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Micron Technology (MU) massively exceeded expectations with its third quarter earnings report, published after market close on Wednesday, causing shares in the company to soar 16% during the following session. Record-breaking revenue figures suggest that customers are more than willing to pay increased prices for memory, a fact that manifested very differently for Apple (AAPL), whose shares sank 6% on Thursday after the computer giant announced price hikes to its Mac and iPad range of products. In a very blunt statement, Apple admitted that the rapid expansion of AI data centres has created a surge in demand for memory and storage and that the company has reached a point where it is unable to shield their customers from the resulting price increases. The relentless demand from AI endeavours has been known to cause shortages and higher prices in the consumer market for several years already – ask anyone trying to build their own PC – but the latest chapter now illustrates the direct competition between major tech firms. Apple was not the only giant to falter on Thursday, with the remainder of the magnificent seven also closing yesterday’s session in the red. Speaking of which, Micron’s recent ascent, coupled with the introduction of SpaceX (SPCX) to the Nasdaq, has somewhat reshuffled the pecking order in terms of America’s largest companies by market capitalisation. Micron briefly surpassed both Tesla and Meta on Thursday, while SpaceX and Broadcom currently occupy the 6th and 7th spot respectively. The AI boom has made heroes of companies that had been overlooked for many years and soon the magnificent seven may well swell to the magnificent ten. Yesterday’s PCE price index changed very little in terms of the overall inflation picture. Expectations were largely met and while the headline figure topped 4.1%, the core inflation rate only increased 0.3% in May; not enough to trigger any immediate shift in monetary policy. Expectations for a rate hike actually fell following the publication, with interest rate traders now looking at a 70% chance of a rate hold during the next Fed meeting on the 29th of July. With that said, markets are still coming to terms with a stronger dollar, a narrative that has punished non-yield-bearing assets harshly. Gold is in the process of losing $4,000 per ounce while silver is down to $56. The white metal has now more than halved in value since setting a record high of $120 per ounce earlier this year. Over in cryptocurrencies, Bitcoin lost $60,000 yesterday and is currently bogged down in the mid-$58,000 range. Needless to say, sentiment in the crypto sphere is truly in the gutter. #MU #AAPL #BTC 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 recent conflict in Iran severely tightened global oil supplies, starving the world of millions of barrels that would normally flow out of the Strait of Hormuz, leading to an acute spike in crude oil prices. In response, many countries around the world were forced to tap into their own domestic petroleum reserves in order to make up for the shortfall. This in no small part explains why oil prices only rose to the extent that they did. Instead of entering a bidding war for every last barrel of oil on Earth, governments around the world instead adopted a policy of using what resources were already available to them, while being more frugal with such. China in particular was able to dramatically reduce crude imports by making use of its vast inventories, while also throttling refinery output and limiting consumption within its borders. Similar approaches were adopted throughout the world; a collective strategy that did much to cushion the supply shock. An interesting but overlooked point about all of this is that a number of countries were well prepared for such an outcome. Why so? Why do nations around the world maintain strategic oil reserves? As with many other facets of the global oil industry, the reasoning stems from the 1973 oil crisis. Towards the tail end of that year, Egypt, Syria and a number of Arabic nations launched a joint offensive against Israel. While the conflict itself would wind down relatively quickly, ending with a ceasefire less than three weeks into hostilities, the Arabic world, via OPEC, elected to punish all Western powers deemed to have been supportive of Israel by means of a wide-ranging oil embargo. The embargo would last a mere six months, but this would be enough to prompt fuel shortages in many countries, causing oil prices to quadruple in some cases. The United States were not prepared for the ensuing supply shock, suffering significant inflationary pressures and poor economic growth as a result of the lack of petroleum. The US government was forced to implement a number of emergency measures, including a national 55 mph speed limit, year-round daylight-saving time and public campaigns to encourage energy conservation. Such measures were mostly temporary, but the crisis would provide the political momentum for the Energy Policy and Conservation Act, signed by President Ford in late 1975. The act included the creation of the Strategic Petroleum Reserve, designed to ensure the US would never again be caught