Eurostoxx futures are up 0.5% in early European trading. This positive trend continues as the weekend approaches, even with a regional holiday vibe. German DAX futures have also risen by 0.5%, and UK FTSE futures show similar growth. The DAX is bouncing back from losses over the last two weeks and is aiming for new record highs.

US Futures and Intel’s Comeback

In the US, futures are steady, with S&P 500 futures climbing 0.2% and Dow futures gaining 0.7%. This lift is partly due to good news from UnitedHealth. Intel is also recovering after its announcement earlier today. With European markets showing strength, it’s a good opportunity to take advantage of the momentum in the DAX. The index is close to its previous highs and is now aiming for the important 20,000 mark. Given the lower trading volumes typical in August, seen back in summer 2023, positions in DAX call options could provide leveraged exposure to this upward trend. The current low volatility, with the VSTOXX index near 14, makes these options relatively affordable. However, the holiday period can cause sudden shifts with unexpected news. Traders might want to use call spreads to manage their risk while aiming for new highs.

Dow’s Performance and UnitedHealth’s Influence

In the US, the Dow is leading the S&P 500 mainly due to confidence in stocks like UnitedHealth. This optimism comes after a strong Q2 2025 earnings report, which showed a 12% year-over-year revenue rise in their Optum division. Selling out-of-the-money puts on UnitedHealth could help us earn premium and benefit from the high confidence of major investors. Intel’s recovery also comes from a specific news event, with confirmation of a significant government contract for its foundry services. For traders, this creates a short-term opportunity to leverage the surge in momentum and implied volatility. We view this as a tactical play on Intel’s situation rather than a signal for the entire semiconductor market. Overall, this positive mood is present despite the latest July 2025 Eurozone CPI data at 2.1%, slightly above the ECB’s target. The market is currently overlooking this, betting that central banks will keep their positions steady. This poses a key risk in the upcoming weeks, as any hawkish comments could quickly reverse these gains. Create your live VT Markets account and start trading now.

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FX Option Expiries

Today, there are two important expiries for EUR/USD at 1.1650 and 1.1675. Recent strong US PPI data caused the dollar to regain some strength, but the holiday in Europe might keep price changes minimal. The 100 and 200-hour moving averages at 1.1641 and 1.1662 are drawing short-term interest, which could impact market activity. If you need more advice on using this information, additional resources are available. With the significant EUR/USD option expiries at 1.1650 and 1.1675, we expect the market to stay calm today. The European holiday helps support this idea, keeping price action quiet. However, this brief stability hides a growing difference that may influence the market in coming weeks.

Potential Market Movements

Looking ahead, the dollar remains strong thanks to solid economic data. The latest US Producer Price Index for July 2025 showed a surprising increase of +0.4%. This leads to expectations that the Federal Reserve will maintain higher interest rates for an extended period. This is a stark contrast to discussions around monetary policy we saw earlier in 2024. On the other hand, the Eurozone is showing signs of cooling. Its recent inflation data for July 2025 dropped to 2.1%. This gives the European Central Bank a stronger reason to consider rate cuts before year’s end. The widening gap between Fed and ECB policies is a key focus for us. For traders, the current calm offers a chance to prepare for future shifts. Implied volatility for EUR/USD options expiring in the next month or two is relatively low, despite the likelihood of a breakout. We believe this period of stability will lead to a notable trend once today’s technical barriers are broken. Thus, we see an opportunity to position for a decline in EUR/USD in the coming weeks. Taking bearish positions, such as buying euro puts, could be a smart strategy. This would capitalize on a possible dip toward the 1.1500 psychological level as differences in central bank policies grow clearer. Create your live VT Markets account and start trading now.

