The EUR/USD pair is moving lower due to ongoing uncertainty surrounding the US-Iran conflict and persistently high crude oil prices.
Possible technical scenarios:
As we can see on the daily chart, the EUR/USD pair broke down cleanly below the 1.1682-1.1788 range. From the 1.1788 mark, the price has sufficient room to extend its decline toward the support at 1.1494.
Fundamental drivers of volatility:
The euro remains under pressure as soaring energy costs intensify risks for the Eurozone economy.
High oil prices continue to act as the primary headwind for the single currency, with Brent crude trading above $106 per barrel, marking an increase of over 30% from pre-conflict levels. As a major net energy importer, the Eurozone faces mounting inflationary pressures and dimmed economic prospects as a result.
Adding to the bearish pressure is growing caution across global financial markets. Investors continue to migrate toward safe-haven assets amid ongoing tensions in the Middle East, a flight to safety that supports the US dollar while capping demand for European currencies.
The dollar is also finding support from lingering uncertainty surrounding the Federal Reserve's monetary policy trajectory. Elevated energy prices have fueled fears that US inflation will remain sticky, reinforcing expectations for a prolonged period of monetary tightening.
Despite statements from Donald Trump regarding continued ‘serious negotiations’ with Iran, market players remain skeptical about a swift diplomatic resolution to the conflict. Consequently, investors maintain a cautious stance toward European assets, leaving EUR/USD with a clear downward bias. A lack of diplomatic progress and sustained high oil prices could further weigh on the euro in the near term.
Intraday technical picture:
Given the current look of things on the 4H chart, EUR/USD has reversed downward from the 1.1655-1.1682 resistance area, clearing a path for sellers to target the 1.1494 support level.
GBP/USD is trending downward following disappointing UK labor market stats and broad-based strength in the US dollar.
Possible technical scenarios:
The daily chart suggests that the GBP/USD pair reversed lower from the upper boundary of its 1.3208-1.3436 sideways range. In the near term, the price retains the potential to test the lows of May 18, and a sustained consolidation below that level would open the door for a slide toward the 1.3208 support.
Fundamental drivers of volatility:
Selling pressure on the pound intensified after macro data revealed a sharp contraction in employment figures and a drop in job vacancies for April.
According to the ONS, the drop in employment marked the steepest decline since May 2020. Although the agency noted the likelihood of subsequent data revisions, market players interpreted the release as a clear sign of a cooling UK labor market.
The soft data has cooled expectations for a more aggressive, hawkish stance from the Bank of England in response to rising energy costs. That being said, the market is still pricing in the probability of a rate hike at the July meeting, which is currently limiting the depth of the pound's decline.
Ongoing political uncertainty in the UK remains an additional headwind. Investors are keeping a close watch on the situation surrounding Prime Minister Keir Starmer amidst mounting internal pressure within the Labour Party.
Meanwhile, the US dollar is well-supported by cautious market sentiment regarding the Middle East conflict and expectations that the Fed will maintain its restrictive stance on interest rates. In the short term, GBP/USD will remain highly sensitive to both UK political developments and shifts in US monetary policy expectations.
Intraday technical picture:
Locally, the 4H chart also demonstrates a reversal from the 1.3436 resistance level, leaving room for a move toward the previous lows at 1.3302. From this mid-range point, the pair could either extend its drop toward 1.3208 or stage a recovery back to 1.3436 if sellers fail to consolidate below 1.3302.
The USD/JPY pair maintains its upward momentum, trading close to three-week highs against a backdrop of steady demand for the dollar and ongoing geopolitical risks in the Middle Ea.
Possible technical scenarios:
The USD/JPY pair is currently testing the 158.93 resistance level. A consolidation above this mark will pave the way for the pair to target psychological resistance at 160.00 yen per dollar.
Fundamental drivers of volatility:
The US dollar continues to find support from expectations of further monetary tightening by the Federal Reserve. Markets are still factoring in the probability of a rate hike before the end of the year, which enhances the appeal of the dollar and drives the USD/JPY uptrend.
Conversely, the yen faces persistent pressure from concerns over the health of the Japanese economy, which is vulnerable to the Middle East conflict and high energy prices. Despite strong Japanese GDP data, investors remain wary of the economic outlook and the domestic currency.
At the same time, the Bank of Japan is reportedly considering slowing down or temporarily pausing the reduction of its bond-purchasing program. Reuters sources indicate that the central bank is concerned about instability in the debt market and may ease the pace of its quantitative tightening (QT) to avert excessive volatility and preserve market liquidity.
CWhile the BOJ remains poised to raise interest rates as early as its June meeting, a potential slowdown in stimulus unwinding limits the yen's appreciation potential. Against this backdrop, the overall balance of fundamental factors continues to favor further gains for USD/JPY.
Intraday technical picture:
Given the unfolding situation on the 4H chart, USD/JPY has pushed above the 158.93 level, setting the stage for an extended rally toward the dotted target at 160.45.
The daily chart suggests that USD/CAD is testing the upper boundary of its 1.3503-1.3744 trading range. If the pair successfully consolidates above the 1.3744 level, the next upside target will be the horizontal resistance level at 1.3861.
