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If last week’s charts are anything to go by, a large percentage of traders are too busy lounging around the pool or frolicking on the beach to contribute anything towards financial markets. It is mid-August after all; who can blame them. Trading volumes on the NYSE and Nasdaq were far below yearly averages last week as holiday season entered full swing and trading desks reduced to skeleton crews. If there was one pivotal talking point to latch onto, it was the fact that the US economy showed a second consecutive month of cooling inflation, at least according to the latest CPI data. The deceleration in consumer price growth was hardly anything to write home about, coming in 0.1% lower than the previous month, the salient point is the direction of travel. Less inflation means less chance of an interest rate hike, and indeed interest rate traders reacted accordingly, swinging more heavily in favour of a rate hold in September and October, but still leaning towards one adjustment to the upside during the December FOMC meeting. The total lack of reaction in the US dollar was quite telling, suggesting that FX markets had largely pre-empted the shift over the prior two weeks. With that said, the greenback’s competitors have their own problems to worry about and the relative stability in the dollar currency index may be providing cover for broader turmoil. The euro is under pressure from the economic stagnation afflicting the European Union, while the yen remains at the mercy of low interest rates courtesy of the Bank of Japan. The Swiss National Bank has absolutely no interest in seeing the Swiss Franc appreciate in value either, turning global currency markets into a giant race to the bottom. Speaking of the yen, the joint intervention to prop up the Japanese currency has already begun to unwind, with USDJPY once again approaching 160. The DXY has remained under 100 points for most of August already and is once again on the back foot going into today’s session. Easing expectations on the dollar allowed risk-on sentiment to come to the fore-front last week; precious metals undertook a minor leg up with gold reaching $4,375 per ounce by Friday and silver closing just shy of $65. US stocks recorded modest gains overall, as the S&P 500 edged to a fresh all-time high on Thursday, while the Nasdaq 100 added 1% to its tally to close the week back above 30,000 points. Semiconductors were the driving force behind the rally, meaning the jubilation did not spread as far as the Dow Jones, which lost half a percent last week. The rebound in tech sent a number of companies flying, most notably Sandisk (SNDK), which exploded 35% higher, while Western Digital (WDC) and Micron (MU) gained 17% and 11% respectively. Dell Technologies (DELL) also continued to surprise markets last week by pushing 8% higher into unexplored territory. Not the most fascinating of economic calendars in the days ahead, but there are still a few events worth keeping an eye out for. Wednesday will see the publication of the latest batch of UK and European inflation data, both of which will factor into future interest rate predictions on their respective currencies, but the main event will be the release of the FOMC minutes covering the July meeting. Comments from different board members will be all the more interesting given that the gathering occurred before the most recent inflation reading. On Friday, currency traders will have to tune in to the July inflation figures in Japan, which will play into interest rate dynamics in the yen. On earnings calendar, Walmart (WMT) may be worth paying attention to on Thursday because it offers an independent glimpse into US consumer spending – a metric that fell sharply according to last Friday’s retail sales figures. With the macro calendar cleared, the spotlight may well return to geopolitics this week, as the US-Iran memorandum of understanding expires and diplomatic relations in the Middle East continue to sour. #IRAN #DXY #FOMC About the Author Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS. Reviewed by RADEX MARKETS Risk Warning: Trading derivatives and leveraged products carries a high level of risk, including the risk of losing substantially more than your initial investment.

The Relative Strength Index (RSI) is probably one of my favourite indicators that I use for trading. It is a momentum oscillator that moves between 0 and 100, measuring the speed and strength of recent price gains and losses. An RSI reading above 70 is generally considered overbought, while a reading below 30 is considered oversold. That sounds straightforward perhaps a little too straightforward. Many beginners see RSI fall below 30, assume the currency pair must be ready to recover and immediately open a buy position. They then watch, usually with growing discomfort, as the price continues falling and RSI remains oversold for far longer than expected. The problem is not necessarily the indicator. It is how the number is being interpreted. In this guide, I will explain what RSI means in forex trading and show how its formula works using a practical currency-pair calculation. We will also look at the RSI scale, the importance of the 50 midline, divergence signals and the settings traders can use for different trading styles. Most importantly, we will examine when RSI signals are useful, when they are misleading and why no reading should be treated as an automatic instruction to enter a trade. The Relative Strength Index (RSI) is a momentum indicator that measures the speed and strength of recent price movements on a scale from 0 to 100. A reading above 70 normally suggests that a currency pair is overbought, while a reading below 30 suggests it is oversold, although neither reading guarantees that the price is about to reverse. To start your trading journey, open an account trusted by traders all over the world. The Relative Strength Index (RSI) is a momentum oscillator developed by technical analyst J. Welles Wilder Jr. and introduced in 1978. It moves between 0 and 100, comparing the strength of a currency pair's recent gains with the strength of its recent losses. In plain language, momentum describes how quickly and strongly a price is moving. If EUR/USD has recorded several convincing upward closes, its RSI will generally rise. If falling prices begin to dominate, the indicator will move lower. RSI forms part of technical analysis, but it does not predict where a currency pair will go next. Instead, it helps you judge how forceful or stretched the recent price movement has