The weekly oil inventory report is expected to show a decrease of 1.759 million barrels in crude oil and a drop of 0.915 million barrels in gasoline. However, distillates are predicted to increase by 0.928 million barrels. Last week, Cushing recorded a small increase of 0.045 million barrels. Recently, private data indicated a larger crude oil drop of 2.4 million barrels.

Current Trading Values

Private reports from the API state that crude oil is currently priced at $62.54 per barrel. This provides a reference point for the upcoming inventory data. With private data showing a bigger crude drop than expected, we may see a short-term price rise. If the official report confirms a draw of 2 million barrels or more, we could see crude prices push towards the $65 resistance. Traders might consider short-dated call options to take advantage of this possible price increase. The gasoline drop aligns with the end of the summer driving season, but demand is likely to fall sharply after Labor Day in early September. The increase in distillates, which includes diesel and heating oil, is more worrisome. This trend connects with recent PMI data showing a slight decrease in Eurozone manufacturing at 49.5. This suggests that any price surge in crude may be limited, making a bearish strategy on the crack spread a good option in the coming weeks. Given the uncertainties, implied volatility for oil options is on the rise, making them pricier. We could consider selling premium using strategies like iron condors if we believe prices will stay between $60 and $66 after the inventory data is released. This approach could benefit from a drop in volatility once the numbers are public.

Broader Market Considerations

The overall market focuses on the $62 price point, which is low for many OPEC+ producers. There is increasing talk about the cartel considering further production cuts if prices do not recover by their next meeting. This gives the market a cushion, making it risky to be outright short, and suggests an opportunity to sell out-of-the-money put options below the $58 mark. We remember the sharp price drop in late 2023 when worries about weak global demand caused WTI crude to fall nearly 20% in one quarter. While current U.S. demand seems stable, the increase in distillates raises a red flag. Therefore, any long positions should be hedged against possible economic downturns. Create your live VT Markets account and start trading now.

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Gold prices recently dropped to their lowest point since August 1, reaching a low of $3311.62. This was near the important 100-day moving average of $3304.32. The support here encouraged buyers, leading to a recovery, and gold is now up $26.77, trading at $3341.76. Staying above the 100-day moving average is crucial for a positive outlook. If gold falls below this level, it could change the momentum and make it harder for buyers to regain control. Right now, gold is moving between $3246 and $3452, and price changes have been limited even with recent downward pressure.

Gold’s Short-term Recovery

On hourly charts, gold has risen above the 100-hour moving average of $3336.26, showing some short-term recovery. However, it is still below the 200-hour moving average of $3350. For a stronger short- to medium-term bullish outlook, gold needs to break and stay above this level. Gold stocks are under pressure, with the NASDAQ down 1.75% and the S&P down 0.92%. The NASDAQ is trading farther away from its 200-hour moving average of 21124.99, currently at 20936. The S&P index is beneath its 100-day moving average of 682.13 and is testing its 200-hour moving average at 6350.79, with today’s low at 6350.48. As of today, August 20, 2025, gold is bouncing back strongly from its 100-day moving average. This interest in gold is a direct reaction to the weakness in stocks, which have been struggling after the July CPI report revealed inflation is still high at 3.8%. We see this as a classic risk-off period, favoring precious metals over stocks for now. For gold derivatives, holding call options or long futures is a smart choice as long as prices stay above the crucial $3304 support level. A key point to watch is the 200-hour moving average near $3350; breaking above this could lead to more buying. This upward momentum is also supported by substantial central bank purchases, which absorbed over 400 tonnes in the first half of 2025.

Strategic Perspectives on Indices

The S&P 500’s drop below its 200-hour moving average at 6350 is a serious bearish signal. We recommend buying put options or selling short futures, especially as the market reacts to the increasing chances of another Fed rate hike in September. This sensitivity to the market is a lesson learned during the inflation shocks of 2023 and 2024, making traders quick to sell when price pressures persist. The NASDAQ shows even more weakness, trading significantly below its key moving averages. This suggests that tech stocks are particularly at risk amid expectations of rising interest rates. Now is a good time to consider strategies like bear put spreads to limit risk while potentially benefiting from further declines. We are carefully observing if buyers can maintain the 20,900 level in the coming days. Create your live VT Markets account and start trading now.

