Overnight during the Asian session, global markets were hit with a wave of fear due to reports of an attack in Iran. As a result, Asian indices experienced a sharp decline, with Nikkei225 losing more than 2.5%. Similarly, EU and US futures also lost more than 0.5% on average. However, safe havens such as Gold and Silver saw a notable rally, while Crude Oil experienced over a 3% rally.

Traders should exercise caution as escalation may create higher volatility, especially if it continues. Protect positions at all times.

Possible rate hike by the Fed?

In the past few days, US economic figures have shown considerable strength. As a result, the possibility of the Federal Reserve cutting rates has decreased. This is reflected in the Fed Fund Futures, which indicate that it is unlikely that rate cuts will occur in June, July, or even September.

During yesterday’s trading, several Federal Reserve officials stated that they are not in a hurry to cut rates. Additionally, Fed’s Williams stated that while a rate hike is not the Fed’s base case at this time, they will raise rates if necessary.

DXY hovering above 106.0

The US Dollar reclaimed the 106.0 resistance level after briefly dropping below it during yesterday’s trading. This morning, the index reached 106.35 following reports of an attack on Iran.

In the meantime, the technical indicators remain heavily overbought. However, the downside retracement is likely to continue, but it will be limited before the upside trend resumes.

Over the next few weeks, we will see if the Federal Reserve will postpone its first rate cut. If we continue to see strong economic releases, the US Dollar will likely strengthen, and any downward retracement may be regarded as a chance for buyers to invest. In the coming weeks, markets will need to factor in the delay of the first rate cut.

EURUSD upside retracement may stretch towards 1.07

For the past five trading sessions, EURUSD has managed to hold above 1.06, causing technical indicators to shift to slightly bullish. This stabilization may indicate the beginning of an upside retracement.

The resistance area between 1.0680 and 1.07 must be surpassed for further gains towards 1.0750. This is a short-term retracement, not a trend.

USDJPY near 155.0

USDJPY has been hovering around its resistance level of 155.0 for the past four trading days. This marks the highest level it has reached in approximately 30 years. Interestingly, the Bank of Japan has not intervened yet. Previously, the BoJ had intervened multiple times when the currency pair reached 152.0. There is speculation that the BoJ may take action if USDJPY surpasses 155.0.

Verbal interventions are not slowing down the USDJPY rally; therefore, it’s imperative for those shorting the USDJPY to focus on risk management.

Gold rally stalled

Earlier this morning, gold briefly rallied above $2400 in response to the attack on Iran. However, the rally stalled and gold is now trading near $2380. This could be an early indication that a significant retracement is underway, particularly as the daily chart is showing multiple reversal candles.

A break below $2380 would trigger further declines towards $2360.

 

 

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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