Risk sentiment turning positive again

Frank Walbaum FX Strategies.Asia

Dollar strength returns as markets digest Iran developments

The US dollar continues to strengthen, supported by the Fed's commitment to fighting inflation and maintaining a restrictive policy stance. While the recently announced agreement between the US and Iran officially marks the end of the conflict, many analysts argue that the deal appears less restrictive than expected and leaves several major issues unresolved. Nevertheless, the end of the war itself is being viewed positively by financial markets as it reduces uncertainty and lowers the risk of further escalation.
USDJPY remains one of the most important pairs to watch. The pair has broken above the 160 level and is showing signs that bullish momentum may resume. Despite the Bank of Japan's recent rate hike, the Yen remains relatively weak, suggesting that yield differentials continue to dominate FX flows. Oil prices have staged a modest rebound after a sharp decline throughout the week. However, with the Strait of Hormuz reopening and supply concerns easing, the broader trend remains softer and current price action may simply represent a technical retracement from oversold conditions.

Market talk

Equity markets continue to show resilience despite the stronger dollar. The S&P 500 remains constructive above 7,540 points and is currently trading more in a sideways consolidation pattern than a correction. Lower oil prices continue to support the broader risk-on narrative by reducing inflation concerns and improving the outlook for consumers and businesses. Crypto markets remain relatively stable, while FX traders focus on whether dollar strength can extend further. Overall, market sentiment remains cautiously positive, with investors balancing a stronger USD against the benefits of lower energy prices and easing geopolitical risks.

Tendencies in the markets

Equities sideways, USD stronger, BTC weak, oil sideways, Silver weak, Gold weak.

Author

Frank Walbaum

FX Strategies.Asia

Frank has been working in the TV business for several years. Acquiring his skills in Germany’s biggest broadcasting station, he then chose to work and live in Asia, which was in 2007.

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