The USD is stronger today ahead of the durable goods orders report. Expectations are set at -10.8% after last month’s significant jump of 16.4%. Non-Defense Capital Goods, excluding aircraft, is anticipated to rise by 0.2%, down from 1.7% last month. After the ECB decided to keep rates unchanged, ECB’s Villeroy pointed out that a stronger Euro has a disinflationary effect. Similarly, ECB’s Rehn emphasized taking a meeting-by-meeting approach to monetary policy due to concerns about economic growth. ECB’s Kazaks recommended maintaining current interest rates to let recent easing measures take effect.

Economic Projections

The ECB survey has lowered inflation forecasts for 2025 and 2026 to 2.0% and 1.8%, respectively. GDP growth expectations were slightly adjusted, with 2025 projected at 1.1% and 2026 also at 1.1%. In the UK, June retail sales increased by 0.9% month-over-month, though this is below the expected 1.2%. Year-over-year sales rose by 1.7%. Japan’s BoJ may consider a rate hike before the year ends, as upcoming data will guide their decision. Germany’s July Ifo business climate index improved to 88.6. In the US market, stock futures are steady, while bond yields are mostly unchanged or slightly higher. Oil prices are slightly up, gold prices have dropped, and Bitcoin has fluctuated, decreasing to $116,502. Recent comments from ECB officials suggest a cautious approach ahead. Both Villeroy and Rehn are warning about growth risks, showing they are not rushing to change policy. This dovish stance, along with lowered inflation expectations from the Survey of Professional Forecasters, indicates the Euro may weaken in the coming weeks.

Currency Strategies

This situation creates a clear policy divergence, especially after the US durable goods orders beat expectations, showing only a -1.1% drop instead of the anticipated -10.8%. Given this contrast, we plan to buy put options on the EUR/USD currency pair, allowing us to benefit from a potential decline while limiting our risk to the premium paid. In Japan, we are monitoring reports suggesting officials may raise rates by the end of the year. This change would mark a significant shift from years of very loose monetary policy and could lead to a stronger yen. As a result, shorting currency pairs like USD/JPY or EUR/JPY through futures contracts looks appealing. The below-expectations UK retail sales data, despite a rebound, supports our negative outlook on the British pound. As the economy shows weakness, the Bank of England might feel pressured to ease policy sooner. We will look for chances to position ourselves for further GBP/USD declines. The current calm in US stock indices, alongside mixed messages from central banks, creates some uncertainty. The CBOE Volatility Index (VIX) has been hovering near historical lows around the 12-13 level, indicating complacency and resulting in lower option premiums. We see this as an opportunity to buy protection or make directional bets with limited risk, such as purchasing puts on broad market indices. Gold’s quick drop of over $25 from its recent highs is a reaction to the stronger US dollar and stable yields. The loss of momentum suggests that selling call spreads above the market to collect premium could be profitable. Meanwhile, Bitcoin’s steep decline to a new weekly low below $115,000 before recovering shows that high volatility is still the norm, presenting opportunities for nimble traders using careful risk management. Create your live VT Markets account and start trading now.

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The Japanese yen is falling because of ongoing political uncertainties. European stock markets began the day lower as they await news on trade. The European Central Bank claims inflation will stay at 2% for the medium term, with no need for immediate interest rate changes. German business confidence and French consumer sentiment didn’t quite meet expectations, and UK retail sales were lower than predicted.

Major Currency Movements

The dollar is making a comeback, with both EUR/USD and GBP/USD decreasing. The USD/JPY has increased against the yen due to Japan’s political troubles. Commodity currencies like USD/CAD and AUD/USD are also facing challenges because of changing exchange rates. European stocks dipped early on, impacted by Volkswagen’s disappointing earnings and LVMH’s weak sales report. The DAX index is down 0.8%, and updates on the US-EU trade deal are still pending, causing caution in the markets. Gold has fallen to $3,340, while cryptocurrencies like Bitcoin have dropped to two-week lows. As the week wraps up, investors are focused on trade news and upcoming tech earnings. It’s also important to watch the US jobs report and Trump’s deadline on August 1st. We see the dollar’s rise as a key indicator for the next few weeks, especially with EUR/USD and GBP/USD crossing below important moving averages. The weak Ifo data from Germany and a slowing money supply in the Eurozone support a bullish view of the dollar. Therefore, we plan to buy call options on the dollar index or sell put spreads on the euro.

