FUNDAMENTAL
OVERVIEW
USD:
The US dollar has been
gradually strengthening since Tuesday as the US-Iran stalemate led to some
profit-taking on bearish dollar bets. There’s still no clear sign of a second
round of talks after Iran refused to send a delegation to Islamabad on Tuesday
due to the US blockade in the Strait of Hormuz.
The only good thing that is
holding everything from puking hard is the ceasefire. Just today the Israel and
Lebanon ceasefire got extended by another three weeks and the US-Iran ceasefire
looks to be open-ended.
In the meantime, everyone
has been replenishing their military stockpiles, with the US sending more ships
and military forces to the Middle East. Traders will need to stay nimble
because things can get ugly very quickly.
The price action continues
to be driven by US-Iran headlines, and this is unlikely to change until we get
an official resolution.
EUR:
On the EUR side, nothing
has changed as ECB policymakers continue to reiterate their hawkish bias while
calling for patience given the unpredictability of the US-Iran situation. This complicates the job for the ECB as they can only
work on demand and therefore risk exacerbating the economic damage.
In case the war ends before
the June meeting, the ECB will likely look through the short-term impact and
keep their neutral stance at least until September as they gather more data in
the summer.
If the current stalemate
drags on and the supply disruptions persist, recession fears will likely
increase, which should ultimately weigh on the euro. On the other hand, a
resolution might keep the euro supported in the short-term on better risk
sentiment.
EURUSD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that EURUSD has extended the pullback
this week amid the US-Iran stalemate, with the major support around the 1.1640
level now getting in sight. If the price gets there, we can expect the buyers
to step in with a defined risk below the support to position for a rally into
the 1.20 level. The sellers, on the other hand, will want to see the price breaking
lower to pile in and target a move back into the 1.14 handle.
EURUSD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have
a downward trendline defining the current pullback into the support. We can
expect the sellers to continue to lean on the trendline to keep pushing into
new lows, while the buyers will look for a break to pile in for a rally into
new highs, although the risk to reward setup would be better around the
support.
EURUSD TECHNICAL ANALYSIS –
1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here as the sellers will
likely continue to lean on the trendline to keep pushing into new lows, while
the buyers will look for a break to pile in for new highs
