Last week’s recap
Last week was mostly a gold week. There were a couple of good chances to get into the market: first the longs got ridden, and toward the end of the week the shorts set up nicely. Not a very active week — but a good one. This week the breakdown covers more assets.
The big picture: two weeks that decide the summer
Before the individual instruments, the frame — because everything this week hangs off it. The next two weeks are the key ones: the Fed, the Bank of England and the Bank of Japan meet, with NFP right behind them. The main market driver is the dynamics of the US 10-year yield. If yields keep rising, the dollar stays strong and risk assets stay under pressure. At the first signs of a reversal in the yields, expect a large correction in the dollar and a recovery across most markets. On the fundamentals, an intervention next week looks highly likely.
DXY — the dollar index
103.90 is visually the ceiling on the dollar index for now, but the main Debt sits at 106.50. Direction depends on Warsh and Bessent — the Treasuries and their actions are the foundation for the week. The key scenario is a continued rise in the 10-year toward the important resistances, which supports dollar strength into the 102.7–104 area.
A vertical rise to 106.50 is very unlikely: on the 10-year that’s the 5.75–6% region, already a financial-crisis level for the whole world. The Fed would need to hike 0.5% on Wednesday — and then, after a spike up in the dollar, everything would roll into a correction, the 10-year included. A 25-basis-point hike is doubtful too; more likely they wait until September, and that kind of waiting could drag the 10-year toward 6% — which is a dollar at 106.50 and the euro around 1.0985 on spot. If the crisis scenario develops further, DXY could stretch to 106–108. After the Fed or the US Treasury steps in, expect the yields to reverse and the dollar to weaken.
US10Y — the one chart above all of it
The upper zones are very bad for the entire financial system. Powell spent his years as chairman rattled every time the 10-year approached 4.8–5% — and now 6% is looming. No panic here, and looking that far ahead is not the preferred game: but if 6% prints, the S&P 500 and the whole US stock market fall vertically and risk assets get driven down almost in a straight line. For now these are only thoughts — a crisis is not something worth trading on purpose.
EUR
The zones have narrowed and landed exactly where they should. Wednesday’s volatility is being actively traded in the options. There’s a one-point zone at 1.1380, and from there it can ride to the straddle and the puts — those are the biggest openings, so 100 points is an easy ride from the open. 1.1411 is also in work. Ideally, a 200-point drop sets up the buys — because down there the US, with its Treasuries, should start scrambling, and that’s dollar weakness.
Friday also printed a lot of options openings around 1.1275–1.1285, where a pullback can be worked with a reduced lot. Bigger picture: the current decline should finish and a reversal form, with the buy interest around 1.1185. The medium-term recovery target is the 1.1560–1.1735 area if things stabilize after the Fed. The idea in one sentence: first the decline, then the correction up.
JPY — the standout of the week
The main trade idea for the coming weeks. The expected move from the Bank of Japan: a final impulse up to 166.75–167, then the intervention and a strong reversal toward 158–159. The main position is planned from that zone, counting on a fast strengthening of the yen after the central-bank meetings. From the 63 strike the options go in the money. That trade is on — and then we’ll see what they paint until August 12.
GBP
The pound ties in closely with what the euro does. If the euro heads to 1.1185, the pound needs to spill to 1.2919. Given that the Bank of England meets Thursday and, like the ECB, will leave the rate unchanged, the odds of that drop are reduced — but they exist. 1.3427 also has to be worked: that’s the main Debt at the moment. And since the pound started falling earlier than the euro, it can pull back earlier too; there are players sitting in options on the zone below.
The pound looks weaker than the euro but is also near a potential reversal zone, so the main interest is buys from 1.3244, first target around 1.3427, further target 1.3758. If the market plays out the crisis scenario, the decline could go deeper before a full recovery. For now the nearest zones are in work — the rest gets decided by Wednesday.
S&P 500
Until Thursday’s clearing, these options are interesting if the S&P spills — that’s also the week’s maximum volatility, so let’s see whether they give such a spill. Rising yields keep the pressure on the US stock market, so the preference for now is selling into strength and buying only from predefined strong support zones. If the full crisis scenario plays out, the index could correct deeply, significantly below current levels.
Silver
Further downside is the working view. The main interest is sells after a confirmed break, then a buy-back around 49.5. Silver stays more volatile than gold, so expect a stronger move if the crisis scenario develops.
Gold
The 10% zone for Monday is still alive, but a rising open looks doubtful — selling to the lower zones is the preferred read. Tuesday is the semi-annual expiration, so Wednesday brings a refinement of the zones. There’s a very high probability the contract’s maximum volatility moves to 3562 on Wednesday — we’ll see what the CME calculates after the expiration. All the money sits in these options, so don’t forget the option of a spill down to 3562; 6% on the Treasuries hints they could go there.
The biggest buy interest is the 3550–3560 area, where a major medium-term bottom should form. After that the dollar goes into weakness, everything else into growth through the end of the year, and gold gets to 4530–4540 easily. Until that zone is reached, the preference is looking for sells from the resistances.
The plan, in one line
These are zones and scenarios being watched — the market decides, not the trader. Let price come to your levels and let the confirmations line up before you act. New to the terms? The glossary covers every structure named above.