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**Japan Economic Outlook** Japan’s economy showed strong performance in Q2, which helped boost the yen. As a result, the USD/JPY pair dropped by 0.4% to 147.12. This decline followed a minor bounce earlier due to inflation worries highlighted in the US PPI report. The strong Q2 GDP data from Japan has contributed to the yen’s strength. The USD/JPY pair previously tested a support level around 147.61-70 but rebounded as the dollar picked up after US data was released. There is speculation about a potential Bank of Japan (BOJ) rate hike, but clear statements from policymakers are still awaited. Traders are weighing the possibility of a rate hike in December, but uncertainty lingers. The BOJ might hold off on any commitments until there’s more clarity, resulting in ongoing indecision in the market. Currently, USD/JPY is trading between the 100-day and 200-day moving averages of 145.49 and 149.24, respectively, staying within a range. This pattern follows an unsuccessful attempt to break the 150.00 level before the US jobs report was released. The surprisingly strong Q2 GDP from Japan, growing at an annualized rate of +3.6%, is exerting downward pressure on USD/JPY today. This comes after a brief rebound for the dollar yesterday, driven by a higher-than-expected US Producer Price Index reading of +0.4% month-on-month, raising inflation concerns. This mix of factors is likely to keep the pair within its current range for now. **Strategy for Derivative Traders** For derivative traders, this scenario suggests selling volatility over the next few weeks. The pair is comfortably positioned between its key moving averages, with the 100-day at 145.49 acting as a floor and the 200-day at 149.24 serving as a ceiling. This creates a clear range, ideal for strategies that aim to collect premiums. A good strategy could involve selling an October strangle with strikes set outside this range, perhaps around 145.00 and 150.00. The Bank of Japan is known for its cautious approach and is unlikely to indicate any policy changes until October or November at the earliest. This prolonged period of uncertainty typically reduces market volatility, making short-volatility positions attractive. We’ve seen this behavior before, especially during the BOJ’s gradual shift away from ultra-loose policy throughout 2024. They tend to gather data over several months before making moves, resulting in these range-bound trading periods. The failed attempt to break above 150.00 just before the last US jobs report underscores the strong resistance at the top of the range. The main risk to this strategy is an unexpected policy announcement or a sharp rise in US inflation data. To protect against this, holding some inexpensive, far out-of-the-money puts can serve as a wise hedge against a sudden market drop. This strategy offers low-cost insurance if the BOJ chooses to act sooner than anticipated. Create your live VT Markets account and start trading now.

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Assumption Day is a public holiday in several European countries such as France, Spain, Italy, and parts of Germany. It aligns with Ferragosto in Italy, creating a relaxed market atmosphere as many people take time off. The Milan exchange is closed today, while other exchanges remain open. However, trading is expected to be quiet due to holiday festivities.

Low Trading Volumes

Because of the holiday, we’re seeing low trading volumes on major exchanges. Historical patterns from August 2023 and 2024 show that average daily volumes can drop by up to 20% during this time. For those trading derivatives, this means wider bid-ask spreads and a higher risk of price gaps due to low activity. With the holiday mood likely continuing into next week, we recommend being cautious about opening large positions. The potential for sharp and unpredictable price swings suggests it’s wise to widen stop-losses on any current trades to protect against minor news fluctuations. This environment is not suitable for making aggressive, short-term bets on futures or options. We see this quiet period in late August as a chance to prepare for increased volatility in September. Historically, volatility, as measured by the VSTOXX index, tends to reach its lowest point during these calm summer weeks before rising as institutional traders return. For instance, the VSTOXX hit its yearly lows in the summers of the early 2020s before an eventful autumn.

Market Strategy for September

This brings us to consider buying longer-dated options while implied volatility is low. Acquiring October contracts on key indices like the DAX or CAC 40 lets us position ourselves for a major market move once this quiet period concludes. The currently lower premiums indicate the market’s calm, providing an advantageous entry point for a potential spike in September. Create your live VT Markets account and start trading now.

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Japan’s Q2 GDP increased by 0.3% from the previous quarter and 1.0% annualized, beating expectations. This marks five consecutive quarters of growth, driven by rising consumer spending and capital investment. The strong data led to a stronger yen and a rise in the Nikkei. In China, July data revealed ongoing declines in new home prices both monthly and yearly, though the annual decreases were slightly smaller. Industrial output grew by 5.7% year-over-year, falling short of the 5.9% forecast. Retail sales increased by 3.7% year-over-year, below the expected 4.6%. Fixed asset investment rose by 1.6% from January to July, missing the 2.7% prediction.

