Major US stock indices have fallen, but not as much as expected from premarket futures. The NASDAQ dropped by 162.2 points, which is a 0.83% decrease. The S&P index is down by 46.2 points, or 0.76%, while the Dow has fallen by 575 points, a 1.34% drop. Shares of Adobe slid by 7.15% even after beating expectations and offering a slightly positive forecast. Meta’s shares stayed the same, while Apple’s stock dipped by 0.94%. Amazon’s shares fell by 1.12%, Microsoft is down by 0.11%, and Alphabet dropped by 0.99%. Tesla and Nvidia also saw declines, with decreases of 0.1% and 1.19%, respectively. The University of Michigan will soon release its preliminary consumer sentiment figure, expected to be 53.5. The current conditions figure is likely to be 59.4, and the expectations figure is projected at 49.0. Even though the drops are softer compared to earlier trading, the declines across all major US indices show a market that is becoming more cautious. The NASDAQ’s 0.83% decrease suggests that tech sector optimism is waning. Big drops like this, especially alongside declines in the S&P and Dow, indicate a broader cautious sentiment, not limited to just one sector. Adobe’s price drop deserves further attention. The 7% fall, despite good revenue and guidance, might mean that investors were expecting even more or looking to take profits. When positive news doesn’t raise stock prices, it usually signals that expectations were too high. This tends to worry short-term traders who rely on momentum. The overall behavior of major tech stocks, particularly Meta’s stability and the drops in Apple, Microsoft, and Alphabet, supports the idea that enthusiasm is cooling. This isn’t a full reversal, but more like a pause after months of gains. Tesla and Nvidia’s slight declines also add to this sentiment. There’s no rush to sell, but buyers aren’t jumping in enthusiastically either. Amazon, which often quickly adjusts to retail spending expectations, saw a 1.12% drop. This may reflect the consumer mood data expected soon. The University of Michigan’s sentiment figures typically indicate demand confidence. At 53.5, this expected reading is historically low. Both the current conditions and expectations are below levels usually linked with strong consumer activity, suggesting shoppers are worried and don’t expect significant improvements soon. This situation feels uneasy with high valuations. In an environment of low confidence, assuming steady revenue growth starts to look risky. Therefore, we should be cautious about taking overly ambitious positions based solely on recent price trends or brand loyalty in any single stock. It’s not enough to trust resilience right now. Instead, we are closely monitoring implied volatility metrics. They may widen in the coming sessions, potentially offering good entry points for selling options. However, timing is key—it would be unwise to start short-delta trades before key sentiment or inflation data without protection. We are also watching the skew closely. If we notice traders paying more for puts than calls in large-cap stocks, it might indicate that hedging is increasing. This often signals that downside risks are being priced in more heavily, offering better options for directional exposure. In this kind of market, where reactions don’t always match the news, patience and discipline are crucial. Nothing appears to be broken, but there are signs of dislocation—this is when our strategies often perform best.

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Japan’s Prime Minister Ishiba will meet President Trump in Canada. He still wants the US tariffs to be removed. President Trump has said that auto tariffs might be coming soon. This meeting is important for both leaders to discuss trade issues.

High Trade Tensions

The fact that Prime Minister Ishiba is meeting with President Trump shows how serious trade tensions have become. They are expected to discuss the possibility of new tariffs, especially on cars. When Trump talks about potential auto tariffs, it’s not just talk. It affects manufacturing across borders and overall exports. If these tariffs happen, shipping volumes, prices, and industrial output forecasts could be significantly impacted. Simply put, if tariffs are introduced soon, especially on vehicles, there’s a short time to adjust to this risk. Markets are already reacting to these potential threats. We are seeing price changes in short-term futures and options tied to transport and manufacturing, indicating that hedging is increasing. The unusual volatility suggests that traders are taking action now rather than waiting. Traders still hope for a deal, but they are preparing for higher costs by the end of the quarter. Strategies relying on calm markets might struggle if talks hit a snag. We know from past experience that a simple comment from Trump can shift prices significantly. Dealers are also positioning themselves for both scenarios—if the tariffs are delayed or if they happen all at once. It makes sense to use wide straddle moves around monthly expiries in this environment. We’ve noticed this trend not only in autos but also in textiles and consumer goods. The credit index options market reflects a similar situation—lower-quality stocks are being repriced quicker than investment-grade ones, suggesting a shift in risk confidence.