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The NASDAQ index is currently facing the largest drop among major indices, down by 187 points or 0.87%, now at 21,126.36. It’s testing its 200-hour moving average; if it drops below this point, we could see even more declines. On August 1, the index fell sharply after the US jobs report but bounced back quickly, reaching an all-time high of 21,803.75 by August 12. If it goes below the 200-hour moving average, traders will likely look to the 38.2% retracement level of 20,864.09 from the June 23 low.

The S&P Index Decline

The S&P index is also down, testing its 100-hour moving average at 6,382.38 and currently trading lower at 6,378.00. A continued drop could lead to attention on its 200-hour moving average at 6,350.92. Right now, the NASDAQ has fallen below its 200-hour moving average, hitting a low of 21,003.44. It’s now trading at 21,023.59, down 291 points or 1.36%. This drop below the 200-hour moving average is a bearish short-term signal. It indicates that the recent pullback since the all-time high on August 12 may still have further to fall. The S&P 500 is showing similar weakness, trading below its key moving averages. This uncertainty is evident in the broader market, where the VIX, a measure of expected volatility, has surged to over 19. This is a big increase from the lows near 12 earlier this month, indicating that traders are buying protection against a potential market drop in the coming weeks.

Market Sentiment and Strategies

However, it’s important to remember what happened at the start of this month, looking back from August 2025. After the August 1 jobs report, the market sent a similar bearish signal when it dropped below the 200-hour moving average, but then it reversed sharply and rallied to new highs. This recent experience suggests that today’s break, while worrying, could also be a bear trap. Current market sentiment seems tied to the July 2025 inflation report, which came in a bit higher than expected at 3.4%. This raised concerns about what the Federal Reserve might do next, dampening the optimism from a strong second-quarter earnings season. These mixed economic signals are causing the current market indecision and volatility. For those trading derivatives, this increase in volatility means option premiums are higher, making strategies that involve selling options more attractive. Given the chance for another sharp reversal, using defined-risk strategies like put debit spreads could be a smart move. This allows us to aim for lower levels while limiting our maximum loss in case the market suddenly rallies. The next major support level to watch for the NASDAQ is around 20,864. If the index keeps falling and breaks this level, it would indicate a likely deeper correction. We should also be mindful that September is approaching, which, based on data since 1950, has historically been the stock market’s weakest month. Create your live VT Markets account and start trading now.

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The US dollar fell in early trading due to mortgage fraud allegations against FOMC member Lisa Cook. This has raised speculation that President Trump may choose a new nominee for the Federal Reserve. In the EUR/USD market, sellers pushed the price close to a 50% retracement from the July 1 high, but buyers stepped in during the European session. The price rose above the 200 and 100-hour moving averages, which are between 1.1664 and 1.1668, reaching a peak of 1.1673.

Attraction Of Bullish Signals In USD/CHF Trading

In USD/CHF trading, the price dropped to a new session low of 0.8054 after previously being above the moving averages, which are between 0.8066 and 0.8073. The next support is near recent lows and a 50% retracement level at 0.8041. A further drop could increase bearish pressure. For USD/CAD, the price fell below 1.38607 after briefly rising above the August 1 high of 1.38786. To regain upward momentum, the price needs to break through the swing area of 1.3891–1.3904, aiming for the 38.2% retracement level at 1.39229. In the stock market, the S&P is down by 5 points, the Dow is up by 28 points, and the NASDAQ is down by 41.5 points in premarket trading. The new allegations against an FOMC member are creating significant uncertainty about the Fed’s future actions, causing the US dollar to weaken. This is evident in the derivatives market, where implied volatility on major dollar pairs has increased by almost 5% today. With speculation about a new presidential appointment, this uncertainty will likely continue, making long volatility strategies, like straddles on the EUR/USD pair, appealing in the coming weeks.