Currency Movements

Aside from the yen’s strength driven by Japan’s figures, major currency changes were limited. The GBP, CHF, EUR, and CAD all saw slight gains against the USD. Stocks in the Asia-Pacific region had mixed results: Australia’s S&P/ASX 200 rose by 0.45%, Hong Kong’s Hang Seng dropped by 1.25%, Shanghai Composite increased by 0.26%, and Japan’s Nikkei 225 climbed by 1.01%. Reports mentioned that China stopped car trade subsidies in some areas, and foreign companies were warned against hoarding rare earths. Economic activity faces challenges amid external uncertainties. The notable economic weakness from China, with both retail sales and industrial output below forecasts, is our main focus. This continues a long-term trend, as China’s official manufacturing PMI has stayed below 50 for much of the past year, indicating contraction. This ongoing weakness suggests we should consider put options on the Hang Seng index or shorting the Australian dollar, which often reflects Chinese industrial demand. Conversely, Japan’s economy shows unexpected strength, with Q2 GDP growth exceeding expectations and marking five straight quarters of expansion. It’s worth noting that the Bank of Japan ended its negative interest rate policy in spring 2024, a significant change that supports the economy. With this momentum and the strengthening yen, we could explore buying call options on the Nikkei 225 index.

US Market Event

The upcoming speech by Fed Chair Powell on August 22 is a critical event for the US market, especially after the recent rise in producer prices heightened inflation concerns. This recalls the aggressive rate hikes from 2023 that aimed to control inflation, which peaked above 9% in 2022. We expect higher volatility, making it a good time to look at straddles on the S&P 500 for potential sharp moves. We are also monitoring major investors, as Soros Fund Management significantly increased its Nvidia holdings, betting on the ongoing AI-driven market rally. This trend has influenced markets for over a year, and such a large institutional investment hints at further upside. Following this lead, we could consider buying call options on key semiconductor and tech stocks. The slowdown in China’s industrial output will likely impact commodities, putting ongoing downward pressure on industrial metals like copper. Meanwhile, the oil market is focused on the upcoming meeting between Trump and Putin. Any new developments from that meeting could create sudden volatility in crude prices, making it wise to consider options that profit from sharp price movements. Create your live VT Markets account and start trading now.

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Broader Consumer Goods Trade-In Scheme

The consumer goods trade-in scheme has led to over 10 million applications. It is expected to boost vehicle demand by around 3 million units this year. Thanks to the subsidies, new energy vehicles (NEVs) are projected to make up more than 60% of these sales. However, if auto trade-in subsidies are paused, even in certain regions, it could create challenges for a booming sector. Chinese NEV stocks such as BYD and Li Auto have already risen by over 15% since their Q2 2025 earnings reports, which highlighted strong domestic demand. This news contradicts the positive outlook that has supported these stock increases. We should consider taking short positions on Chinese NEV manufacturers that rely heavily on the domestic market. Buying put options for companies like NIO and XPeng may be a wise way to protect against a possible decline in their Q3 sales forecasts. The uncertainty about which regions are impacted will likely increase implied volatility, making options appealing. This situation also affects battery producers like CATL and suppliers of raw materials. Lithium carbonate prices, which had stabilized around ¥115,000 a tonne in July 2025 after a turbulent year, might come under pressure again if NEV demand forecasts are adjusted downward. A similar pattern occurred in the late 2010s when subsidy changes caused a sharp but temporary drop in battery metal prices.

Western Automakers With Chinese Market Exposure

We should also keep a close eye on Western automakers that depend heavily on the Chinese market, especially Tesla and Volkswagen. Reports suggest that over 30% of Tesla’s global sales last quarter came from China. Any significant slowdown in demand there would directly affect Tesla’s growth. Nonetheless, the ongoing scrap renewal incentives can help cushion the impact. This indicates a shift in policy toward phasing out older, more polluting vehicles, rather than a complete withdrawal of support for the auto market. A smart strategy might be to look for overreactions and find good entry points if the market sells off widely across the sector. Create your live VT Markets account and start trading now.

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China has warned Western companies about a potential shortage of rare earths due to stockpiling. The country plans to limit the export of these vital materials.