become. Read more: Forex Technical Analysis: A Step-by-Step Beginner's Guide This distinction matters because an overbought reading does not automatically mean the price will fall. Equally, an oversold reading is not proof that the market has reached its bottom. RSI describes the condition of the move; it does not hand you the ending in advance. RSI measures the balance between upward and downward price momentum over a selected number of periods, with 14 periods being the standard setting. It is based on the relative size of recent gains compared with recent losses rather than the actual price of the currency pair. For example, GBP/USD trading at 1.3200 does not have a higher RSI simply because its exchange rate is higher than EUR/USD at 1.1600. The indicator only considers how each pair has moved during the chosen lookback period. When average gains are stronger than average losses, RSI rises. When average losses take control, it falls. A reading near 50 suggests the two sides are relatively balanced. You may also see price reach a new high while RSI fails to do the same. That disagreement can provide an early warning that the move is losing momentum, although we will examine this more closely in the divergence section. RSI follows the market's rhythm by comparing recent upward closes with recent downward closes. When rising candles are larger or more frequent, RSI moves higher. When falling candles begin to dominate, it moves lower. Imagine EUR/USD has been trading sideways between a clear support and resistance level. If the pair reaches the top of that range while RSI moves above 70, the reading may warn that buying momentum is becoming stretched. In a ranging market, this type of overbought or oversold signal tends to be more useful because price is already moving between recognisable boundaries. The situation changes when the market develops a strong trend. During a sustained rally, RSI can remain above 70 while the price continues climbing. In a steep decline, it can stay below 30 without producing an immediate recovery. For this reason, RSI extremes are generally more reliable in ranging conditions than in one-way markets. The indicator must always be read alongside the wider trend rather than treated as a standalone reversal signal. RSI is calculated by comparing the average gain with the average loss over a selected number of periods. The standard setting uses 14 periods. The formula is: RSI = 100 − [100 ÷ (1 + RS)] Where RS (relative strength) = average gain ÷ average loss An average gain is the total of all positive price changes divided by 14. An average loss is the total of all negative price changes, treated as positive values, divided by 14. The example below uses published GBP/USD daily closing prices from 14 July to 3 August 2026. We need 15 closing prices to calculate the 14 changes used by RSI. The total gains over the 14 periods were 351 pips, while the total losses were 315 pips. Dividing each by 14 gives an average gain of 25.07 pips and an average loss of 22.50 pips. Dividing the average gain by the average loss gives an RS of 1.114, and placing that into the formula produces an RSI of 52.70. An RSI of approximately 52.70 tells us that gains held a modest advantage over losses during this particular 14-day sequence. It does not, by itself, tell us that GBP/USD should be bought or sold. This example shows the initial calculation using simple averages. After that first value, Wilder's method smooths the previous averages as each new period is added. Your platform may therefore display a slightly different number depending on its price feed, candle closing time and earlier price history. Fortunately, MT4, MT5 and other trading platforms perform these calculations automatically. Understanding the formula is still worthwhile because it explains where the number comes from, why it rises and falls, and why one unusually large trading day can affect the reading. Read more: What is a pip in forex trading? How to calculate and use it Reading RSI involves two related skills. First, you need to understand what the different areas of the 0–100 scale suggest. You can then use the 50 midline to judge whether bullish or bearish momentum currently has the advantage. The RSI scale is normally divided into three broad zones. These zones provide useful information, but they should be interpreted as market conditions rather than automatic trading instructions. An RSI reading below 30 tells you that recent losses have been particularly forceful. It does not tell you that sellers have finished. Entering a buy position simply because the indicator reads 29 can mean stepping directly in front of a trend that is still gathering speed. The area between 30 and 70 is often described as neutral, although that description can be misleading. RSI holding between 50 and 70 can support a bullish trend, while repeated failures below 50 can confirm that bearish momentum remains in control. A reading above 70 indicates that recent gains have been unusually strong. The currency pair may be stretched and vulnerable to a pullback, but strong buying pressure can keep RSI overbought for days or even weeks. For this reason, overbought means that the move deserves closer attention, not that a sell order should be opened immediately. The 50 midline is one of the most useful parts of RSI, despite receiving far less attention than the familiar 70 and 30 levels. When RSI holds above 50, average gains are stronger than average losses, suggesting that bullish momentum has the advantage. When it remains below 50, recent losses are stronger and bearish momentum has the edge. This can be used as a simple trend filter: For example, suppose GBP/USD is making higher highs and higher lows while RSI repeatedly dips towards 50 before turning higher. Those rebounds suggest that bullish momentum is returning after each price pullback. Experienced traders often watch this behaviour more closely than they wait for RSI to reach 70 or 30. Extreme readings may be relatively rare, but the indicator's relationship with the 50 midline can provide a running view of market direction. As a result, the midline often gives RSI far more practical value than its overbought and oversold labels alone. There is no universal "good" RSI level. The most useful reading depends on whether the currency pair is trending upwards, trending downwards or moving sideways. A trader looking for a buy may initially think that an RSI below 30 is ideal. However, that reading could simply confirm that the pair is falling aggressively. In an established uptrend, a pullback towards 40 or 50 