Potential Opportunities In EUR/USD Market

For the EUR/USD, bouncing from the 50% retracement level and moving above essential hourly moving averages signals a bullish trend. We suggest buying near-the-money call options for September expiration to take advantage of further dollar weakness. Recent data from August 15 showed Eurozone industrial production unexpectedly grew by 0.5%, which supports a potential rally if political challenges for the dollar persist. The drop in USD/CHF below its moving averages indicates a flight to safety, with the Swiss franc gaining from the political chaos in Washington. This situation is similar to the market behavior seen during US banking stress in spring 2023 when the franc strengthened significantly. We plan to buy put options on this pair, targeting a move below the 0.8041 support level in the short term. For USD/CAD, the failed breakout attempt shows that sellers still control the market. The inability to maintain gains is especially bearish, considering that WTI crude oil prices have remained strong, closing above $85 per barrel yesterday for the fifth consecutive session. This combination of a weak dollar and robust oil prices indicates that selling USD/CAD futures or buying put options is the preferred strategy. The mixed opening for US stocks, especially the tech-heavy NASDAQ showing weakness, suggests that investors are feeling anxious. The VIX, a key measure of market fear, has risen above 18 today, a level not seen since early July 2025. This implies a growing demand for portfolio protection. We recommend considering buying put options on major indices like the S&P 500 to safeguard against a potential downturn caused by Fed policy uncertainty. Create your live VT Markets account and start trading now.

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President Trump posted on Truth Social, calling for Cook to resign due to allegations of mortgage fraud. This comes after he previously demanded the Intel CEO’s resignation in August for alleged ties to China. Cook, who was appointed by Biden, is facing scrutiny for reportedly misclassifying her rental properties as her primary residences. This situation could give Trump a chance to appoint a new member to the Federal Open Market Committee.

The FHFA Investigation

FHFA Director Pulte announced that the Department of Justice will begin a criminal investigation. He noted that Fed Chair Powell might respond dramatically to this situation. Cook’s alleged fraud revolves around listing rental properties as primary residences, raising concerns about mortgage fraud. Trump may be trying to increase his influence over the Federal Reserve amid these allegations. The political implications of these claims are significant, sparking debates about strategy and convention in Washington. However, while notable, these events may be overshadowed by broader national criminal issues. This situation offers Trump political leverage but is set against a complex backdrop of political ambitions and strategies. The financial and political fallout could impact future choices and leadership roles.

Market Reactions to Political Uncertainty

This political attack on the Fed is fueling uncertainty, which derivative traders might exploit. The VIX, a gauge of market fear, rose over 15% to 19.5 this morning, marking the sharpest increase linked to the Fed since the early 2024 banking crisis. The best strategy now is to buy volatility through options, as future monetary policy becomes less clear. The market is quickly adjusting its interest rate expectations, presenting opportunities in rate derivatives. The CME’s FedWatch Tool indicates a 40% chance of a rate cut at the September FOMC meeting, up from just 15% yesterday. Traders are betting on instability, making options on SOFR futures particularly appealing for playing interest rate movements without picking a specific direction. This situation brings back memories of late 2018, when similar presidential pressure on the Federal Reserve caused volatility to spike. Back then, traders who anticipated volatility made significant profits during that unpredictable policy environment. We should expect more price fluctuations as this political struggle over the Fed’s independence unfolds in the coming weeks. There’s also a move toward safety in the bond market, with the 2-year Treasury yield falling 12 basis points to 4.10% due to concerns about a chaotic Fed. This trend suggests that call options on Treasury bond ETFs like TLT may perform well if uncertainty continues to drive investors toward safe-haven assets. The rapid shift in yields shows that the market is taking the threat to the Fed’s leadership seriously. Finally, a politicized Federal Reserve could undermine the credibility of the U.S. dollar globally. An unstable central bank might weaken the dollar, creating opportunities in currency derivatives. Buying call options on pairs like EUR/USD can be a direct way to bet on potential dollar weakness in the coming weeks. Create your live VT Markets account and start trading now.

