The weekly Baker Hughes rig count shows some small changes this week. The oil rig count went up by one, making it 412. Meanwhile, the gas rig count dropped by one to 122. Overall, the total rig count remains steady at 539. In the oil market, crude oil prices have slightly fallen. Prices are down by $0.72, or 1.13%, now at $63.24. Last week, prices didn’t change much, closing at $63.33.

Current Market Signals

The unchanged rig count, with only one new oil rig added, suggests that U.S. producers aren’t eager to expand operations while crude oil is near $63 per barrel. This lack of action indicates that the market is waiting for clearer price signals before starting new drilling. This hesitation leads to a period of steady prices for now. This caution is understandable given recent economic data. Manufacturing PMI data from July 2025 revealed ongoing slowdowns in both China and Europe, which is affecting fuel demand. Additionally, the latest EIA report showed a smaller-than-expected draw of only 1.2 million barrels from crude inventories last week, indicating that consumption isn’t strong enough to significantly raise prices. On the supply side, there appears to be a price floor around the low $60s. OPEC+ has agreed in their June 2025 meeting to maintain production cuts through the end of the year to avoid a major price drop. The current low U.S. rig count, which is nearly 20% below the highs seen in mid-2023, suggests that U.S. output might remain flat or decline in the coming months, tightening future supply even further.

Potential Trading Strategies

For the next few weeks, this likely points to a market that will stay within a range, caught between weak demand and limited supply. Traders might want to try strategies that benefit from low volatility, such as selling iron condors with strike prices around $60 and $68 on near-term options contracts. This strategy bets that crude oil prices won’t shift significantly in either direction. However, this balance probably won’t last long. We could consider buying longer-term straddles, which would allow us to profit from a large price change in either direction before the year ends. The current low implied volatility also makes these positions cheaper to enter, setting up for a potential breakout when demand improves or supply cuts start to have a bigger impact. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

European stock markets had mixed results at the end of the trading day. The German DAX decreased by 0.07%, while France’s CAC increased by 0.67%. The UK’s FTSE 100 dipped by 0.42%, but Spain’s Ibex rose by 0.47%. Italy’s FTSE MIB saw a notable gain of 1.1%. Over the past week, major European markets saw overall growth. The German DAX went up by 0.81%, and France’s CAC jumped by 2.33%. The UK’s FTSE 100 climbed by 0.47%, reaching a record high. Spain’s Ibex recorded a 3.05% increase, reaching its highest level since December 2007. Italy’s FTSE MIB improved by 2.47%, marking the best performance since June 2007.

Investor Confidence Grows

The substantial weekly gains, particularly for Spain and Italy, indicate strong investor confidence, as these indices are reaching levels not seen since before the 2008 financial crisis. This surge seems to be supported by the latest Eurozone flash Consumer Price Index (CPI) for July 2025, which registered at a manageable 2.1%. This data has reinforced the European Central Bank’s more cautious stance, increasing the appetite for risk. However, the mixed results on Friday, with slight declines in the DAX and FTSE 100, suggest that some investors might be taking profits at these record highs. This could mean we are entering a phase of consolidation or a small pullback in the coming days, which is a normal response after such a rapid rise. European volatility, as shown by the VSTOXX index, has dropped to 14.5, well below its five-year average of around 19. This low level of implied volatility makes options contracts more affordable, offering a chance to establish positions for potential future movements with a favorable risk-reward balance.

Options Strategies to Consider

Given the strong market trend, selling out-of-the-money put spreads on indices like the CAC 40 or DAX for September 2025 expiration may be a wise choice. This strategy allows us to earn premiums while expecting that the market won’t experience a significant decline in the next few weeks. It profits from a rising or stable market and the passage of time. For those with significant long equity positions, buying protective puts on an index like the FTSE 100 is now more affordable due to the low volatility. Reflecting on the market correction in autumn 2023, we see how quickly investor sentiment can change from record highs. Having a small allocation to puts can provide essential protection against sudden downturns. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The GDPNow model from the Atlanta Fed estimates the GDP growth for the third quarter of 2025 at 2.5%. This estimate hasn’t changed after the economic data released on August 15. Recent information from important US institutions shows that personal consumption spending for the third quarter has increased from 2.0% to 2.2%. On the other hand, growth in gross private domestic investment has been lowered from 7.3% to 6.6%.

