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Geopolitical tensions lead to worst trading day for S&P, NASDAQ, and Dow since May
The S&P, Nasdaq, and Dow had their biggest drop since May 21, triggered by rising tensions between Israel and Iran. This led to a wave of selling in the markets.
By the end of the day, all major indices were down by -1.13% or more. The Dow Industrial Average fell by -769.83 points, or -1.79%, closing at 42,197.79, below its 200-day moving average of 42,502.38 and 100-day moving average of 42,233.09.
Next week, important central banks will meet to influence global monetary policy and economic forecasts.
Next week, major central banks will announce important monetary policy decisions. The Bank of Japan, the Federal Reserve, the Swiss National Bank, and the Bank of England will all hold meetings. The Fed and BOE are expected to keep their rates steady. The Swiss National Bank, on the other hand, might lower rates by 25 basis points.
The Fed’s meeting will draw significant attention for its rate decision and updated economic forecasts, including the dot plot showing future rate expectations. Although President Trump is advocating for rate cuts, Fed officials are cautious due to uncertainties surrounding tariffs and their potential impact on inflation and jobs.
The situation for the Fed remains complicated. Rising oil prices and escalating tensions between Iran and Israel are significant factors. While U.S. economic growth is positive, recent Consumer Price Index (CPI) and Producer Price Index (PPI) data indicate that a modest rate cut might be possible. The Bank of Japan continues its very loose monetary approach.
Other noteworthy events include U.S. retail sales, Australian employment data, and UK retail sales figures. High geopolitical risks are still affecting global markets. The upcoming week will feature announcements from the BOJ, the Swiss National Bank, and the Bank of England, along with various important economic indicators and speeches from key financial leaders.
This week promises to be busy with major monetary updates and important market data. Central banks from the US, Japan, the UK, and Switzerland will be updating their policies. It’s unusual for all four to meet around the same time, which could lead to short-term market changes. For those tracking interest rate derivatives closely, the upcoming announcements could cause a quick reassessment of policy expectations, especially as economic indicators vary across regions.
To clarify, the Federal Reserve is not expected to raise rates now. They have indicated a wait-and-see approach, despite political pressure to cut borrowing costs. Fed officials are hesitant because inflation, while lower than before, has not returned to target levels. Rising costs in services and energy also complicate the situation. With recent oil price increases posing risks to inflation, a clear easing cycle is not yet in sight. It’s important to note that the updated dot plot—not just the headline decision—might create the most market volatility, especially if there are changes in the median expectation for rate cuts in 2024.
In Japan, Ueda remains steady. Although inflation numbers have climbed, core inflation has not shown the strength needed for a policy shift. So, the BOJ is unlikely to change its dovish stance anytime soon. This situation doesn’t provide much for aggressive rate traders, aside from potential shifts in currency, but JGB volatility could rise if market expectations for policy normalization are unexpectedly adjusted.
The Swiss National Bank may take action soon. Current expectations are balanced, but there’s a fair chance they’ll cut rates by a quarter point. The strength of the Swiss franc has helped keep imported inflation low, allowing for a cautious decrease. Markets have partially accounted for this, but an official cut could lead to a significant yield adjustment in short-term swaps.
Conversely, the Bank of England has been in a tough spot for months. Though inflation has decreased, wage pressures linger and consumer demand is showing some softness. Bailey and his team are expected to hold rates steady again. However, if the monetary policy summary suggests possible easing later this summer, it could move short-term UK OIS pricing. Given the persistence of services inflation, we think they will continue their cautious messaging for now.
For us, the focus is less on the headline decisions—many of which may already be factored into the market—and more on the guidance, underlying data, and the tone during press conferences. We’ll be watching for any signs of inflation tolerance and whether policymakers start to adjust their views on the trade-off between growth and inflation.
