TradFi Weekly Recap July 06-July 10

🚨 Fed in a Dilemma! Middle East Conflict Reignites Pushing Oil Prices Higher, Dollar Plunge Brings Great Opportunities for Range Trading

1. Weekly Market Summary

This week, the global macroeconomic market experienced severe volatility, struck by the dual impacts of fundamentals and geopolitics. On the one hand, U.S. June Non-Farm Payrolls (NFP) plummeted to 57,000, falling far below expectations and indicating a rapid cooling of the labor market. On the other hand, inflation data such as CPI, PPI, and PCE remain stubbornly high due to previous factors. This stark contrast of "stubborn inflation and unexpectedly cold employment" has left the Federal Reserve (Fed) in a complete dilemma: fearing a recession if they hike rates, and fearing an inflation resurgence if they don't.

Meanwhile, the Middle East ceasefire agreement is on the verge of collapse. U.S. airstrikes on Iran and the withdrawal of Iran's oil export waivers have caused international oil prices to soar. Amidst the loss of clear forward guidance and escalating geopolitical risks, the US Dollar Index (DXY) recorded its largest single-day drop since late April. The significant expansion in market volatility has created excellent swing trading opportunities for traders.

2. Weekly Market Themes

High Inflation Meets Weak NFP, Fed Caught in an Extreme Tug-of-War

The unexpectedly low June NFP data of 57,000 and the decline in the leisure and hospitality sectors sent a strong signal of economic cooling. However, the stickiness of price indices prevents the Fed from easily easing policy. Continuing to hike rates could trigger a hard landing for the economy; pausing hikes might allow the lurking inflation monster to revive at any time. This contradiction in policy logic has directly drained the upward momentum of the US dollar.

Targets to watch: US Dollar Index (DXY), Short-term US Treasuries (US02Y)

Middle East Ceasefire Near Collapse, Supply Shock Pushes Oil Prices Higher

Following attacks on commercial ships in the Strait of Hormuz, the U.S. military launched retaliatory airstrikes against Iran. Coupled with the U.S. Treasury's withdrawal of Iran's oil sales waivers, this double blow (shipping disruptions + tightening sanctions) poses a severe threat to crude oil supply. WTI and Brent crude surged in response, as the geopolitical risk premium quickly reshaped the pricing logic of the energy market.

Targets to watch: Brent Crude (UKOUSD), WTI Crude (USOUSD)

Imported Inflation Fears Resurface, Driving Cross-Asset Volatility Expansion

As the Middle East conflict triggers a spike in oil prices, fresh concerns about "imported inflation" are brewing. The jump in oil prices is highly likely to force the Fed into a more "hawkish" stance when facing lingering inflation pressures. The 10-year US Treasury yield jumped to 4.549% following the news, signaling a comprehensive expansion of volatility across equities, bonds, and forex markets.

Targets to watch: S&P 500 Index (US500), 10-Year US Treasury (US10Y)

3. Major Asset Review

Forex Market (DXY)

The US Dollar Index experienced a massive earthquake this week, marking its largest single-day drop since late April. The shockingly weak NFP instantly cooled market expectations for further Fed rate hikes. Combined with a drop in short-term Treasury yields, the dollar lost its core support for maintaining strength, completely breaking its unilateral trend.

Commodity Market (UKOUSD)

Crude Oil became the absolute protagonist this week amid the geopolitical conflict. Stimulated by the dual catalysts of U.S. airstrikes and tightening sanctions, WTI crude futures surged 2.87% to temporarily trade at $72.46, while Brent crude rose 2.75% to $76.18. The bullish momentum is strong, making it the core sector for recent trend-following breakout trades.

Stock Index CFDs (US500 / NAS100)

Stock indices faced a fierce tug-of-war between bulls and bears this week. On one hand, weak employment data eased some short-term tightening expectations; on the other hand, concerns about imported inflation from soaring oil prices and jumping Treasury yields placed new pressure on equity valuations. The indices fluctuated violently amidst the foggy macro landscape, testing traders' skills in range-bound trading (buying low and selling high).

4. Next Week's Focus

• Middle East Situation and Energy Crisis Development: Closely monitor the subsequent development of the U.S.-Iran conflict and shipping security in the Strait of Hormuz. Any escalation in geopolitical tensions could further push up oil prices, thereby triggering global inflation nerves.
• Fed Officials' Stance and Inflation Stickiness: Caught between the NFP slowdown and soaring oil prices, the market will highly focus on recent public speeches by Fed officials, looking for clues on how they will strike a balance between "preventing recession" and "fighting inflation."

5. Summary

This week's market logic can be summarized as: "The Fed falls into a dilemma, the dollar's unilateral trend collapses, and Middle East conflict ignites the oil bull." When the central bank loses clear forward guidance, the market will swing violently back and forth between "rate hike panic triggered by inflation rebounds" and "recession fears triggered by weak employment."

For traditional spot investors, a market lacking a clear direction is a nightmare; but for traders, this is a golden era! In terms of trading strategies, it is recommended to seize the long breakout opportunities in crude oil driven by geopolitical risks. Meanwhile, for the wide-range fluctuations of the US Dollar Index and stock indices, utilize the flexibility of two-way trading and the excellent liquidity of the Bitget platform to precisely capture the lucrative profits brought by volatility expansion amidst this extreme macro tug-of-war!