Forex market highlights: Middle East peace hopes boost market sentiment

Forex market highlights: Middle East peace hopes boost market sentiment

The US Dollar extended its decline for the fourth consecutive day as investors shifted toward riskier assets, moving away from the USD safe haven amid easing tensions in the Middle East.

Key points to watch on Wednesday, June 25:

• Despite a shaky start to the Trump-mediated ceasefire deal, investors remain optimistic about a gradual de-escalation of missile exchanges between Israel and Iran.
• The US Dollar Index (DXY) is trading near multi-year lows around 97.70, poised for its lowest close in nearly 40 months.
• Federal Reserve Chair Jerome Powell begins his second day of testimony before Congressional committees, expected to face broad questions beyond traditional monetary policy.

Major currency moves

• EUR/USD surged to a 44-month high above 1.1600, supported by broad USD weakness amid ongoing EU-US tariff tensions.
• GBP/USD climbed to multi-year highs near 1.3650, bolstered by USD weakness, with limited Bank of England commentary expected.
• USD/CAD pulled back after a technical rebound, pressured by falling oil prices, trading near 1.3700 following a break below a descending channel.
• AUD/USD continues its medium-term downtrend around 0.6500, awaiting Australian May CPI data, with no major surprises anticipated.

Commodities update

• Gold (XAU/USD) slipped below $3350 amid easing geopolitical risks, reducing safe-haven demand and likely to face further downside pressure in the near term.
• Oil prices extended sharp losses following the Iran-Israel ceasefire implementation. Brent crude fell 3.8% to $68.81 per barrel, while WTI dropped 4.1% to $65.73. Markets responded to diminished fears of supply disruptions, pressuring prices lower.

Trade recommendations

• Gold (XAU/USD): Neutral to gradual selling near $3350-$3370, targeting support at $3300, with stop loss above $3400, given reduced safe-haven demand.
• EUR/USD: Buy near support at 1.1550, targeting 1.1650, while remaining cautious of any escalation in tariff tensions that could hinder upside momentum.
• GBP/USD: Hold longs above 1.3550 with a stop loss at 1.3450, expecting continued strength supported by USD weakness.
• USD/CAD: Sell near resistance at 1.3750, targeting initial support at 1.3600, as CAD benefits from stabilized oil prices.
• AUD/USD: Neutral bias awaiting inflation data, with bearish pressure likely to persist below 0.6500.

Conclusion

Markets remain cautiously optimistic as geopolitical developments in the Middle East, particularly the potential ceasefire between Iran and Israel, continue to dominate sentiment. This ceasefire serves as the key factor calming fears and boosting investor confidence, which may positively influence currency and global market movements.

At the same time, Fed Chair Jerome Powell's testimony remains a focal point for markets, with any hints regarding future monetary policy or economic outlook capable of triggering sharp moves in the US Dollar and financial markets broadly.

Investors should closely monitor these political and economic developments, exercising caution in decision-making amid current market volatility driven by intertwined geopolitical and monetary factors.