🌏 Trade Tensions Subside, Focus Shifts to Policy Decisions and Political Risks

🌏 Trade Tensions Subside, Focus Shifts to Policy Decisions and Political Risks

✅ Reduced Trade Risks: Negotiation Progress and Geopolitical Calm

• US–EU Reach Tariff Agreement
  The previously threatened 30% US tariffs have been withdrawn, with both sides agreeing on a 15% rate.
  European stocks rallied in response, though dissatisfaction with the deal has emerged in Germany and France.
  Some profit-taking seen in auto-related stocks, exerting temporary pressure on the euro.
• US–China Talks Continue
  Negotiation deadline extended, with an additional 90-day grace period for tariffs.
  Vice-premier level working talks begin today in Stockholm.

✅ FX Market: Dollar Firm but Uncertainty Lingers

• USD/JPY
  As trade worries ease, focus shifts to monetary policy and political uncertainty.
  Yen selling prevails on expectations of widening interest rate differentials and uncertainty over PM Ishiba’s political future.
  During London hours, the pair ranged between 148.16–148.74, now stable in the mid-148s.
• EUR/USD
  Initial rebound after the agreement was limited. Ongoing concerns from Germany and France plus broader economic uncertainty cap gains.
  Tokyo: 1.1599 → London: 1.1527 → Europe: rebound toward 1.1580.
  Weak economic sentiment continues to weigh on the euro.
• GBP/USD
  After rising in Tokyo, the pound lost steam in London before recovering—essentially a round trip.
  High: 1.3362 → Low: 1.3316 → Now: hovering around 1.3350 with little clear direction.

🧾 Upcoming US Data & Financial Events

Note: Fed is in blackout period ahead of FOMC—no official remarks expected.

🏛 Monetary Policy Path and Political Uncertainty

• Bank of Japan (July 31)
  Asahi Shimbun reports that a rate hike is unlikely, accelerating yen selling.
  BoJ may revise inflation forecasts higher due to surging food prices.
• FOMC (July 31)
  Broad expectations for rates to remain unchanged.
  Reports suggest Trump may have personally urged Chair Powell to cut rates.
• ECB (European Central Bank)
  Deutsche Bank hints a rate hike could be next.
  Diverging national outlooks make market expectations mixed.
• Japanese Politics
  Speculation around PM Ishiba’s resignation grows; intra-party discord draws attention.
  Political instability seen as a potential catalyst for foreign investors to reduce Japan exposure.

🔍 Market Mood & Outlook

Markets remain supported by trade resolution optimism, keeping the dollar firm.
However, with major events ahead—FOMC, BoJ, and US NFP (Aug 2)—volatility could spike.
Beware of "sell-the-fact" reactions as key events unfold.
A tense, range-bound market may persist until directional clarity emerges.

📊 [Strategy Analysis] Key Pairs Outlook & Scenario Breakdowns

💴 USD/JPY (around 148.55)

📌 Base Strategy: Buy on dips, but cautious ahead of key events

• Support: 147.80 / 147.40
• Resistance: 148.85 / 149.20

🔹 Drivers:

• Trade risks fading, yen-buying pressure reduced
• BoJ likely to hold rates + political risk → yen selling
• FOMC & NFP to guide dollar direction

✅ Tactical Plan:
Maintain bullish bias above 147.80.
Consider reducing long positions if price stalls near 148.85.

📉 Alternative Scenario (Risk):
If FOMC turns dovish or NFP disappoints → test of low 147s.

💶 EUR/USD (around 1.1585)

📌 Base Strategy: Sell on rallies, cautious of data and tariffs

• Resistance: 1.1610 / 1.1650
• Support: 1.1550 / 1.1500

🔹 Drivers:

• EU economic concerns + uncertain US–EU trade dynamics → euro capped
• USD strength sustained via rising DXY

✅ Tactical Plan:
Fade rallies below 1.1610. ECB’s dovish stance vs firm USD is the base thesis.

📉 Alternative Scenario:
Stronger German data or weak US prints → possible test of 1.1650.
Still, below that level, selling pressure expected to resume.

💷 GBP/JPY (around 197.90)

📌 Base Strategy: Trend remains up, but overbought conditions rising

• Support: 197.10 / 196.50
• Resistance: 198.30 / 198.85

🔹 Drivers:

• UK data is soft, but JPY weakness lifts GBP/JPY
• Risk-on tone supports the pound

✅ Tactical Plan:
Buy on dips between 197.10–197.50.
Break above 198.30 could trigger momentum toward 198.85.

📉 Alternative Scenario:
If FOMC triggers yen buying, sub-197 levels may accelerate losses—manage stops tightly.

📌 Summary Chart: Strategy Breakdown