Global markets were led by a sharp retreat in oil after three nights without US-Iran strikes, with September WTI down nearly 7.8% on the day after finishing a little more than 8.5% higher last week; it hit $93.50 on 23 July, eased to about $87.70 before the weekend and traded to slightly above $82, with the mid-point of the month’s rally near $80.30. Lower crude helped pull bond yields down: the 10-year US Treasury yield fell four basis points to almost 4.63% and the two-year slipped three to 4.30%, while European benchmarks were mostly 4–7 bp lower and the UK 10-year gilt was down seven. Risk appetite improved as Europe’s Stoxx 600 rose about 0.7% and US futures gained 1.0%–1.6%, while CXMT surged by more than 450% on its Shanghai debut; gold held above its 20-day moving average near $4070 after a 1.4% weekly rise, and silver followed last week’s roughly 5% gain, briefly topping $60 before slipping to around $59.
In FX, the euro traded within about $1.1365–$1.1435, with option expiries of 1.3 bln euros at $1.1375 and nearly 1.5 bln euros at $1.1400; sterling rebounded from almost $1.3300 to near $1.3365, while USD/CAD ranged around CAD1.4070–1.4115 and the Australian dollar tried to regain $0.7000 as options worth almost A$600 mln clustered near $0.7030. USD/JPY eased through JPY163.35 but stayed close to last week’s near-JPY164 40-year high as one-month implied volatility rose from about 5.9% to around 6.3%; USD/CNH fell to around 6.7650 as the PBOC set CNY6.7911 versus 6.7939. Emerging markets were led last week by the Colombian peso (+1.3%), then the Brazilian real (almost +1%), rouble (+0.60%) and Mexican peso (nearly +0.4%); the rupee rose a little more than 0.7% to around INR95.7840, testing the 20-day average near 95.81, after inflows of around $32 bln cited from subsidised-rate measures. Data focus includes US durable goods after May’s 4.5% drop, with Boeing orders 121 versus 27 and deliveries 64 versus 60; core orders are seen up 0.9% after 1.4%, while June’s 1.5% monthly average in H1 2025 would slow to about 0.9% in H1 2026. US Q2 GDP is seen at 2.3% annualised versus 2.1% in Q1 and GDPNow at 1.7%; Mexico’s trade surplus widened from almost $920 mln in Jan–May 2025 to $5.77 bln in Jan–May 2026 and Q2 GDP is forecast at 0.6% q/q after -0.6% in Q1. Elsewhere, eurozone M3 grew 3.3% y/y versus 3.0% in May, Germany’s IFO business climate rose to 86.6, Japan’s producer service prices eased to 3.2% from a revised 3.4%, and China’s industrial profits rose 15.1% y/y versus 21.1%.
Market Strategies in Reaction to Volatility
We should take advantage of the sharp drop in oil prices, which have fallen nearly 8% to around $82 a barrel, by positioning for further cooling in inflation expectations. Historically, a sudden weekly drop in crude of this magnitude tends to drag down ten-year Treasury yields by another 10 to 15 basis points in the subsequent weeks. We suggest buying short-term call options on US Treasury proxies to capture this yield decline, especially with the 10-year yield already slipping to 4.63%.
With giant tech earnings like Microsoft, Meta, Apple, and AMD coming up this week, we expect heightened volatility in the equity options space. These four tech giants represent over 15% of the total S&P 500 market capitalization, and historical data shows their earnings weeks can swing the Nasdaq by an average of 2.5% in either direction. Implied volatility for tech-heavy indexes is currently underpricing this event risk, making long straddles or strangles on the QQQ attractive plays for us before Wednesday.
Key Trades in Foreign Exchange Markets
In the currency markets, we should focus on the heavy option expiries pinning the euro near $1.1400. Today alone, nearly 2.8 billion euros in options expire between $1.1375 and $1.1400, which is keeping price action tightly contained. We recommend selling short-term straddles around the $1.1400 strike to collect premium, as the spot price is highly likely to remain anchored by these massive open-interest blocks.
For the Japanese yen, we must prepare for potential central bank action as the currency hovers near JPY163.35, just below its 40-year low. Although the Bank of Japan is widely expected to stay on hold, historical interventions have triggered sudden 300-to-500 pip rallies in the yen within hours. With one-month implied volatility sitting at a relatively low 6.3%, buying out-of-the-money USD/JPY put options offers us a cheap hedge against a sudden, aggressive rate hike or currency intervention.
Finally, we should look at trading the Australian dollar as it struggles to hold the $0.7000 level. With A$600 million in options expiring at $0.7030 today, any breakout attempt is facing stiff technical resistance. We favor entering short-term limit orders to sell the Aussie near $0.7030, targeting a retracement back toward the $0.6960 support level.
