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The US oil rig count falls to 422, down from 424
The Baker Hughes US oil rig count has dropped from 424 to 422. This change highlights what’s happening in the US oil industry right now.
Reports show that China’s economy is stable, with a 5.2% increase in GDP in the second quarter compared to last year. However, there are worries about slowdowns in retail sales and falling property prices.
Gold’s price rises within a triangle pattern amid improved sentiment and mixed rate outlooks
Gold prices are rising, with XAU/USD now above $3,350 and approaching the peak of a symmetrical triangle pattern. Recent U.S. housing data shows improvement, with Building Permits up 0.2% and Housing Starts jumping 4.6% in June.
The preliminary consumer sentiment from the University of Michigan for July has risen to 61.8, up from June’s 60.7. Inflation expectations are easing too, as the one-year forecast dropped from 5% to 4.4%, while the five-year expectation fell from 4% to 3.6%.
Federal Reserve Interest Rate Decision
The Federal Reserve is maintaining interest rates between 4.25% and 4.50%. Markets see a 57.8% chance of a 25 basis-point cut in September. Some Fed members suggest no cuts are coming soon, while others predict reductions by 2025. Gold faces resistance at $3,362 and $3,371, with a potential rise to $3,400 and the April peak at $3,452. If it falls, support is at $3,324 and $3,292, with a further drop to $3,228 possible. An RSI of 54 shows balanced momentum, as traders watch for market updates. Central banks aim to stabilize prices using interest rates. They adjust these rates to control inflation, with policymakers often labeled as ‘doves’ or ‘hawks’ based on their preferences. Policy decisions are made after coordinated discussions, and there is a blackout period during which officials can’t comment publicly.Market Volatility And Trader Strategies
Gold is nearing a crucial technical point at the top of its symmetrical triangle. A strong move past the $3,362 resistance could indicate a rise towards $3,400. Traders should be ready for heightened volatility as gold tests this limit. Market expectations of a rate cut are a key driver in the current price. The CME FedWatch Tool shows over 55% probability for a 25 basis-point cut by the September meeting. This outlook is supported by recent data indicating the Consumer Price Index (CPI) has decreased to 3.1%, giving policymakers more reason to consider easing. However, there are signs of economic strength. The rise in housing starts and better consumer sentiment may argue against an immediate rate cut. This data suggests the central bank may take a cautious “wait-and-see” approach. Historically, uncertainty before policy decisions often leads to increased implied volatility, making options more appealing for sellers and more considered for buyers. Traders in derivatives should think about strategies like long straddles or strangles to profit from possible big price changes, regardless of direction. Given the mixed signals from Fed members, we’ll be closely watching their public comments in the coming weeks. Statements from hawks could lower expectations for a cut and push gold toward support at $3,324. In contrast, dovish comments could lead to a rally beyond resistance. The blackout period before the next meeting will be a key time for positioning based on the latest available insights. Create your live VT Markets account and start trading now.The Japanese yen is trading steadily against the US dollar amid political and policy concerns.
The Japanese Yen (JPY) is moving within a tight range against the US Dollar (USD), influenced by monetary policy and political events. Currently, USD/JPY is trading above 148.00, as attention shifts to Japan’s upcoming election.
The scheduled Upper House election on July 20 adds uncertainty to the currency and bond markets. There are concerns that the ruling LDP-Komeito coalition might not secure the necessary 50 seats, which could create opportunities for opposition parties that support increased fiscal spending.