Beyond the central banks, key data next week will be significant. In the U.S., retail sales will provide insight into household spending. Following last month’s unexpected results, any new signals of declining demand could raise the likelihood of a rate cut this fall. The UK’s retail numbers may also impact Gilt yield curves if consumer weakness deepens. Additionally, Australian jobs data is crucial. If unemployment rises or job growth falls short, expectations for RBA rate cuts—already precarious—could change quickly.
Geopolitical tensions, especially in the Middle East, remain critical. Market sensitivity to oil prices cannot be ignored. Even traders without direct energy positions must consider the inflation effects on rate curves. This heightened awareness will be important, even beyond scheduled economic events.
As key financial officials speak throughout the week, paying attention to nuances is essential. It’s often in spontaneous moments—panel discussions, Q&A sessions, and off-the-cuff comments—where true policy insights may emerge. During weeks like this, every word matters. We’ll be aligning our short-term trading strategies with these key moments.
With so much information coming in, rate curves, especially in the 2Y-5Y range, could be very responsive to every new detail. There is likely to be a lot of movement—not just from unexpected output, but from changing forecasts. Staying flexible, especially regarding expectations versus actual decisions, is crucial.
IAEA’s Grossi reports destruction of Iran’s surface uranium plant and contamination at Natanz
The International Atomic Energy Agency (IAEA) has confirmed that Iran’s above-ground facility for enriching uranium to 60% purity has been destroyed. However, there is no evidence that the underground enrichment areas at Natanz were attacked, although damage to power supplies might have impacted centrifuges.
Radiological and chemical contamination has been reported inside Natanz. Iran claims that the nuclear site in Esfahan has been targeted by Israel.
Impact On Nuclear Facilities
According to the IAEA’s report, the above-ground area of one of Iran’s uranium enrichment facilities has been destroyed. This section was crucial because it was enriching uranium close to weapons-grade levels. So far, there is no confirmation of damage to the fortified underground areas at Natanz. However, reports suggest that power supplies may have been interrupted, which is significant because centrifuges need a steady power supply to function properly. The reports also highlight the presence of radiological and chemical contamination inside Natanz. This could result from either a technical issue or physical damage, which may have caused the release of hazardous materials without damaging the structures. Additionally, Iranian officials have accused Israel of attacking the Esfahan nuclear facility. This situation leads to several important outcomes. First, there might be temporary disruptions to uranium enrichment, which could change production timelines. Second, the detection of contamination usually triggers shutdown procedures, safety inspections, and cleanup efforts. These processes could take days or weeks, depending on how open Iran is to international cooperation.Market Implications
For those monitoring market volatility related to geopolitical events, this situation warrants close attention. It could increase prices in energy markets, especially for uranium and oil contracts. Short-term expectations need to be adjusted accordingly. Continued reports of damage to facilities or halted nuclear activities will create more uncertainty, increasing the demand for protective measures in energy-related investments. Price volatility will likely respond to each verifiable update, rather than rumors. In markets indirectly connected to energy, such as commodities or industrial sectors, calendar spreads may widen as concerns about supply issues arise. We have already seen bid-to-offer ranges expanding slightly for contracts affected by Middle East tensions. This calls for a careful evaluation of risk before making long-term investments. As for trading positions in the upcoming sessions, it’s essential to observe how instruments react not only during regular hours, but also during thinly traded overnight sessions. In these times, order books are more sensitive, and news impacts aren’t always fully absorbed. We’ve seen sharper re-pricing in Asia-Pacific markets in response to unexpected geopolitical news, so time zone alignment could create valuable opportunities worth tracking. It’s also critical to consider how ongoing developments may affect policy discussions. If international bodies or Western governments respond, this could significantly alter market positioning, especially for investments related to defense or energy security. We should be ready for changes in implied volatility metrics around key speeches and intelligence briefings, rather than waiting for confirmed actions. Lastly, we shouldn’t underestimate the psychological impact on overall market sentiment. Risk appetite often declines rapidly when headlines mention radioactive contamination or weapons-grade materials, even if the actual details are contained. This means that defensive measures and short-term protective strategies may become more expensive, prompting us to consider them sooner rather than later. Create your live VT Markets account and start trading now.Israel warns that retaliation for Iran’s missile strike could impact crucial energy facilities and significantly disrupt oil exports.