Short-Lived Opportunities

We view any signs of weakness in certain markets as temporary, not as a sign that risks have vanished. This also impacts hedging positions in yen and dollar pairs. A real stabilization will need more than just a pause on tariffs; it requires clear reductions in threats. Without this, we expect prices to remain too unpredictable for large, unhedged bets. Ishiba’s ambition to have all tariffs removed is higher than what current market prices suggest. This difference between political goals and market expectations creates short-lived opportunities if managed carefully. Convexity trades are increasing in areas heavily impacted by trade tensions. These opportunities rely on specific triggers and require follow-through. We are focusing on rolling two-week averages of skew and term structure to catch early changes. Regardless of what happens in Canada, reactions will likely come quickly. Create your live VT Markets account and start trading now.

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The OPEC Secretary-General has indicated that there have been no recent changes in supply or market conditions, meaning no extra measures are needed. Crude oil prices are rising due to worries about possible supply disruptions. The daily chart shows strong upward movement above the 200-day moving average of $68.47. This rise is above previous limits and supports a bullish trend.

Today’s Trading Actions

Today’s trading saw prices break above the 61.8% retracement of the 2025 trading range, currently around $70.96, boosting positive momentum. Crude oil is trading at $72.91, which is a gain of $4.09 or 5.94% for the day. It reached a peak of $77.57, the highest level since January 20. The annual high of $80.73 was set on January 15. Immediate support is found at the April 2 high of $72.22. If prices fall below this, they could head toward the 61.8% retracement at $70.96. Current data suggests that supply fundamentals are stable, according to Al Ghais, which reduces the need for further intervention. However, the market is reacting differently as prices continue to rise. The price movement has moved comfortably above a historically key level—the 200-day moving average—which has shifted from being a ceiling to a minor support at $68.47 amidst climbing prices. Now that prices have closed above the 61.8% retracement, the next short-term level to watch is around $72.22. This area, a key point from early April, could serve as a temporary pause. If momentum falters here, traders might look again toward the $70.96 range, which is both a retracement level and a pivot established earlier this quarter. The day’s intraday highs near $77.57 may not signal a breakout, but they show the market’s willingness to test higher levels unseen since earlier this year. Beyond that, the next significant target is the January high of $80.73. If prices rise towards that level in the coming sessions, we might see shifts in positioning, especially around contract roll periods when trading volume increases and pressure becomes more apparent.

Monitoring Delta Exposure

For those tracking delta exposure, this price movement has multiple implications. Options skews are likely adjusting due to the rally, especially as call options approach being in-the-money. This situation often leads market makers to adjust their gamma, contributing to further movement in the underlying assets. Be prepared to consider these effects rather than just relying on directional chart signals. Carry costs in calendar spreads might also increase briefly, as near-term contracts outpace those planned for the future. This backwardation typically suggests that the market is focusing on immediate issues, whether geopolitical, related to supply chains, or even weather in transport areas. Prices are rising while physical fundamentals are stable, indicating that expectations are driving the movement. When this disconnect occurs, it’s wise to reevaluate short gamma exposure and position sizes, especially around week-end or month-end expirations. We’ve seen cases where thin liquidity amplifies price swings. Regarding implied volatility, today’s movements likely caused a short-term reduction in skews for puts, especially for strikes a few dollars below the current price. Traders looking to express near-term views should test these levels for premium efficiency before committing to positions or spreads, particularly ahead of high-volume sessions near inventory updates or major data releases. The coming sessions will feature rebalancing flows, especially from index-linked exposures, which may create more noise than signal on price charts. During these times, mechanical triggers—like breaking support and resistance—usually carry more significance than market sentiment. We will continue to monitor changes in positioning, particularly with rising open interest levels and their deviation from past trends. These patterns often appear a few sessions before increased market volatility. Tail scenarios may become more intriguing if minor support levels break down quicker than they build up. Be prepared for any whipsaw risks. Create your live VT Markets account and start trading now.