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The New Housing Price Index (NHPI) for Canada fell by 0.1% in July, a slight improvement from the 0.2% drop in June. This index measures the prices of newly built residential homes based on agreements between builders and buyers. Prices are collected from builders without including value-added taxes like the federal goods and services tax and the provincial harmonized sales tax. The survey includes new single-family homes, semi-detached homes, and townhomes.

The NHPI Data Coverage

The NHPI offers data for the whole country and individual provinces, as well as details for 27 major urban areas. The data is not adjusted for seasonal changes, meaning it remains consistent from one reporting period to the next, without revisions. The NHPI data for July 2025, which shows a small decline of -0.1%, suggests the market is stabilizing rather than bouncing back. This small drop does not alter the overall outlook for traders in the upcoming weeks. The main influence remains the Bank of Canada’s policy rate, which has been high since the aggressive hikes in 2023. This housing data indicates that the Bank of Canada is likely to maintain its current stance at the next meeting. July 2025 inflation data shows the Consumer Price Index (CPI) remains high at 2.9%, well above the 2% target. Therefore, policymakers have little reason to lower rates based on a slightly improved housing figure. We anticipate that short-term interest rate derivatives, like BAX futures, will remain steady, with low chances of a rate change soon.

Impact on Markets and Trading Strategy

For currency traders, this supports a neutral view on the Canadian dollar. The USD/CAD exchange rate will likely respond more to actions from the U.S. Federal Reserve or changes in global risk sentiment than to minor Canadian housing data. We wouldn’t suggest making new bets on the CAD based on this information, as the interest rate difference between Canada and the U.S. is not expected to change. In the equity options market, this slightly improved data may lessen some of the risks priced into Canadian bank stocks and real estate investment trusts (REITs). After a significant drop in national home sales over the last two years, any sign of stability is a positive for lenders and property owners. We might think about selling out-of-the-money puts on these sectors to earn premium, expecting that the worst of the housing correction is behind us. Overall, the plan for the upcoming weeks should be patience, as this data indicates a continuing economic slowdown instead of a new trend. The market is showing signs of stabilization following the rise in borrowing costs, which aligns with recent Statistics Canada data showing the national unemployment rate has risen to 6.3%. We see better opportunities in selling volatility rather than buying directional trades, as the central bank seems to be in a holding pattern. Create your live VT Markets account and start trading now.

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David Zervos, the chief market strategist at Jefferies LLC and a candidate for the Fed Chair position, is worried that the Federal Reserve’s current policies are too tight. He pointed out that inflation is still high and questioned how effective tariffs really are. Zervos also implied that Fed Chair Powell may not have complete independence. Additionally, the US Director of Federal Housing suggested there could be issues with FOMC member Lisa Cook, which might impact her role. This could lead to President Trump nominating someone new for the Federal Reserve Board.

Economic Policy Discussions

These updates come as monetary policy and its effects on the economy are key topics for market analysts and policymakers. The Federal Reserve’s actions are being closely watched. With possible changes in Fed leadership ahead, we might see a significant increase in market volatility. Uncertainty about Fed Chair Powell’s future and the nomination of someone who thinks current policies are “too restrictive” indicate that the VIX, which has been around a low of 14, is probably priced too low. It might be a good idea to buy VIX futures or long-dated call options on volatility ETFs to protect against potential policy shifts. This situation creates a puzzling outlook for interest rates that derivative traders can utilize. While David Zervos criticizes the restrictive policy, he also mentions “excessively high” inflation, making it unclear whether the next move will be to raise or lower rates. Currently, the SOFR futures market is predicting a 55% chance of a rate cut by the end of 2025, a belief that now seems too early and could change quickly.