Israel has warned Iran that there will be consequences for its missile attack on populated areas. One potential target for Israel’s response is Kharg Island, a major Iranian oil export hub located 25 km from the mainland in the Persian Gulf. Kharg Island is the largest oil export terminal in Iran, handling a significant portion of oil exports, but these amounts can fluctuate due to sanctions.
In regular situations, Kharg Island is responsible for over 90% of Iran’s oil exports and can manage up to 6 million barrels per day. Its strategic location near the Strait of Hormuz is crucial for shipping logistics. Because of its importance, it has been targeted in past conflicts. Disruptions at this site could seriously hurt Iran’s oil export capabilities.
An Israeli attack on Kharg Island would affect global oil markets, and retaliation remains a possibility. Israel’s goal is to eliminate nuclear threats, often leading to strong responses rather than negotiations. The U.S. response is unclear; it might choose to act as a defense supplier, which could benefit its own industry if conflicts develop.
This situation highlights rising geopolitical tensions in the Middle East, marked by new threats and possible reactions. The focus is on a vital oil export facility and the potential fallout if it is attacked. Given its role in global energy supply, this facility is economically significant, impacting major economies dependent on stable energy prices.
The potential military target is not just symbolic; it’s crucial for global trade routes. An attack would likely cause immediate reactions in energy markets, including tighter supply projections and price swings. Oil futures and transport indexes will need close monitoring.
This moment calls for attention that goes beyond simple technical indicators or recent trade volumes. Historical patterns show that serious threats near key maritime hubs cause widespread effects. Changes in implied volatility might happen before actual spot price movements, something to watch as we assess how various actors will respond.
Another key aspect is Washington’s approach. The U.S. often avoids direct confrontations but has shown a consistent trend of increasing defense contracts and support during tense times. Larger defense contractors may benefit from heightened expectations for aid, even without full engagement. This could lead to adjustments in the market, especially in aerospace and logistics futures.
These aren’t just theoretical shifts; markets will adjust as risks rise. Positions sensitive to credit risk in the Middle East must consider the potential for supply disruptions. Commodities tied to freight, maritime insurance, and risk premiums in oil trading could become more volatile depending on how events unfold.
Short-term volatility measures may fluctuate unevenly across various sectors. However, overall market movements might disguise significant pressure in transport, energy delivery, and financial protections. While it’s not yet a state of panic, balanced exposure is crucial right now. We have focused on the trends in both calendar spreads and the risk profile in long-term energy investments.
It’s also essential to recognize how quickly market sentiment can change. If expected responses are delayed, prices could overshoot their realistic risk levels. This creates potential opportunities, though acting on them requires caution. Monitoring hedging actions in closely linked ETFs and leveraged positions may provide better early signals than standard headline indicators.
The cost of protection is already increasing in some areas. This isn’t necessarily a signal to exit positions but a prompt to reassess. We’ve identified some spread positions as too narrow given the current situation. A few policy announcements could significantly alter those margins.
Clear information doesn’t always come from formal statements. It often emerges through logistical movements, changes in shipping routes, or updated export quotas. Staying responsive while maintaining core positions will likely be the key balance we all need to strike.
Crude oil futures close at $72.98, up by $4.94 or 7.26%
July crude oil futures have increased significantly, rising by $4.94 or 7.26%, bringing the closing price to $72.98.
This jump signals a noticeable change in market sentiment, indicating a shift in expectations rather than just minor fluctuations.
