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Scotiabank strategists say CAD strengthens against USD, extending typical April outperformance despite uncertain risk sentiment and momentum targets March lows

The Canadian Dollar rose against the US Dollar over the weekend, moving in line with other commodity-linked currencies despite an uncertain risk backdrop. USD/CAD fell to its lowest level since mid-March and continued a seasonal pattern often seen in April.

USD/CAD remained above a fair value estimate of 1.3531, while earlier overvaluation seen in late March and early April was described as easing. Technical analysis noted a break below support at 1.3625 after a brief pause last week.

Near Term Technical Direction

Short-term chart patterns were cited as pointing to further USD/CAD weakness. A retest of the early March low around 1.3520/25 was presented as a possible next move.

We are seeing the Canadian dollar strengthen decisively, continuing its usual April outperformance even with some uncertainty in the market. This move has pushed the USD/CAD pair below the key 1.3625 support level. The short-term trend now points firmly downward for the US dollar against the loonie.

This strength is supported by firm commodity prices, with West Texas Intermediate (WTI) crude recently breaking above $87 per barrel for the first time since late 2025. The positive momentum in oil gives the loonie a fundamental tailwind. Derivative traders should factor this external strength into their models for the Canadian dollar.

Given the bearish technical setup, we believe traders should consider buying USD/CAD put options. These positions would profit from a continued slide towards the 1.3520/25 area, which represents the lows from early March. Options expiring in late May or June offer a good timeframe to capture this expected move.

Options Strategy Considerations

Recent economic data reinforces this view, as last week’s Canadian CPI print came in slightly above expectations at 2.9%, keeping the Bank of Canada on hold. Meanwhile, the latest U.S. jobless claims figures showed a notable increase, suggesting some softening in the American labor market. This policy divergence is fundamentally negative for USD/CAD.

For those looking to generate income or express a less aggressively bearish view, selling out-of-the-money USD/CAD call spreads is an attractive strategy. By selling a call and buying a further-out-of-the-money call for protection, traders can profit if the pair stays below their chosen strike prices through expiration. This is a way to capitalize on the easing overvaluation we’ve observed since early April.

Looking back, the seasonal strength for the CAD this April appears even more pronounced than what we saw in 2025. Last year, the move was choppy, but this year’s break below 1.3625 seems more decisive. This suggests underlying momentum that could carry through into May.

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As oils strengthens the Canadian dollar, USD/CAD nears six-week lows amid a broadly weaker US dollar

USD/CAD fell for a second day on Monday, trading near 1.3610 and down 0.44%. It hit its lowest level in six weeks as the US Dollar weakened and market sentiment improved.

Markets reacted to reports of possible renewed talks between the US and Iran. Axios reported that Tehran has made a new proposal to end the conflict and reopen the Strait of Hormuz, a key route for global oil supply.

Risk Sentiment And Safe Haven Flows

These reports reduced demand for the US Dollar as a safe-haven. Negotiations were still described as uncertain.

The Canadian Dollar found support from higher oil prices. WTI traded around $94.65, up 1.32% on the day, amid ongoing concerns about supply after weeks of disruption in the Strait of Hormuz.

Canada is the largest oil exporter to the United States, which can support the Canadian Dollar when oil prices rise. Any agreement that eases supply risks could reduce crude prices and weaken this support.

Attention is now on Wednesday’s policy decisions from the Bank of Canada and the Federal Reserve. Both are widely expected to keep interest rates unchanged.

Central Bank Outlook And Volatility

The Fed meeting may add to US Dollar volatility in the coming days. This is due to uncertainty over the Fed’s future stance and the possibility it could be Jerome Powell’s last meeting as chair.

We remember that period in 2025 when USD/CAD tested six-week lows around 1.3610, largely driven by a temporary dip in the US Dollar. That move was fueled by WTI crude prices surging above $94 a barrel on supply fears. This dynamic provided significant, though short-lived, support for the Canadian dollar.

Today, the situation has evolved, as WTI crude is trading closer to $85, well off those 2025 highs. This moderation in oil prices has removed a key pillar of support for the Canadian currency. As a result, we’ve seen USD/CAD hold firm recently, currently trading around the 1.3750 mark.

The market’s reaction in 2025 to potential US-Iran dialogue was a clear reminder of how quickly sentiment can shift. Geopolitical headlines often cause short-term weakness in the US dollar as safe-haven demand eases. Traders should remain cautious, as such moves can reverse just as quickly when negotiations falter.