Trading Strategies and Market Outlook

The political issues affecting the yen create a clear trading opportunity. A rise above 147.80 is significant, and we’ve seen this before; during the 2022-2024 period, differentials drove USD/JPY well above 150. We will create bullish positions using call options on USD/JPY, aiming for a return to those historical highs. Warnings from Volkswagen and LVMH may be just the start for European stocks, which are sensitive to trade news. During previous tariff uncertainties, like in 2018, we’ve seen significant drops in export-heavy indices like the German DAX. We believe buying put options on the DAX is a good way to protect against further negative trade news. With major events like tech earnings and the August 1st jobs report approaching, we expect a significant increase in market volatility. The CBOE Volatility Index (VIX), usually below 15 in stable markets, could rise to the 20-25 range seen during past uncertain times. We’re buying VIX call options to take advantage of this anticipated volatility. Comments from officials like Kazaks and Rehn support our view that the European Central Bank will stay cautious. The downward adjustment of inflation forecasts makes a hawkish policy shift unlikely, making the euro less appealing. This aligns with our bearish view on EUR/USD and our strong dollar positions. The simultaneous drop in gold and Bitcoin suggests investors are seeking the safety of cash instead of alternative assets. When the dollar strengthens substantially, it tends to draw money away from non-yielding assets like gold, which recently faced resistance at the $3,430 mark. We’re watching for chances to short gold futures if it falls below recent support levels. Create your live VT Markets account and start trading now.

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Recent market trends indicate a shift towards a slightly aggressive stance as trade uncertainty lessens. Expectations for central bank rate changes by the end of the year are as follows: – **Federal Reserve**: Expected to cut rates by 43 basis points, with a 97% chance of no change at the next meeting. – **European Central Bank (ECB)**: Projected to cut by 16 basis points, with an 86% likelihood of holding steady. – **Bank of England (BoE)**: Anticipates a 47 basis point reduction, with an 82% chance of a rate cut soon. – **Bank of Canada**: Forecasts a 12 basis point cut, with a strong chance of no change. – **Reserve Bank of Australia**: Expects a 56 basis point cut, with an 87% probability of a cut at the next meeting. – **Reserve Bank of New Zealand**: Planning for a 35 basis point decrease. – **Swiss National Bank**: Facing a 7 basis point cut. – **Bank of Japan**: Expected to raise rates by 22 basis points but likely to hold steady at their next meeting.

Impact of Trade De-escalation

The easing of trade tensions and expansionary policies have helped mitigate tariff effects, likely supporting this trend. However, reduced momentum may occur as current market realities set in, necessitating new drivers. There could be vulnerabilities in the market if positions in risk assets become too stretched. Dellamotta points out that betting against a recession is not as straightforward as before. With the S&P 500 reaching record highs over 5,400 in June 2024, it’s evident that the easing of trade tensions is already reflected in asset prices. Future growth will need specific triggers, rather than just general optimism. The path ahead appears more complicated, especially concerning the Federal Reserve. Although the market expects rate cuts, the latest US Consumer Price Index data for May showed inflation at 3.3%—cooling but still above the 2% target. For derivative traders, this means preparing for uncertainty around when the Fed will act instead of betting on a guaranteed cut.

Shifting Monetary Policies

Central banks are already changing their approaches. Both the Bank of Canada and the ECB cut their key interest rates by 25 basis points in early June 2024. In contrast, the BoE kept its rate steady at 5.25% during its June meeting, despite high expectations for a cut. This divergence opens up opportunities in currency pairs and cross-market trades since monetary policies are not aligned. Due to the stretched positioning in risk assets, traders might want to implement strategies that benefit from increased volatility. Given the fragility of the market, any unexpected negative growth could lead to sharp sell-offs. Therefore, long volatility positions through options could be profitable. For example, buying straddles or strangles on major indices might provide protection and profit potential from sudden market moves in either direction. Historically, markets often rise on the expectation of rate cuts but can become choppy or even drop when cuts actually happen, confirming underlying economic weakness. We have observed this pattern in previous easing cycles, where the first cut marked a short-term peak for stocks before a consolidation phase. Thus, it is wise to be cautious about chasing rallies and be ready for a more complex, two-sided market in the upcoming weeks. Create your live VT Markets account and start trading now.

