The US Dollar saw a sharp correction after the fragile ceasefire began, but that downward trend has now completely stopped.
With the peace narrative having stalled, it is clear that the FX market is taking a more realistic view of the US-Iran diplomatic talks than stock markets, which remain optimistic despite little real progress.
Foreign exchange markets are focusing on energy prices instead of tech sector excitement, and are adjusting for geopolitical risks.
The petrodollar trade: Oil and US Dollar correlation. Source: TradingView, May 12, 2026.
After gaining against the US Dollar in late March and early April, most major currencies are back to trading in a narrow range.
Today, though, they are quickly reversing as WTI crude oil moves back above $100 with the recently souring narrative.
The ongoing conflict and related economic challenges are supporting the US Dollar. Although new reports suggest Iran may dilute its highly enriched uranium to 3.7% and 20%, overall diplomatic talks have stalled, and the uncertainty continues to disrupt energy supply chains while adding to demand for the US Dollar.
Current session’s FX performance. Source: Finviz, May 12, 2026.
Along with the ongoing geopolitical uncertainty, a higher-than-expected inflation report has strengthened the US Dollar, with another inflation report due tomorrow in the form of PPI.
Today’s CPI showed headline inflation at 3.8%, compared with 3.7% expected, and core CPI at 2.8%, versus a 2.6% forecast. That was a large rise, though not too surprising considering the explosion in gas prices.
The strong inflation reading keeps suggesting that the Fed will keep rates unchanged, if not hike, putting pressure on other major currencies.
US morning data. Source: MarketPulse Economic Calendar.
We will look at the Dollar Index, EUR/USD, and GBP/USD to assess the current state of the FX market and where to look next.
Dollar Index 4H Chart
Dollar Index daily chart, May 12, 2026. Source: TradingView.
The US Dollar is breaking out of its end-March downward channel after forming a triple bottom right around the 97.50 level.
With the recent lows coinciding with the mid-zone of the larger 96.00 to 100.00 range, the consolidation could be tightening further between 98.00 and 100.00 as long as the peace process does not move forward.
Expect more US Dollar rallies if the index breaches 98.50.
Levels of interest for the Dollar Index:
Resistance Levels
- 98.50 to 98.70 war pivot
- 98.78 4H 200-period MA
- 99.40 to 99.50 resistance
- Initial war spike 99.68
- 100.00 to 100.50 main resistance zone
- War highs 100.544
Support Levels
- 98.00 2025 support, testing and bearish below
- Support 97.40 to 97.60, triple bottom
- 2025 lows 96.40 to 96.80 support
- Range lows at early 2022 consolidation just below 96.00
GBP/USD 4H Chart and Technical Levels
GBP/USD 4H chart, May 12, 2026. Source: TradingView.
GBP/USD is still trading between 1.3410 and 1.36 but is now rejecting its resistance zone, heading back to support.
Add ongoing outflows and political turmoil in the UK, with Keir Starmer’s ministers resigning, and the outlook for the Pound looks bearish.
While still far, watch whether the 1.34170, 2024 top, level holds.
Levels of interest for GBP/USD:
Resistance Levels
- December resistance 1.36, range highs
- Pre-FOMC highs 1.36010
- Resistance 1.37 zone
- 2025 resistance around 1.38
Support Levels
- Key pivot 1.3410 to 1.3440
- 1.34170, 2024 top level
- Pivotal support 1.3250 to 1.33
- 1.32 war support
EUR/USD 4H Chart and Technical Levels
EUR/USD 4H chart, May 12, 2026. Source: TradingView.
EUR/USD is also rejecting its 1.18 resistance and quickly falling towards the 1.17 momentum pivot, with bearish acceleration expected as the RSI falls below neutral.
Sellers are also breaching the 4H 50-period MA, which could weigh on price action. While momentum is still lacking, traders will want to confirm the move with strong bearish candles and volume around 1.1720.
Levels to place on your EUR/USD charts:
Resistance Levels
- 1.17380 4H 50-period MA
- Resistance zone around 1.18, +/- 150 pips
- 1.1830 June 2025 highs
- 1.1850 to 1.1860 recent test
- September 2021 highs, resistance 1.19 to 1.1950 zone
Support Levels
- 1.17 to 1.1720 March pivot
- Rebound highs 1.17200, bearish below
- Major pivot 1.16250 to 1.16350
- 1.1540 to 1.1570 war support
- 1.1475 to 1.15 November support
- War lows 1.1410
Safe trades and keep a close eye on ceasefire news.