may provide a more useful reference than waiting for an oversold signal that never arrives. Technical analyst Constance Brown's work on RSI ranges helps explain how the indicator behaves differently according to the market's direction: This behaviour is sometimes called an RSI range shift. Instead of travelling evenly between 30 and 70, the indicator's typical operating range moves higher during an uptrend and lower during a downtrend. For example, imagine EUR/USD is rising steadily, and RSI has remained between 45 and 78. Each time the indicator falls towards 45, the price completes a modest pullback before buyers return. Waiting for RSI to reach 30 would produce no entry reference because the strength of the trend prevents it from becoming conventionally oversold. Anyone who treats 70 and 30 as the only RSI levels that matter can sit through an entire trend without seeing what they consider a valid signal. For this reason, a good RSI level is one that makes sense within the pair's current market structure, not simply a number taken from the trading textbook 101. One of the easiest RSI mistakes to make is buying an oversold currency pair while it is still in a clear downtrend. To illustrate the lesson honestly, consider the following first-person example as a reconstructed trade scenario rather than a claim about a verified historical position. I was watching GBP/USD fall on the four-hour chart. The pair had already formed a series of lower highs and lower lows, but when RSI dropped to 27, I convinced myself that the selling had gone far enough. I bought one standard lot at 1.2640, placing my stop-loss 40 pips lower at 1.2600. There was no bullish price confirmation and no established support level underneath the entry. My entire reasoning amounted to "RSI is oversold, so the price should bounce." It did not. GBP/USD briefly paused before continuing lower. RSI fell from 27 to 22, the price reached 1.2600 and the stop-loss closed the position for a 40-pip loss, approximately $400 on a standard lot, excluding trading costs. Read more: What is a stop-loss order and how to set it The problem was not that RSI had produced an incorrect number. The indicator had accurately shown intense bearish momentum. My mistake was treating oversold as another word for bottom. That is an important distinction. RSI can help you recognise changing momentum, but the way you enter and confirm a trade determines whether that information is genuinely useful. A more measured approach is to wait for RSI to leave the extreme zone before considering an entry. For a possible buy setup, that means allowing RSI to fall below 30 and then waiting for it to climb back above 30. The move back above the threshold suggests that selling pressure may be easing and that buyers are beginning to respond. The sequence looks like this: This approach does not remove the possibility of a losing trade. It simply prevents you from buying while bearish momentum is still accelerating. The same principle can be applied in reverse. If RSI rises above 70, waiting for it to cross back below 70 provides some evidence that buying pressure is weakening. Selling the moment RSI touches 70 means acting before that change has occurred. A cross back through the threshold is therefore evidence of a momentum shift, not proof of a reversal. If it happens in the middle of nowhere, against a powerful trend and without price confirmation, it remains a weak setup. In a strong uptrend, RSI may rarely fall below 30. Waiting exclusively for an oversold reading can leave you watching the entire move from the sidelines, which is very safe, admittedly, but not especially productive. The 40–50 zone often provides a more practical reference during bullish market conditions. As price pulls back, RSI declines from a higher reading towards the midline. If the wider trend remains intact, the indicator may find support between 40 and 50 before turning upwards again. A potential bullish trend setup may include: Suppose EUR/USD is trending upwards on the daily chart. RSI reaches 72 during a strong rally before price begins to pull back. Several sessions later, RSI falls to 46 while EUR/USD tests a previous resistance level that has now become support. A beginner may ignore the situation because RSI is nowhere near 30. A more experienced trader recognises that 46 can be entirely normal in an uptrend. If the price holds support and RSI turns back above 50, the combination may indicate that bullish momentum is returning. The crucial point is that the 40–50 zone is not a buy signal by itself. It becomes useful when the following conditions agree: The reverse applies in a downtrend. RSI may repeatedly rally into the 50–60 area before turning lower, while price forms lower highs beneath resistance. In that environment, waiting for RSI to exceed 70 may mean missing several legitimate trend-following opportunities. This is what separates a basic reading of RSI from a more experienced one. Beginners tend to ask whether the indicator is overbought or oversold. Experienced traders are more likely to ask where RSI is operating within the current trend and whether its range has shifted. RSI should not be used on its own. A signal carries more weight when it appears alongside an established support or resistance level, a clear price-action pattern or a widely followed moving average. For example, RSI crossing back above 30 is more meaningful if EUR/USD is simultaneously rejecting daily support. Without that additional context, the indicator is simply reporting a change in recent momentum, and that may not be enough to justify risking money. RSI provides the clue. Price structure and risk management decide whether the clue is worth acting upon. Read more: The best forex indicators every trader should use in 2026 RSI divergence occurs when price and the indicator move out of step, usually warning that the momentum behind the current trend is weakening. The signal develops because RSI measures the strength of recent gains and losses. Price may continue reaching a new extreme, but if the move is being made with less force, RSI may fail to confirm it. Divergence is worth noticing, but it is not an automatic reason to enter a trade. Fading momentum can continue for some time before price reverses, and sometimes the reversal never arrives. Bullish divergence forms when price makes a lower low while RSI produces a higher low. The lower price shows that sellers have pushed the currency pair to a new low. However, the higher RSI reading suggests that the downward move has less momentum than the previous decline. Selling