Analysis Of The Surge
This surge likely comes from tight supply conditions and bigger-than-expected draws in stock levels. When inventory falls faster than expected, spot prices start influencing future prices. This can lead to quick unwinding of short positions, especially if traders have heavily favored one side. Such unwinding can be chaotic. Currently, this isn’t just a one-time spike caused by a single news event. If you’ve been paying attention to market trends, you would have seen consistent buying in recent sessions—a clear sign of repositioning. This isn’t driven by speculation; it shows a real change in how traders are preparing for supply variations into the late summer. Some trading desks might see this increase as a break through recent resistance levels, clearing out previous sell orders and prompting new buying. Once these barriers are crossed, momentum takes hold. Based on past patterns, we should expect volatility to rise, especially if refinery margins support prices and economic data from major consumers surprises positively.Market Reactions And Expectations
Crude-related derivatives are already adjusting. Implied volatility is rising, and front-month risk reversals are leaning toward calls, which is unusual unless there’s a significant change in sentiment. Calendar spreads have widened, indicating that traders expect prices to remain strong due to near-term supply constraints. Moving forward, it’s crucial to manage positions carefully amidst larger-than-usual price swings. If you notice gamma exposure shifting into higher ranges, it’s time to adjust hedges accordingly. Forward curves are changing, requiring attention to time decay and carrying costs. The focus now should be on recognizing structural changes rather than simply reacting. When near-term demand remains unresponsive to price changes, backwardation becomes more entrenched. Any strategy based on roll yield or calendar arbitrage needs to consider this. Expect some short-term selling into rallies, but don’t anticipate these sales to stabilize prices like they did earlier this quarter. We are now in a market that reacts more to physical data than to sentiment. Price movements will be faster and will require quicker adjustments to market exposure. Create your live VT Markets account and start trading now.US stock indices decline as Dow, S&P, and NASDAQ reach significant session lows
US stocks are sliding toward their lowest points of the day after Iran’s missile strike. The Dow Jones Industrial Average has dropped by about 850 points, or 1.98%, and is now at 42,114.88.
The S&P 500 has fallen by 78 points, or 1.25%, bringing it to 5,969.73. The NASDAQ Composite is down 283.1 points, or 1.44%, now at 19,379.62.
Currently, both the NASDAQ and S&P indices are nearing their 100-hour moving averages. For the S&P, this average is at 5,962.84, and it has seen a low of 5,964.26, staying slightly above that mark.
The NASDAQ’s 100-hour moving average is at 19,384.13, but it has reached a low of 19,369.32, dropping below the moving average.
The latest news indicates a sharp downturn in US stocks, driven by the missile strike from Iran. Traders are pulling back, and major indexes—the Dow, S&P, and NASDAQ—are all experiencing significant losses. The Dow has fallen nearly two percent, while both the NASDAQ and S&P are also down over one percent.
Right now, the focus is on the technical levels being tested, especially where the prices stand in relation to their 100-hour moving averages. These averages serve as key reference points for short-term trends. The S&P is just above this average, while the NASDAQ has dipped below it.
When prices approach their moving averages, the focus shifts from direction to behavior. It shows whether traders will respect the average or let prices break through. For those trading short-term derivatives, these moments can be critical. If the S&P closes below its average for more than a couple of sessions, it could signal a loss of confidence in further gains. Conversely, moving back above the average can indicate that the sell-off is being absorbed, suggesting ongoing buying interest.
Given that the NASDAQ has already fallen below its moving average, we expect some increased activity, especially in short-term options. This situation often acts as a trigger—either catching aggressive sellers off guard and reversing the trend or continuing the downtrend. It’s essential to pay attention to reactions around these averages. While timing doesn’t have to be perfect, it’s crucial to consider liquidity to avoid slippage during trading, especially in high-volatility situations.
In the coming days, implied volatility in equity-linked instruments is likely to rise, especially if political news remains uncertain. We’ve seen that at-the-money (ATM) options are widening beyond historical norms, indicating that traders are pricing in uncertainty. If this trend continues, holding these positions may become more expensive, and gamma-sensitive flows could lead to quicker price fluctuations, potentially destabilizing even well-valued positions.
It’s wise to monitor renewed demand at previous support levels instead of just reacting to news headlines. These averages, while not foolproof, reveal where traders are interested. Relying solely on overshoots or breakdowns without confirmation can be risky, especially in a week where external factors have more influence than usual.
