Good morning. In 1973, the world’s first oil crisis hit after OPEC cut production, sending crude prices soaring 400% in just months. Stock markets worldwide plunged as energy costs exploded.

It was a reminder that geopolitics can move markets faster than any chart pattern.

-Jonathan Kibbler, Shaun A, Jordon Mellor

MARKETS

Prices supplied by Google Finance as of 4:00am ET - stock prices as of close. Here is what the prices mean.

TRADER INSIGHTS

The markets have been noisy lately central banks, inflation, geopolitics, tariffs you name it, traders are reacting to it. Sometimes in this kind of chaos, the best thing to do is strip it all back and look at the Commitment of Traders (COT) report for clarity.

And right now, two markets stand out with extreme positioning that could turn into potential trading opportunities: Crude Oil and AUD/USD.

Non-commercial traders are holding record short positions in crude oil futures, levels we haven’t seen since 2012. That’s a big statement from hedge funds. The logic is simple: OPEC+ keeps increasing production, and more supply usually weighs on prices.

Technically, here’s what I’m watching:

I’ve been talking about this one for a while, and it’s still high on my watchlist. The COT report shows extreme short positioning in AUD futures, far greater than what we saw in August, and not far from April 2024’s reversal levels.

Add to that:

The COT report is flashing some big signals right now:

For us traders, this is about patience and timing. Extremes don’t mean immediate reversals, but they do mean opportunity. If the technicals line up the setup could be too good to ignore.

-Jonathan Kibbler

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NEWS

Markets lit up on Monday after President Donald Trump announced that he had fired Federal Reserve Governor Lisa Cook. Cook quickly pushed back, saying the move was illegal and refusing to step aside.

The clash is now the latest flashpoint in Trump’s long battle with the Fed and it has traders watching closely.

1. Trump’s Attempt to Remove Cook

Trump claimed Cook made false statements on mortgage applications and used that as justification to terminate her “for cause.” He posted the letter on Truth Social, escalating his criticism of the central bank. Cook said Trump has “no authority” under the law to remove her and vowed to keep doing her job. She has hired high-profile legal counsel to fight the move.

2. Fed Independence Under Pressure

By law, Fed governors can only be removed for misconduct or dereliction of duty. Legal experts argue Trump’s firing attempt will almost certainly face court challenges. If he were to succeed, it would mark a significant shift in the Fed’s independence, raising the risk of political influence over monetary policy. Traders know that Fed independence is key to global confidence in the dollar.

3. Market Reaction

The dollar index slipped 0.3%, 2-year Treasury yields fell four basis points, and gold picked up 0.3% as investors hedged against instability. Stock futures edged lower, showing the unease. Traders don’t like uncertainty around the Fed, especially when it comes from the White House.

4. What’s at Stake for Powell and Policy

If Cook is eventually removed and Trump’s nominee Stephen Miran is confirmed to Adriana Kugler’s vacant seat, Trump would control four of the seven Fed board seats. That could tilt decisions toward faster rate cuts, weaker dollar policies, and more volatility across markets. Powell’s term as chair doesn’t expire until 2026, but this fight could shape the policy path much sooner.

Trump’s clash with Lisa Cook is more than just political noise. It puts the Fed’s independence in question, which is central to the dollar’s stability and credibility. For us traders, this isn’t background drama, it’s a direct signal that U.S. monetary policy could become more politicized.

Gold, bonds, and the dollar already reacted to the headlines, and more volatility could follow as the legal fight plays out. Whether Trump succeeds or not, the pressure he’s putting on Powell and the Fed is clear. For us traders, that means central bank politics just became another market-moving variable we can’t ignore.

-Shaun A

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