A year ago, our focus was on the Bank of Canada and the Federal Reserve holding rates steady in a high-inflation environment. Now, the key factor is the divergence in their easing cycles, with the BoC having already initiated rate cuts while the Fed remains more patient. This interest rate differential, which favors holding US dollars, continues to provide a strong floor for the USD/CAD pair.

Given this context, traders should consider strategies that benefit from a stable or stronger US dollar against the Canadian dollar. Buying USD/CAD call options or call spreads offers a way to gain upside exposure while defining and limiting downside risk. This approach protects against any unexpected surge in oil prices that could temporarily strengthen the loonie.

We also learned from the uncertainty around the central bank meetings in 2025 that implied volatility can present opportunities. Selling cash-secured puts on USD/CAD at levels below the current market, perhaps around the 1.3600 strike, could allow traders to collect premium. This strategy is effective if we expect the pair’s downside to remain limited by fundamental support.

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Standard Chartered expects the ECB to hold 2.00% on 30 April as conflict drives cautious monitoring

Standard Chartered strategists Christopher Graham and John Davies expect the European Central Bank to keep the deposit rate at 2.00% at its 30 April meeting, while it waits for more data as the Middle East conflict develops. They say there is a rising risk of a June rate rise if the Strait of Hormuz remains effectively closed.

Euro area inflation for April is forecast at 2.9% for the headline rate and 2.2% for the core rate, which reduces the chance of a rate rise in April. President Christine Lagarde is expected to say it is still too early to judge the full economic impact and that policy options remain open.

Inflation Signals And Policy Wait

Since the March meeting, headline inflation rose in March as higher oil prices fed into fuel costs. Core inflation edged lower, and purchasing managers’ indices fell into contraction in April.

The April inflation release on 30 April, due before the policy decision, is expected to show the same pattern. The article notes it was produced using an AI tool and reviewed by an editor.

We remember this time last year, in April 2025, when the European Central Bank held its deposit rate at 2.00%. The bank was facing a dilemma with rising headline inflation from an energy shock while core inflation was easing. The conflict in the Middle East and the effective closure of the Strait of Hormuz created significant uncertainty.

Fast forward to today, April 27, 2026, and the situation feels familiar yet different. The ECB’s deposit rate is now at 2.50%, but recent Eurostat flash estimates show headline inflation has cooled to 2.4% while core inflation remains stubbornly high at 2.7%. This presents a new kind of challenge, shifting the focus from external energy shocks to persistent domestic price pressures.

Market Positioning And Trade Implications

While the Hormuz situation has stabilized, new supply chain pressures from tensions in Southeast Asia are clouding the growth outlook. The market is now pricing in a nearly 60% probability of another 25 basis point hike by July, a notable shift from just a month ago. We believe President Lagarde will again avoid committing to a path, keeping all options on the table.

For derivative traders, this means positioning for continued uncertainty in interest rate policy. We see an opportunity in using interest rate swaps to pay a fixed rate, anticipating that the ECB may be forced to act more hawkishly than current sentiment suggests. This positions a portfolio for a potential upward surprise in rates over the next few months.

Given the ECB’s likely cautious communication, implied volatility on short-term Euribor futures options looks attractive. Purchasing straddles for June could be an effective strategy to capitalize on a significant market move, regardless of whether the ECB surprises with a hike or a more dovish pause. This protects against the risk of being on the wrong side of a policy decision.

The divergence between a potentially more hawkish ECB and a Federal Reserve that has clearly signaled a pause creates a compelling case in currency markets. We believe the interest rate differential could move in favor of the Euro in the coming weeks. Therefore, using EUR/USD call options offers a defined-risk way to position for potential upside in the currency pair.

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April saw the US Dallas Fed manufacturing index slip to -2.3 from -0.2 previously

The Dallas Fed Manufacturing Business Index in the United States fell to -2.3 in April. It was -0.2 in the previous reading.

The move takes the index further below zero. This signals weaker factory activity in the Dallas Fed district for April.

Texas Factory Slowdown And Market Implications

The recent drop in the Dallas Fed Manufacturing index to -2.3 shows that the slowdown in Texas is getting worse. This report is a warning sign for the broader U.S. economy, given the state’s importance in industrial output. We should consider this a signal to become more defensive in our trading strategies over the coming weeks.