pressure may therefore be weakening. For example, suppose EUR/USD falls to 1.0850 with RSI at 24. The pair then recovers briefly before declining to a new low at 1.0820. This time, RSI only falls to 32. Price has moved lower, but RSI has moved higher. This disagreement creates bullish divergence and warns that sellers may be losing control. A trader could then watch for additional evidence, such as: The divergence draws attention to the possible change. Confirmation helps determine whether the market is actually beginning to turn. Bearish divergence forms when price makes a higher high while RSI records a lower high. The new price high shows that buyers have pushed the currency pair further upwards. However, the lower RSI peak indicates that they have done so with less momentum than before. Buying pressure may be running out of steam. Suppose GBP/USD rallies to 1.3180 with RSI at 76. Following a small pullback, the pair rises again and reaches a higher high at 1.3220. RSI, however, only reaches 68. This is bearish divergence: price has strengthened, but the momentum reading has weakened. A trader may respond by watching for price to reject resistance, RSI to move back below 70 or the market to break beneath a recent higher low. Until price provides that confirmation, the divergence remains a warning rather than a complete trade setup. RSI divergence can fail repeatedly when a currency pair is trending strongly. A powerful uptrend may produce one bearish divergence, then another and perhaps a third, while the price continues reaching new highs. This happens because fading momentum does not necessarily mean that the opposite side has taken control. Buyers may be advancing more slowly, but they are still advancing. The same problem appears during a steep decline. Bullish divergence may suggest that selling momentum is weakening, yet the price can continue falling as each attempted recovery is overwhelmed. Trading every divergence signal can therefore lead to a series of premature counter-trend positions. To reduce that risk, consider: Divergence is best viewed as an early warning that a trend may be tiring. It tells you to pay closer attention; it does not tell you to press the entry button. The standard RSI setting is 14 periods, but it can be adjusted to suit different timeframes and trading styles. Shortening the period makes RSI react more quickly, producing more signals but also more market noise. Lengthening it creates a smoother indicator with fewer, steadier signals. A "period" refers to one candle on the selected chart. RSI 14 on a daily chart uses 14 daily candles, while RSI 14 on a one-hour chart uses 14 hourly candles. Read more: How to Read Forex Charts for Traders RSI 14 provides a reasonable balance between responsiveness and stability. It is sensitive enough to reflect changing momentum without reacting excessively to every minor price movement. For most beginners, the default setting is the most sensible place to start. It also makes chart analysis easier to compare because RSI 14 is widely used across the market. This does not mean it is automatically the best setting for every strategy. It simply provides a well-established baseline from which a trader can test alternatives. Reducing RSI to six, seven or nine periods makes the indicator more sensitive to recent price changes. It reaches overbought and oversold zones more frequently and reacts more quickly when momentum shifts. This responsiveness may suit day traders working with shorter timeframes, where opportunities develop and disappear rapidly. The cost is a noticeable increase in false signals. On a five-minute EUR/USD chart, for example, RSI 7 may cross above and below 30 several times during an unsettled session. Some crosses will reflect genuine changes in momentum, while others will simply be short-term price noise. A faster RSI does not necessarily provide better information. It provides more information, leaving the trader to filter a greater number of weaker signals. Increasing the period to 21 or more smooths the RSI line. Individual candles have less influence on the calculation, so the indicator takes longer to respond to changing prices. Longer settings may suit swing and position traders who are more interested in established momentum than brief intraday fluctuations. Signals occur less frequently, but they are less likely to be caused by a single erratic candle. The disadvantage is additional lag. By the time a slower RSI confirms that momentum has changed, part of the price move may already have taken place. The RSI period is not the only setting that can be changed. Traders can also adjust the standard 70 and 30 thresholds. In a clearly trending or volatile market, using 80 as overbought and 20 as oversold can reduce the number of premature counter-trend signals. These stricter levels require momentum to become more extreme before attracting attention. For example, RSI may repeatedly move above 70 during a strong GBP/USD uptrend without the price reversing. Raising the overbought threshold to 80 filters out some of these early warnings and focuses attention on more stretched conditions. The trade-off is that stricter thresholds produce fewer signals. A move may reverse before RSI reaches 80 or 20, so no setting removes uncertainty. Changing RSI settings should be based on testing rather than on trying to make the indicator fit a trade you already want to take. Start with RSI 14 and the standard 70/30 levels, record how they perform under your strategy, and only adjust them when the results provide a clear reason. RSI is useful because it makes momentum easier to read, but it cannot predict reversals or remove uncertainty from trading. Its weaknesses become particularly noticeable when market conditions change. There is always a downside in trading. The honest limitation is simple: RSI cannot tell you with certainty what price will do next. It becomes more useful when its reading agrees with the trend, market structure and a meaningful price level, but even then, the signal can fail. This is why risk management remains necessary on every trade. The Relative Strength Index tells you how quickly and strongly a currency pair's price has recently changed. It acts like a speedometer for momentum, moving between 0 and 100 to highlight when buying or selling pressure may have become unusually strong. A high RSI reading shows that recent gains have been stronger than recent losses. A reading above 70 is normally considered overbought, but it can remain elevated during a strong uptrend and does not guarantee an immediate price reversal. In