China’s Strategy With Rare Earths

China aims to gain an advantage by controlling the supply of rare earths. This insight comes from an anonymous source cited by the Financial Times. With China indicating it may use rare earths as a negotiating tool, we expect certain industries to experience increased volatility. Companies that rely on these materials for manufacturing, like electric vehicle makers and wind turbine manufacturers, will likely face rising costs. This situation sets the stage for price fluctuations in the upcoming weeks. We suggest considering investments in non-Chinese rare earth producers. For example, Australian-based Lynas Rare Earths (LYC) and US-based MP Materials (MP) have shown increased trading activity after similar news in the past. MP Materials stock has already risen over 8% in early August trading as the market begins to account for this supply risk. On the other hand, now is a good time to explore put options on companies with weak supply chains. Major tech firms and automakers that have not diversified their sources will be most at risk. Recent data from early 2025 indicated that over 85% of permanent magnets used in U.S. industries come from China, showcasing a reliance that can be exploited.

Historical Precedent of Rare Earths Export Restrictions

A similar situation occurred in 2010 when China restricted exports, leading to a 700% surge in prices for elements like neodymium within a year. This historical context suggests we should be prepared for a rapid price shock again. Traders in derivatives should brace for potential volatility, even if it’s less extreme than before. The futures market for these elements also presents a direct opportunity. Neodymium and dysprosium futures contracts have jumped nearly 15% in the past thirty days purely on speculation. We expect this trend to speed up if China follows through on its warning with official quota cuts for the fourth quarter. This scenario also challenges Western governments’ multi-year efforts, including initiatives backed by the 2022 Inflation Reduction Act, to create alternative supply chains. The market’s response will indicate how much confidence traders have in these new, non-Chinese sources. Implied volatility in major auto ETFs has reached levels not seen since the supply chain challenges of 2023. Create your live VT Markets account and start trading now.

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China’s new home prices fell for the second month in a row in July, decreasing by 0.3% compared to June. The drop became less severe in big cities as local governments introduced incentives for homebuyers. According to calculations by Reuters using data from the National Bureau of Statistics, 60 out of 70 cities surveyed saw month-on-month price declines, a trend similar to June. On a yearly basis, home prices dropped by 2.8%, which is a slight improvement from June’s 3.2% decline. Prices decreased at a slower rate across all city tiers. Policymakers are working to stabilize the property market, which once accounted for a quarter of China’s economic activity, as part of their strategy to achieve around 5% GDP growth amid various challenges.

Government Incentives And Policies

Despite multiple measures to boost demand and provide support to developers, a lasting recovery has not yet occurred. Recent strategies included using housing provident funds, offering purchase subsidies, and easing suburban buying restrictions in Beijing while keeping limits within the fifth ring road. Additional reports revealed that China’s property investment fell by 12.0% year-on-year from January to July, a steeper drop than the 11.2% decline in the first half of the year. The ongoing weakness in China’s property sector is a significant issue, echoing the price drops seen in mid-2024. Data indicates that new home prices are still declining each month despite government support efforts. This suggests that the market has not reached its bottom, making investments in this sector very risky in the near term. The latest data for July 2025 shows property investment has decreased by 9.5% year-on-year, indicating the problem goes beyond just home prices. This lack of confidence is evident in the Hang Seng Mainland Properties Index, which has dropped over 15% since the year’s start. The government’s inability to provide strong support continues to dampen investor sentiment.

Market Implications And Strategies

With the slowdown in construction activity, it’s wise to consider bearish positions on related industrial commodities. For example, iron ore futures have recently fallen below $110 a tonne on the Singapore Exchange due to reduced demand forecasts. Buying put options on major mining companies that rely heavily on China could be a smart way to hedge against further declines. We can expect ongoing pressure on the yuan, as the People’s Bank of China may need to implement more monetary easing to kick-start the economy. This situation makes shorting the offshore yuan (CNH) against the dollar an appealing strategy using futures contracts. Additionally, buying put options on broad China-focused ETFs can help protect against a more extensive economic slowdown. The steady stream of policy announcements accompanied by disappointing data is causing significant implied volatility. We could use options strategies like long straddles on key Chinese bank stocks. This approach allows us to profit from substantial price movements in either direction, whether from an unexpected stimulus package or another major developer default. Create your live VT Markets account and start trading now.

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China’s recent economic data has fallen short of expectations, revealing several challenges. Retail sales in July grew by 3.7% compared to the previous year, but this was below the anticipated 4.6%. Industrial production saw a rise of 5.7% year-on-year, yet it also missed the forecast of 5.9%.

