Oil prices turn lower as Bessent says U.S. may have Iran deal "today or tomorrow"
For traders, the message is straightforward: the next aggressive push higher in USD/JPY may no longer be met by Japan alone.
FX Daily: Yen Rises Sharply With Traders on Intervention Watch
The yen surged again on Monday after Japan and the United States confirmed that they had acted together to arrest its slide, turning what initially looked like another unilateral Japanese intervention into something considerably more powerful.
USD/JPY fell below 156 after trading above 163 only days earlier. Japan had already stepped into the market late last week, but direct US participation dramatically strengthened the signal: Washington is no longer merely giving Tokyo permission to defend the yen. It is prepared to stand on the same side of the trade.
That creates what I would call a two-headed intervention monster.
Japanese authorities appear to have spent as much as ¥8.2 trillion supporting the currency, while the US Treasury reportedly bought yen through the Federal Reserve Bank of New York. Treasury Secretary Scott Bessent’s photographed notes—including an apparent instruction to buy between $5 billion and $10 billion of yen—removed much of the remaining ambiguity.
That does not mean the yen has suddenly entered a durable bull market. The yield differential remains wide, Japan’s energy-import burden remains significant, and the Bank of Japan is still moving more slowly than the market would normally require to generate a sustained currency reversal. Intervention can change positioning and price action quickly, but it cannot permanently erase the underlying carry incentive.
Still, it can make that carry far more dangerous.
The yen has spent decades serving as one of the financial system’s preferred funding currencies. Investors borrowed cheaply in yen and recycled that capital into higher-yielding bonds, equities and currencies elsewhere. As long as USD/JPY moved higher in an orderly fashion, the trade offered both positive carry and favourable price momentum.
That comfortable arrangement has now been interrupted.
The importance of coordinated intervention is not that it announces a new Plaza Accord or Bretton Woods-style monetary system. We are not there. The significance is that Washington has demonstrated a willingness to lean against disorderly dollar strength when it threatens an important ally and begins destabilising broader markets.
That alters the risk-reward calculation.
A renewed move above 160 could quickly attract another official response. Conversely, a sustained break below 155 would begin generating a more serious discussion about carry-trade deleveraging, particularly if it coincided with weaker equities or falling US yields.
The immediate trade is therefore less about chasing the yen after an enormous move and more about respecting the new reaction function. Selling USD/JPY at any price is dangerous after intervention-driven volatility, but automatically buying every dip is no longer the comfortable trade it was a week ago.
Tokyo now has Washington standing behind it.
And when both heads of the intervention monster are watching the same level, yen-funded risk positions deserve a much wider margin for error.
Market Daily: Which Dips Are Worth Buying and Which Rallies Are Worth Fading?
July delivered the worst monthly performance for high-beta momentum since the Global Financial Crisis, while volatility across factors and investment themes surged to its highest level since the pandemic.
The conversation has therefore changed quickly. Investors are no longer simply asking when to buy the dip. They now want to know whether the rebound can hold.
Goldman’s flow data suggest the momentum unwind is probably closer to its end than its beginning. US and European high-beta momentum have erased most of their year-to-date gains, prime brokerage data show the sharpest three-day reduction in gross exposure since November 2022, and net exposure across momentum, mega-cap technology and broad AI has fallen to year-to-date lows.
But it is not yet an invitation to charge back into every high-beta trade. Factor volatility remains extreme even as index volatility looks relatively contained. In other words, the surface may appear calm while the fighting underneath remains intense.
My instinct is that the worst of the forced selling has probably passed, but the recovery will be uneven and full of air pockets. Limited-loss structures still make more sense than outright aggressive exposure while the market works through the remaining positioning damage.
The clearest dip-buying opportunity sits in AI hardware.
Hyperscaler earnings did not remove every concern around capital spending or monetisation, but they reaffirmed that underlying AI demand remains strong. The cleaner opportunities are therefore in the infrastructure supporting that demand: US data centres, European semiconductors and broad AI, and Asian bottleneck plays.