Possible technical scenarios:
Judging by the look of things on the daily chart, USD/CAD has reached the midpoint of the 1.3503–1.3744 range. A local correction may occur from the intermediate dotted level at 1.3642. That being said, if current fundamental conditions persist, the pair has enough room to move down toward the 1.3503 support.
Fundamental drivers of volatility:
The US dollar maintains its upper hand against the Canadian loonie as investors shift their focus to the upcoming release of Canada's April inflation data and the subsequent policy outlook for the Bank of Canada.
Annual inflation in Canada is projected to accelerate to 3.1% from 2.4% in the previous month, with core CPI expected to remain stubbornly above the BoC's 2% target. Intensifying price pressures would give the central bank a mandate to maintain its hawkish rhetoric, reinforcing expectations for a prolonged period of elevated interest rates.
Adding fuel to the inflationary fire are risks of new trade restrictions from the US, alongside the ongoing Middle East crisis, keeping energy prices high. This complicates the outlook for the Bank of Canada and clouds the prospects for any near-term policy easing.
At its latest meeting, the BoC maintained a cautious approach, revising its inflation forecasts upward and leaving the door open to further tightening if energy shocks persist. Markets are currently pricing in more than 50 basis points of rate hikes by year-end.
Despite support from hawkish domestic rate expectations, the Canadian dollar has recently succumbed to dollar strength, as global uncertainty and cautious investor sentiment keep the US dollar heavily bid
Intraday technical picture:
The 4H chart shows USD/CAD attempting to establish a foothold above the 1.3744 level. A successful consolidation here will shift the focus to the next major resistance level at 1.3861.
Gold is trading with a bearish bias, hitting one-and-a-half-month lows as expectations mount for a more restrictive monetary policy stance from the Federal Reserve. The precious metal is facing strong headwinds from climbing US Treasury yields and persistent inflationary risks.
Possible technical scenarios:
Gold prices have dropped below the 4635.63 level. If the prices manage to consolidate below the May lows, the downward slide could extend toward the support level at 4375.25.
Fundamental drivers of volatility:
The primary bearish catalyst for the yellow metal remains the prospect of higher-for-longer US interest rates. Rising inflation concerns tied to the prolonged standoff in the Persian Gulf have reinforced expectations that the Fed will maintain its hawkish stance, which in turn pushes US Treasury yields higher.
Further dampening demand for non-yielding gold is the shift in market pricing regarding Fed rate hikes. According to the CME FedWatch tool, traders are now pricing in a 38% probability of a rate hike by December. Against this backdrop, the investors are awaiting the release of the minutes from the April FOMC meeting, which could provide fresh clues regarding the central bank's policy path.
Geopolitical developments remain a key market driver. Investors continue to monitor relations between the US and Iran, as any shift in diplomatic talks has a direct bearing on inflation expectations and interest rate projections.
Market attention was also drawn to comments from Donald Trump, who noted "good chances" of reaching a deal on the Iranian nuclear program after receiving a peace proposal from Tehran. This has slightly eased geopolitical anxieties, curbing safe-haven demand for gold.
Intraday technical picture:
As evidenced by the 4H chart, gold has pulled back to the lower boundary of its 4510.26-4772.29 sideways range marked by the two dotted lines. In case of a clean exit from it and consolidation below 4510.26, horizontal at 4375.25 will serve as the next target.
Brent crude prices have undergone a mild technical correction following their recent rally; however, the broader uptrend remains intact as the market remains highly sensitive to headlines coming out of the Middle East.
Possible technical scenarios:
On the daily chart, Brent continues its recovery within a wide 95.18-113.99 range, trading roughly midway toward its upper boundary. The consolidation above the $100-per-barrel mark is paving the way for an extended rally toward 113,99, leaving significant upside potential.
Fundamental drivers of volatility:
The catalyst for the local pullback in oil prices came from comments by Donald Trump, who announced the suspension of a planned strike on Iran to allow diplomatic talks to continue.
That being said, the primary driver for the energy market remains the situation surrounding the Strait of Hormuz, which is a vital chokepoint accounting for roughly 20% of global oil and LNG supplies. Despite a temporary de-escalation in rhetoric, supply disruptions persist, and the conflict remains the single largest risk factor for the global energy complex.
Signs of continued diplomatic engagement also took some heat out of prices. Iran presented fresh terms for a peaceful resolution, including a cessation of hostilities and the lifting of certain restrictions. The market views these developments as a factor that mitigates the risk of an immediate escalation.
However, the structural supply picture remains tightly constrained. While the US extended waivers allowing several countries to purchase Russian crude, the US Strategic Petroleum Reserve (SPR) has drained to its lowest level since July 2024 following massive historical inventory releases.
In the near term, crude oil will continue to move primarily on the back of headlines from the US-Iran negotiations. Any signs of a breakdown in the diplomatic process could quickly spark a sharp leg higher in Brent prices due to lingering structural supply risks.
Intraday technical picture:
The 4H chart shows Brent maintaining a steady upward trajectory within the broader 95.18-113.99 range, with bulls likely targeting the upper boundary at 113.99.
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