Keep your position sizes appropriate for the risks associated with these events. Trying to ride out macro-driven moves without hedges can lead to regret. We’ve made sure our exposure remains adaptable, adjusting all delta risk back to neutral by the end of the day. It’s not about making bold predictions; it’s about protecting what you have.
Oil rig count drops by three to 439, while production increases to 13.43 million bpd
This week, the Baker Hughes rig count for oil dropped by three, leaving 439 active oil rigs. The natural gas rig count also fell by one, bringing the total to 113.
In total, there are four fewer rigs this week, giving us a combined rig count of 555. Compared to last year, there are 46 fewer oil rigs, a decrease of 9.5% from 485 rigs.
US Oil Production Growth
Even with fewer rigs, US oil production has increased to 13.43 million barrels per day. This is up from 13.10 million barrels per day last year, showing a growth of 2.5%. So, let’s break this down. We see a decrease in the number of active drilling rigs, down from 485 last year to 439 now, which is a significant drop of about 9.5%. However, US oil output is rising, currently at 13.43 million barrels per day, compared to 13.10 million barrels per day last year. This indicates a 2.5% increase in production. This trend suggests that drillers are producing more oil with fewer rigs. This improvement is likely due to better efficiency brought about by newer technology, more productive wells, or focusing on proven areas—likely a combination of these factors. While the number of natural gas rigs is also declining, the main focus remains on crude oil for now. We should also consider how these changes impact price expectations. Typically, a drop in rig counts might signal supply issues and potential price hikes, but current data doesn’t support that idea. Steady production growth contradicts this expectation. This insight should caution anyone looking to invest based solely on anticipated supply constraints.Rig Count Implications
It’s important to know that the efficiency improvements we are seeing won’t last forever. Eventually, having fewer rigs may put real pressure on production levels. So far, however, productivity per rig is high enough to compensate for the reduced drilling activity. This situation encourages us to rethink how we interpret rig counts. Instead of seeing them as a direct indicator of short-term production, we should pay equal attention to actual supply data. From a strategic perspective, the focus shouldn’t just be on rig counts. The market is currently influenced more by projected supply than by the number of rigs drilling. Even though rig counts are declining, production stability remains strong, which could impact market spreads. We must also consider if this production growth can continue without new investments in drilling. If companies start delaying reinvestment due to price pressures or tighter budgets, we might see a dip in production later. Until that happens, we should be careful not to overestimate immediate supply reductions based solely on rig counts. As supply continues to be active—not just in rig numbers but in production—we need to adjust our strategies accordingly. Margins are still under pressure in some market spreads, and if hedging picks up—especially from producers wanting to secure current prices—it could flatten certain forward market structures. In the short term, we might gain more insights from weekly production reports and storage levels than from rig counts. These details are likely to influence price movements, especially if declines in rig counts start aligning with production decreases—though that hasn’t happened yet. We should closely monitor production efficiency, interest in hedging, and export activity. These factors often hold the key to where volatility might arise next. Create your live VT Markets account and start trading now.European indices fell due to geopolitical tensions, with Italy and Spain experiencing the largest declines.
European stocks fell due to geopolitical tensions and negative global sentiment. All major regional indices saw losses, with the Italian and Spanish markets declining more than others.
At the close:
– **German DAX**: 23,516.24, down 255.22 points (-1.07%)
– **France’s CAC**: 7,684.69, down 80.43 points (-1.04%)
– **UK’s FTSE 100**: 8,850.62, down 34.31 points (-0.39%)
– **Spain’s Ibex**: 13,910.59, down 178.30 points (-1.27%)
– **Italy FTSE MIB**: 39,438.74, down 509.64 points (-1.28%)
During the trading week:
– **German DAX**: -3.24%
– **France’s CAC**: -1.54%
– **UK’s FTSE 100**: +0.14%
– **Spain’s Ibex**: -2.37%
– **Italy FTSE MIB**: -2.86%
This summary shows a broad decline across Europe’s main stock markets, driven mainly by political uncertainties. While most markets fell, Italy and Spain saw more significant declines, suggesting they are more sensitive to economic changes. In contrast, the UK’s slight gain may reflect stronger domestic factors.