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The recent increase in US tariffs is not likely to raise inflation levels. Inflation is currently under control, which requires clear communication about future monetary policies. In an unpredictable environment, flexible and evidence-based strategies are essential. **The Risks to Economic Growth** Economic growth faces several downside risks. The rising Euro also has a disinflationary effect. Policymakers are exploring options for future interest rate cuts. Given these factors, we believe the European Central Bank’s recent decision to cut rates by 25 basis points in June is likely not a one-time event. Markets expect at least one more rate cut by the end of the year, a view supported by Monsieur Villeroy’s dovish comments. Therefore, it’s wise to prepare for lower interest rates by considering moves like shorting short-term interest rate futures. The mention of the Euro’s disinflationary effect is especially relevant for currency traders. Although Eurozone inflation rose to 2.6% in May, concerns about growth risks are paramount for policymakers. This suggests a widening gap in policies compared to the US Federal Reserve, making a case for buying put options on the EUR/USD, as the interest rate difference favors the dollar. This monetary policy approach should benefit European stocks. The Euro Stoxx 50 index has already gained over 8% this year, and the expected further easing makes equities more appealing than bonds. We see value in buying call options on broad European indices to take advantage of this potential growth. **Volatility and Market Opportunities** The focus on “agile pragmatism” indicates that volatility might increase around future data releases, especially inflation reports. Historically, during the easing cycle from 2011 to 2014, the central bank took incremental actions, leading to periods of market uncertainty between meetings. As a result, utilizing options to manage risk or employing strategies like iron condors on European assets could be beneficial in the weeks ahead. Create your live VT Markets account and start trading now.

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The European Central Bank (ECB) will make its monetary policy decisions based on the situation at each meeting, focusing on inflation and related risks. Fears about economic growth are rising, suggesting that more time may be necessary for decision-making. According to a Financial Times report, a 15% tariff is expected as the ECB waits for more data and clarity on the US-EU trade deal.

Trading Strategy Implications

The ECB’s cautious approach shows their hesitation. This meeting-by-meeting strategy creates uncertainty, meaning traders should brace for more market fluctuations during key data releases. Buying volatility, such as through options, appears to be a smart strategy now. The ECB is worried about economic growth, even though the Eurozone’s GDP rose slightly by 0.3% in the first quarter. This adds a dovish tone, indicating that the recent rate cut in June might not be followed by another soon, limiting potential gains for the Euro. Therefore, we should think about strategies that could gain from a stagnant or weaker Euro compared to the US dollar. As the central bank takes time with its decisions, the market may move sideways until a significant event occurs. This environment is suitable for selling options to earn premiums, but the risks from a trade conflict remain high. Tariffs on European goods would primarily affect export-driven economies like Germany.

Market Outlook and Strategies

In the past, periods of policy uncertainty have resulted in unstable, range-bound markets, often followed by sharp moves. For example, before critical policy changes during the 2012 sovereign debt crisis, we saw a similar trend. Thus, preparing for a significant move in either direction using long straddles on major European indices like the Euro Stoxx 50 could be beneficial. With Eurozone inflation slightly up to 2.6% in May, the bank is juggling the need to combat inflation while also supporting a weak economy. This dilemma reinforces our belief that derivative traders should prepare for sudden shifts rather than a clear trend. It would also be wise to hedge any long positions in European stocks with put options. Create your live VT Markets account and start trading now.

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Talks between South Korean ministers and US officials were delayed because of a scheduling conflict with US Treasury Secretary Scott Bessent. However, a meeting is now scheduled for Friday to discuss a tariff agreement between the US and Japan. During these talks, South Korea presented a plan to the US Commerce Secretary that the US found intriguing. South Korea is seeking a deal similar to the one the US has with Japan, which could lead to tariff reductions in the 10-20% range.

Impact On Risk Assets

This potential deal could have a positive effect on risk assets, although much of the optimism is already reflected in current market prices. If the negotiations fail, South Korea might face a 25% tariff starting August 1, but there may be an extension if talks are nearing completion. We think the market has already considered the likely 10-20% tariff agreement, reducing the chance for large gains. The KOSPI index has stayed strong, close to the 2,800 level, indicating that investors are already optimistic. Thus, the best trading opportunity lies not in the expected outcome, but in preparing for surprises. With the August 1 deadline approaching, there is more downside risk if the discussions mentioned by Dellamotta do not succeed. A complete breakdown in negotiations would likely shock the market, causing the Korean Won to drop against the dollar and hurting export-reliant stocks. Traders might want to buy out-of-the-money put options on major Korean ETFs as a budget-friendly way to protect against a negative surprise after the meeting with Greer.

Betting On Market Volatility

A strong strategy is to bet on an increase in market volatility. The VKOSPI, South Korea’s volatility index, has recently been trading below 15, a level that is historically low, making options cheaper. We recommend using straddles or strangles, which can profit from significant market moves in either direction, to take advantage of the uncertainty leading up to the deadline. History from past US trade negotiations shows that final results often lead to sharp market reactions. South Korea’s vehicle exports to the US were valued at over $45 billion in 2023, so any news on tariffs will have an immediate impact on that key sector. We will be closely monitoring signals after the postponed meeting with Bessent. Create your live VT Markets account and start trading now.

