Looking to the Futures

At the end of July, we saw the United States sell Euros and buy the Japanese Yen from international reserves.  U.S. Secretary of the Treasury, Scott Bessent, made comments surrounding a need to curb currency volatility and reducing risks to Asian markets.  We have not seen currency intervention since 2011, but it came at a time of need.  From an inflation-adjusted standpoint, the yen has not seen currency weakness of this magnitude since around the 1960’s.

There are many ways in which a government can strengthen a currency: raising interest rates, buying back its own currency using foreign exchange reserves, or reducing the money supply by selling government bonds in open market operations.  

Japan ranks as the largest foreign holder of U.S. Treasury securities sitting at above 1.14 trillion. If they were to choose to sell U.S. Treasuries, raise U.S. dollars, and then use those dollars to buy back the Japanese Yen thus propping up their currency, then the U.S. could see interest rates rise. 

U.S. President Donald Trump has been a long-term proponent of lowering interest rates and has even went as far as opposing the Federal Reserve’s rate decisions.  Federal Reserve Chairman Kevin Warsh has maintained the fed funds rate target range of 350 to 375 basis points through his first few meetings as the new chairman, but the FOMC (Federal Open Market Committee) minutes indicated they are watching inflation closely.  There is discussion surrounding potential rate hikes if inflation is not able to be controlled. 

According to the CME FedWatch Tool, through the end of the year there is a roughly 45% chance of a 25 basis point hike and a 19% chance of hiking a cumulative 50 basis points.  From the last Fed meeting in July, we saw three FOMC members dissent (who favored a quarter-point hike) versus no dissenters the previous meeting. 

The current administration is left trying to sway the Federal Reserve and work with other governments to keep rates down.  A question to ask would be has this currency intervention set precedent for future involvement?  As mentioned above, it is an uncommon occurrence and does not happen much.  Speculators are using this information as a signal that the administration is not comfortable with direct U.S. Treasury sales in the secondary market. 

Japan has access to other alternatives though such as the Federal Reserve’s FIMA (Foreign and International Monetary Authorities) repo facility, which the U.S. suggested it use going forward. 

According to the CFTC Commitment of Trader’s Report published August 11th 2026, we have seen a decrease in short positioning across the board by dealers, asset managers, and leveraged funds. 

Light Sweet Crude Oil futures (/CL) have traded in a wide range since June 30, moving between 67.04 and 93.50. Prices have since pulled back and are trading below the 9-day, 50-day, and 100-day simple moving averages (SMA), while remaining above the 200-day (SMA), which recently acted as support after crude briefly moved below it and reached a low of 67.04 on July 2. From a short-term trend perspective, the 9-day (SMA) crossed above the 50-day simple moving average on July 27, which may be viewed as a bullish technical development. However, the 20-day simple moving average and 21-day exponential moving average remain below the 50-day (SMA), suggesting the broader technical picture remains mixed. Volatility has eased from mid-month levels, falling from a high near 175% to roughly 69%. Momentum has also cooled, with the relative strength index declining from near 70 to 52.6. With the RSI only slightly above 50, momentum appears more neutral and may suggest crude is beginning to stabilize.

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