with its pants down. And so, over the following decades, the United States, and later other nations, would embark on vast oil storage infrastructure projects. The first image that comes to mind when hearing about petroleum storage is perhaps that of a large standing oil tank or silo, but this is generally not the case. Rather than build expensive above-ground facilities, the US elected to store the precious resource exactly where it came from: underground. Huge caverns were carved out by injecting water into underground salt deposits and removing the resulting brine, creating extremely large cavities that were relatively inexpensive to maintain. Salt caverns have a number of beneficial properties when it comes to storing crude oil. The first is that salt is self-sealing; small cracks that would otherwise become leak paths in other rock formations will naturally close under pressure, making salt a self-sustaining containment vessel. The second advantage is that because the oil is stored underground, it is protected from the surrounding environment. Temperatures are much more stable, evaporation is minimal, extreme weather conditions such as hurricanes or tornados are a non-issue, as are any potential military threats. The third point is that salt cavern storage makes withdrawing the oil very easy: simply pump the cavern with water and the lighter crude oil will rise to the top, ready to be pumped out. The United States had a head start in such endeavours, reaching a peak storage capacity of 727 million barrels by the mid-2000s, which it would fill to the brim by the year 2009. As of the time of writing, the Strategic Petroleum Reserve is roughly half full, but the amount of crude oil held in commercial reserves bumps the total figure up significantly. As mentioned in the opening paragraph, China also has huge crude oil storage facilities, but unfortunately getting an accurate figure is somewhat complicated by the fact that the Chinese state does not officially report on the volume of its reserves. Moreover, statistics often conflate government reserves and commercial inventories into the same figure, which amount to around 1.3 billion barrels in total. Somewhat surprisingly, the country with the third largest reserves is Japan, at around 300 million barrels in government capacity, plus another 180 million barrels in mandatory private sector reserves. Taking population sizes and domestic consumption into account, Japan is very well insulated against supply shocks, maintaining inventories equivalent to 5 or 6 months of consumption, not only as crude oil, but as refined petroleum products as well, including petrol, diesel, kerosene and jet fuel. The safeguarding reflects the island nation’s reliance on foreign energy imports, as well as its vulnerability to natural disasters, which require usable fuel to be readily available. Firing up a refinery in the aftermath of a tsunami or earthquake is obviously not ideal when emergency vehicles need to be deployed to save lives. When the US boasted full storage reserves back in 2009, it was still a net importer of petroleum products. As of today, the United States exports more total petroleum products than it imports, granting it an extra buffer against supply disruptions, somewhat justifying an only half-full SPR. China, due to its huge population size, is still a massive importer of crude oil because it produces only 30% of the amount needed to satisfy domestic demand, which explains the gigantic reserves accumulated in recent years. While the US, Japan and China were able to withstand the recent supply disruptions with demonstrable preparedness, many countries around the world did not weather the storm so elegantly. South and South-East Asia were hit disproportionately hard, suffering economic consequences from the lack of oil and natural gas almost immediately. Pakistan and Bangladesh faced instant shortages, causing significant drops in industrial production and forcing both countries to introduce energy austerity measures. Given its huge population and comparatively small reserves, India was also unprepared for the supply shock, but managed to get away with it by aggressively buying from Russia; the event nevertheless served as a loud warning shot to build more storage facilities. Further east, it came to light that the Philippines imports up to 98% of its crude oil from the Gulf, while having absolutely no state-owned strategic reserves to speak of. The archipelago declared a state of emergency as early as March as the impact of fuel shortages ravaged its battered economy. Thailand, Vietnam and Indonesia all implemented shorter work weeks or work-from-home initiatives to save power, while rearranging commercial supplies and using emergency measures to make up for the shortfall. The lack of natural gas forced a number of countries in the region to lean more heavily on coal-fired generation to plug the gap. Needless to say, environmental concerns flew out the window over the course of the past few months. Further north, the lack of oil and natural gas resulted in a very different problem. South Korea and Taiwan are renowned for their role in semiconductor manufacturing, an extremely energy-intensive industry that requires