This local data aligns with the latest national ISM Manufacturing PMI, which recently fell to 49.8, slipping back into contraction territory. These figures suggest weakening demand for goods is not an isolated issue, putting a spotlight on the health of the entire industrial sector. This creates uncertainty, as the market is now caught between signs of slowing growth and a Federal Reserve focused on inflation.

Given this, we believe it is prudent to look at buying protective puts on industrial and transport ETFs. The CBOE Volatility Index, or VIX, is currently trading near 17, a historically moderate level that makes hedging with options relatively inexpensive right now. Selling out-of-the-money call spreads on individual manufacturing stocks that have already guided for weaker earnings could also be a viable strategy.

This situation is complicated by the last core CPI report, which showed inflation remains stubbornly above the Fed’s target at 3.6%. Looking back to late 2025, we saw similar manufacturing weakness, but the market expected the Fed to quickly cut interest rates. With inflation still a problem today, the central bank has little room to support the economy, meaning any dip could be more painful for stocks.

Over the next few weeks, we will be watching the Q1 earnings reports from major industrial companies for confirmation of this slowdown. Any corporate guidance that points to lower future orders will likely add significant pressure on the market. Therefore, holding a bearish to neutral stance using derivatives seems like the most logical response to manage risk.

Key Signals To Watch In Coming Weeks

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BNY’s Bob Savage says Iran offered the US a deal to reopen Hormuz, end war; nuclear talks delayed

Iran, using Pakistani mediators, has proposed a deal to the US that would focus first on reopening the Strait of Hormuz and ending the war. Nuclear talks would be delayed to a later stage to avoid internal disagreements in Iran over nuclear concessions.

Iranian Foreign Minister Abbas Araghchi has held talks in Pakistan and Oman, with more discussions expected in Moscow. The US has not yet responded to the proposal.

Market Setup And Diplomatic Timeline

Under the plan, the US blockade would be lifted first. This could reduce US leverage over Iran’s uranium stockpile and any suspension of enrichment.

Oil price forecasts are rising as disruption to energy supply continues. Brent staying above $90 per barrel through to the end of 2026 is increasingly seen as a consensus.

Given the Iranian proposal, we are at a pivotal moment where the high geopolitical risk premium in oil could either solidify or rapidly unwind. The U.S. has not yet responded, creating significant uncertainty that we must navigate in the coming weeks. For now, the consensus view that Brent will remain above $90 per barrel holds, but this new diplomatic channel introduces a clear downside risk.

With June Brent futures trading around $92.50, the market is pricing in continued disruption from the blockade that began in 2025. This stoppage effectively choked off nearly 20 million barrels per day from easy transit, a supply shock that reminded us of the volatility seen after the 2022 invasion of Ukraine. We should therefore consider holding long positions through call options, betting that the Trump administration will prioritize nuclear leverage over a quick deal.

However, a surprise U.S. agreement would cause prices to fall sharply as the Strait of Hormuz reopens. To prepare for this less likely but high-impact event, we could purchase cheap, out-of-the-money put options as a hedge. This strategy would protect our portfolio from a sudden dovish shift in U.S. policy toward Iran.

Positioning For A Range Break

The elevated implied volatility in crude options indicates the market is bracing for a significant move, and last week’s EIA report of a larger-than-expected inventory draw only reinforces the current supply tightness. We must closely watch for any official statements from Washington or Tehran, as these will be the primary catalyst for oil’s next major price direction. A decisive response either way will likely move the market well beyond its current trading range.

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Domino’s Pizza edges towards weak support at $303.68, after closing at $367.83 with 20,000 locations worldwide

Domino’s Pizza has over 20,000 locations worldwide and closed on Friday at $367.83. A key chart level discussed is $303.68, which is about 18% below that close.

Before the 2021 rise, the share price moved sideways around $303.68 for an extended period. After that, it rose to about $560.

The share price is now more than $190 below those highs. It has been trending down over a multi-year period.

During 2022–2023, the price reached around $303.68 and then rebounded strongly, moving back towards $500. That rebound has since been mostly reversed.

A move down from $367.83 to $303.68 is described as unlikely to be smooth, with potential short-term bounces. Another level mentioned is $420, with a weekly close above it described as a condition for a change in structure.

For Domino’s Pizza, the entire trade right now is defined by the price level at $303.68. With the stock closing last week at $367.83, we see more downside ahead before the real test begins. This view is reinforced by the latest Q1 2026 earnings report, where U.S. same-store sales grew just 1.2%, falling short of the 2.5% analysts were expecting.