Economic Data Contributors

These figures use the seasonally adjusted annual rate, incorporating data from the US Census Bureau and the Bureau of Labor Statistics. The Federal Reserve Board and the Treasury’s Bureau of the Fiscal Service also significantly contribute to this data. An updated GDPNow estimate will be available on August 19. For those interested in tracking economic growth, future release dates can be found in the “Release Dates” section. With the GDPNow estimate steady at 2.5%, it reflects a strong US economy. This number suggests there’s neither a sharp slowdown nor significant overheating, likely allowing the Federal Reserve to maintain its current policy. For traders, this indicates that large interest rate cuts are not likely coming soon. This stability may reduce overall market volatility for a while, a trend we’ve observed throughout much of the summer. The CBOE Volatility Index (VIX) has been around 14, well below its average of about 19, which makes options cheaper. This could be a good time to buy protective put options on major market indices or create long-volatility trades for potential market changes later this quarter.

Trading Strategies

The report shows differences we can trade on: personal consumption is growing, while private investment is declining. This suggests strategies favoring consumer discretionary sectors over those sensitive to capital spending, such as industrials or commercial real estate. We might look at call options on consumer ETFs and put options on industrial sector funds to capitalize on this divide. Looking ahead, an important event this month is the Jackson Hole symposium at the end of August. Given steady growth and the recent July 2025 Consumer Price Index (CPI) data showing core inflation at 3.1%, any hawkish comments from Fed officials could shake the market’s calm. Traders should be prepared for potential volatility around that event. Growth staying above 2% supports the Fed’s decision to keep rates steady after the hikes in 2022-2023. This likely means options on short-term interest rate futures will continue to reflect expectations that rates will remain high for an extended period. Thus, betting against rate futures could be a smart strategy. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

USDCAD went up this week, moving within a tight range of 70–75 pips. The lowest point was on Monday, while the highest came on Thursday, near a previous peak from August 1. Today, there was a slight pullback that tested the rising 100-hour moving average at 1.37807. The price dipped to 1.3788 but quickly bounced back. From Monday to Thursday, the price hovered near the 100-day moving average, acting like a magnet instead of providing strong support or resistance.

Buyers Gain Slight Advantage

Yesterday, the price broke above the 100-day moving average, currently at 1.37707, which gives buyers a slight edge. As we look to next week, the trend is expected to stay positive as long as prices remain above the 100-day moving average. If the price exceeds the week’s high of 1.38193, it could aim for the previous high of 1.38788. On the other hand, falling below the 100-day moving average would allow sellers to take control again. USDCAD has been trending higher this past week, but the fight between buyers and sellers has kept the movement limited. The price staying above the 100-day moving average at 1.37707 favors buyers as we head into the next weeks. This suggests a strategy of buying on dips. This slight upward trend is also supported by recent economic data from August 2025. The latest US CPI figures show inflation at 3.4%, while Canada’s job report indicated a surprising rise in unemployment to 6.2%. This difference means the US Federal Reserve may stay stricter on its policies compared to the Bank of Canada.

Impact of Economic Indicators and Oil Prices

Additionally, WTI crude oil prices have dropped, recently falling below $75 a barrel, which negatively impacts the Canadian currency. We recall the differing policies of the central banks in 2024, which often drove consistent trends in this pair. The current situation feels similar, hinting at a possible trend. For those trading derivatives like call options or long futures, the initial target is the recent high near 1.3819. If that level is breached, it would set sights on the high from the first week of August 2025 at 1.38788. The analysis indicates there’s potential for upward movement if momentum builds. Conversely, the 100-day moving average is crucial for risk management. A clear drop below 1.37707 would signal that sellers are back in control. Such a move would advise considering protective put options or exiting long positions. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Today’s Market Sentiment

Today’s market sentiment is cautiously optimistic. While technology shows mixed results, sectors like healthcare and consumer cyclicals are doing well. Investors are weighing news and economic indicators with both hope and caution, which could lead to changes in their portfolios. In tech, focusing on infrastructure software may be better than investing in semiconductors because of their price fluctuations. It’s wise to strengthen your portfolio with healthcare stocks due to their durability and earnings. Diversifying is key, and keeping up with market changes can provide an edge. Today, UnitedHealth Group’s stock jumped 11.42% after the August 12, 2025, government proposal for higher-than-expected insurance reimbursement rates. This rise has caused significant implied volatility. We see a chance to sell out-of-the-money put options on UNH or the healthcare ETF (XLV). This strategy allows us to earn a higher premium while remaining optimistic. It’s beneficial because it can profit from stock price stability and decreasing volatility in the upcoming weeks.