constant uptime. Disruptions to energy supplies, fluctuating freight and insurance rates, higher logistics expenses, unreliable deliveries of crucial chemicals and gases, all have immediate and profound impacts on the technology sectors of such advanced economies. The semiconductor industry can absorb very high energy costs before production becomes uneconomical – a computer chip is infinitely more valuable than a barrel of oil; the bigger problem is that so many vital pieces of the puzzle are dependent on a single shipping lane in the Middle East. The 20% drawdown in the Korean Kospi index between February and March illustrates the danger well enough. Global energy architecture is incredibly fragile. The recent conflict in Iran was a wake-up call for many. The main take away is that being totally reliant on foreign nations for something as fundamental as power generation is strategically unacceptable. The lesson could have been much harsher. 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 rarely move in a straight line for long. Prices constantly fluctuate as traders react to economic data, central bank decisions, market sentiment, geopolitical events, and of course, unexpected news. Whether it is a sharp rally in EUR/USD following a strong Non-Farm Payrolls report or a sudden sell-off in gold due to changing interest rate expectations, market prices are always adjusting to new information. As a result, when an asset rises or falls significantly, many traders begin asking an important question: has the market moved too far from its fair value? If so, could prices eventually return to a more normal level? This idea forms the foundation of Mean Reversion trading. The concept suggests that when prices deviate substantially from their historical average, they may eventually tend to move back towards that average over time. Rather than chasing strong trends, Mean Reversion traders look for opportunities where markets may be temporarily overbought or oversold. Mean Reversion strategies are widely used across financial markets, including forex, stocks, commodities, indices, and cryptocurrencies. Traders often combine this approach with technical indicators, price action analysis, and risk management techniques to help identify potential trading opportunities. In this guide, we will explore what Mean Reversion is, how it works, common Mean Reversion trading strategies, and how traders identify potential opportunities in real market conditions. Mean Reversion is a trading concept based on the idea that prices may eventually move back towards their historical average after experiencing unusually large price movements. Traders use Mean Reversion strategies to identify potential overbought and oversold market conditions and look for opportunities when prices appear stretched away from their average value. While the strategy can be effective in certain market conditions, it is often combined with risk management tools and additional technical or fundamental analysis to improve decision-making. Ready to put your market knowledge into practice? Open a trading account today and start exploring the opportunities available across global financial markets. Mean Reversion is a trading concept based on the belief that when the price of an asset moves significantly away from its historical average, it may eventually tend to move back towards that average over time. In forex trading, Mean Reversion means looking for situations where a currency pair appears unusually expensive or unusually cheap compared to its recent price history. Traders then monitor the market for signs that the price may begin moving back towards a more normal level. The theory is based on the idea that markets do not move endlessly in one direction. Prices are constantly influenced by factors such as: For example, if EUR/USD rallies sharply following a surprisingly weak US inflation report, the market may become temporarily overbought. Some Mean Reversion traders may then begin monitoring for signs that the pair could pull back towards its recent average price. Essentially, Mean Reversion traders are not necessarily trying to predict the next major trend. Instead, they are attempting to identify situations where prices may have moved too far, too fast. Common tools used to identify potential Mean Reversion opportunities include: These signals can help traders evaluate potential entry and exit opportunities while maintaining a structured trading approach. Now that we understand the basic concept, let's compare Mean Reversion with another popular trading approach: Trend Following. Many traders become confused when comparing Mean Reversion and Trend Following strategies because both approaches can be profitable. However, they are based on completely different assumptions about how markets behave. Mean Reversion Trend Following Imagine EUR/USD rises 400 pips in a few days after a major European Central Bank announcement. A Mean Reversion trader might ask: "Has the market become overextended?" A Trend Following trader might ask: "Could this rally continue for another 400 pips?" Neither approach is automatically right or wrong. The key to this is to understand which type of market environment you are trading. This