Safe Haven Assets Boost Dollar

The ongoing conflict has led investors to seek safe haven assets like the US Dollar. Iran has issued warnings against US military actions, which has heightened global tensions. The Federal Reserve has updated its growth forecasts, lowering the GDP prediction for 2025 from 1.7% to 1.4%, while increasing PCE inflation expectations to 3%. Recent US economic data shows a slowdown, while inflation in the Euro Area remained unchanged in May. The EUR/USD fell below a crucial support level, signaling a bearish trend. The pair is now testing support at 1.1450-1.1470, with further declines expected, while resistance is at 1.1530. As the Dollar continues to gain strength, thanks to Powell’s firm stance, traders may need to rethink their investments tied to the Dollar, especially due to safe haven demand. Powell’s comments, along with the Fed’s cautious approach to monetary policy, suggest that changes in interest rate expectations are likely to happen slowly, unless there are significant drops in inflation data. Notably, the Fed’s decision to keep rates steady while hinting at potential cuts later this year has provided short-term support for the Dollar. This signals a less dovish outlook than many expected.

Euro Struggles Amid Tensions

In Europe, the EUR/USD is failing to maintain its position above 1.1500 and is currently struggling around 1.1485. This suggests growing downside pressure. This decline is influenced by both the Dollar’s strength and stagnant inflation data in the Euro Area. As a result, traders should adopt stricter risk thresholds on long Euro positions until more clarity on regional price trends emerges. The support level around 1.1450–1.1470 is crucial. If this level breaks with momentum, technical selling could push the pair down, likely targeting the 1.1400 area in the near term. Furthermore, news surrounding tensions in the Middle East is impacting trading across various asset classes. The US President’s mixed signals about potential intervention are driving tactical moves in favor of the Dollar. As a result, Gold and Treasuries have gained interest; however, the focus here is on the ongoing shift toward lower-risk assets, rather than just a reaction to the headlines. Traders should stay flexible, especially as weekends approach, when unexpected events or military developments could catch risk-seeking trades off balance. Create your live VT Markets account and start trading now.

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