Growth Challenges

Both factory output and retail sales for July did not reach predictions, highlighting growth difficulties within the economy. Additionally, home prices continued to decline both monthly and yearly in July. A spokesperson from the National Bureau of Statistics stated that China’s exports are facing pressure due to external uncertainties. Many companies are also experiencing increased challenges. Tariffs are one of the factors impacting China’s exports. The economic situation seems to be affected by these external pressures. Reflecting on previous data, we see that July’s figures confirmed concerns about underlying weaknesses. The drops in retail sales and industrial production, along with falling home prices, signaled the challenges ahead. The figures indicated that external pressures and tariffs were genuinely affecting the economy.

Current Market Sentiment

Today, we see the consequences of this ongoing trend. The latest July 2025 data shows that China’s manufacturing PMI has been under the 50-point mark for three straight months, currently at 48.9. In light of the slowing growth, now forecasted by the IMF at just 4.1% for 2025, the People’s Bank of China has once again lowered its one-year loan prime rate. This persistent weakness keeps us cautious about the Chinese yuan. The USD/CNH currency pair has been testing the 7.45 level, and we believe it has potential to climb higher. Traders might consider purchasing out-of-the-money call options on USD/CNH to prepare for further yuan depreciation in the upcoming weeks. The slowdown also poses challenges for industrial commodities. Copper prices, an important indicator of global manufacturing, have recently fallen below $7,800 per tonne, a level not seen in over a year. Buying put options on commodity-focused ETFs or major mining companies heavily reliant on China is a straightforward strategy. We remain cautious about equity indices with significant exposure to Chinese demand. Hong Kong’s Hang Seng index continues to underperform, and weaknesses are also evident in European markets, especially the German DAX. Selling futures on these indices or buying put spreads could provide a favorable risk-reward opportunity in the near term. The increasing uncertainty suggests higher market volatility. The VIX index has been gradually rising from its lows, recently reaching 19.5 as traders start accounting for more risk. We recommend buying VIX call options to directly benefit from growing market anxiety. Create your live VT Markets account and start trading now.

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China’s factory production and retail sales growth slowed in July, falling short of expectations. Industrial output increased by 5.7% compared to last year, down from June’s 6.8%, marking the weakest growth since November 2024. Retail sales growth also dropped to 3.7% from 4.8%. Both industrial output and retail sales were below forecasts. Fixed asset investment grew by only 1.6% from January to July, while a rise of 2.7% was expected. These results pose challenges for Beijing due to weak domestic demand and global issues.

Economic Challenges Facing China

This data comes as China faces pressure from US trade policies and low domestic consumption. A decline in factory prices, with the producer price index down by 3.6% in July for the second month in a row, adds to the troubles. Authorities are taking steps to boost spending and reduce competition to reach their 2025 growth target of around 5%. Even though a trade truce between the US and China has eased some tension, analysts remain cautious. Weak demand, global uncertainty, and recent disruptions from extreme weather are potential threats to China’s economic growth in the coming months. With disappointing data from July, we believe the economic slowdown in China is a long-term trend rather than a temporary setback. The shortfalls in industrial output and retail sales show that domestic demand is struggling to improve. This suggests a negative outlook for assets related to Chinese growth in the upcoming weeks.

Market Implications of China’s Economic Slowdown

The economic weakness is being reflected in currency markets, as the offshore yuan has dropped past the 7.40 mark against the U.S. dollar for the first time this year. The People’s Bank of China’s cautious 10-basis point rate cut last week did not help restore confidence. We expect further pressure on the yuan, making strategies that profit from its decline appealing. The drop in factory activity poses a risk to industrial commodity prices. Iron ore futures on the Dalian exchange have fallen to around $105 per tonne, as factory price cuts indicate that manufacturers are reducing prices and lowering orders for raw materials. Considering short positions on copper and other base metals could be wise as this trend continues. For equity traders, this situation suggests renewed challenges for the Hang Seng and mainland indexes, similar to the difficulties experienced during the 2023-2024 period. With consumer and business confidence low, stimulus efforts may not be able to spark a rally. Thus, buying put options on broadly China-focused ETFs could serve as a good hedge or speculative short position. Create your live VT Markets account and start trading now.

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