Divergence in the Technology Sector

There is a noticeable divergence in the technology sector, which could offer a pairs trading opportunity. The weakness in semiconductors, highlighted by a recent report from the Semiconductor Industry Association showing a 2% drop in global sales for July 2025, suggests buying put options on an ETF like SOXX. This could be balanced by buying call options on resilient software infrastructure companies, such as Microsoft or a software ETF (IGV). Considering the market’s cautious mood and mixed signals, using overall market index options can help manage risk ahead of next week’s inflation data. The July 2025 Consumer Price Index report revealed that core inflation remains stubbornly above 3%, leading to uncertainty that has pushed the VIX up to around 17. We recommend selling a defined-risk iron condor on the SPY as a smart strategy to profit if the market remains stable while traders await clearer economic insights. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

The University of Michigan’s consumer sentiment index dropped to 58.6 in August, lower than the expected 62.0 and down from July’s 61.7. Current conditions fell to 60.9 from 68.0, while expectations decreased slightly to 57.2, better than the estimate of 56.5. Worries about inflation have grown. The one-year inflation expectation rose to 4.9% from 4.5% last month, and the five-year outlook increased to 3.9% from 3.4%. This 5% decrease in consumer sentiment is the first drop in four months.

Durable Goods Buying Conditions

Buying conditions for durable goods fell sharply by 14%, the lowest point in a year due to high prices. Current personal finances also dropped slightly because of inflation worries, but expectations for personal finances improved a bit. Consumers are not as negative as they were in April when tariff tensions were high. Inflation expectations, both for the short and long term, increased in August, ending a short period of decline. However, these expectations are still lower than the highs seen earlier in 2025. The unexpected drop in consumer sentiment to 58.6 serves as a significant warning for the weeks to come. This type of shock, fueled by renewed inflation fears, usually results in more market volatility. We can expect the VIX, which averaged over 25 during the inflation worries of 2022, to start rising from its recent lows.

Impact on Federal Reserve and Interest Rates

The spike in one-year inflation expectations to 4.9% puts pressure on the Federal Reserve. After pausing rate hikes because of tariff concerns in April, this new data may compel them to adopt a more aggressive approach. We might see an increase in bets on rate hikes in the futures market, making put options on bond ETFs like the TLT a smart hedge against rising yields. It’s important to focus on the consumer discretionary sector, which might be hit hardest by this news. The 14% drop in buying conditions for durable goods indicates potential trouble for retailers and automakers. Buying puts on an ETF like XLY seems wise, especially since US consumer credit card debt is nearing record highs, exceeding $1.2 trillion this year. This shift in sentiment suggests a movement away from riskier assets in the short term. The decline in consumers’ opinions about their current financial situation points to a potential drop in spending, which could affect corporate profits. We may want to consider protective put options on broad market indexes like the SPY or QQQ to safeguard against a market downturn. While consumers may no longer fear the worst-case scenario we saw in April, the renewed anxiety about inflation marks a significant change. This is not a reason to panic but an opportunity to strategically add bearish positions, especially in rate-sensitive and consumer-focused sectors. Our strategy should anticipate a higher chance of economic slowing 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

The USDCHF has been trending downwards. It has dropped below the 100 and 200-hour moving averages after experiencing daily fluctuations. On Monday, it hit its highest point since August 1st but quickly fell below these crucial averages, dipping past the 50% retracement level at 0.80405, entering a swing zone between 0.8017 and 0.80233. Although buyers briefly pushed the price up, their momentum faded as the week went on. Recent U.S. retail sales data caused a temporary price spike toward the moving averages, but sellers swiftly brought the price down near session lows around 0.8048. If the price stays below 0.8075, the short-term outlook favors sellers. A move above this level could shift sentiment toward buyers.

Price Movement and Key Levels

If the price breaks below the 0.80405 level and continues down past the swing zone of 0.80233 to 0.8017, a further decline may be expected. Key resistance remains at 0.8075, with the first support at 0.80405 and a second support zone between 0.80233 and 0.8017. The short-term outlook remains bearish unless the price exceeds the resistance at 0.8075. Given the difficulty in holding above 0.8075, we believe the USDCHF is likely to decline. Derivative traders might consider strategies that benefit from a decrease or sideways movement below this critical resistance level. This could include buying put options with strikes targeting around 0.8020 or taking short futures positions with a stop-loss just above the 0.8075 moving average. This technical weakness in the dollar aligns with the latest economic data. The July 2025 U.S. CPI report showed core inflation easing to 2.8%, leading markets to rule out more Fed rate hikes for this year. The worse-than-expected U.S. retail sales numbers this week have also dampened the dollar’s outlook, explaining the rapid emergence of sellers on this news.