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Canada’s manufacturing sales fell by 2.8% in April, exceeding the expected 2.0% decline. This marks the largest monthly drop since October 2023 and the lowest level since January 2022. In March, sales had already decreased by 1.4%. The primary cause of this decline was a sharp 10.9% decrease in petroleum and coal products. Sales of motor vehicles and primary metals also dropped by 8.3% and 4.4%, respectively. Excluding petroleum and coal, sales were still down by 1.8%. Compared to April last year, manufacturing sales fell by 2.7%, showing a 1.8% decrease when adjusted for constant dollars. The Industrial Product Price Index also dropped by 0.8% during the same month. Manufacturers reported that recent U.S. tariffs have impacted Canada’s manufacturing sector. About half of those surveyed indicated they felt the effects of tariffs. A third reported price increases, a quarter faced higher costs for raw materials, shipping, or labor, and a fifth noticed changes in product demand. The most affected areas included transportation equipment, primary metals, and fabricated metals, with Ontario experiencing the greatest drop in sales due to tariffs. This data signals a notable downturn in Canadian manufacturing. The 2.8% decline in April exceeded expectations and followed an already poor showing in March. The consecutive monthly decreases and year-on-year losses indicate a widespread slowdown across various industries — from fuel refining to car production and heavy metals — rather than just isolated disruptions. The challenges are compounded by U.S. tariffs, which are significantly affecting the industry. Many businesses report experiencing higher input costs, changing demand, and tighter profit margins, especially in Ontario, where many affected plants are located. In terms of pricing, even the Industrial Product Price Index showed a 0.8% decline, highlighting a scenario where both input costs and output prices are decreasing. After adjusting for inflation, it becomes clear that fewer units were sold at lower prices. It’s evident that broader economic pressures, including U.S. policies, are influencing Canada’s manufacturing sectors. Production is slowing down, and the areas most affected, particularly transportation and metal fabrication, may not recover quickly without changes in conditions. The rise in raw material costs and evolving demand patterns adds further complexity. This decline in manufacturing data, along with rates not seen since late 2023, affects our outlook on short-term risks. Volatility is increasing in sectors that were previously stable. With less output, the situation is prone to sharp price swings in response to any surprise data or policy changes. We are closely monitoring trade and domestic output data, as these may provide early signs of whether producers are adjusting their inventories or cutting back further due to lower demand. The effects of tariffs are still not fully factored in, and additional challenges could disproportionately affect firms with thin margins or those closely linked to the U.S. market. In summary: we should anticipate ongoing softness in the coming weeks. The gap between expectations and actual results is widening, making it unlikely that market reactions will remain subdued. Differences between stronger and weaker sectors may become more evident, and fluctuations in industrial sentiment figures may carry greater significance. Timing is crucial. Market participants often react strongly to unexpected production trends, especially when drops exceed expectations. In this environment, quick decision-making and strategic positioning are more important than ever. Industrial and energy-related companies will likely feel the impact, even with their smaller weight in broader indices. Producers are adapting to cost changes by reducing orders, cutting production, or delaying shipments. We are watching for any shifts toward lower inventory levels and forward guidance that reflect these changes. The overall climate is one of declining demand, softer prices, and increasing sensitivity to policy changes. Without a clear catalyst for recovery, we must carefully monitor pricing pressures and production volumes.

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Canada’s industrial capacity utilization rate increased to 80.1% in the first quarter, exceeding expectations of 79.8%. This suggests positive movement as monetary policy loosens. In the mining, quarrying, and oil and gas extraction sector, the capacity utilization rate rose by 0.7 percentage points to 76.7%. This growth is attributed to increased activity in the oil sands and support services.

Electricity Sector Insights

The electric power generation, transmission, and distribution sector saw its rate rise from 83.2% to 86.1%. The demand for electricity increased due to colder than usual temperatures, which led to greater heating needs. On the other hand, the manufacturing sector faced a slight decrease of 0.2 percentage points, settling at 77.9%. This decline resulted mainly from drops in petroleum and coal product manufacturing by 6.9 percentage points, and fabricated metal product manufacturing by 3.1 percentage points. This report shows mixed strengths in the economy, especially in energy and utility sectors, while other areas struggle to keep up with changing monetary conditions. The rise in Canada’s industrial capacity utilization rate to 80.1%, slightly above expectations, takes place as policy-makers ease restrictions. This is significant. Bouchard’s department connected the higher rate in oil and gas extraction to a rebound in oil sands development and increased supporting activities. Essentially, production is adapting to stronger demand, or at least preparing for it. Meanwhile, the 2.9-point jump in electricity sector utilization reflects the impacts of weather—colder temperatures increasing residential and industrial demand, especially in regions reliant on traditional heating methods.