is why many experienced traders learn both methodologies and apply them when conditions are appropriate. Read more：Trend trading strategies: How to trade using indicators? The term "Mean Reversion" refers to the process of identifying when prices have moved unusually far from an average level and assessing whether they may eventually move back towards that average. The basic workflow is relatively straightforward. Traders first establish a reference point, then measure how far the current market price has deviated from that level. Common tools used include: As a result, Mean Reversion traders continuously monitor markets for signs that price may begin returning towards its historical average, often treating that average as a potential target zone. Understanding the theory is one thing. Seeing how Mean Reversion works in a real trading scenario is where the concept becomes much easier to understand. Let's assume EUR/USD has been trading comfortably around its 20-day Moving Average at 1.1000 for several weeks. Following an unexpectedly weak US inflation report, traders begin aggressively selling the US dollar. As a result, EUR/USD rallies sharply from 1.1000 to 1.1250 within a few trading sessions. At this point, several Mean Reversion indicators begin flashing warning signs: An RSI reading above 70 often suggests the market may be overbought, while trading above the upper Bollinger Band can indicate that price has moved outside its normal trading range. A Mean Reversion trader might begin monitoring the market for evidence that bullish momentum is slowing. In my example, the trader is not necessarily predicting a major downtrend. Instead, they are anticipating that the market may simply move back towards its average level. Of course, markets are not obligated to cooperate. EUR/USD could continue rising to 1.1400 or higher, which is why risk management remains absolutely essential. While Mean Reversion strategies can help traders identify situations where prices appear stretched away from their historical average, it is important to remember one crucial fact: just because a market looks overextended does not mean it will immediately reverse. One of the most common mistakes made by inexperienced traders is assuming that an overbought market must fall or an oversold market must rise. Unfortunately, financial markets often remain irrational for longer than traders expect. As a result, many traders combine Mean Reversion analysis with additional technical indicators and price action tools to improve the quality of their trading signals. The goal is not simply to identify price extremes but to find evidence that momentum may be weakening and that a potential reversal could be developing. Some of the most commonly used tools include: Each tool provides a different perspective on market behaviour and can help traders evaluate whether a potential Mean Reversion opportunity may exist. The Moving Average (MA) is one of the most widely used tools in Mean Reversion trading. It helps traders establish a reference point by calculating the average price over a specific period. When prices move significantly away from the Moving Average, some traders begin monitoring whether the market could gradually move back towards that average level. For example, if GBP/USD normally trades close to its 50-day Moving Average but suddenly rises 400 pips above it following a major news event, some traders may begin assessing whether the move has become excessive and whether a correction could occur. The Moving Average provides a simple but effective starting point for Mean Reversion analysis. Bollinger Bands are among the most popular indicators used in Mean Reversion strategies. They consist of: The indicator helps traders assess whether prices have moved beyond their normal trading range. Suppose EUR/USD surges after a major European Central Bank announcement and breaks above the upper Bollinger Band. This does not automatically mean the market will reverse. However, some traders may begin monitoring for: If these signals appear together, traders may view this as evidence that the market could begin reverting towards the middle band. In other words, Bollinger Bands help traders visualise when prices may have moved outside their normal range and whether a return towards the average could be developing. The Relative Strength Index (RSI) is a popular momentum indicator used by traders to assess whether a market may be overbought or oversold. This is my go-to indicator. The RSI measures the speed and magnitude of recent price movements and produces a value between 0 and 100. By monitoring these readings, traders can gain insight into changes in market momentum and trader sentiment. An overbought market occurs when prices have risen rapidly and may be due for a pause or pullback. An oversold market occurs when prices have fallen sharply and may be due for a rebound. It's important to remember that overbought does not automatically mean prices will fall, and oversold does not automatically mean prices will rise. Instead, these conditions simply indicate that traders may begin monitoring for potential reversals. For example, if GBP/USD falls sharply following weaker-than-expected UK economic data and