Political Factors Affecting the Yen
These political changes have led to a sell-off in Japanese government bonds, pushing long-term yields to their highest levels in decades and weakening the Yen. The Yen is close to its one-year low against the USD, and future election results could impact fiscal policy and the Bank of Japan’s (BoJ) interest rate decisions. From a technical perspective, USD/JPY is consolidating below a resistance range of 148.65 to 149.00, forming what could be a double-top pattern. Momentum indicators hint at a potential decrease in bullish strength, but the overall trend remains positive as long as prices stay above important moving averages. If the price falls below 147.14, we might see further declines. In contrast, closing above 149.00 could lead to a test of 151.62. Key factors affecting the Yen include the health of the Japanese economy, BoJ policy, differences in bond yields, and overall market sentiment. Given the current political uncertainty, derivative traders might want to explore strategies that capitalize on increasing volatility. A hung parliament could lead to unpredictable fiscal policies, causing sharp and unexpected movements in the currency pair. Buying straddles or strangles could allow traders to benefit from significant price changes in either direction without needing to predict a specific outcome.Investment Strategies Amid Uncertainty
For those expecting further weakness in the Yen, the ongoing wide interest rate gap is a significant factor. As of late 2023, the yield on a 10-year U.S. Treasury note exceeds 4.5%, while the yield on a similar Japanese bond is under 1.0%. This situation encourages investors to prefer dollars over yen. Purchasing call options on USD/JPY offers a way to bet on a rise towards 151.62 while limiting risk. However, traders should be cautious about the risk of government intervention. Historically, Japanese authorities have intervened when the Yen weakens abruptly, as seen in September and October of 2022 when USD/JPY surpassed levels of 145 and 150. Buying put options can serve as a hedge or a direct bet on a sudden policy shift, particularly since officials often issue verbal warnings before taking action. The current technical landscape shows a period of indecision, and derivative traders can set their triggers accordingly. The consolidation below 149.00 suggests that traders are waiting for a catalyst, whether political or from the central bank. We recommend that those holding long positions consider buying puts with a strike price near the 147.14 support level to safeguard their trades. Create your live VT Markets account and start trading now.The Australian dollar strengthens as the US dollar weakens, supported by rising bond yields in Australia.
The Australian Dollar has bounced back after a drop caused by disappointing employment data. This recovery is supported by a weaker US Dollar and an increase in Australia’s 10-year government bond yield. There are worries that the Reserve Bank of Australia may cut interest rates in August.
AUD/USD is holding steady, trading close to Thursday’s high of 0.6527, boosted by rising iron ore prices. Additionally, optimism about China’s economic support has increased demand for the Australian Dollar.
The US Dollar Index Update
The US Dollar Index has experienced losses, hovering around 98.25, still facing pressure even though Consumer Sentiment data is positive. The preliminary Consumer Sentiment Index for July reached 61.8, up from 60.7 in June, and exceeded expectations of 61.5. There is uncertainty regarding the Federal Reserve’s next move due to mixed opinions among its officials. The drop in US Treasury yields is affecting the US Dollar, providing some relief for the Australian Dollar. A rate cut by the Reserve Bank of Australia is expected after the June employment report showed an increase in unemployment to 4.3%. The market is pricing in a 25-basis-point cut in August, with the possibility of more cuts later in the year. The Reserve Bank of Australia sets interest rates to maintain price stability and support the economy. Economic indicators like GDP and consumer sentiment impact the AUD. Quantitative Easing tends to weaken the AUD, while Quantitative Tightening can strengthen it.Volatility and Trading Strategies
We believe that the gap between short-term AUD strength and the likely rate cut presents a volatility opportunity. The Australian Dollar is receiving support from external factors, but the outlook for domestic monetary policy is becoming more negative. This scenario suggests that sharp price movements are more likely than a steady trend in the near term. The market is heavily anticipating rate reductions from the central bank. ASX cash rate futures indicate that traders see over a 70% chance of a 25-basis-point cut in August. This high expectation means any surprises in timing or tone could lead to significant market reactions. On the other hand, there is less certainty about the Federal Reserve’s plans, which is putting pressure on the US Dollar. The CME FedWatch Tool shows more than a 90% chance that US policymakers will keep rates unchanged at their next meeting, creating a policy difference that currently favors the AUD. This divergence in central bank outlook is a key factor for the currency pair. Given these contrasting factors, traders should consider strategies that capitalize on increased price swings instead of betting on a single direction. We recommend buying volatility through options, such as a straddle or a strangle on the AUD/USD pair. This strategy allows traders to profit from a big move in either direction leading up to the August decision. Looking at the data, one-month implied volatility for the AUD/USD pair is around 8%, which is moderate historically. We see this as a good opportunity to enter volatility positions since it may not fully reflect the risks from upcoming employment data and central bank comments. Historically, the AUD has experienced significant price jumps around RBA policy changes, often exceeding initial market expectations. Support from essential commodity prices continues to help the currency. For example, iron ore futures have remained strong, trading above $105 per tonne in Singapore, driven by hopes of stimulus from China. However, recent official data shows China’s Manufacturing PMI still in contraction at 49.5, adding uncertainty to the situation. Create your live VT Markets account and start trading now.Pound Sterling weakens against the Euro amid growth concerns, indicating market shifts toward Germany
The Pound Sterling has had a tough time against the Euro this year, showing a change in how the market feels about Germany and the Eurozone. Economists believe that lower confidence in the UK’s GDP and productivity growth means fiscal issues won’t be solved just by economic growth.