Manufacturing Sector Challenges

Despite some sectors seeing growth, manufacturing reveals deeper issues. A 0.2-point drop might seem small, but breaking it down shows nearly a 7 percentage point decrease in petroleum and coal products and over 3 points in fabricated metals. This indicates a shift that is more structural than cyclical, meaning these declines won’t reverse quickly. Traders focusing on derivatives should note the differences across industrial segments. These discrepancies may point to ongoing volatility and adjustments needed in future pricing assumptions. While parts of extraction and energy are recovering, manufacturing signals that challenges in output remain. We’ll analyze implied volatility based on this data, especially with upcoming inventory and output releases. The current trends don’t support a full rebound in all sectors, and the market is unlikely to view this increase in capacity use as evenly distributed. Also, expect forward-looking indicators linked to energy-sensitive instruments to reflect short-term demand changes. Weather anomalies, like those affecting electricity demand last quarter, will have direct impacts on seasonal hedges and calendar spreads. Additional problems may arise where infrastructure can’t keep up or when margins tighten due to fluctuating input costs. For now, the main takeaway is clear. While increased utilization in extraction and power sectors may indicate rising core industry demand, it also raises the risk of commodity price shocks. Lower output in manufacturing suggests we haven’t fully overcome the broader challenges in industrial demand recovery. For those monitoring short-term interest rate expectations—especially in futures or options—this mixed data is less likely to change the overall trend significantly but may affect pricing at the edges. There is little in this report to indicate a single directional move across rates, but there are clear signs that discrepancies between sector-related exposures could widen. Create your live VT Markets account and start trading now.

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The US dollar gained strength after Israel’s military actions against Iran’s nuclear and military facilities. This situation also caused US yields to rise—a rare event. Current US yields show slight increases: – **2-year yield:** 3.911%, up 0.6 basis points – **5-year yield:** 3.962%, up 0.4 basis points – **10-year yield:** 4.359%, up 0.2 basis points – **30-year yield:** 4.846%, up 0.3 basis points US stocks started lower but stabilized: – **NASDAQ:** down 1.13% – **S&P index:** down 0.90% – **Dow industrial average:** down 1.0% Crude oil prices jumped by 7.95% to $73.45. Gold rose by $37, or 1.1%, reaching $3423.56. However, Bitcoin saw a slight drop, falling by $600 to $105,121. The video further explores the EURUSD, USDJPY, and GBPUSD currency pairs from a technical perspective. This analysis offers insights into market feelings and risks, which may help lessen the impact of current geopolitical tensions on trading. What we see is how external events can quickly affect multiple asset classes. The US dollar rising after military strikes is a common reaction, reflecting its status as a safe asset in uncertain times. Interestingly, bond yields are rising even with increased risk avoidance, which is unusual. Typically, during such geopolitical events, investors flock to treasuries, leading to lower yields. The slight rise in yields suggests that there is more than just a focus on safety; investors might be anticipating inflation or changes in future interest rates. The yield curve, particularly between two and thirty years, is relatively stable. However, these increases prompt us to consider the impact on bonds sensitive to duration. Even minor changes, like half a basis point, can significantly affect leveraged positions. Although the shifts are small, they are more significant in this environment. Equity indices fell together, led by technology stocks. All major US equity benchmarks dropped consistently but without panic. This suggests a rotation rather than a withdrawal. Investors didn’t completely flee to cash; instead, they repositioned based on shifting costs and risks. The synchronized drops across indices indicate a broader reassessment, not isolated weakness. Commodities told a similar tale; oil prices soared nearly 8%. This is expected with tensions in the Middle East, as it raises concerns about supply disruptions. The increase in oil prices pushes forward contracts much higher than usual, making risk management for hedging more challenging until prices stabilize. The rise in gold was anticipated, but a $37 increase is significant, indicating a shift in sentiment rather than just a typical move to safe assets. If this trend of investing in physical assets continues, it may slow growth in related sectors due to limited capital. In contrast, Bitcoin’s slight decline shows its evolving role. The drop suggests it is becoming more of a speculative asset rather than a safe haven, reacting like high-risk stocks in a tough environment. This indicates that there hasn’t been a complete flight from risk, even with overall market anxiety. Regarding foreign exchange, the video mentioned focuses on technical analysis for key USD pairs. Analyzing these charts reveals more than just directional trends; it helps confirm trader behavior. Traders buying USD through EURUSD and GBPUSD consider interest rate differences, but geopolitical factors shape these trades, influencing their risk outlook. It’s worth noting that pricing has remained orderly. This is a positive sign. Even with military tensions disrupting economic calm, market mechanisms aren’t amplifying stress through feedback loops. Thus, today’s reactions seem measured and intentional. This is crucial when balancing leverage and implied volatility. The key is to use these small fluctuations as an advantage, avoiding impulsive moves based on headlines. As the week progresses, there may be pressure to widen hedges or adjust strategies. However, right now, maintaining tighter ranges with steady adjustments seems more suitable. We expect more data and policy updates soon. Bonds may react again, influenced by shifts in equities or oil, or currency pairs might test yesterday’s levels. Ultimately, understanding how trading desks reorganize their positions is vital. There’s likely to be a temptation to widen spreads to navigate volatility better. But timing these changes carefully can prove more beneficial than waiting for another trigger. While we aren’t in crisis mode, we remain exposed enough to see sharp reactions from even minor events.