Even with these losses, the situation isn’t entirely panicked. The DAX’s drop of over 3% in one week is notable, especially after a strong earnings period. This shift indicates a change in risk appetite among traders, who are pulling back after having been too optimistic about the economy.
Volatility isn’t extremely high right now, but we are seeing changes in market behavior. There’s an increase in protective trading strategies, hinting at a lower tolerance for downturns. Market valuations are not universally high, but they are generally above historical averages, making them vulnerable if sentiment shifts without any clear cause.
From our perspective, this isn’t just temporary noise. The consistent negative trend among major European markets indicates that rebalancing is happening. When multiple indices start moving together, it often leads to significant changes in options pricing.
Given this pattern, it’s important to rethink what will be successful in short-term trades. For example, the recent weakness in the MIB suggests that sectors tied to manufacturing and industrials may continue to face challenges until broader economic conditions improve. Traders are widening spreads on short-term straddles, favoring downside protection—this shows a growing willingness to hedge against longer-term volatility.
Although the FTSE 100 finished the week positively, this hasn’t translated into a stronger demand for call options or other leveraged strategies. We haven’t seen any new bullish flows yet, which is concerning. The difference between price movements and trading positions indicates that the recent rise might have been more mechanical than based on strong conviction, risking sustainability unless new data lifts expectations in key sectors like mining or energy.
We are also monitoring how prices react to geopolitical news across different markets. Changes in sentiment due to headlines are tightly linked. Recently, options pricing has started to lead, rather than follow, changes in spot prices—suggesting that confidence in future outcomes is separating from underlying fundamentals.
We see this as a signal to be responsive, rather than predictive. With reduced correlations among different asset classes—especially equities and interest rates—the focus now is on spotting mispricing opportunities. There are already some discrepancies between implied and realized volatility in certain German midcap stocks. This could provide a chance for positioning aimed at reversion to the mean, especially when individual stocks behave differently from broader indices.
For now, we’re keeping our duration short and our exposure balanced, reacting to market conditions rather than making big predictions. There will be a time for conviction, but that moment hasn’t arrived yet.
The Canadian dollar rises as USDCAD hits new lows, influenced by rising oil prices and falling dollar demand.
USDCAD has reached new lows in 2025 as the Canadian dollar strengthens due to rising oil prices, leading to a decrease in demand for the U.S. dollar. The exchange rate has dropped to 1.3574, its lowest since October 2024.
The currency pair fell below a crucial technical range of 1.36038 to 1.36337, which includes last week’s low. Staying under this range continues downward pressure, increasing short-term selling. If this trend persists, the rate could approach 1.3500, with last September’s low at 1.34198.
Current market conditions point to further declines as USDCAD trades within levels last observed between August and October 2024. The Canadian dollar’s rise—backed by strong oil prices—has pushed the USD/CAD pair to levels not seen since last autumn. Falling below the earlier support zone of 1.36038–1.36337 indicates that sellers remain confident. The daily closures below this zone suggest resistance against rallies, reflecting changes in capital flows and regional expectations.
As USDCAD stays within historically significant price zones last accessed between late summer and mid-autumn of 2024, it approaches the 1.3500 mark and just below it, last September’s 1.34198. Breaking through these levels could spark more downward momentum. While this isn’t necessarily a steep decline, it could adjust derivative contracts in response to ongoing weakness.
We believe a short position remains valid as long as the important levels mentioned earlier are not regained confidently. The market is behaving in ways that suggest adjustments in expectations regarding monetary policy differences, particularly how oil-linked currencies react to prolonged inflation signals.
It’s important to remember that support levels hold due to trader positioning, not mere expectation. Once a support level breaks, market flows can quickly become one-sided. Without a significant reaction near previously tested lows, we assume further weakness is more likely than a reversal.
