volatility Strategies

As a result, it’s wise to view this situation as a short-term volatility event, not the beginning of a new upward trend. Traders might consider selling call spreads above recent highs, like in the $98-$100 range for November WTI contracts, which could profit if the panic eases and prices return to their usual range. However, it’s smart to prepare for the unlikely chance that this could signal a more serious situation. Allocating a small amount to inexpensive, far out-of-the-money call options can act as a low-cost hedge. This protects a portfolio from the rare but significant risk of a real military escalation between Russia and a NATO member. Create your live VT Markets account and start trading now.

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**EIA Report Shows Surprising Inventory Changes** Before the report, WTI crude oil was up by 68 cents, reaching $63.32. Private data from the day before indicated that crude oil inventories increased by 1,250,000 barrels. Gasoline stocks also rose by 329,000 barrels, and distillates went up by 1,500,000 barrels. The weekly inventory numbers for September 5th were unexpectedly bearish. Instead of a decline, crude oil stocks rose by nearly 4 million barrels. Analysts had predicted a 1 million barrel draw. This points to a sudden drop in demand or an unexpected increase in supply. These numbers match recent economic data that show a global slowdown, reducing expectations for fuel use. For example, China’s manufacturing PMI for August 2025 was 49.2, indicating a second month of contraction and weak industrial demand. The significant 4.7 million barrel increase in distillates, used for diesel and heating oil, highlights this industrial weakness. **Price Implications and Trading Strategies** We have seen similar inventory patterns lead to major price drops before. For example, the big inventory builds in late 2018 led to a 40% fall in WTI crude prices that quarter. With this situation happening just as the peak summer driving season ends, it suggests that the recent price of $63.32 per barrel may not last. For derivative traders, this market favors bearish positions. We recommend buying out-of-the-money put options on WTI for October or November expiration. This strategy lets you benefit from potential price drops to the $55-$60 range while clearly limiting your risk. Traders using futures should consider shorting the front-month contract, making sure to implement disciplined stop-loss orders to protect against sudden changes from geopolitical news. This report may also push the futures curve further into contango, making bearish calendar spreads a smart strategy. This involves selling the front-month contract and buying a later contract to profit from the growing price difference. Create your live VT Markets account and start trading now.

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The USDCAD pair has been staying above its moving averages, indicating that buyers are in control. However, sellers are putting pressure on the pair, causing it to trade lower today. Last week, USDCAD tested the 100-day moving average around 1.37631. This support helped lift the pair before the weekend, with it closing near the week’s high.

Early Week Movement

This week began with downward pressure, but buyers quickly turned things around. After the price tested the rising 200-bar moving average twice at 1.37967 on the 4-hour chart, it bounced back above the 100-bar moving average at 1.3818, boosting the momentum for buyers. Holding these levels has created a positive outlook. Even with the upward movement, the rally has not reached important targets. The week’s highs fell short of the August 1 high of 1.3878, a swing area between 1.3891 and 1.3904, and the 38.2% retracement from the March high at 1.39235. This retracement level also lines up with the August 22 high, serving as a barrier for buyers. If USDCAD can stay above the key moving averages, the upward movement will continue. Buyers need to break through the 38.2% retracement at 1.39235 to unlock more upside potential and challenge the bearish trends we’ve seen since February. Right now, USDCAD is holding above its key moving averages, indicating that buyers have an advantage. This strength is likely supported by last week’s Canadian employment report, which showed a surprising loss of 12,000 jobs, weakening the Canadian dollar. The price holding around the 100-day moving average at 1.3763 is a positive sign for continued upward movement.

Investment Strategies

Since the rally appears to be losing steam, taking a simple long position could be risky, making options a smart choice. Buying call options with strikes around 1.3850 that expire in a few weeks may be a wise way to tap into potential upside. This strategy limits our risk to the premium paid while we wait to see if buyers can break through resistance. The most crucial level to watch is the 1.39235 resistance, marking the 38.2% retracement from the March 2025 high. Recent US inflation data from August 2025 came in slightly higher than expected at 3.4%. A solid break above this level could lead to a quick upward move. If we see a daily close above this price, it would signal a good time to adopt more aggressive bullish strategies. However, we need to consider the risk of failure and watch the support near the 1.3800 level. If the price drops below this level, it would indicate that sellers have regained control—a pattern we observed during similar uncertain periods in 2024. Therefore, holding some out-of-the-money put options with strikes below 1.3750 could serve as a useful hedge against a sudden reversal. We also need to keep an eye on crude oil prices, which significantly affect the Canadian dollar. Recently, Western Canadian Select (WCS) prices fell below $80 a barrel for the first time in two months, providing support for USDCAD. Any increase in oil prices could slow down this pair’s rise, making it an essential factor to watch alongside the technical indicators. Create your live VT Markets account and start trading now.

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In July 2025, US wholesale sales grew by 1.4%, exceeding the expected 0.2% increase. The sales had previously risen by 0.3%. Inventories increased by 0.1% in July, slightly down from the previous rise of 0.2%.

Economic Impact

Even though this report is not a top priority, inventory figures are important for GDP calculations. These numbers can lead to significant short-term changes because of stockpiling and de-stocking tied to tariffs. The July wholesale figures were much stronger than anticipated, showing a large increase in sales. This strong demand, along with a smaller-than-expected increase in inventories, indicates a healthy economic outlook for the third quarter. It suggests that businesses are effectively selling their products instead of letting them gather dust. This data becomes more meaningful when we consider the overall economic climate. The August jobs report was solid, and core inflation has stuck above 3% for the last quarter. Strong underlying demand will likely make the Federal Reserve cautious about predicting any future interest rate cuts.

Investment Strategies

For derivative traders, this points to a “higher for longer” scenario regarding interest rates. We should expect more volatility in interest rates, and pricing for Fed funds futures may shift, lowering the chances of a rate cut in early 2026. This situation makes long-term call options on interest rate futures a risky choice right now. This is a stark contrast to the large inventory builds during the supply chain issues of 2022 and 2023. Back then, stockpiling indicated uncertainty, but today’s data suggest a healthy cycle with strong final demand. The inventory-to-sales ratio has recently dropped to 1.32, well below the 1.45 levels seen during those unstable times. This underlying strength could be a sign to consider call options on cyclical sector ETFs, such as industrials and consumer discretionary, that benefit from a strong economy. On the other hand, it might be wise to buy protective puts on interest-sensitive sectors like technology and utilities. The possibility of sustained higher interest rates is a significant challenge for those groups. Create your live VT Markets account and start trading now.

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