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Eurostat has released new data showing that industrial production in the Eurozone dropped by 2.4% in April. This was worse than the expected decline of 1.7%. The figure for the previous month was initially reported at +2.6% but was later revised down to +2.4%. The decrease in industrial production affects various sectors. Intermediate goods went down by 0.7%, energy fell by 1.6%, and capital goods dropped by 1.1%. Durable consumer goods had a small decrease of 0.2%, while non-durable consumer goods saw a larger fall of 3.0%.

Impact On Manufacturing Activity

These numbers, shared by Eurostat, highlight the current state of manufacturing in the Eurozone. The revision of last month’s data shows that earlier optimism was likely exaggerated. For traders, this serves as a reminder that economic indicators continue to challenge recovery efforts in some areas. Energy production has faced challenges again, pulling the overall index downward. The significant drop in non-durable consumer goods suggests a decline in household consumption or weaker demand, possibly due to ongoing inflation pressures. The decrease in intermediate goods and capital equipment indicates a slowdown in business demand and future investments, which suggests companies are cautious and cutting back on spending for expansion. When new data comes in so much lower than expected, it tends to influence the pricing of futures and options that rely heavily on market sentiment. This situation reflects a broader trend of decreasing outputs across different categories rather than just a single poor result dragging down the average. It’s important because the updated data shows a consistent pattern rather than a one-time event. The decline in machinery and infrastructure-related outputs—shown by the fall in capital goods—is concerning, as it often leads other sectors. These numbers are significant and seem timed to test the confidence built into current interest rate expectations.

Volatility And Market Implications

Given this perspective, looking at short-term implied volatility may provide more insight than focusing solely on market direction. The current market reaction has been subdued, which might mean downside risks are being underestimated or that there’s a belief that ECB policy will remain steady. We should closely observe whether structured selling in longer-dated options begins to unwind, especially for those sensitive to further inventory declines. With this in mind, calendar spreads may not be as stable as they have been recently. It’s worth monitoring if put skew becomes steeper with upcoming data. If this happens, positions expiring in early July might indicate a quicker market adjustment. This is especially important considering recent shifts in market flows since earlier data revisions. Taking a closer look at overarching trends, there is a clear slowdown in the main drivers of production. It’s misleading to attribute this solely to seasonal variations. Instead, there is real weakness in core demand now impacting the manufacturing supply chain. This is evident in the gap between durable and non-durable goods. We believe these changes have not yet been fully accounted for in certain market derivatives. The adjustment in future expectations is lagging behind actual performance, particularly concerning the Euro. There is a growing gap between reported volume and future expectations suggested by volatility curves—this presents opportunities in specific targeted strategies. Finally, this moment isn’t just a reaction. The broad decline suggests a structural hesitation in the market. Justifying long positions becomes harder unless they are balanced with tightening spreads, especially for those involved in cyclical sectors. It’s essential to rethink strategies and shift focus from simplistic rate-based setups to more event-driven approaches. Create your live VT Markets account and start trading now.