Swiss Franc Strength and Central Bank Policies

On the flip side, the Swiss franc is showing solid strength. The Swiss National Bank (SNB) has maintained a hawkish approach, with recent comments highlighting concerns about inflation, which rose to an annualized 2.1% last month, above the SNB’s target. This difference in policy between a Fed that is on hold and a vigilant SNB contributes to a weaker USDCHF. We recall the surprising 50 basis point hike by the SNB in June 2022, demonstrating their commitment to combat inflation. This history enhances the SNB’s credibility, making traders cautious about opposing a central bank focused on a strong currency policy. Consequently, shorting USDCHF rallies becomes a more attractive strategy. In the upcoming weeks, we will closely monitor the 0.8040 support level. A significant break here could lead to the June 2025 swing lows around 0.8017. Traders might use bear put spreads to manage risk while positioning for this possible move downward, especially if the price remains capped by the 0.8075 resistance. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

US industrial production fell by 0.1% in July, while analysts expected it to remain unchanged at 0.0%. However, June’s production was revised up from 0.3% to 0.4%. July’s capacity utilization hit the predicted 77.5%, and June was also adjusted slightly from 77.6% to 77.7%. On a yearly basis, industrial production grew by 1.4%, and capacity utilization rose by 1.5%.

Cooling US Economy

The small decline in July’s industrial production of -0.1% adds to concerns about a slowing US economy. This follows the July jobs report, which showed a moderate increase in payrolls of 160,000 and a core Consumer Price Index (CPI) that dropped to 2.9% year-over-year. For traders, these trends indicate that the Federal Reserve’s tight policies are starting to take effect. It’s important to examine the details of the report; the increase in June’s production to 0.4% is noteworthy. This suggests that the industrial sector is not in freefall, but rather experiencing a mild slowdown. This view of a “soft patch,” rather than a sharp downturn, complicates a purely negative outlook on the market. This information affects expectations for future interest rates, which are crucial for derivative pricing. The likelihood of a rate cut in the fourth quarter, originally at about 40% last week based on CME FedWatch data, may now rise to around 55-60% following this report. Positioning in interest rate futures or options on Treasury ETFs like TLT might be a good strategy to benefit from this shift. Given the uncertainty, we can expect an increase in market volatility in the coming weeks. The VIX, currently around a low 14, may gradually rise to the 18-20 range as the market processes mixed signals about growth. Buying VIX calls or using straddles on the SPX could be a smart way to prepare for this anticipated increase in market fluctuations.

Market Strategy

This weakness in industrial production signals a chance to hedge or take bearish positions on industrial companies. For instance, considering buying puts on the Industrial Select Sector SPDR Fund (XLI) might be worthwhile. On the flip side, a more dovish outlook from the Fed is generally good for growth stocks, especially in the tech-heavy QQQ. We’ve seen similar situations before, particularly leading up to the Fed’s policy shift in 2019. At that time, slowing manufacturing data preceded a series of rate cuts that ultimately boosted the market. This historical perspective suggests that while short-term caution on industrials is wise, this slowdown could pave the way for a significant market rally later this year if the Fed decides to act. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

US industrial production data is set to be released, with expectations of no change at +0.0% compared to last month’s +0.3%. Capacity utilization is expected to dip slightly from 77.6 to 77.5. Additionally, manufacturing output is predicted to fall by -0.1% after a previous rise of +0.1%. Further data, coming out at 10 AM, includes US business inventories for June, which are anticipated to increase by 0.2% after no change before. The University of Michigan’s consumer sentiment for August is forecasted at 62.0, a small increase from 61.7. Current conditions might change slightly to 67.9 from 68.0, while expectations are forecasted to drop to 56.5 from 57.7.

