Daily Market Outlook, July 23, 2025
Patrick Munnelly, Partner: Market Strategy, Tickmill Group
Munnelly’s Macro Minute…
A surge in Japanese stocks boosted Asian markets on Wednesday after President Donald Trump revealed a trade agreement with Japan, sparking optimism for more deals, which helped ease the disappointment from U.S. earnings impacted by increased tariffs. On Tuesday, Trump announced that Japan would benefit from a reduced 15% tariff on exports to the U.S. This came after a deal with the Philippines, where the U.S. will implement a 19% tariff on imports from that country. Japanese government bonds fell, with the yields on 10-year JGBs rising significantly by 8.5 basis points to 1.585%, as the reduced uncertainty cleared the way for the Bank of Japan to begin raising interest rates again. Traders are anxious as Japanese Prime Minister Shigeru Ishiba is expected to soon decide whether to resign after evaluating the outcome of the trade deal, according to the Yomiuri newspaper.
In addition to trade news, investors are anticipating earnings reports later today from Tesla and Alphabet, Google's parent company, which are among the Magnificent 7 stocks that have largely fuelled the market rally due to optimism surrounding AI. Thus far, U.S. earnings reports have shown mixed results as investors are closely examining them for indications of a slowdown in the U.S. economy and the impact of Trump's tariffs. General Motors experienced an 8.1% drop after announcing a $1 billion impact from tariffs in its quarterly results.
The majority of the ECB Governing Council likely considers Eurozone policy rates to be in a neutral position. With inflation at or near target levels, depending on the measure, a pause in the easing cycle appears justified. However, a range of uncertainties clouds the outlook, many of which lean toward creating downside risks for inflation. Chief among these is the impact of U.S. tariffs. While negotiations continue, these tariffs are clearly detrimental to export performance, which not only hampers short-term growth prospects but also exerts disinflationary pressure by increasing the availability of local supply. The rise in fiscal spending provides some offset to this demand weakness, though the effects are more gradual. This spending, focused on infrastructure and capital expenditures, also brings positive supply-side benefits. Contrary to concerns raised by hawkish policymakers, this does not appear to be inflationary. Nor does it necessarily signal rising debt burdens, as such investments typically yield high multipliers and contribute to stronger long-term growth trends. While the recent recovery in the exchange rate might seem like another potential challenge for exports, the appreciation remains relatively modest. Moreover, it has beneficial effects, such as lowering dollar-denominated input costs, particularly for energy. This, in turn, creates additional room for monetary policy manoeuvring, which should help support domestically driven growth. As a result, the ECB retains the flexibility to consider further easing measures later in the year, potentially as early as autumn.
Bitcoin reached 120k on Tuesday, moving nearer to its historical peak. Spot trading activity for BTC on exchanges surged following its record high, with Binance experiencing the most significant increase in volumes. Additionally, Bitcoin's open interest surpassed its upper limit, indicating greater involvement in the market.
Overnight Headlines
Trump Announces Japan Trade Deal With 15% Reciprocal Tariffs
Japan Agrees To US Demands On Cars, Rice; To Invest $550B In US
BoJ Deputy Uchida: No Immediate Need To Hike Rates After US Deal
Japan Stocks Rally, Yen Strengthens Slightly On Trade Deal News
JGB Futures Slide; Fiscal Concerns Linger Post-Election
Japan PM Ishiba To Declare Resignation In August, Reports Say
US Nuclear Weapons Agency Breached In Microsoft SharePoint Hack
Alibaba Launches Open-Source AI Coding Model Touted As Advanced
Oil Rises, Boosted By Hopes For More Trade Agreements
Vale’s Iron Ore Output Rises On Stronger Amazon Mine Performance
US Envoy Witkoff To Visit Middle East For Renewed Gaza Ceasefire Talks
Roche Halts Gene Therapy Shipments Outside US Amid Scrutiny
UniCredit Withdraws BPM Offer Following Italian Government Pushback
Baker Hughes Logs Higher Second-quarter Profit, But Revenue Slides
Texas Instruments’ Stock Falls On Weak Forecast
FX Options Expiries For 10am New York Cut
(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.1650 (570M), 1.1700 (1.5BLN), 1.1715-20 (509M), 1.1725-30 (810M)
1.1750 (330M), 1.1790-1.1800 (1.8BLN)
USD/CHF: 0.7825 (600M), 0.7875-0.7900 (560M)
EUR/CHF: 0.9325-40 (430M). EUR/GBP: 0.8730 (318M)
GBP/USD: 1.3465 (226M), 1.3490 (271M), 1.3585 (300M), 1.3645 (253M)
AUD/USD: 0.6500-10 (922M), 0.6525-30 (1BLN), 0.6580 (671M), 0.6670-75 (1BLN)
USD/CAD: 1.3625 (796M), 1.3640 (705M)
USD/JPY: 146.30-40 (1.2BLN), 146.50-60 (1.9BLN), 146.65-75 (1.6BLN)
147.00-10 (1.4BLN), 147.20-25 (834M), 148.00 (1.3BLN), 148.20-30 (730M)
AUD/JPY: 95.80 (305M)
CFTC Positions as of the Week Ending July 15th
Speculators have reduced their net short position in CBOT US 5-year Treasury futures by 11,259 contracts, bringing it down to 2,505,528. They've also decreased their net short position in CBOT US 10-year Treasury futures by 68,202 contracts, resulting in a total of 772,377. Conversely, there has been an increase in the net short position for CBOT US 2-year Treasury futures by 33,727 contracts to 1,299,860. Speculators have raised their net short position in CBOT US UltraBond Treasury futures by 5,794 contracts to 228,618 and in CBOT US Treasury bonds futures by 21,386 contracts to 130,144.
Equity fund speculators have cut their net short position in the S&P 500 CME by 8,741 contracts to 329,471, while equity fund managers have decreased their net long position in the S&P 500 CME by 2,265 contracts to 862,416.
The FX net long positions stand at 103,582 contracts for the Japanese yen, 128,221 contracts for the euro, and 29,191 contracts for the British pound. The Swiss franc has a net short position of -22,637 contracts, and Bitcoin's net short position is -2,486 contracts.
Technical & Trade Views
SP500
Daily VWAP Bearish Above 6260 Target 6400
Weekly VWAP Bullish Above 6100 Target 6515
EURUSD
Daily VWAP Bearish Below 1.1710 Target 1.16
Weekly VWAP Bullish Above 1.1640 Target 1.19
GBPUSD
Daily VWAP Bearish Below 1.3580 Target 1.3450
Weekly VWAP Bearish Below 1.3580 Target 1.3450
USDJPY
Daily VWAP Bullish Above 1.45 Target 1.48
Weekly VWAP Bullish Above 1.45 Target 1.51
XAUUSD
Daily VWAP Bullish Above 3320 Target 3420
Weekly VWAP Bearish Below 3350 Target 3290
BTCUSD
Daily VWAP Bearish Above 113k Target 120k
Weekly VWAP Bullish Above 108k Target 130k
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Past performance is not indicative of future results.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!