MT4 or MT5, open the Indicators menu, select Oscillators and choose Relative Strength Index. RSI will appear in a separate window below the main price chart, with 14 periods normally used as the default setting. RSI stands for Relative Strength Index, a momentum oscillator introduced by J. Welles Wilder Jr. in 1978. It measures the speed and size of recent price changes on a scale from 0 to 100. A common RSI buy signal occurs when the indicator falls below 30 and then crosses back above 30, suggesting that selling pressure may be easing. The signal should still be supported by factors such as price support, bullish confirmation and the wider trend. RSI can be applied to any currency pair and timeframe because its underlying calculation remains the same. However, false signals and market noise tend to increase on very short timeframes and less-liquid currency pairs. Major economic releases can move prices sharply and push RSI into an extreme zone within moments. Overbought and oversold readings carry less meaning during this volatility, so it is often better to wait for the market to digest the news before interpreting RSI again. RSI is one of the most widely used momentum indicators in forex trading, largely because it presents complex price information in a simple 0–100 reading. However, using it effectively requires more than waiting for the line to reach 70 or 30. There are three key points to remember: RSI divergence, midline crosses and range shifts can all add useful context, but none of them guarantees a successful position. The indicator is based on past prices, can lag during fast markets and may produce repeated false signals when a trend is particularly strong. For this reason, RSI should support a trading decision rather than make the entire decision for you. Practising on a demo account allows you to observe how the indicator behaves across different currency pairs, timeframes and market conditions without risking real money. Lee W. is a seasoned professional trader with over 10 years of experience. Passionate about sharing valuable expertise and unique market insights, Lee W. now serves as an external and independent market analyst for RADEX MARKETS. Reviewed by RADEX MARKETS Risk Warning: Trading derivatives and leveraged products carries a high level of risk, including the risk of losing substantially more than your initial investment. Related concepts:

They say good news comes in threes, but in the case of US inflation data, markets will have to settle for only two. Wednesday’s CPI publication fell perfectly inline with predictions, with headline and core year-over-year readings falling to 3.5% and 2.5% respectively in July. The lack of surprise translated into very little movement across financial markets, in what is turning into a rather dull week for traders. The bigger surprise arrived with the PPI release the following day, as producer prices remained steady in July, with an overall inflation rate of 0%, while the core element showed price appreciation of 0.2% from the prior month; both figures fell short of expectations. The general inflation picture is suddenly looking a lot less pessimistic. The rebound in crude oil prices in July does not seem to have spilled over to consumer or producer prices, and the US has now observed two consecutive months of cooling. While current inflationary pressures remain above the Fed’s target of 2%, the central bank may not feel the need to act quite so hastily following the last two days of economic data prints. The implied odds of a rate hike on the dollar have fallen once again, this time nearing a 66/33 split in favour of a hold during the next meeting in mid-September. The next real inflation test will arrive at the end of August in the form of the PCE price index, a gauge more heavily favoured by the Federal Reserve anyway. Putting on the tin-foil hat for a minute, if one were to manufacture the conditions for an end-of-year rate cut, this is almost exactly how one would go about doing so. US labour data weakened last week, although not too alarmingly, then inflation data started to show signs of cooperating, against expectations. Markets have been primed for months now about the growing threat of inflation, and the Fed has made it abundantly clear that it intends to combat such dangers. With that in mind, this week’s mundane print looks comparatively more promising. Afterall, the Fed does not have to wait until the inflation rate falls all the way down to the official 2% target before acting; if signs point in the right direction, the board can justify easing off a little. Very convenient. The sense of optimism was enough to lift the S&P 500 to a fresh record high on Thursday, while the Nasdaq 100 climbed back over 30,000 points for the first time since June. The dollar itself has not undergone any significant moves in either direction over the past two weeks, with the DXY content to remain just shy of the 100-point level. A healthy degree of profit-taking occurred in precious metals yesterday, dragging gold down to $4,350 per ounce and silver down to the $64.50 range. Oil markets have mellowed out somewhat this week; the Brent Crude index sank marginally lower to $87 per barrel yesterday while WTI contracts fell as low as $80; still very little progress on the Iran front. The Nikkei and Kospi indices opened strongly this morning as trading got underway in Asia, maintaining the momentum seen in semiconductor stocks over the last couple of days. Cryptocurrency traders are equally bored with the current state of affairs, as Bitcoin remains almost stationary around $64,000 per coin. At least the SEC had something to contribute to the conversation this week, stating that rules for certain digital assets may be pushed forward with or without the US Senate’s approval. The Clarity Act is dead in the water until September at the very earliest, but that may not stop regulators from exploring other means to achieve their goals. The SEC is scheduled to discuss such matters later today, where members will consider whether to "create a tailored offering regime for certain investment contracts involving crypto assets”. The body may also provide details on a possible legal exemption for tokenised stocks, something that the crypto industry has been working towards for many years already. #CPI #PPI #SEC About the Author Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS. Reviewed by RADEX MARKETS Risk Warning: Trading derivatives and leveraged products carries a high level of risk, including the risk of losing substantially more than your initial investment.