Stagflationary Trade Environment

This environment suggests a stagflationary trade, as policy struggles to combat inflation without causing a recession. The latest core PCE reading for July 2025 was at a stubborn 3.3%, while Q2 2025 GDP growth was only 1.1%, highlighting this challenge. We see value in options strategies that could benefit from ongoing inflation, such as investing in commodity ETFs, while also hedging against a wider economic slowdown. For equity index traders, this new information calls for a more cautious approach. A tougher or less predictable Fed could lower stock valuations, especially with the S&P 500’s forward P/E ratio at a high 20. We recommend buying put spreads on the SPY or QQQ as a cost-effective way to safeguard portfolios against a possible market downturn in the coming weeks. Create your live VT Markets account and start trading now.

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The USD remains steady against the EURUSD, USDJPY, and GBPUSD as everyone looks forward to Fed Chair Powell’s speech. The NZDUSD dropped after a dovish rate cut by the RBNZ. In the UK, July CPI was higher than expected, with both headline and core rates at +3.8% year-on-year. Services inflation is a challenge for the Bank of England due to increasing stagflation risks. The GBPUSD stands firm around 1.3490, with options at 1.3500 preventing much movement.

MBA Mortgage Applications

In the US, MBA mortgage applications fell by 1.4% for the week ending August 15. The market index dropped to 277.1, and the refinance index decreased to 926.1, while the purchase index stayed at 160.3. The 30-year mortgage rate rose slightly to 6.68%. Attention is focused on Fed statements as concerns grow about inflation and political pressure for rate cuts. A 25 bp cut is expected next month. ECB’s Lagarde mentioned slowing growth in the euro area, with no new policy updates. The market expects an 11 bps easing by year-end. The NZDUSD declined after the RBNZ lowered the OCR to 3% and indicated lower rates will continue until 2026. US equity markets are lower, with the Dow down -14.27 points, NASDAQ down -47.02 points, and S&P down -6.37 points. US yields have stayed the same across most durations. The market is currently in wait-and-see mode ahead of Fed Chair Powell’s speech at Jackson Hole this Friday. The US dollar is unchanged against major currencies, indicating that traders are hesitant to make large bets until there is a clear policy direction. This quiet period is a good time to prepare for the expected volatility after the speech.

Anticipation for Fed Chair Powell’s Remarks

The main concern for the Fed is that recent data showed inflation for July 2025 at 3.5%, while the market sees an 85% chance of a rate cut in September, according to CME FedWatch data. This difference means Powell’s comments could trigger significant market changes, making options strategies like straddles on the EURUSD or USDJPY appealing to capture a breakout. There has been a noticeable spike in one-week implied volatility for major currency pairs, indicating this expectation. In the UK, inflation for July 2025 unexpectedly rose to 3.8%, strengthening the belief that the Bank of England will pause its rate cycle. With a 94% chance of holding rates already factored in and substantial options expiring at the 1.3500 level for GBPUSD, this pair may stay range-bound for now. This situation suggests that selling volatility on the pound could be a smart strategy leading up to Friday. ECB President Lagarde recognized slowing growth, but futures markets show that traders aren’t convinced rate cuts are coming soon in the Eurozone. If Powell hints at a dovish shift, the dollar could weaken against the euro, since the Fed would be seen as taking more decisive action. Historical trends in 2023 show that when the Fed diverged from the ECB, it led to strong movements in the EURUSD. The best opportunity is visible in the NZDUSD, following the Reserve Bank of New Zealand’s cut to 3% and its clear guidance for more easing. Their forecasts now suggest the policy rate will drop to 2.71% by year-end, confirming a strong dovish stance. This presents a straightforward strategy: sell into any rallies or use put options on the kiwi dollar to follow the current momentum. Create your live VT Markets account and start trading now.

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The European session was quiet, with little news and data available. The main topic was the UK CPI report, which exceeded expectations again. Services inflation rose to 5.0% year-on-year, raising concerns about the Bank of England’s recent decision to cut interest rates. The Pound saw an initial rise after the data release but quickly returned to previous levels. Changes in interest rate expectations were minimal. The central bank seems to prefer a lengthy pause or possible rate cuts, allowing for future adjustments.

