Dollar Slides As US/Iran Peace Hopes Bloom
Dollar Under Pressure
The US Dollar continues to push lower as we move through the back of the week. A stark shift in sentiment over the US/Iran war has sparked a rally across the risk complex, with USD and crude prices softening simultaneously. The week started with grave fears that the ceasefire was about to collapse amidst reports of US ships attacked in the Strait of Hormuz, followed by US retaliation leading Trump to announce Project Freedom: a mission to forcefully reopen the Strait of Hormuz. However, both sides were seen dialling back the aggression with Trump announcing on Tuesday that Project Freedom would be paused for now, while the Iranian Foreign Minister cited progress in peace talks.
Bearish USD Risks
Risk markets cheered the easing of tensions while USD saw heavy selling as traders abandoned safe-haven positions to chase higher yielding plays elsewhere. Stocks, crypto and commodities have been soaring this week and while these positions remain fruitful, USD should continue lower near-term. There is a growing view that the US is leaning on China to help pressure Iran into a deal with speculation that such a deal could come ahead of Trump and Xi’s mid-May meeting. If traders start to get a stronger sense that a deal is coming, USD should start to push deeper near-term with the announcement of a deal set to pull the greenback down sharply as oil prices plunge and risk assets soar. However, if talks stumble again and tensions rise once more, USD should move higher on fresh safe-haven demand.
Technical Views
DXY
Price continues to correct lower within the descending wedge which has framed the correction lower from YTD highs. 96.63 remains the big support level to watch with the potential for a fresh rotation higher still seen while price holds above that area. Near-term bulls need to clear 99.15 to regain momentum and put focus back on the 100 level.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.