The Strait of Hormuz has been largely closed to maritime traffic since March, causing global trade disruptions and endless moaning about petrol prices. The world's oil producers have been hit hard and are understandably looking for alternative trade routes. A quarter of all seaborne oil normally passes through the strait, as well as a significant percentage of the liquified natural gas, fertiliser and chemicals critical to industrial production worldwide. The front door is closed; people are looking for a back passage, or perhaps an unlocked window, or even the chimney. Producers across the Gulf are exploring different possibilities, scrambling to dust off old pipeline blueprints and establish new ways to bypass the old channels. Many of these routes already exist but have remained dormant for decades due to the presence of more economically viable paths. Other options are more adventurous but fall apart the second any degree of scrutiny is applied. So what is the answer? The old reliable: Saudi's East-West pipeline If there is one route that gets wheeled out every time the Persian Gulf gets uppity, it is Saudi Arabia’s East-West Pipeline, aka the Petroline. The pipeline cuts 1,200 km across the Saudi desert, all the way from the eastern coast to the Red Sea port of Yanbu, bypassing the Strait of Hormuz entirely. Following the outbreak of hostilities earlier in the year, the system was beefed up to a capacity of 7 million barrels of oil per day, 5 million of which is destined for export. Unfortunately for Saudi Arabia, the main bottle neck is in fact the loading speed in Yanbu, which by some accounts may only reach 3 million BPD. With that said, the East-West pipeline remains an effective tool in the Saudi arsenal, enabling the gulf state to export the bulk of its daily oil production. Problem solved? Nope. While Iran jealously guards the door to the Persian Gulf, Yemen occupies much the same role over in the Red Sea. Both bodies of water are only accessible via extremely narrow straits, control of which effectively limits passage in and out. On the one hand the Strait of Hormuz; on the other the Strait of Bab Al-Mandab. Trading one chokepoint for another is not the stroke of genius it sounds like. It’s like trading obesity for diabetes. The Houthis have launched a naval blockade of their own, targeting international shipping companies and attacking Saudi coastal sites. The Saudi Petroline itself was attacked by Yemeni drones back in 2019, so what the world is currently seeing is nothing new. As of the time of writing, naval traffic through the southern entrance to the Red Sea has fallen to around 30 commercial vessels per day, down from well over one hundred ships pre-conflict. The Mediterranean push Iraq finds itself in an even worse position. The country is almost entirely landlocked, possessing only a laughably short coastline on the Persian Gulf, through which 95% of its oil exports used to flow. Iraq has halved production compared to earlier in the year because it simply cannot export the oil quickly enough; its reserves are full to the brim; it is desperately looking for a release valve. Several options are available. The first is the Kirkuk–Ceyhan line into Turkey, which allows Iraq to export a trickle of crude oil towards its northern neighbour. The main issue with this pipeline is that it traverses Kurdish territories, resulting in a geopolitical nightmare that has long plagued the oil trade in the region. The conflict in Iran has forced reality to the forefront however, and Baghdad has committed to aggressively scaling up daily oil flows from 200,000 barrels per day to 750,000. A more nostalgic option would be to redevelop the old Kirkuk–Baniyas pipeline into Syria, a 900 km relic first completed all the way back in 1952. Unfortunately, the pipeline has seen more wars than the AK-47 and since the 2003 invasion of Iraq has been nothing more than a desert ornament. How much of the original pipeline can be salvaged remains to be seen, but the appetite to revive the old route remains high. A major consortium of international players, including Chevron, is currently gestating behind the scenes to start work on a massive series of parallel pipelines designed to move oil directly from Iraqi oil fields to the Mediterranean Sea. The project has a lot of weight behind it and if completed would allow the export of roughly 3 million barrels per day, enough to cover the bulk of Iraq’s daily oil production at its peak. But here is the joke: both of these pipelines point in exactly the wrong direction. Let us remind ourselves that 80-90% of all oil exports leaving the Persian Gulf were destined for Asian markets. Oil that would normally sail east would instead have to travel overland to the Mediterranean, out through the Gibraltar Strait, all the way down Africa’s west coast, round the Cape of Good Hope and across the Indian Ocean to reach the same customers. It would be like driving from London to Cardiff but going via Glasgow. No one wants to go to Glasgow. No way east Back to the drawing board. Going south is out; going north benefits no-one; going west is a huge waste of time. Only one cardinal point left to try. If the vast majority of crude oil exports are destined for Asia, then why not simply head overland to the east? Short answer: because it is utterly impossible. Constructing an oil pipeline between the Arabian Gulf and the Far East presents so many insurmountable challenges that no one on Earth is even considering the possibility. There are essentially only three ways to carry goods over land between Europe and East Asia. The first is to go via Russia, which many countries are seeking to avoid for obvious reasons. The second is to go via Iran, which many countries are seeking to avoid for even more obvious reasons. The third way is to thread the needle between these regional powers through the South Caucasus, a zone comprised of Georgia, Armenia and Azerbaijan. The region has been highly contested since the fall of the Soviet Union and remains on shaky ground to this day. The area could potentially serve as the perfect buffer zone, acting as a neutral trade corridor connecting the eastern and western hemispheres, and to a