Market Reactions and Expectations

Meanwhile, markets stayed stable or cautious, waiting for Fed Chair Powell’s speech at the Jackson Hole Symposium. Analysts believe Powell will avoid making firm commitments and will focus on data-driven decisions. If Powell suggests a possible rate cut in September, risk assets might soar. On the other hand, if he claims more data is needed to consider a rate cut, that would indicate a hawkish stance, likely leading to a risk-off attitude and increased demand for the US dollar. The latest inflation report from the UK surprised many—services inflation reached 5.0%, and the overall CPI hit 4.2%. This puts the Bank of England in a tricky spot, especially after they reduced rates in August. For those trading derivatives, this uncertainty around the Pound means options that thrive on volatility, like straddles on GBP/USD, could be worth considering. Despite the rising inflation numbers, the Pound’s rally didn’t last long—a trend we’ve seen before. The options market reflects this doubt, as pricing on future interest rates suggests the central bank will likely pause for an extended period instead of hiking rates. This indicates that any strength in the Pound might be a chance to position for limited gains, perhaps by selling out-of-the-money call options.

Jackson Hole Symposium

Now, everyone is waiting for Fed Chair Powell’s speech at the Jackson Hole Symposium later this week. We remember how his hawkish remarks in August 2022 led to a market sell-off, so we need to brace for possible volatility. Most expect him to maintain a data-dependent message, confirming a neutral stance for now. If Powell hints at a likely rate cut in September, we could see a strong rally in risk assets. This outlook is supported by the latest US CPI report, which indicated inflation has cooled to 2.8%, providing the Fed some leeway to ease policies. Traders might take positions by buying short-dated call options on equity indices or put options on the US dollar. On the flip side, if he stresses the need for more data before considering a cut, essentially ruling out a September move, the markets will view this as hawkish. This could be backed by the recent Non-Farm Payrolls report, which added a solid 250,000 jobs last month. With fed funds futures currently indicating a 60% chance of a cut, such a statement would likely lead to a market shift, driving equities lower and boosting the US dollar. Create your live VT Markets account and start trading now.

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For the week ending August 15, 2025, the Mortgage Bankers Association reported a 1.4% drop in US mortgage applications. This follows a 10.9% rise the week before. The market index fell from 281.1 to 277.1. The purchase index increased slightly from 160.2 to 160.3. Meanwhile, the refinance index fell from 956.2 to 926.1. The average rate for a 30-year mortgage went up slightly from 6.67% to 6.68%.

Mortgage Applications and Interest Rates

Mortgage applications and interest rates usually move in opposite directions. This latest data isn’t expected to significantly disrupt the market. The recent decline in applications isn’t alarming for the housing market’s health. The -1.4% fall is likely a normal correction after the previous week’s strong increase. The drop was mainly due to less refinancing activity. The purchase index remains steady, indicating that demand from homebuyers is strong even with mortgage rates around 6.7%. This strength suggests the Federal Reserve is unlikely to rush into further rate cuts. Over the past year, inflation has struggled to drop below 3%. The last Consumer Price Index (CPI) report for July 2025 showed inflation at 3.1%. This continued inflation pressure, along with steady demand in housing, keeps bond market rates from decreasing significantly. For derivatives traders, this supports the idea that higher interest rates will last longer. The market may still be predicting too many rate cuts by the end of the year, similar to the overly optimistic outlook seen in late 2023. This suggests it could be wise to sell futures contracts linked to the SOFR rate for December 2025 or buy put options on those contracts.

Housing Sector Strategies

In the housing sector, the stable purchase index indicates no major downturn in homebuilder stocks. Traders might consider selling out-of-the-money put options on homebuilder ETFs instead of making risky bets. This strategy allows for collecting premiums based on the belief that the sector has a solid support level. This data is just one aspect leading up to the Federal Reserve’s Jackson Hole symposium at the end of the month. The market is closely watching the Fed’s next steps, and this report doesn’t indicate an urgent need for stimulus. As a result, we expect implied volatility on interest rate options to remain high in the upcoming weeks. Create your live VT Markets account and start trading now.

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