Pound Sterling Performance
This year, the Pound has weakened against the Euro. The EUR/GBP is aiming for a target of 0.87 in three months and a revised six-month forecast of 0.88. On the other hand, the US dollar has become stronger, emerging as the best-performing currency among the G10, with room for further growth. The forecasts mentioned come with risks and uncertainties. They are not recommendations to buy or sell assets. Investing in open markets carries significant risks, including emotional stress and possible total loss. Make sure to do thorough research before making any financial decisions. We expect the UK’s weak growth outlook to be a main concern in the coming weeks. The Organisation for Economic Co-operation and Development has recently projected UK growth at only 0.4% for 2024—one of the lowest among developed economies. This supports the idea that fiscal challenges will continue. Such economic struggles make it hard to justify investing in the Pound. Given this situation, we recommend that derivative traders think about strategies that benefit from a rising EUR/GBP exchange rate. The latest German ZEW Economic Sentiment survey increased for the tenth month in a row to 47.5, showing growing optimism in the Eurozone’s largest economy, which supports the 0.88 forecast. Buying call options on this pair could be a smart way to prepare for this anticipated change.Dollar Performance
The dollar has been performing strongly, backed by a hawkish Federal Reserve. With US core inflation stubbornly high at 3.6%, interest rates are expected to stay elevated for a while, which will likely keep demand for the dollar high. We believe that purchasing USD call options against the Pound is a wise strategy. History shows that when US monetary policy is strict and UK economic data struggles, the GBP/USD pair faces downward pressure. This difference makes a strong case for using strategies that take advantage of both trends. Therefore, we suggest considering put options on GBP/USD, as this would benefit from the Sterling’s domestic weaknesses and the dollar’s strength abroad. Create your live VT Markets account and start trading now.GBP/USD rises by 0.21% during North American session after UK employment data eases pressure
GBP/USD bounced back, trading above 1.3450 on Friday after struggling earlier. This recovery was driven by better market sentiment and lower US consumer inflation expectations, which weighed on the US Dollar.
Cryptocurrency Market Update
In the cryptocurrency world, Bitcoin is currently trading above $120,000, close to its all-time high of $123,218. Ethereum has surged more than 20% this week, aiming for the $4,000 level. Ripple has also hit a new high at $3.66, showing growing demand and optimism in the market. China reported a 5.2% year-on-year growth in the second quarter, which beat expectations. However, drops in fixed investments, retail sales, and falling property prices raise concerns about a possible economic slowdown. We see the recent weakness in the US Dollar as an opportunity. The latest US Consumer Price Index revealed that overall inflation has cooled to 3.2% year-over-year. This supports the idea that the Federal Reserve may stop raising interest rates. As a result, we’re thinking about buying near-term call options on GBP/USD to benefit from a potential rise toward the 1.3500 level.Global Market Concerns
That said, we should be cautious about the ongoing weakness in the British economy. Recent data from the Office for National Statistics shows that UK wage growth is slowing, and the unemployment rate has increased to 4.2%. This confirms our concerns about the labor market, making it risky to hold long positions. Using options with a clear downside limit is a smarter approach. The overall market’s risk appetite seems robust, which favors currencies like the pound over safe havens. The Crypto Fear & Greed Index is currently at a “Greed” level with a score of 72, reflecting the optimism around assets like Ethereum. Historically, such eagerness in speculative assets often leads to strength in other risky financial instruments. Despite this positive sentiment, we remain alert to the warning signs from China. While the growth figure is strong, youth unemployment is still a significant issue, and the property sector crisis looms, with major developers like Country Garden missing debt payments. A major global slowdown from China could trigger a rush to the safety of the dollar, quickly undermining any bullish positions on the pound. Create your live VT Markets account and start trading now.The Canadian dollar rises against the US dollar after dovish comments from Fed Governor Waller
The Canadian Dollar (CAD) is gaining strength against the US Dollar (USD) after comments from Federal Reserve Governor Christopher Waller. The USD/CAD pair is currently trading above 1.3720, showing a slight drop of 0.20%.
Waller indicated that the Federal Reserve might consider cutting the policy rate by 25 basis points. Recent employment data from the US private sector shows signs of slowing down, and inflation risks from tariffs may only be temporary.