the RSI drops to 25, some traders may begin looking for evidence that selling momentum is fading and that a potential rebound could develop. This is why RSI is often used alongside other indicators rather than as a standalone trading signal. Support and Resistance Levels are among the most widely used tools in technical analysis and can play an important role in Mean Reversion trading. Support is an area where buying interest has historically emerged. Resistance is an area where selling pressure has historically appeared. When a market has moved significantly away from its average price and simultaneously approaches a major support or resistance level, some traders begin assessing whether a Mean Reversion opportunity may be developing. Imagine USD/JPY has fallen sharply over several trading sessions and reaches a support level that has held multiple times during the past year. At the same time: A Mean Reversion trader may view the combination of these signals as evidence that a rebound towards the historical average could become more likely. The reason is that multiple forms of analysis are supporting the same trading idea. Understanding Mean Reversion is relatively straightforward. Applying it in live market conditions is where things become a little more challenging. Different market environments often require different approaches. As a result, many traders combine Mean Reversion principles with technical indicators such as Moving Averages, Bollinger Bands, and RSI to help identify potential entry and exit opportunities. Below are some of the most commonly used Mean Reversion strategies. The Bollinger Bands Strategy is one of the most widely used Mean Reversion approaches. Its core concept is simple: when prices move significantly outside their normal trading range, they may eventually tend to move back towards the middle band, which represents the average price. Suppose EUR/USD drops sharply after a surprise economic announcement and trades below the lower Bollinger Band. A trader may wait for: If these conditions occur, the trader may anticipate a move back towards the middle band. The objective is not necessarily to predict a new uptrend but to capture a move back towards the market's average price. The RSI Strategy is one of the most common applications of Mean Reversion trading. Its core idea is to use RSI readings to identify situations where market sentiment may have become excessively bullish or bearish. Overbought conditions occur when buying pressure has pushed prices higher at an unusually rapid pace. Oversold conditions occur when selling pressure has driven prices sharply lower. In both cases, traders may begin looking for evidence that momentum is slowing and that prices could move back towards their average level. Suppose AUD/USD experiences a rapid decline after weaker-than-expected Australian employment data. The RSI falls to 24. A trader may monitor for: If these signals appear together, the trader may view this as a potential Mean Reversion setup. Read more：The best forex indicators every trader should use The Moving Average Strategy uses the market's average price as a benchmark. The theory is that when prices move unusually far away from the Moving Average, they may eventually gravitate back towards it. Imagine GBP/USD normally trades close to its 50-day Moving Average at 1.3000. Following an unexpected Bank of England announcement, the pair rallies to 1.3350. Some traders may begin monitoring whether: If confirmation appears, the trader may anticipate a move back towards the Moving Average. The Moving Average strategy remains popular because it is simple, easy to understand, and can be applied across multiple markets. Pairs Trading is a popular Mean Reversion strategy that focuses on two assets that normally move closely together. The core idea is that highly correlated assets often maintain a relatively stable relationship over time. However, temporary market events, shifts in sentiment, or unexpected news can occasionally cause the price relationship to become distorted. When this happens, some traders believe the relationship may eventually return to its historical norm. Imagine two highly correlated forex pairs, EUR/USD and GBP/USD. Historically, both pairs often move in a similar direction due to their relationship with the US dollar. Let's assume their normal performance looks like this: Suddenly, the relationship widens: The spread between their performance has widened considerably. Some traders may believe EUR/USD has become temporarily overextended relative to GBP/USD and that the relationship could eventually normalise. A simplified trade might involve: The objective is not necessarily to predict market direction but to profit if the spread narrows. This approach is commonly used by hedge funds and professional traders because it focuses on relative value rather than outright market direction. Statistical Arbitrage is an advanced Mean Reversion strategy that uses historical data, mathematical models, and quantitative analysis to identify potential trading opportunities. Rather than relying solely on chart patterns or technical indicators, statistical arbitrage attempts to identify situations where prices have moved away from their