certain extent the South Caucasus already serves this purpose. International interests from the four corners of the globe converge on this narrow land passage, but local disputes cannot be brushed aside so easily. Azerbaijan and Armenia have yet to agree on a permanent peace treaty, while Georgia is largely viewed as having drifted too close to Russia. As mentioned previously, getting crude oil out of Iraq and into Turkey is just about doable. From there, one might be forgiven for entertaining the possibility of transporting said crude oil to the Caspian Sea, and then on to East Asia. But here lies the problem: pipelines only flow in one direction. All the pipelines between Turkey and Azerbaijan are designed for one task and one task only: carrying oil and gas to the west, towards Europe. Turkey is host to a number of different transport links, including the Kirkuk–Ceyhan line listed above, but also the Baku-Tbilisi-Ceyhan line, which does indeed take crude oil all the way from the Caspian Sea. The destination remains the same: the Mediterranean. Useless for the task at hand. Entirely new infrastructure would have to be built, passing through Kurdish and Caucasus lands alike. No one can be bothered with it. Even if such a pipeline were to magically materialise, the problem then turns to the Caspian Sea, a body of water over which no fewer than five countries claim jurisdiction, including Iran and Russia. The oil would have to go from Baku, on the western edge of the inland sea, to either Turkmenistan or Kazakhstan. The Caspian is seismically active, with frequent mud volcanoes, flammable eruptions and transient islands; it would not be out of place in Mordor. The appetite for building such a pipeline is currently non-existent. And even if that pipeline were to appear out of thin air, the problem then turns to Turkmenistan and Kazakhstan, which are home to some of the most inhospitable conditions on the planet. The first issue is the thousands of kilometres of rugged mountainous terrain beset by wild temperature swings, the second is the total lack of political will to begin infrastructure undertakings of the required magnitude. Turkmenistan is simply not interested. Kazakhstan has proven more flexible but will not do anything that risks rocking the boat with Russia, through which it currently exports around 80% of its crude oil. Even if all the above were somehow achieved, there are still thousands of kilometres of Chinese territory to cross before a hypothetical pipeline could reach the eastern coast. There are innumerable challenges to overcome. Complete pipe dream. Back to the drawing board, again Every time a major chokepoint gets squeezed, the story plays out in the same way. Half-forgotten infrastructure gets rushed back into service, a series of previously written off routes enter the discourse, and then everyone realises why they were using the original routes to begin with. Trade routes are organic entities; they follow the path of least resistance. There is a reason why 90% of all trade travels by sea. The world’s oceans are its natural highways; avoiding them is a fool’s errand. Consider the options. Option 1 is to spend decades building a pipeline across some of the worst terrain on Earth, through a dozen different nations, some of which may change their mind or undergo violent leadership changes halfway through completion, to end up with a solution that is by no means guaranteed to be any more stable than the original route. Option 2 is to put the kettle on and wait for everything to blow over. The current system is not sufficiently broken to make other solutions even remotely viable. A few months of disruption is not enough to force the world to build alternative trade routes. All we can do in the meantime is have a nice collective tut at the petrol station. About the Author Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS. Reviewed by RADEX MARKETS Risk Warning: Trading derivatives and leveraged products carries a high level of risk, including the risk of losing substantially more than your initial investment.

Hidden away within the prosperous northern Italian region of Emilia-Romagna lies a very different kind of treasure. Rather than hoarding precious metals, the huge storage facilities belonging to the Credito Emiliano Bank are instead home to thousands of tonnes of another kind of gold. These perfectly maintained climate-controlled vaults are designed for one purpose and one purpose only: to jealously guard wheel upon wheel of the world-famous Parmigiano Reggiano cheese. The European heatwave has raged on for months now and north Italy has not escaped the sun’s wrath. Weather conditions are now threatening the bank’s high-tech warehouses, which have to carefully maintain narrow temperature and humidity ranges in order to stop the precious dairy products from drying out or spoiling. Higher outside temperatures are causing electricity bills to swell by 30% in some cases, cutting into the bottom line of a very peculiar business model. While making premium cheese is a very lucrative business, dairy farmers have to contend with the difficult problem of cash-flow. Because the final product requires 12, 24 or even 36 months of maturation, farmers have no immediate income with which to cover daily operating costs such as cow feed, milking equipment or labour costs. The work being done on any given day may not pay off for several years. The same issue pervades a number of other food and drink businesses, including whiskey distilleries, vineyards and even high-end charcuterie facilities. This is where Credito Emiliano steps into the equation. Instead of storing its freshly made cheese on site, the dairy farm will deliver the unaged wheels to the bank’s warehouses, where they will serve as collateral for loans, granting farmers the necessary capital to keep their operations running. Credito Emiliano will typically advance 70-80% of the current market value of the cheese, keeping the rest as a buffer against degradation and market fluctuations, making such agreements very low risk for the bank. The loan itself is relatively low interest because of the value and stability of the collateral, meaning the farmers also benefit from