Fed Rate Cut Expectations
Even with strong real estate market data from June, the outlook for more Fed rate cuts in September is affecting the USD/CAD exchange rate. Preliminary consumer sentiment data for July in the US increased to 61.8, while inflation expectations decreased for both the 1-year and 5-year forecasts. The resilience of the US economy suggests that interest rates might stay within the 4.25%-4.50% range for a while longer. However, political uncertainties and slow progress in trade talks could limit the strength of the US Dollar. The daily chart for USD/CAD shows a consolidation around the 78.6% Fibonacci retracement level at 1.3714. The pair is slightly above the 20-day Simple Moving Average (SMA) at 1.3674, facing resistance at the 50-day SMA at 1.3733. Key resistance levels include the June high at 1.3798 and the psychological barrier at 1.3900. Support levels are found at the psychological mark of 1.3600 and the June low at 1.3540.Factors Influencing The Canadian Dollar
The Canadian Dollar is affected by Bank of Canada interest rates, oil prices, economic health, and trade balances. The Bank of Canada aims to keep inflation between 1-3% through interest rate adjustments. Rising oil prices and a positive trade balance help strengthen CAD. While inflation can weaken a currency, higher interest rates tend to attract investment, which boosts the currency. Key economic indicators like GDP, PMIs, employment rates, and sentiment surveys can shift CAD’s trajectory. A strong economy supports CAD and encourages investment, potentially leading to interest rate hikes. Given the mixed economic signals, we expect the USD/CAD pair to stay within a consolidation phase. Traders in derivatives should explore strategies that can benefit from range-bound movement or sudden volatility spikes. Currently, the market shows the 30-day implied volatility for USD/CAD at around 6.5%, indicating fairly stable but not completely calm conditions. Waller’s comments are influencing market expectations, with the CME FedWatch Tool suggesting a greater than 65% chance of the Federal Reserve cutting rates in September. This creates downward pressure on the US dollar, making call options on the Canadian dollar (or put options on USD/CAD) appealing as a speculative opportunity. We see this as a major factor that could limit gains for the currency pair. On the Canadian side, the steady price of West Texas Intermediate (WTI) crude oil over $80 per barrel is supportive for the loonie. However, this is balanced by the Bank of Canada’s recent rate cut and a cautious stance on future changes, resulting in mixed effects on the currency. This combination reinforces our view of a stable trading environment in the near term. We recommend that traders use the technical levels mentioned as a reference for option strategies. An iron condor, with strikes sold around the 1.3600 and 1.3800 levels, might benefit from the pair staying within this range. Alternatively, a long strangle strategy—buying both a call and a put option—could profit from a breakout due to unexpected economic data. Political uncertainty, particularly with the approaching US election, poses a significant risk that might affect the current technical outlook. We expect that as the election draws closer, implied volatility will increase, raising options premiums. Traders should keep this potential change in mind for any medium-term strategies. Historically, periods leading up to a Fed policy shift, like in mid-2019, often feature choppy, sideways trading before a clear trend forms. At that time, the USD/CAD pair experienced weeks of indecision before eventually breaking lower when rate cuts were confirmed. We may be witnessing a similar situation now, rewarding those who practice patience and range-dependent strategies. Create your live VT Markets account and start trading now.GBP/USD rises as UK employment figures ease Bank of England concerns
UK payroll numbers were revised upwards, easing pressure on the Bank of England as inflation remains high. In the US, Fed Governor Waller supports a rate cut in July, while President Goolsbee is cautious about inflation due to tariffs. US consumer sentiment improved, with the index increasing to 61.8, and inflation expectations for the next five years dropped to 3.6%.
During the North American session, GBP/USD rose by 0.21%. The pair was trading at 1.3442, up from a low of 1.3406. In the UK, limited economic data showed a better jobs report, revising May’s payroll numbers from -109K to -25K. This alleviates some worries about the labor market and offers the Bank of England some relief as inflation remains above 3%.