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The USD/JPY has gone up by 0.5% as it approaches the 200-hour moving average. This increase follows reports that a Japanese lawmaker from the ruling LDP has gathered enough support to request a joint meeting of both houses of the National Diet. The purpose of this meeting is unclear, but there are rumors that it could be related to a potential challenge to Ishiba. This political uncertainty has affected market sentiment, causing a drop in the Japanese yen.

Technical Analysis

USD/JPY, which faced downward pressure earlier this week, has bounced back and is close to its 200-hour moving average. If it breaks above this level, it could shift control back to buyers in the short term. Ishiba’s political future seems uncertain, and there are doubts about the ruling coalition’s ability to earn back voter trust. The potential for a broader political movement in Japan adds to the overall uncertainty around the yen. We view the current political situation as a clear indication of ongoing short-term weakness for the yen. The movement of USD/JPY towards its 200-hour moving average shows that traders are selling the yen due to rising uncertainties. This reaction is typical in markets facing possible leadership instability in a significant economy. The cabinet’s approval rating recently hit a record low of 22.2% in a Kyodo News poll, raising the likelihood of a leadership challenge. We suggest buying call options on USD/JPY as a smart way to bet on potential increases while managing downside risks amid this political drama.

Market Strategy

Uncertainty is causing market fluctuations, with implied volatility on the yen rising over 5% in the past week. If you expect a significant price change but aren’t sure in which direction, a long straddle could be a good strategy. This options approach profits from a large move in USD/JPY, whether it goes up or down. We should remember past events, like the frequent leadership changes in the late 2000s. While domestic politics made waves, the yen’s movement was often influenced by global risk sentiment. For example, during the 2008 financial crisis, the yen strengthened significantly as a safe-haven asset despite Japan’s political instability. In the end, the political drama distracts from the main issue: the significant interest rate gap between the U.S. and Japan, which is over 5 percentage points. This ongoing fundamental pressure continues to negatively impact the yen, making any rally driven by politics a potential selling opportunity. We believe the yen is likely to trend downwards until the Bank of Japan indicates a major policy change. Create your live VT Markets account and start trading now.

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The recent ECB survey of professional forecasters for the third quarter of 2025 shows a drop in expected inflation rates. Inflation for 2025 is estimated at 2.0%, down from 2.2%. For 2026, inflation is expected to fall to 1.8%, a decrease from the previous 2.0% forecast. The survey also touches on economic growth, with a positive update for GDP growth in 2025. It is now projected to be 1.1%, up from an earlier estimate of 0.9%. However, the GDP growth forecast for 2026 has been revised down to 1.1% from 1.2%.

Long Term Inflation Forecast

The long-term inflation forecast remains steady at 2%, which aligns with the European Central Bank’s target for medium-term inflation. These updated projections give insight into expected future economic conditions, focusing on inflation and growth. With the new survey data, it seems the European Central Bank can start lowering interest rates. The expected decrease in inflation to the 2.0% target for 2025 provides enough reason for policymakers to ease monetary policy. This view is supported by recent statistics showing Euro area inflation cooled to 2.4% in April 2024. In the coming weeks, we will focus on interest rate derivatives that benefit from falling rates. We plan to enter into receive-fixed interest rate swaps and buy futures contracts based on Euribor. This strategy prepares our portfolio for the anticipated rate cut in June and possible further cuts later this year.

Opportunities and Market Strategies

Comments from key officials suggest a cautious approach to easing. President Lagarde has hinted strongly at a move next month but is non-committal about future actions. This opens up an opportunity, as the market may be underestimating the number of cuts needed to address the disinflation trend highlighted in the new survey. The 2026 inflation outlook, now at 1.8%, is crucial for our strategy. This figure, falling below the target, indicates the ECB might need to be more aggressive in easing than previously thought. We see potential in options strategies that bet on quicker rate reductions through late 2024 and into 2025. Slow economic growth also supports the central bank’s need for action. The modest 1.1% GDP growth forecast aligns with recent data, such as the HCOB Eurozone Manufacturing PMI, which remained below growth territory at 47.3 in May. A weak economy cannot sustain high interest rates, reinforcing our negative view on rates. Historically, when the ECB has started an easing cycle amid weak growth, it usually doesn’t stop at just one or two cuts. The central bank tends to continue easing until there is significant economic improvement. We expect this trend to continue, making long-term positions for lower rates appealing. This interest rate gap could negatively impact the Euro’s value. Therefore, we will also consider strategies to short the Euro against the US Dollar. Buying put options on the EUR/USD offers a cost-effective way to speculate on a weaker Euro due to a more dovish central bank. Create your live VT Markets account and start trading now.