the arrangement. A full wheel can easily fetch $1,000 or more, so securing 70-80% of that amount is an effective means of quickly raising a substantial amount of funds. The technical side of cheese storage is nothing to be sniffed at. The edible gold is stacked from floor to ceiling on shelves reaching up to 10 metres high while automated robots sweep up and down the aisles to delicately brush, clean and turn the massive 40 kg wheels. Each one must be carefully turned over every week to ensure a uniform aging process, thereby ensuring a consistent flavour throughout the hundreds of thousands of cheeses. The facilities are equipped with state-of-the-art bank-grade security systems, including armoured gates, infrared security cameras, motion sensors and biometric tracking. Climate systems maintain the temperature between 14°C and 18°C and the humidity at around 80-85%. Recent summers have forced the warehouses to undergo a number of upgrades, including modern insulation cladding and dynamic ventilation systems. The problem for Credito Emiliano is that as temperatures rise, it becomes more expensive to store the collateral, thereby cutting into the profitability of their business model. In some cases, the wheels are stored for up to three years, so a string of hot summers can make a significant dent in the bank’s bottom line. Increased electricity bills are only one element of this; expensive infrastructure upgrades may also be required. Higher temperatures also affect the cows themselves. Hot cows would rather lie down and sunbathe than tirelessly eat grass all day, which reduces milk yields. Moreover, the milk produced is of lesser quality, characterised by a different fat and protein balance, potentially causing the resulting cheese to fail the strict grading standards. Less cheese produced means less collateral, leading to fewer loans and less revenue for the bank. The humble dairy industry meanwhile has adopted a futuristic approach to these new problems by turning to blockchain technology. Instead of sending their cheese to the bank’s vaults, farmers store their wheels within their own facilities and implant each one with an edible microchip made out of food-safe silicon. The chips are able to withstand years of acidity and salt at the heart of the cheese and can be read by a hand-held laser scanner that picks up a unique digital ID, which is then stored on an immutable blockchain ledger. Local sensor data are also recorded along with the ID of each cheese, tying each one to detailed environmental records. A non-fungible cheese, so to speak. Should the farm wish to use one of their wheels as collateral for a loan, the ledger will register the cheese in question as a digital asset pledged to the bank. This prevents the stinky business of cross-collateralisation on behalf of the farmer, preventing them from taking out multiple loans on the same cheese. Credito Emiliano currently handles around half a million wheels of cheese at any given time, equating to around $400 million worth of collateral. About the Author Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS. Reviewed by RADEX MARKETS Risk Warning: Trading derivatives and leveraged products carries a high level of risk, including the risk of losing substantially more than your initial investment.

Financial markets have not had much to say for themselves over the past couple of days, as traders and investors eagerly await the latest CPI report scheduled for publication later today. The question on everyone’s mind is whether the US rate of inflation will continue to show signs of slowing down, following on from the surprise drop observed in June. The crash in crude oil earlier in the summer dragged consumer prices down along with it, but the resumption of hostilities spiked the Brent benchmark back up to $100 per barrel in July, albeit briefly. Economists are predicting another drop in the headline figure last month, although only a marginal one, from 3.5% to 3.4%, while the core inflation rate is expected to drop from 2.6% to 2.5%. Last week’s jobs stats did not exactly paint the kindest picture of the US labour market, lowering expectations that the Federal Reserve will enact a rate hike during next month’s meeting; should today’s inflation print point to less aggressive price increases, the Fed will have yet another excuse to hold steady. Markets have been unwilling to commit to one direction or another so far this week, preferring instead to wait on clearer macroeconomic signals. A drop in inflation would likely weaken the dollar and embolden risk-on sentiment, but such boldness is absent for the time being and positioning ahead of the publication remains dullishly neutral. The Dow and S&P 500 quietly simmered below record highs yesterday, while currencies displayed a remarkable level of stability throughout the session. Precious metals were somewhat subdued, with gold and silver falling 0.50% and 1.6% respectively, while Bitcoin also receded to under $64,000 per coin. Markets are in the waiting room, ready to be called in; not long now. Crude oil prices were on the rise earlier in the week, as diplomatic progress on the Iran front advanced at a glacial pace. Nothing of real substance has emerged as of yet, and attacks on shipping vessels resumed over the last couple of days, although the parties involved have so far not seen a collapse in negotiations. Brent Crude toyed with $90 per barrel yesterday and is on the front foot again this morning, while WTI contracts sit at around $84. Meanwhile, US crude oil inventories reported a surprise rise of 9 million barrels last week, complementing the 3 million barrels added the week prior. The Strategic Petroleum Reserve now boasts around 300 million barrels stored in its underground vaults, meaning the caverns are now roughly 40% full. The surprise rise in reserves suggests that the physical US market is absorbing the supply shock better than headlines imply. #CPI #DXY #OIL About the Author Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS. Reviewed by RADEX MARKETS Risk Warning: Trading derivatives and leveraged products carries a high level of risk, including the risk of losing substantially more than your initial investment.