normal historical relationships. Many quantitative trading firms and institutional investors use sophisticated algorithms to analyse thousands of market relationships simultaneously. Suppose a statistical model shows that two assets normally maintain a price spread of 50 points, but the current spread has widened to 70 points — a deviation of 20 points above normal. The model calculates that historically, when the spread reaches this level, it reverts towards the average 75% of the time. A trader or algorithm may therefore place a trade expecting the spread to move back towards 50 points. Statistical Arbitrage typically requires: For this reason, it is generally more suitable for quantitative traders, proprietary trading firms, hedge funds, and institutional investors. For most retail traders, simpler Mean Reversion strategies involving RSI, Bollinger Bands, and Moving Averages are often easier to implement and understand. Read more：What is arbitrage trading? How beginners profit from it Mean Reversion strategies assume that prices may eventually move back towards their historical average. Unfortunately, markets do not always cooperate. Major economic releases, central bank announcements, geopolitical events, and unexpected market developments can cause prices to continue moving away from their average levels for much longer than traders anticipate. Consequently, risk management is essential. Be aware that even the best Mean Reversion setup can fail. Read more：What Is Leverage in Forex and How Much Should You Use? Read more：What is liquidity in Forex and how is it measured The key lesson is simple: Mean Reversion can be a powerful trading concept, but no strategy works 100% of the time. Read more：10 forex risk management tips every trader should know A Mean Reversion strategy is a trading approach based on the idea that prices may eventually move back towards their historical average after deviating significantly from it. Traders use various indicators and analysis tools to identify potential opportunities. There is no universally best time frame. Mean Reversion strategies can be applied on intraday, swing trading, or long-term charts depending on the trader's objectives and market conditions. Mean Reversion strategies can be profitable, particularly in range-bound or volatile markets. However, they are not foolproof and can result in significant losses if applied blindly during strong, prolonged trends. Common risks include trend continuation, false signals, leverage risk, and liquidity risk. Effective risk management is essential because markets do not always revert to their historical averages. Yes. Mean Reversion strategies are widely used in forex markets and can be applied to major, minor, and exotic currency pairs using indicators such as RSI, Bollinger Bands, and Moving Averages. Yes, many Mean Reversion concepts are relatively easy to understand. However, beginners should practise on demo accounts first and combine Mean Reversion analysis with sound risk management techniques. Mean Reversion is based on a simple but powerful idea: when prices move significantly away from their historical average, they may eventually tend to move back towards that average over time. Throughout this guide, we have explored how traders use Moving Averages, Bollinger Bands, RSI, and Support and Resistance Levels to identify potential Mean Reversion opportunities. We have also examined several commonly used Mean Reversion strategies, including Bollinger Bands trading, RSI-based setups, Moving Average strategies, Pairs Trading, and Statistical Arbitrage. While the concept is straightforward, successful implementation requires discipline, patience, and proper risk management. Markets do not always revert when traders expect them to, and strong trends can continue far longer than anticipated. Economic data releases such as NFP and CPI reports, central bank decisions, geopolitical developments, and unexpected market news can all influence price behaviour and cause Mean Reversion setups to fail. For this reason, many experienced traders combine Mean Reversion analysis with additional technical indicators, price action techniques, and sound risk management practices before entering a trade. Used correctly, Mean Reversion can become a valuable addition to a trader's toolkit and help identify opportunities across forex, stocks, commodities, indices, and cryptocurrency markets. However, it should always be viewed as one component of a broader trading strategy rather than a guaranteed path to profits.