To see why $303.68 is so important, we have to look at the chart before the big run-up in 2021. The stock built a solid base right around that price for a long time before it launched toward the $560 highs. Since then, DPZ has spent years slowly giving back all of those gains in a methodical downtrend that still looks active.

This level at $303.68 has already been tested once, back during the 2022-2023 period when it created a strong floor and a significant bounce. That rally has now completely failed, and the buyers who defended that level have little to show for it. We believe that every time a support level has to be defended, it gets weaker, not stronger.

For derivative traders, this outlook suggests buying put options with expirations in the coming months, such as for June or July 2026. A more risk-defined strategy would be a bear put spread, perhaps buying the June $360 put and selling the June $320 put to finance the position and cap the risk. With implied volatility sitting near 35%, spreads offer a cheaper way to express this bearish view compared to buying puts outright.

The descent toward our target will likely see bounces, so we should avoid chasing weakness on every down day. Instead, these temporary price lifts should be seen as better opportunities to initiate bearish positions. A bullish reversal would require a close back above $420, and nothing about the current trend suggests that kind of strength is on the horizon.

EUR/GBP weakens within 0.8600–0.8800 as sterling outperforms; Eurozone PMIs falter, BoE tightening expectations rise

EUR/GBP has moved lower within a 0.8600–0.8800 range as the Pound performs better than the Euro. Weaker euro-zone PMIs and higher stagflation risk contrast with firmer UK data and persistent inflation, which has led markets to price more Bank of England tightening.

April euro-zone PMI surveys showed a weaker services sector and a steadier manufacturing sector. The services PMI fell 2.8 points to 47.4, while the manufacturing PMI rose 0.6 points to 52.2.

Eurozone Pmi Signals Growth Strain

The euro-zone composite PMI dropped 2.1 points to 48.6, its weakest level since November 2024. It has fallen 3.3 points since February, before the Middle East conflict, with business confidence deteriorating faster than during the early 2022 energy shock.

The Pound has been more resilient over the past week, keeping modest downward pressure on EUR/GBP while the pair stayed inside the same range. UK data suggests more momentum at the start of the year, and the energy shock has had limited impact so far.

UK rate expectations have shifted towards more BoE tightening amid stronger growth momentum. The UK 2-year government bond yield is up about 30bps from its recent low, versus about 20bps in the euro-zone and just over 10bps in the US.

Looking back at the analysis from around this time last year, we can see the divergence between the UK and Eurozone economies was already setting the stage for a weaker EUR/GBP. That trend has largely continued, with the pair breaking well below the 0.8600 level mentioned and now trading closer to 0.8450. The fundamental reasons identified in 2025, namely a struggling Eurozone and a resilient UK, have mostly played out as expected.

Policy Divergence And Trading Implications

The economic data this year supports this continued divergence. The UK’s March 2026 inflation report showed core CPI at a stubborn 3.2%, forcing the Bank of England to maintain a hawkish stance and delay any rate cuts. In contrast, the European Central Bank, faced with stagnant growth, delivered its first 25 basis point rate cut of the cycle in February 2026.

For the coming weeks, we see value in positioning for further, albeit slower, downside in EUR/GBP. Traders should consider buying put options on the pair, targeting strikes below the 0.8400 psychological level with expirations in the third quarter. This strategy benefits directly if the interest rate differential between the UK and Eurozone continues to widen in the pound’s favour.

Historically, such clear policy divergences can persist for several quarters, as we saw in the 2016-2017 period following the Brexit vote. However, we must be mindful that much of this negative news may already be priced into the Euro. Germany’s latest IFO Business Climate index for April 2026 did show a surprising uptick, suggesting the worst of the pessimism might be passing.

Given the risk of a short-term rebound, a bear put spread could be a more prudent strategy than buying puts outright. This involves buying a higher-strike put and selling a lower-strike put simultaneously, which lowers the initial cost of the trade. This approach would protect our capital if the pair unexpectedly reverses but still allows us to profit from a modest decline toward the 0.8350 area.

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With major tech earnings imminent, the AI-driven rally faces scrutiny as markets return to record highs

The S&P 500 has rebounded from a late-March sell-off, led by tech and AI-linked shares. This week, five of the Magnificent Seven report earnings within about 48 hours: Microsoft, Alphabet, Amazon and Meta on Wednesday, then Apple on Thursday.

