The USD is modestly higher to start the US session reversing some of the declines from the moves during the holiday session yesterday. Against the 3 major currencies – the EUR, JPY and GBP – the gains are moderate with a rise of 0.08% vs the EUR, 0.19% vs the JPY and 0.24% vs the GBP. The greenback is the strongest vs the NZD with a gain of 0.51%.
Today, US bond markets are open after the hiatus from trading yesterday due to the Memorial Day holiday, and the yields are lower but the USD is not reacting with a move lower with perhaps some counter progress toward peace the cause of the apprehension.
More specifically, the Iran-US negotiations remained alive, but Iran continued to send mixed signals that are making any peace agreement difficult (and the US may also be playing it’s part).
While negotiators are still discussing a temporary framework deal centered on a 60-day ceasefire, reopening the Strait of Hormuz, and possible sanctions relief, Iran simultaneously continued actions and demands that are undermining confidence in the talks.
The biggest issue remains Iran’s refusal to fully give ground on its enriched uranium stockpile. Iran continues to insist that enriched uranium remain under Iranian control, while the US is demanding either destruction of the material or strict international oversight.
Iran also tied broader regional demands into the talks, including linking any agreement to ceasefire conditions involving Lebanon and Hezbollah. At the same time, Hezbollah attacks and Israeli retaliatory strikes in Lebanon continued overnight, adding more instability to negotiations. Yesterday, Pres. Trump added another levels of complexity to the region by suggesting the middle eastern countries all come together under the Abraham Accord as well.
The Abraham Accords are a series of agreements first signed in 2020 that normalized diplomatic relations between Israel and several Arab nations, including the United Arab Emirates, Bahrain, Morocco, and Sudan. The deals were brokered by the United States during President Trump’s first term.
The accords were considered historic because they marked the first major normalization agreements between Israel and Arab states in decades. The goals included improving regional security cooperation, expanding trade and investment, increasing tourism, and creating a united front against threats from Iran.
President Trump is now trying to expand the Abraham Accords further by encouraging additional countries like Saudi Arabia, Qatar, Pakistan, Turkey, Egypt, and Jordan to formally normalize relations with Israel as part of a broader Middle East peace framework. It may not be the time.
Despite some positive overtures toward peace, military tensions also escalated again overnight. The US carried out additional “self-defense” strikes on Iranian missile sites and mine-laying vessels after alleged threats to shipping routes and US forces near the Strait of Hormuz. Iran then claimed it shot down a US drone and warned of retaliation for any further violations.
So while diplomacy is still moving forward incrementally, Iran’s continued military activity, tougher negotiating demands, and links to Hezbollah are keeping markets cautious and preventing confidence that a final peace deal is close.
This morning Pres. Trump posted “Peace through Strength”.
I am not sure this is going anywhere.
US futures are trading higher with the Dow trading at record levels (up 325 points) in pre-market trading. The Nasdaq is up about 300 points from Friday’s 26343 close putting it near the highest closing levels on record at 26635. The S&P is trading up 52 points which would put it near 7520 at the open and above the record high close at 7501 from last week;’s trading.
Technically, looking at the 3 major currency pairs:
The EURUSD traded above and below its falling 200 hour MA yesterday and is doing the same today. The high price today reachee in the European morning session, peaked right at the 50% midpoint of the move up from the end of March low at 1.1645. The price has diped toward the 200 hour MA at 1.16297 – trading at 1.16325 currently. Below the 100 hour MA at 1.16217 adds to the support needed to get below to give the sellers more control. The market is consolidating awaiting the next shove.
The USDJPY is trading higher and has moved back above both the 100-hour MA at 158.99 and the natural resistance level at 159.00, giving buyers more control in early North American trading.
At the start of trading on Monday, the pair dipped below the 100-hour MA, but sellers could not generate enough momentum to extend the move down toward the 200-hour MA at 158.85. That failure to push lower helped shift the bias back to the upside. The 200-hour MA still remains a key downside target and would need to be broken to increase the bearish bias in the pair.
For now, however, the path of least resistance is higher, with last week’s high near 159.33 the next key upside target. Traders will continue to use the 100-hour MA near 158.99 as the close risk-defining level for both buyers and sellers.
The GBPUSD is trading lower and has moved below its 100-day MA at 1.34748, shifting the bias more to the downside. The pair initially found support near the 38.2% retracement of the rally from the March low at 1.34669, and bounced modestly from that level. However, as the North American session gets underway, the price is once again testing that key support zone.
For sellers to gain more control and increase the bearish tilt, they still need to push the price below the 100-hour MA at 1.34508. A break below that level would open the door for a move toward the more critical support cluster near the 200-day MA and 200-hour MA at 1.34218.
On the topside, the broken 100-day MA at 1.34748 now becomes an important barometer. A move back above that level would help shift the bias back in favor of the buyers.