US Stock Market Moves

US stocks are showing mixed results. The Dow is up, fueled by Warren Buffett’s Berkshire Hathaway increasing its stake in UNH shares, which jumped by 10% in premarket trading. This contributed to the Dow’s rise of 266 points. Meanwhile, the S&P index gained 6.75 points, while the NASDAQ fell by -30.69 points during premarket hours. The US dollar has been fluctuating since the data release. The EURUSD pair peaked at 1.1699, fell to 1.1672, and then climbed back to 1.1701. The area between 1.1696 and 1.1703 is important for future movements. We see the stagnant industrial production numbers as a direct result of the Federal Reserve’s rate hikes that peaked in late 2024. This cooling effect indicates a loss of momentum in the economy. The expected drop in manufacturing output suggests corporate earnings in this area may face challenges in the coming quarters. The ongoing low consumer sentiment, now at 62.0, shows that households are struggling with higher rates and slower job growth, as highlighted in the latest jobs report. This is a signal to consider protective put options on consumer discretionary sector ETFs. Given that the VIX is currently near 18, below its historical average, buying VIX call options could be a cost-effective way to protect against a potential market downturn.

Market Sentiment and Strategy

Don’t be misled by the Dow’s gains; they are mainly driven by a single non-economic event involving UNH shares. The NASDAQ’s decline is more revealing, signaling concerns that tech growth companies may face challenges in a slowing economy. This trend suggests a ‘risk-off’ sentiment, prompting traders to be cautious about the overall market upside. The dollar’s struggle to maintain its gains reflects a belief that the Fed might lower rates, possibly as early as the first quarter of 2026. Looking back to 2019, we saw similar economic softening before a shift in central bank policy. Therefore, we view options strategies that bet on further dollar weakness, like call options on the EURUSD, as having a good risk-to-reward ratio. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now

Fed official Austan Goolsbee has shared his concerns about the latest Consumer Price Index (CPI) and Producer Price Index (PPI) data. While he is worried, he advises against overreacting to just one month’s figures. Tariffs are adding uncertainty because they haven’t been one-time events. Rising prices combined with potential job losses could become a serious issue. The Fed is trying to control how tariffs affect goods and their components. It’s not easy to decide which price hikes to ignore and which to address. Rate policies might change; if future inflation reports are consistent, adjusting rates could still be an option. Strong economic signs were observed at the beginning of April, but rising service costs are raising concerns.

Market Reactions

The markets reacted with the NASDAQ dropping by 23 points, while the Dow Jones and S&P rose by 254 and 7.21 points, respectively. US Treasury yields are steady, with small declines in the two-year and 10-year notes. Goolsbee indicated that the expected actions in September may not match rates due to service inflation’s impact. The market still predicts a strong chance of a 25 basis-point cut in September. Fed Chair Powell’s upcoming speech at Jackson Hole could shed more light on the situation. The latest inflation figures have created some uncertainty, challenging the market’s confident expectation of a September rate cut. The CPI for July 2025 unexpectedly increased to 3.5%, fueled by a surprising rise in service costs, which we thought was stabilizing. This highlights a clear gap between the Fed’s cautious approach and the market’s current expectations. This added uncertainty suggests that market volatility may rise in the upcoming weeks. Options pricing, especially for contracts expiring after the next inflation report and the September Fed meeting, is likely to become pricier. Traders might want to explore strategies that capitalize on this anticipated increase in implied volatility as the future becomes less predictable.

Bond Market Reaction

The bond market has seen yields decrease slightly, which seems odd given the Fed’s hawkish comments. Currently, the CME FedWatch Tool indicates a 91% chance of a rate cut next month. This may provide an opportunity to position against this common belief if we think the Fed will react seriously to the new inflation data and keep rates steady. Concerns about a “nightmare scenario” of rising prices and falling employment pose a direct threat to the stock market, especially in growth sectors. We experienced a similar situation in late 2023, when persistent service inflation delayed the Fed’s shift and caused a brief market downturn. This suggests that buying protective put options on major indices could be a wise way to protect against a potential dip. We also need to consider new tariffs on electronics and automobile parts that began in June 2025. These costs could show up more significantly in the next PPI report, complicating the Fed’s view on inflation. There’s a risk that these tariff-induced price increases are not just temporary and could force the Fed to pause on rate changes. All attention will be on Fed Chair Powell’s speech at the Jackson Hole symposium on August 22. His remarks will be crucial in confirming the market’s optimistic expectations or aligning with the more cautious tone being expressed now. Any hint that the Fed is more worried about inflation than the market anticipates might lead to a significant reevaluation of assets. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now