Microsoft’s results will centre on Azure and whether AI-related demand supports cloud growth, while spending pressures margins. Latest figures: revenue $81.27B (up 16.72% year on year), gross profit $55.30B (up 15.60%), operating income $38.27B (up 20.92%); key levels include support $408–$413 and resistance $435.75.

Key Earnings Focus And Levels

Alphabet will be judged on Search ads, Cloud and AI costs. Latest figures: revenue $114.00B (up 18.19%), gross profit $68.23B (up 22.20%), operating income $36.10B (up 16.64%); resistance is $338.59–$350.15, with support $313.92–$314.96.

Amazon’s focus is AWS as a read on AI infrastructure demand. Latest figures: revenue $213.39B (up 13.63%), gross profit $103.43B (up 16.34%), operating income $26.23B (up 22.71%); support is $252.90–$258.60.

Meta is expected to link AI spending to ad performance. Latest figures: revenue $59.89B (up 23.78%), gross profit $48.99B (up 23.85%), operating income $24.75B (up 5.48%); resistance sits near $720.82 and $736–$740.

Apple’s focus is iPhone demand, Services growth, China sales and AI plans. Latest figures: revenue $143.76B (up 15.65%), gross profit $69.23B (up 18.80%), operating income $50.85B (up 18.72%); resistance is $271.70–$280.90.

Looking back to this time last year in 2025, we saw the market rally into that pivotal earnings week for the Magnificent Seven. That test provided the fuel for the breakout that carried through the rest of the year. Now, in late April 2026, we are in a similar spot with the S&P 500 testing record highs again.

How Traders May Position Into Earnings

The environment today is more tense, however, as the March 2026 PCE inflation report came in at a stubborn 2.7%, keeping the Federal Reserve from signaling any rate cuts. With the unemployment rate holding firm at 3.8%, the market is now pricing in a “higher for longer” interest rate scenario. This makes the upcoming earnings reports even more critical for justifying current stock valuations.

Last year, Microsoft’s value was tied to Azure’s growth, a theme that continues today. Traders are pricing in a significant move, as Azure’s results are a direct indicator of corporate AI spending. Given the stock has been consolidating, buying straddles or strangles could be an effective way to play a large earnings-driven move without betting on the direction.

For Alphabet, we saw the 2025 concerns about AI cannibalizing its Search business prove to be overblown, though AI spending did impact margins. The stock has been range-bound, which has pushed implied volatility down ahead of its report. This setup could make selling out-of-the-money puts an attractive strategy for those willing to bet that key support levels will hold.

Amazon’s breakout last year was confirmed by strong AWS performance, and that business remains its primary growth engine. The stock has since established strong support, making it a favorite for institutional investors. Bullish traders might look at call debit spreads to play for a move higher while defining their risk and lowering their cost.

We remember how Meta needed to prove its heavy AI spending would translate to stronger ad revenue, which it successfully did throughout late 2025. Now, with the stock at much higher levels, questions about the sustainability of that spending are resurfacing. The high implied volatility suggests that selling an iron condor could be a viable strategy to profit if the stock stays within a predictable range after the report.

Apple was the odd one out in last year’s AI-focused market, and while it has since rolled out its own AI strategy, it is still perceived as playing catch-up. Its stock has underperformed its peers over the past six months, reflecting investor skepticism. Because its implied volatility is relatively lower, buying protective puts could be a cheaper way to hedge against any weakness in its iPhone or China sales numbers.

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TD Securities’ Munoz and Nir say US releases—GDP, PCE inflation, ISM manufacturing and confidence—will steer dollar traders

TD Securities reports a heavy US data week covering GDP, the PCE Price Index, ISM manufacturing, and consumer confidence, plus durable goods orders, trade data, housing data, and regional Fed surveys. The releases are expected to shape the near-term picture for the US Dollar.

The week’s data is expected to show early effects from the Iran conflict through higher oil prices and tariff pressures. These factors are expected to lift headline inflation and support nominal spending, while weighing on real spending.

Key Inflation And Spending Signals

March core PCE inflation is forecast at 0.26% m/m and 3.2% y/y, with headline PCE at 0.64% m/m and 3.5% y/y. Personal spending is projected at 0.7%, while real spending is expected at 0.1%.

Q1 GDP is expected to rise to 2.2% q/q annualised after 0.5% in Q4, led by a rebound in government spending after the shutdown. Consumer spending within GDP is expected to slow to 1%.

ISM manufacturing is forecast to increase to 53.5 despite higher input costs. Consumer confidence is expected to edge lower due to higher petrol prices.