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Light Crude Oil Futures for July 25, 2025, are priced at $66.28. A key bearish level is $66.38, while bullish opportunities appear above $66.62, depending on sustained movement. Bearish targets include $66.23, near today’s Value Area Low, and $65.31, above the Point of Control from July 23. Bullish targets could reach $67.47 if prices stay above $66.62 for two 30-minute periods or continuously for 15 minutes.

Key Levels in Volume Profile Analysis

Important levels such as Value Area High, Low, VWAP, and Point of Control come from volume profile analysis. These areas often influence price direction and reversal points. Knowing these helps traders enter and exit trades intentionally. The tradeCompass system recommends making no more than one trade in each direction daily. It encourages taking partial profits and adjusting stop-loss orders as trades evolve. Following these guidelines can help reduce risk. Volume profile tools like POC, VAH/VAL, and VWAP highlight where market interest lies. They assist traders in identifying possible reversals or accelerations.

Framework Context and Market Dynamics

This analysis is part of the tradeCompass framework and serves as a guideline, not financial advice. Trading futures and leveraged instruments carries risk—only use money you can afford to lose. Currently, the market is confirming a bearish trend, as prices struggle below the $66.38 threshold. This technical weakness aligns with a recent Energy Information Administration (EIA) report showing an unexpected increase in U.S. crude inventories of 3.6 million barrels. This rise in supply adds downward pressure on prices, making short targets more appealing. Concerns also arise from recent comments by OPEC+ delegates suggesting they may reverse production cuts sooner if demand drops. On the demand side, China’s latest manufacturing PMI is at 49.5, indicating a contraction and a decrease in fuel appetite from the world’s largest oil importer. These fundamental issues strengthen the bearish price targets highlighted in the analysis. For derivative traders, considering short futures positions or buying put options seems wise in the upcoming weeks. It’s vital to watch for a potential reversal if prices rise above $66.62, as ongoing geopolitical tensions can lead to sudden price spikes. This highlights the importance of following profit-taking and stop-loss management strategies from the tradeCompass system. Historically, the mid-$60s range has been critical for oil prices, often serving as a support level before further declines. The last significant drop below this area happened in early 2023 and led to a decline toward the low $60s due to recession fears. With the Federal Reserve indicating a “higher for longer” interest rate approach, similar economic challenges could push prices to the final target of $65.31. Create your live VT Markets account and start trading now.

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The Ifo business climate index for Germany in July was 88.6, which is slightly below the expected 89.0. The previous month’s index was 88.4. Current conditions have improved to 87.8, beating the forecast of 86.7. Last month’s number was 86.2. Meanwhile, expectations stayed the same at 90.7 but were revised down from 90.7 to 90.6.

German Business Climate

The German business climate has seen a slight improvement this month, showing a small positive outlook. However, uncertainties like Trump’s tariffs could create challenges, much like those reflected in Volkswagen’s Q2 earnings. The current business climate index suggests a delicate balance in the German economy. While the small rise in current conditions is a hopeful sign, it is balanced by stagnant future expectations. This mixed picture indicates that the market lacks a clear direction in the short term. Recent data reveals that German factory orders dropped by 0.8% last month, emphasizing how global uncertainties affect the industrial sector. Still, with Eurozone core inflation steady at 1.9%, the European Central Bank does not face immediate pressure to tighten policies. This helps maintain support for the markets, even if there’s a limit to growth.

Impact of Tariff Threats

The potential threat of tariffs from the former U.S. president is a major concern, especially after Volkswagen’s warning. Recent statements from Washington have revived threats of a 25% tariff on European auto imports, which would significantly affect major DAX companies. We think that derivatives in the auto sector are accounting for a higher chance of this happening. Considering this environment, we should prepare for increased market volatility rather than a clear trend. We have observed VSTOXX, Europe’s main volatility index, rise from 14 to 17.5 in just two weeks, and we expect this trend to continue. Strategies like long straddles on the Euro Stoxx 50 index might work well for gaining from price movements in either direction. Looking back, the trade disputes of 2018-2019 created a similarly volatile atmosphere for European equities. During that time, markets experienced sharp but short-lived sell-offs due to negative news, followed by rapid recoveries fueled by hopes of resolution. This pattern suggests that selling out-of-the-money puts and calls could be a good strategy for markets that are in a range-bound state. Create your live VT Markets account and start trading now.

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