EUR/USD: Oil talks Dollar walks, with 1,1400 level the next challenge

Vasilis Tsaprounis Independent Analyst

As humanity once again follows with bated breath the developments in the Middle East and the evolution of the conflict between the United States and Israel against Iran, the American currency remains in the spotlight with further gains quite possible if this situation is maintained.

Macroeconomic data remains overshadowed by geopolitical developments as the surprising rise in oil prices due to developments in the Persian Gulf have reignited fears of inflationary pressures in the global economy.

As the Middle East continues to be on fire , concerns in global stock markets have driven several major indices lower with further losses currently a key scenario if this situation persists.

In such an environment, the US currency has benefited from its safe haven currency characteristics and has currently gained more than 600 basis points from EUR/USD highs of recent weeks, with further gains being a possibility as long as the environment of concern remains in international markets.

There is significant volatility in bets on the outlook for interest rates for the coming months, with the environment extremely murky and any possibility of a reduction in the near future beginning to recede, a scenario that applies to both sides of the Atlantic.

My thoughts of positioning in favor of the US dollar near the 1,20 level have been fully confirmed but I failed to maintain these positions for a long time as the developments created feelings of risk aversion and temporary abstention from the markets as I had mentioned in the previous article.

The possibility that the course of the exchange rate has discounted a large part of the developments is significant, with the consequence that the further rise of the US dollar, although very likely, will begin to become difficult, with levels close to 1.12 being the next big challenge.

For now I remain on hold, carefully monitoring developments, but I have begun to consider the possibility of buying the European currency near 1,12 level.

Author

Vasilis Tsaprounis

Independent Analyst

Vassilis Tsaprounis possesses over 25 years of professional experience in Capital Markets and especially in the foreign exchange market.

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