The increased risk of a broader escalation in the Middle East helped lift the dollar, with the move higher also supported by rising global bond yields. Although there were pockets of optimism just 24 hours ago after President Trump appeared to pull back from immediate military action, the threat of renewed bombing has quickly returned to the forefront. Markets remain concerned that even if a temporary pause is achieved, disruptions to oil flows and heightened geopolitical uncertainty could keep energy prices elevated for longer.
Even though crude oil prices edged modestly lower today, traders continue to worry that sustained higher energy costs could keep inflation elevated and potentially reignite inflation expectations, with secondary effects spilling over into other goods and services. That backdrop helped push yields higher across the US curve. The 2-year yield rose 2.6 basis points to 4.116%, the 10-year yield climbed 4 basis points to 4.665%, and the 30-year yield remained comfortably above the 5% level at 5.1774%, up around 3 basis points on the day.
The combination of higher yields and a more cautious risk environment also supported the greenback against risk-sensitive currencies. The AUD was one of the weakest major currencies, with the USD rising 0.82% against it, while the NZD also came under pressure, with the USD up 0.70%.
Looking at some of the major currency pairs:
USDJPY remained firm despite intervention rhetoric: The yen initially strengthened after Japan’s Finance Minister Katayama warned authorities were prepared to take decisive action on FX moves, but the gains quickly faded. USDJPY traded in a relatively contained range between 158.60 and 159.25. One theme becoming increasingly evident is that intervention chatter continues to attract dip buyers rather than sustained selling.Going into the new trading day, the rising 100-hour moving average near 158.56 remains close support. A break below that level would have traders targeting the 158.00 area, where the 200-hour moving average is moving higher. However, if buyers can keep the pair above the 100-hour MA and push back above 159.08, the focus would shift once again toward the key 160.00 level.
AUDUSD fell sharply on the day and extended below a key swing area floor between 0.7100 and 0.7113. The pair dropped to a low near 0.7080 before rebounding back toward the upper end of that broken support zone. However, sellers stalled the recovery near 0.7113, keeping that area as a critical barometer for the new trading day. A move back above — and more importantly staying above — the 0.7113 level would tilt the bias back in favor of the buyers. Staying below 0.7100 keeps the sellers in control and would have traders targeting the 50% midpoint of the rally from the March low near 0.7055, followed by the rising 100-day moving average near 0.7014.
NZDUSD sellers pushed the pair lower from a high near 0.5880 to a session low of 0.5818. That move briefly broke below yesterday’s low near 0.5822, but sellers could not sustain momentum below the April 29 low at 0.5813. A break beneath 0.5813 would increase bearish momentum and target the 61.8% retracement of the rally from the April low near 0.5796. On the topside, buyers need to reclaim 0.5839 with momentum to open the door for a move back toward the 100-hour moving average and the 38.2% retracement level near the 0.5870 area.
GBPUSD rotated back to the downside today after yesterday’s sharp corrective rally stalled near the falling 100-hour moving average and a swing area resistance zone around 1.3645. Sellers leaned against that resistance and pushed the pair back below the 200-day moving average at 1.34229 and the 50% midpoint of the move higher from the March low at 1.3408. Heading into the new trading day, the falling 100-hour moving average is converging near that 50% level, making the 1.3408–1.3409 area a key short-term barometer for buyers and sellers. Staying below that zone keeps the bias tilted to the downside and would have traders targeting the 61.8% retracement near 1.33496, followed by yesterday’s low around 1.3303. On the topside, a move back above 1.3409 and then above the 200-day moving average at 1.34239 would shift the focus back toward today’s highs and give buyers more control.
EURUSD extended lower today, breaking below yesterday’s low near 1.1606 and reaching a session low at 1.1593 before rebounding modestly. The recovery stalled within a swing area resistance zone near 1.1616, keeping sellers in near-term control. Another key risk level for sellers comes in at the 50% midpoint of the rally from the March low at 1.16287. A move back above that level would shift the bias more in favor of the buyers and open the door for a test of the falling 100-hour moving average near 1.1651, which remains a major upside target. On the downside, the next key technical target comes in at the 61.8% retracement level at 1.15768.
US stocks closely session lower, with the Russell 2000 and the NASDAQ index of the weakest.
- Dow industrial average fell -322.01 or -0.65% at 49368.95
- S&P index fell -49.39 points or -0.67% at 7353.65.
- NASDAQ index fell minus 220.02 provides or -0.84% to 5870.71
The small-cap Russell 2000 fell -28.02 points or -1.01% at 2747.07
Gold and silver prices took their cue from the higher yield and higher US dollar. Spot gold fell $-83.90 or -1.85% to $4483. Silver tumbled by four dollars or -5.15% at $73.70. Bitcoin was little changed at $76,790