Volume profiles and commitment from institutional players also favor continuation. Recent sessions show fewer hesitations, with more traders entering with clear directional intent. Long-term options are leaning towards more downside bets, hinting at positioning before upcoming economic data. Over the next few weeks, it’s reasonable to focus on how prices react around 1.3500 and if flows strengthen below that.
Additionally, interbank forward pricing has shifted to reflect a new balance of expectations. This indicates that even at different time frames, the risk premium is no longer biased towards the U.S.
What we are witnessing is not just a slow drift, but a recognition of momentum, supported by a more stable oil market and narrowing yields. This environment makes sudden reversals less likely. For those observing hourly and daily trends, the absence of strong upward movements after minor recoveries stands out. Repeated rejections near resistance points further support the gradual weakening of the U.S. dollar in this pair.
In the coming days, we may gain more clarity as liquidity returns after the recent long weekend in North America, possibly increasing volume in pending orders. Until then, the reaction at key technical levels—rather than headlines—will shape early Q2 positioning.
GBPUSD rebounds after a decline, facing resistance near 1.3580-1.3591 for future direction
The GBPUSD pair began the day with a yearly high during the early Asian session. However, a reversal occurred after an Israeli attack on Iran, prompting investors to seek the US dollar as a safe haven.
This shift pushed the GBPUSD below the 100- and 200-hour moving averages, both around 1.3544. It found support in the swing area between 1.3506 and 1.3517, where buyers often show interest.
As the early U.S. session progressed, this support held firm, indicating its significance. For the bearish trend to continue, the pair would need to drop below this support.
The pair has since bounced back, testing the upper resistance zone from 1.3580 to 1.35919. If it breaks through this resistance, there may be a chance to retest recent highs. However, failing to exceed this level would likely keep the pair within a consolidation range.
Key technical levels to watch are resistance at 1.3580–1.35919 and 1.36158, with a recent peak at 1.36365. Support levels include 1.3544 for the 100/200-hour moving averages and the swing area of 1.3506–1.3517.
In simpler terms, we are observing a cautious response to geopolitical risks. The British pound reached its yearly high, but sellers quickly entered the market as fresh conflict headlines increased demand for the US dollar, a classic safe asset in uncertain times.
When the pair fell below the 100- and 200-hour moving averages near 1.3544, short-term and medium-term traders began changing their positions. Technical levels like these often serve as soft boundaries when there’s no fresh news, and breaking through them usually attracts more sellers.
At the swing zone of 1.3506 to 1.3517, we have seen consistent buying in recent weeks, and the market bounced back in this area again. Buyers tend to return to levels where previous reversals occurred, which is what we’ve witnessed. This support held during the early U.S. session, indicating a strong defense of that area.
What makes this trading situation intriguing is the hesitation just below 1.3592. This level has been tested several times but hasn’t been decisively breached. We find ourselves in a scenario where the market is stuck between solid resistance and dependable support, a classic situation often leading to more drastic movements once one side fails.
For short-term traders, especially those dealing in options on major FX pairs, this tight range between support and resistance presents an opportunity. The more a resistance level is pressed, the higher the chance it will break. If the pair can settle above 1.3592, it could lead to a rally toward the high of 1.3636, possibly driven by momentum or stop orders.
On the other hand, if the pair fails again at this resistance, we may continue to see range-bound trading. This isn’t necessarily negative; range traders can utilize mean reversion strategies within these clear boundaries. However, a sharp drop below the swing zone would change the narrative. A close under 1.3506 could lead to increased selling and a push toward new lows.
It’s crucial to manage positions carefully near risk zones and to quickly reassess our bias if momentum shifts. With news having a big impact this week, a systematic approach to trades, stops, and entry points is vital.
The market structure shows signs that it’s gearing up for a decisive move. Whether this will be an upward break or new selling largely depends on upcoming events and how these technical levels hold up under pressure.
Keep an eye on 1.3592 for possible breakthroughs and on 1.3506 if sellers regain control. Everything happening in between is just noise until one of these levels breaks.