We are facing a familiar environment of stagflationary risks, echoing the concerns we analyzed back in early 2025. The recent March 2026 CPI report showed inflation remains sticky at 3.8% year-over-year, which is complicating the outlook for interest rates. This persistence is forcing a reassessment of how long the Federal Reserve can maintain its current policy.

Unlike the growth rebound we anticipated in Q1 2025, current signals for the U.S. economy are weakening. The Atlanta Fed’s GDPNow tracker is currently pointing to a modest 1.5% annualized growth for the first quarter of this year. This combination of slowing growth and elevated inflation puts pressure on corporate earnings and real consumer spending.

Market Implications For Traders

Just as we saw with the Iran-related oil shock in 2025, we are now facing another supply-side pressure from recent OPEC+ production cuts, which have pushed WTI crude back above $90 a barrel. This directly impacts upcoming headline inflation figures and is likely to weigh on real household spending. For derivative traders, this means pricing in higher volatility for energy and transportation sectors.

With the Federal Reserve’s hands tied by inflation, expectations for rate cuts are being pushed out, with Fed Funds futures now pricing the first potential move for early 2027. This policy uncertainty is causing the VIX, which had been hovering near 14, to creep back toward the 18 level. Traders should consider buying puts on broad market indices like the SPX as a hedge against a potential downturn driven by these stagflationary pressures.

This environment generally supports a stronger US Dollar, as capital seeks safe havens amidst global uncertainty. We believe long call options on the U.S. Dollar Index (DXY) offer a favorable risk-reward profile over the next several weeks. Selling short-dated, out-of-the-money puts on interest rate-sensitive sectors could also be a viable strategy to collect premium while the market waits for more clarity.

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GBP/JPY retreats as Westminster tensions weigh on Sterling, while the weaker Yen caps further declines

GBP/JPY slipped on Monday as the Pound weakened on UK political uncertainty. Reports said Prime Minister Keir Starmer will face a parliamentary vote on a possible probe into whether he misled lawmakers over the appointment of Peter Mandelson as US ambassador.

Losses were limited because the Yen stayed weak against most major currencies. Higher oil prices weighed on the Yen, as Japan relies heavily on imported energy.

Rate Gap Supports Sterling

GBP/JPY traded near 215.67 after reaching 216.06, its highest level since January 2008. A wide interest rate gap between the Bank of England and the Bank of Japan continued to support the pair.

Markets are focused on policy meetings this week, with both central banks widely expected to keep rates unchanged. Policymakers are assessing how rising oil prices affect inflation and growth.

The Bank of Japan’s slow move towards policy normalisation has kept the Yen under pressure, while intervention risk remains. USD/JPY was near the 160 level after repeated warnings from Japanese officials.

On charts, GBP/JPY stayed above the 21-day SMA at 213.60 and the 50-day SMA at 212.24. RSI was around 65 and the MACD histogram stayed positive, though momentum eased.

Options And Downside Protection

Support is seen at 213.60, then 212.24. The technical analysis was produced with help from an AI tool.

Given the political noise surrounding the UK Prime Minister, we are seeing a slight dip in GBP/JPY, presenting a potential entry point. Implied volatility on one-month GBP options has risen to 8.2%, reflecting this uncertainty, but the core driver of this pair remains the massive interest rate gap. The Bank of England’s rate sits at 4.0%, while the Bank of Japan is only at 0.25%, making the carry trade too compelling to ignore for now.

The primary support for this pair’s upward trend is the continued weakness of the Yen. With WTI crude oil holding firm above $95 a barrel, Japan’s import costs are soaring, which pressures the currency. We anticipate the Bank of Japan will hold rates this week, as any sudden hawkish shift could derail their fragile economic recovery seen over the last few quarters.

We must remain cautious about potential intervention from Japanese authorities, as USD/JPY is creeping towards the 160 level. We remember how the Ministry of Finance stepped in with force during the third quarter of 2025 when the pair broke past 162, causing a sharp, temporary reversal in all yen crosses. This risk makes outright long positions in the spot market less attractive than using derivatives to manage risk.

Therefore, our focus should be on strategies that benefit from the uptrend while protecting against sudden downturns. We see value in buying call spreads, such as buying a June 217 call and selling a June 220 call, to cheaply position for further gains. Alternatively, selling out-of-the-money puts with a strike below the key 213.60 support level could be a way to collect premium, assuming the current political issues in the UK prove to be short-lived.

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