This is where price action and fundamentals have separated most dramatically. Positioning in US data-centre trades has roughly halved from its peak, even though the underlying spending cycle remains intact. That is the kind of reset I would rather buy than a simple rebound in speculative technology.
Hyperscalers also deserve another look. They have underperformed the broader market despite continuing to deliver revenue growth and operating leverage from AI spending. If the long end of the Treasury curve remains elevated, profitable mega-cap technology should also hold up better than non-profitable technology, where valuations remain far more sensitive to discount rates.
The rallies worth fading are found in the weaker structural stories that were temporarily lifted by the momentum squeeze.
AI-at-risk baskets in the US and Asia rallied sharply during July’s unwind, not because their fundamentals improved, but because crowded shorts were forced to cover. The same applies to European multinationals facing increasing competition from China. Their prices have rebounded even as earnings expectations remain under pressure, leaving valuations stretched relative to recent history.
European gas-sensitive companies are another candidate. A rebound from the June lows has opened a better entry point for investors who believe higher gas prices will squeeze margins later in the year.
This is not a market where every dip should be bought or every rally chased. The better trade is to buy strong fundamentals damaged by forced selling and fade weak fundamentals rescued by positioning.
That distinction will matter far more than the direction of the index over the next several weeks.
Trump Daily: Iran Talks Begin After Trump Scraps Planned Attack
President Donald Trump has stepped back from what he described as potentially the largest US attack since World War II and replaced it with another diplomatic deadline.
Talks with Iran are expected to begin Monday afternoon after Trump called off the planned strikes, partly following appeals from Saudi Arabia and other regional allies that feared the attack could ignite a far broader Middle East conflict. Trump said he preferred to see whether a deal could be reached and insisted he was “not looking to kill people.”
Markets did not wait for the negotiating table.
Brent crude fell sharply in early Asian trading as investors unwound part of the war premium built into oil during July. The immediate hope is that diplomacy can reopen the Strait of Hormuz, restore more normal shipping flows and remove the threat of another destructive cycle of Iranian retaliation and US escalation.
The market is getting used to this echo: war drums on Friday give way to peace pipes on Sunday.
That does not make the diplomatic opening meaningless. Saudi Crown Prince Mohammed bin Salman reportedly urged Trump to pursue negotiations rather than attack, warning that military action could unleash refugee flows, regional instability and consequences nobody could fully control. Gulf governments increasingly appear to have more influence over Washington’s Iran calculations because they would live directly beneath the fallout from another major strike.
Iran and Oman are also said to be in the final stages of talks over an alternative shipping route through the strait. Those negotiations do not yet amount to a firm agreement to reopen Hormuz, but they suggest Tehran is looking for a commercial and political off-ramp without appearing to surrender control of the waterway.
The problem is that this movie has already had several false endings.
A US-Iran truce reached in June later collapsed, and the latest lull followed renewed missile attacks against American positions in the region. Israel is also waiting on the sidelines rather than embracing the diplomatic push, retaining the option to act if it believes Iran is rebuilding its nuclear or missile capacity.
So the oil market is trading a reduction in immediate danger, not the arrival of durable peace.
Trump has shown repeatedly that diplomacy and military threats are not competing strategies in his playbook. They are alternating levers. One day the attack is loaded and ready; the next, the negotiating room is open. Tehran understands that the strike option has been delayed rather than permanently removed.
For markets, the next signal will come from whether Monday’s talks produce something tangible: an enforceable pathway through Hormuz, a pause in Iranian attacks and a credible framework for the nuclear negotiations.
Until then, lower oil is justified, but complacency is not.
One poorly directed drone, a damaged tanker or another missile aimed at a US base could be enough to reignite the Middle East tinderbox—and send the war premium straight back into crude.
Markets don't take breaks—but you can.
While you're enjoying summer, the market keeps moving. The good news? ProPicks AI never stops working—analyzing thousands of stocks using 100+ financial metrics to surface winning opportunities for you.
Our Tech Titans strategy has more than doubled the S&P 500 since launching in Nov 2023, catching winners like Siemens Energy (+231.5%) and Sandisk (+189%) before the crowd.
Invest smarter this summer—without sacrificing your downtime.