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Iraq has confirmed that gas supplies from Iran are still flowing smoothly, despite recent Israeli airstrikes in the area. This news comes at a time of rising tensions. After a brief drop, oil prices are on the rise again. West Texas Intermediate (WTI) crude is now priced at $72.96 per barrel, showing a 6% increase for the day. Iraq has stated that its gas imports from Iran remain steady, even as Israeli military actions raise concerns in the region. This statement aims to ease worries about possible interruptions to energy supplies, which could affect larger markets. Gas-powered generation is vital for Iraq’s electricity supply, and disruptions to these imports could lead to power shortages. Meanwhile, WTI crude is experiencing a sharp increase, now trading at $72.96 per barrel, recovering by 6%. This rise follows a short decline, likely due to uncertainties surrounding security in the Middle East and changes in short-term demand. Brent crude is also showing signs of recovery, supporting the view that the earlier decline may have been an overreaction. Steady energy demand in Asia and ongoing refinery activity in the U.S. suggest that the market’s appetite for crude remains strong. Current price movements seem to reflect a broader reassessment by energy market players about the stability of supply routes. While Iraqi gas imports from Iran appear secure for now, there are still worries about the overall fragility of connected supplies. With energy futures climbing quickly, we’ve noticed that pricing for options has increased as traders seek protection against price fluctuations. Volatility measures, especially for near-term contracts, indicate a higher risk that may continue over the next two weeks. Institutional traders are acting more strategically, often adjusting their positions sooner than usual. Following rising tensions in the eastern Mediterranean, we noticed a significant increase in call options at the $75 and $80 levels for short-term WTI contracts. This suggests preparation for possible rapid price changes. The actions of traders, including hedgers and short-term buyers, highlight how responsive this month has become to unexpected geopolitical events. Hosseini’s recent remarks about stable exports have made bearish trades more cautious. He assured that there won’t be a drop in deliveries, giving some confidence to industrial users. Still, the persistence of backwardation suggests ongoing medium-term uncertainty, reflecting that peace-of-mind assurances in the media aren’t enough to fully calm the market. In this current climate, sharp reactions to news are becoming standard practice. Any updates from Tehran or Tel Aviv could not only affect spot prices but also impact future contracts, particularly those for the second and third months of WTI, which are currently more sensitive to changes. Therefore, the timing of market reactions is as crucial as the direction. We are monitoring concentration in open interest by strike price, noting that the distribution is heavily clustered in the upper ranges. Traders are gradually increasing delta—not as a mass response, but through more cautious risk management. This clustering could create pressure in the next 10 to 12 sessions, especially if macroeconomic data diverges from current energy market expectations. As broader volatility indices remain stable across other asset classes, any widening of crude derivatives might only affect commodity-related markets for now. However, it’s evident that no trading positions, even those considered hedged, are fully protected in this climate, where political statements and regional tensions can significantly impact intraday trading volumes. Looking ahead, the next challenge appears to be updates on U.S. inventory data and signals from Iranian exports, both of which often influence prices even before they are officially released. We plan to adjust our positions proactively, especially around expiry times when liquidity may be low. When energy prices are closely tied to news, balancing flexibility and risk management becomes essential.

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China’s M2 money supply grew by 7.9% in May compared to last year, a bit lower than the expected 8.1%. The increase in April was 8.0%. In May, new yuan loans reached ¥620.0 billion, which was less than the forecasted ¥850.0 billion and a drop from ¥280.0 billion in the previous month.

Tapering Off In Monetary Momentum

The drop in new bank loans comes after a strong increase in the first quarter, driven by government stimulus due to worries about a potential trade war with the U.S. These new numbers indicate a slowdown in monetary momentum. While many had suspected this, they lacked solid data until now. The slight miss in M2 growth alongside a bigger shortfall in new yuan loans clearly shows that credit expansion is easing after policymakers initially ramped up support earlier in the year. The rapid lending in the first quarter was more about managing external pressure than consistent growth. The ¥620.0 billion lent in May shows that the willingness to borrow is cooling off. Although it’s still an increase from the prior month, it’s significantly less than what was expected. While one might think this could be seasonal, considering the post-stimulus pullback, stricter bank controls, and concerns over asset quality, it looks more like a careful adjustment. We believe that this drop in liquidity and slowing credit growth could impact short-term market sentiment on rates and volatility. Traders focusing on rate-sensitive investments may start to lower their expectations for aggressive easing. The muted credit growth often leads to decreased real activity, which usually calls for some monetary support. However, the slow rise in M2 suggests that authorities are not yet flooding the system with money.

