Oil slid as markets priced in a potential resumption of US–Iran talks, following Donald Trump’s comment that discussions are under way after Tehran said it had no plans for direct negotiations. The Dollar Index (DXY) was up about 0.1% near 99.90, just below 100.00, after the ISM manufacturing PMI rose to 55.6 in July from 53.3, above the 54 forecast. New orders increased to 56.7, while prices paid eased to 71.1 from 73. In G10 FX, EUR/USD fell roughly 0.2% to 1.1510 and GBP/USD slid about 0.4% to 1.3430; USD/JPY declined around 0.4% to 156.90 and AUD/USD dropped about 0.5% to 0.6990. WTI sank about 7.4% to near $78 a barrel, while gold edged up around 0.2% to about $4,052 an ounce, holding above $4,000.
Tuesday’s focus moves to Asia-Pacific data: New Zealand’s Q2 jobless rate is seen at 5.4% versus 5.3%, with employment growth at 0.1% from 0.2% and the labour cost index at 0.6% QoQ. Australia’s final S&P Global services PMI is expected at 53 and the composite at 52.6, alongside the AiG industry index. Japan’s labour cash earnings are forecast at 3.4% YoY in June versus 3.2%, and the BoJ will publish June minutes. China’s RatingDog services PMI is seen at 53.7, down from 54.1. Canada’s S&P Global manufacturing PMI is expected at 50.2 after 53, while US factory orders are forecast to rise 0.2% MoM in June after a 1.3% fall, and JOLTS openings are seen at 7.45m versus 7.594m.
Option Strategies for Commodities and Safe-Haven Assets
We should position ourselves for continued downside in oil by utilizing bear put spreads on West Texas Intermediate (WTI). Yesterday’s sharp 7.4% drop to $78 per barrel shows how quickly geopolitical risk premiums can unwind, reminiscent of the massive single-day plunges seen during previous oversupply scares. With Washington and Tehran hinting at negotiations, we expect implied volatility to remain elevated, making capped-risk option structures highly favorable.
Despite a stronger US dollar, we recommend holding long-term call options on Gold as it consolidates above the historic $4,052 level. Gold’s ability to shrug off a rising Dollar Index (DXY) near 99.90 demonstrates intense defensive demand that historically precedes prolonged bull runs. Central banks bought a record 1,037 tonnes of gold during past global banking stresses, and this ongoing institutional appetite means any geopolitical pullbacks should be viewed as buying opportunities.
Trading Tactics for FX Majors and Commodity Currencies
We advise trading the USD/JPY pair with a downward bias using put options to capitalize on the Bank of Japan’s hawkish stance. The pair’s inability to rally alongside the dollar highlights market fear of another direct intervention, similar to Japan’s historic 9.8 trillion yen ($62 billion) defense operation in 2024. With Japanese wage growth projected to accelerate to 3.4% YoY, further monetary tightening will likely push the pair well below the 156.90 mark.
For European majors, we should look to sell rallies in GBP/USD while maintaining neutral-to-bullish structures on EUR/USD above 1.1500. Cable’s 0.4% slide to 1.3430 reveals its vulnerability to a rebounding dollar, especially without local UK catalysts to support the Bank of England’s recent hawkish tone. Meanwhile, the Euro’s steady retention of the 1.1510 level suggests institutional buyers are actively defending this key support zone.
We suggest buying put options on the Australian and New Zealand Dollars ahead of the upcoming Oceania labor data. The AUD/USD has slipped back under the critical 0.7000 threshold, while New Zealand’s unemployment rate is forecast to climb to 5.4%. Historically, weakening labor markets in this region prompt immediate dovish shifts from central banks, which will likely accelerate the current slide in these commodity currencies.
