U.S. Dollar Rebounds Amid Rising Tensions In The Middle East: Analysis For EUR/USD, GBP/USD, USD/CAD, USD/JPY

U.S. Dollar Moves Higher As ISM Manufacturing PMI Beats Estimates

U.S. Dollar Index gains ground as traders focus on recent developments in the Middle East and react to the ISM Manufacturing PMI report.

The report indicated that ISM Manufacturing PMI increased from 52.7 in April to 54.0 in May, compared to analyst consensus of 53. Numbers above 50 show expansion.

Oil prices gained 7% amid reports indicating that Iran halted exchanges of messages with the U.S. Iran wants Israel to stop its operation against Hezbollah in Lebanon.

In case U.S. Dollar Index manages to settle above the 99.50 level, it will head towards the nearest resistance, which is located in the 99.70 – 99.85 range. RSI is in the moderate territory, so there is plenty of room to gain momentum in the near term.

EUR/USD Pulls Back As Oil Markets Rally

EUR/USD pulled back as traders reacted to the Euro Area Unemployment Rate report. The report indicated that Euro Area Unemployment Rate remained unchanged at 6.3% month-over-month in April, compared to analyst forecast of 53.

Today, traders also had a chance to take a look at the Retail Sales report from Germany. The report showed that Retail Sales declined by -0.3% month-over-month in April, compared to anlayst forecast of -0.4%.

Currently, EUR/USD is trying to settle below the 50 MA at 1.1630. In case this attempt is successful, EUR/USD will head towards the support level at 1.1585 – 1.1600.

GBP/USD Remains Stuck Near The 1.3450 Level

GBP/USD remains stuck near the resistance level at 1.3450 – 1.3465 as traders focus on geopolitical developments and react to the UK Nationwide Housing Prices index report.

The report showed that Nationwide Housing Prices decreased by -0.6% month-over-month in May, compared to analyst consensus of +2.9%.

A successful test of the resistance at 1.3450 – 1.3465 will open the way to the test of the next resistance level at 1.3535 – 1.3550.

USD/CAD Gains Ground As Demand For Commodity-Related Currencies Falls

USD/CAD is moving higher as traders focus on the strong rally in the oil markets. Traders worry that rising oil prices will hurt global economic growth and reduce demand for commodities. Other commodity-related currencies are moving lower in today’s trading session.

The nearest resistance level for USD/CAD is located in the 1.3860 – 1.3875 range. A move above the 1.3875 level will push USD/CAD towards the next resistance at 1.3935 – 1.3950.

USD/JPY Tests The 159.50 Level

USD/JPY tests new highs as traders focus on rising Treasury yields. The yield of 2-year Treasuries climbed above the 4.07% level, while the yield of 10-year Treasuries tested the 4.50% level.

Treasury yields are moving higher as bond traders bet that high oil prices will force the Fed to raise rates to fight inflation. Rising Treasury yields serve as a bullish catalyst for USD/JPY due to the ultra-dovish policy of the Bank of Japan.

USD/JPY is moving towards the psychologically important 160.00 level. If USD/JPY manages to settle above 160.00, it will head towards the nearest resistance, which is located in the 161.50 – 162.00 range. It remains to be seen whether BoJ is ready to defend the yen in case USD/JPY climbs above the 160.00 level.

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