Potential For Additional Loosening Tools

This slowdown, particularly amid rising geopolitical risks, presents a challenge. Previous interventions were laid out in advance, likely to create a buffer before trade tensions escalate further. But the weak loan figures in May indicate tighter financial conditions than intended. This could lead to speculation about additional measures for easing, such as cutting reserve requirements or providing more targeted guidance. For implied volatility in Asian FX and interest rate curves, this softer data can introduce temporary uncertainty. We’ve seen before that small credit contractions lead to quick market reactions before the calm returns. Recently, traders are reassessing much faster, often taking just a few sessions rather than weeks. Thus, positioning around these trends requires quicker responses than in the past. In summary, liquidity support seems to be lagging behind market expectations, causing an imbalance—especially in swaps and structured carry trade products. We should closely monitor further actions by the People’s Bank of China in open market channels. Any signs of increased operations or adjustments to repo rates would likely provide more clarity. It’s important to recognize that this May data, often considered backward-looking, might actually be one of the most forward-looking releases. Growth predictions based on stimulus will only hold if the necessary funds are available and circulating. We’re observing the gap between policy goals and real credit delivery, and how this gap can influence risk perceptions in funding markets. Create your live VT Markets account and start trading now.

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The USDJPY pair is currently moving within a set range, showing weak support for the US dollar. Recent US economic data has been weaker than expected, with lower Consumer Price Index (CPI) and Producer Price Index (PPI) numbers, along with weak jobless claims. This has led to a more cautious outlook on interest rates and a decline in Treasury yields. The Japanese yen remains weak as well. The Bank of Japan is reportedly reducing its bond purchases and has no immediate plans to change interest rates. The central bank is waiting for updates on the US-Japan trade deal and inflation trends. On the daily chart, USDJPY is nearing the 142.35 support level, primarily due to the weak US data. On the 4-hour chart, the price has been stable, fluctuating between important levels. For risk management, it’s best to wait for the price to reach one of these key points. The 1-hour chart shows a drop below the 144.35 level, which has boosted bearish momentum. If the price retests the 144.35 level, sellers can set a defined risk above it, potentially pushing the price down to 142.35. If buyers manage to break above 144.35, they may target 146.28. The University of Michigan’s Consumer Sentiment report will wrap up the week’s economic data. Currently, the market is balancing declining momentum in the dollar against ongoing weakness in the yen. With several inflation reports coming in softer than expected and signs of a weakening labor market, sentiment has shifted towards a more patient approach to US interest rates. Yields have fallen in response, which has removed a key source of USD strength. As a result, the USDJPY pair remains under pressure across various timeframes. Meanwhile, signals from Tokyo indicate a cautious approach rather than decisive action. The Bank of Japan seems hesitant to shake up the markets until it has a clearer understanding of inflation and trade developments. This caution has kept expectations stable following recent bond purchase reductions, explaining the lack of fresh inflows into the yen. Therefore, any decline in the USDJPY pair is mainly due to dollar weakness rather than yen strength. Looking at the charts, we can see decreased volatility. On the daily chart, prices are moving closer to the 142.35 area, a level that previously attracted buying interest. How much the price drops in the short term will depend on reactions to upcoming US consumer data. Notably, recent differences between inflation surveys and actual data may influence trader behavior. The shorter timeframes provide a clearer picture. On the 1-hour chart, there’s been a clear drop below 144.35, leading to growing bearish pressure. Sellers who entered the market earlier may have begun to trail their stops or take partial profits. If there’s a bounce back to the broken 144.35 level and the price stalls, it may present another selling opportunity, especially if trading volume decreases. For those looking for a high-probability trade, it might be wise to remain patient until volatility increases. The 4-hour structure still keeps movement within defined limits, and entering near these edges usually offers better risk management. These boundaries help make decisions without guessing where the price may “break out.” Traders should also keep an eye on sentiment indicators, like the Michigan survey, as they could shift expectations. While this survey usually doesn’t cause big market moves, any significant changes in consumer sentiment and inflation could impact future interest rate paths. While the long-term trend is still cautiously upward, daily and intraday patterns suggest lower levels are being tested consistently. A move below previous support won’t trigger a strong reversal, but combined with weaker macro drivers, a downward shift remains possible. Until there’s a daily close above resistance, the anticipated path seems to lean towards gradual declines.

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