Future Outlook For The UK And US Economy
Looking ahead, the UK will release S&P Global Flash PMIs and Retail Sales data next week. In the US, attention will be on housing data, Flash PMIs, and Durable Goods Orders. GBP/USD is currently showing a modest bullish trend. If it surpasses the 50-day Simple Moving Average at 1.3506, more gains could follow. If it drops below 1.3400, the next support will be at 1.3369. We see opportunities in the different paths of central bank policies in the coming weeks. While one colleague is cautious, Mr. Waller’s support for a rate cut fits with the recent US inflation data, which cooled to 3.3% in May. A potential rate cut in the US could weaken the dollar, pushing the currency pair higher. In the UK, the situation is more complicated, leading to possible volatility around key data. Although payrolls improved, recent official data shows that inflation has dropped to the central bank’s 2% target. This, along with a surprising 2.9% rise in May retail sales, sends conflicting signals to policymakers, likely keeping rates on hold.Investment Strategy Using Options
We recommend using options to trade this forecast, as upcoming reports from both regions could cause sharp movements. Buying call options with a strike price above the current 1.3442 level, targeting the 1.3506 resistance, would enable traders to benefit from a price rise while limiting potential losses. This strategy is especially relevant before next week’s purchasing managers’ indexes. Historically, GBP/USD experiences higher volatility around major economic announcements and central bank changes. For example, the pair moved significantly after the unexpected UK election announcement in May. Using derivatives allows for a defined-risk approach to capture potential breakouts without being fully exposed to unexpected news. Create your live VT Markets account and start trading now.The Euro strengthens against the US dollar as the Greenback weakens and Treasury yields ease.
The Euro is rising against the US dollar as the dollar weakens, following lower US Treasury yields and cautious market feelings. The EUR/USD pair has gone up more than 0.50% and is now around 1.1653.
The US Dollar Index (DXY) is under pressure around 98.18, even with a strong report on Michigan Consumer Sentiment. The University of Michigan’s Index for July increased to 61.8 from 60.7 in June, beating expectations and indicating a resilient economy.
Federal Reserve Officials’ Views
Federal Reserve officials are split on interest rate cuts, with different opinions on inflation due to tariffs. Governor Christopher Waller suggests a 25 basis point cut, while John Williams warns that inflation may stay high. Adriana Kugler thinks it’s best to keep rates steady to meet inflation goals. US tariffs on EU imports have put pressure on the Euro, raising concerns about a trade conflict. Despite positive US data, the European Central Bank (ECB) is not expected to change its policies next week. The ECB’s main goal is price stability, and it primarily uses interest rates to achieve this. In extreme situations, the ECB can implement Quantitative Easing (QE), which typically weakens the Euro. On the other hand, Quantitative Tightening (QT), which stops bond purchases and lets matured bonds run out, can support the Euro during economic recovery. Right now, the mixed signals from the US and Europe are causing volatility, which is great for options trading. Easing US yields are countered by worries about potential trade conflicts in Europe. This back-and-forth indicates that the EUR/USD won’t follow a straight path soon.Strategy for Volatile Markets
We need to closely monitor the differences in inflation data, as these will affect central bank actions. By early 2024, Eurozone inflation has dropped to 2.8%, while US inflation is higher at 3.4%. This makes the policy outlook tricky for both central banks. The market, according to the CME FedWatch Tool, expects a high chance of US rate cuts by mid-year, which we should include in our strategies. Given the differing views from officials like Waller and Williams, we expect sharp price movements around future Fed announcements. A smart move is to buy volatility using strategies like long straddles, which can profit from big price swings in either direction. This approach allows us to benefit from uncertainty without guessing the outcome. The ECB’s expected inaction next week, compared to the Federal Reserve’s debates, shows a policy divide. Historically, when the US cuts rates while the ECB stays put, the dollar tends to weaken. We can position ourselves cautiously with EUR/USD call options, especially around key US economic data releases. However, the risk of tariffs may limit the Euro’s rise and supports the cautious outlook from officials like Kugler. This means that the pair might trade within a range if neither economic bloc signals clear weakness or strength. Selling out-of-the-money puts and calls to create an iron condor could be a good strategy if expectations for volatility decrease. Even if Quantitative Easing seems unlikely right now, we should keep an eye on the comments from officials. Any unexpected hints from the ECB about tightening would strengthen the Euro. This would prompt us to shift away from range-bound strategies and take a more bullish stance on the pair. Create your live VT Markets account and start trading now.Charles Schwab Corporation’s quarterly earnings exceeded expectations at $1.14 per share.
The Charles Schwab Corporation has recently announced its quarterly earnings of $1.14 per share. This figure is better than the expected $1.09 per share and shows growth compared to last year’s $0.73 per share. This result means an earnings surprise of +4.59%, following the last quarter’s report of $1.04 per share when $1 was expected.
The company also achieved revenues of $5.85 billion for the quarter, surpassing estimates by 2.64%. This is an increase from $4.69 billion during the same quarter last year. Over the past four quarters, Charles Schwab has consistently outperformed both EPS and revenue estimates.