Financial markets are grappling with a major selloff in semiconductor stocks which has caused major drawdowns in the US and Asian tech sectors. Jitters began on Monday after Alphabet (GOOG) lost 5% and the newly launched SpaceX (SPCX) continued to erase its post-IPO ascent by falling over 16%. The momentum carried over into Asian stock markets the following day, resulting in major losses in Japan and South Korea alike. Samsung and Hynix, which together make up around half of the broad Korean index, both lost the better part of 13% yesterday, causing the Kospi to hit circuit breakers and close the session 10% in the red. The Nikkei 225 also fell sharply, losing 3.5% from record highs as tech investment firm Softbank shed 10%. The fear spread into the American session later in the day, with Nvidia (NVDA) losing 4%, Broadcom (AVGO) falling 3% and Oracle (ORCL) giving 5.7% back to the market. Micron (MU), which is set to publish its latest earnings after market close later today, collapsed 13% yesterday as aggressive profit-taking took hold. Too early to tell if the tech rout will persist into the latter half of the week, but the Nikkei 225 is once again in the red this morning after losing 1.6%, while over in Taiwan, semiconductor giant TSMC tumbled 3% within hours of the opening bell. For all the headlines, it is worth bearing in mind that the semiconductor scene has exploded in value in recent years and that the current blip has done little to dent the several-hundred percent gains observed in multiple different companies. While by no means the sole contributor to the downfall in tech stocks, the continued strength of the US dollar is certainly not helping matters. The DXY gained another 0.4% yesterday, submerging the euro under the $1.14 mark and pulling the common currency down to a 12-month low against the greenback. The dollar currency index briefly tapped 100.5 earlier this morning, to the further detriment of major currencies. The yen is now closer to 162 than 161 and traders are looking for any signs of intervention from the Bank of Japan. The Korean won has been sitting above 1,500 for almost a month now, and although monetary authorities have stated that the situation is being monitored, no defensive measures have been observed as of yet. The New Zealand dollar and Swiss franc are both at yearly lows against the US dollar, and while the British pound has escaped the same fate for now, it has done so by the skin of its teeth. The world is struggling to contend with the prospect of future rate hikes on the dollar and what such adjustments could mean for asset prices. Earlier this week, Bank of America changed its outlook for the rest of the year, predicting no fewer than three rate hikes between now and December, after having previously forecast none. The sudden shift shines light on the fact that markets were not prepared for any kind of monetary tightening any time soon, in fact quite the opposite. The implications are being felt in currencies but also in precious metals and cryptocurrencies. Gold and silver are once again toying with price ranges not seen since late last year while Bitcoin is struggling to stay above $62,000 per coin – a target first reached back in April 2021. The downturn in digital currencies is particularly egregious because unlike gold, silver or stocks, crypto never established new highs in the first place. A number of risk assets may well have sold off recently, but they did so coming off very strong runs; cryptocurrencies on the other hand did not enjoy the same rallies, making the current slide even more painful for investors. The Clarity Act is still in murky waters, and while both sides of the debate remain at the negotiation table, optimism surrounding the legislation dissipates with each passing day. #MICRON #SAMSUNG #TSMC 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.

Kevin Warsh made quite the splash following last week’s FOMC meeting, his first as Chairman of the Federal Reserve. While the rate decision itself was nothing out of the ordinary, with the board voting unanimously to hold rates steady at 3.50-3.75%, the incoming Chairman has made it clear that business at the central bank will be conducted very differently under his stewardship. If anything, the Fed is set to return to the way it used to operate in the Greenspan era, with much less emphasis on forward guidance and doing away with handholding and overcommunicating. Warsh stated repeatedly that markets should stop expecting the Fed to announce every single move and instead react to incoming economic data. Speaking of which, the Fed Chairman firmly reiterated the committee’s 2% inflation objective, making it clear that such a target would not change until successfully struck. The commitment has dramatically changed expectations for future rate adjustments, with markets now forecasting a 40% chance of an interest rate hike during the next meeting on the 29th of July. The shift necessarily prompted a strengthening of the dollar last week, pushing the DXY to highs of 101 and beyond – levels not seen since May of last year. The greenback is on the front foot again this morning, pushing the euro down to $1.145 and the pound down to $1.32, while the yen battles with a two-year high of 161.7 per dollar. Beyond currencies, higher rates on the USD do not bode well for non-yield-bearing assets such as gold or silver, which have not performed as many would have hoped so far this year, losing 3% and 7% respectively since the first of January. With that said, such numbers pale in comparison to the shocking display in cryptocurrencies, which have fallen around 30-40% over the same time frame. Conflicting headlines surrounding Iran have made for a choppy start to the week for oil prices. Brent Crude revisited $82 per barrel as trading got underway this morning, following aggressive comments from President Trump late last night, but quickly returned to $78 after encouraging developments emerged from the latest round of negotiations in Switzerland. The US and Iran have apparently agreed on a roadmap for a final deal to be reached within 60 days, including an end to hostilities in Lebanon, a crucial point that was missing from the initial memorandum of understanding formalised last week. West Texas Intermediate performed a similar jump higher earlier this morning, only to settle back down to $75 per barrel later in the day. Should negotiations hold, crude oil shipments through the Strait of Hormuz may well quickly return to pre-conflict levels, but a number of Gulf countries have been forced to recognise that relying so heavily on the maritime passage in question has exposed critical vulnerabilities in their shared economic models. Oil producing nations are increasingly turning to alternative export routes, such as the East-West pipeline in Saudi Arabia and the Fujairah pipeline in the UAE, while Iraq has stated that it plans to export crude and naphtha via Syrian and Turkish ports, bypassing the Iranian stranglehold on seaborne shipments. The big event of the week is the publication of the PCE price index on Thursday, which will deliver the latest reading on US inflation. Forecasts for the headline figure are showing an increase to 4%, while the core element, excluding food and energy prices, is expected to remain at 3.3%. Neither number is ideal as far as the Fed is concerned, which would like to see such figures halved over the coming months. Thursday will also see the release of the third and final revision for Q1 GDP growth, durable goods orders, personal spending and personal income, before the June Michigan Consumer Sentiment completes the picture on Friday. The earnings calendar is quiet this week, with the notable exception of Micron Technology (MU) after market close on Wednesday. #USD #IRAN #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.

After months of panic over global crude supplies, the surge in oil prices is now violently reversing, causing all benchmarks to plummet down to the $70 range. At the time of writing, Brent Crude has fallen to $78 per barrel, while West Texas Intermediate has dropped to just $75. Perhaps more interestingly, the Dubai and Murban benchmarks, used to price regional futures contracts in the Middle East, are now in contango until the end of the year, meaning longer-dated contracts are being priced higher than shorter-dated ones. This is the opposite of the backwardation structure observed over the past few months, whereby prompt crude oil prices faced a premium due to the immediate scarcity threat caused by shipping disruptions. The structural flip marks a return to the pre-conflict state of affairs and is a strong signal that at least as far as oil markets are concerned, the Iran war is over. The reopening of the Strait of Hormuz would immediately free up crude oil supplies currently stuck in a number of Gulf states, particularly Iraq, which would reduce the reliance on strategic petroleum reserves, which have faced heavy draws in recent months. While the peace deal has yet to be signed, or even finalised for that matter, financial markets at large have been emboldened by recent comments from Iran and the White House alike. On Tuesday, the Dow Jones Industrial Average topped 52,000 points for the first time in its history, maintaining the momentum from the prior session. The S&P 500 and Nasdaq meanwhile both closed in the red as an acute selloff in the tech sector caused heavy losses for Micron (MU), Sandisk (SNDK) and Advanced Micro Devices (AMD). Despite the rout in tech, recently launched SpaceX (SPCX) managed to close in the green for the third day running yesterday, granting the company a greater market cap than Amazon (AMZN) and placing it among the top five largest companies in the United States. US futures are up slightly going into today’s session, while in Japan the Nikkei 225 is currently enjoying a tussle with the 70,000-point milestone. Later today, all eyes will be on the FOMC meeting, chaired by the newly appointed Kevin Warsh. While markets are fully anticipating another rate hold, analysts will be on the lookout for any hints regarding future decisions and for any language pertaining to inflation. The Federal Reserve will also release the latest “dot plot”, indicating where each individual official believes interest rates will lie at the end of the year and into the next. One notable dot may be missing however, that of Kevin Warsh himself, who has previously expressed dislike for the practice and for forward guidance in general. On Tuesday, the Bank of Japan raised rates on the yen to a 31-year high of 1% in a near-unanimous vote, in what is viewed as a response to creeping inflationary pressures within the island nation. Falling oil prices have not yet had time to infiltrate global market dynamics, making the outlook on producer and consumer prices hard to gauge and putting central banks around the world in a difficult spot. Many monetary officials around the world will be silently hoping for a swift end to the Iran chapter; whether or not they get their wish is another matter. #OIL #DOW #SPCX 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.