US Dollar Price Forecast: Dollar Retreats Amid Hormuz Relief – Can GBP/USD and EUR/USD Break Higher?

Dollar Takes a Step Back as Ceasefire Helps to Calm Geopolitical Fears

Thursday saw the US dollar give a bit of ground across all the major currency pairs as the market tries to get its head around the promise of a two-week stop to hostilities between Washington and Tehran. The deal does at least pause any more military action – in exchange for safe passage through the Strait of Hormuz – and that’s taken a bit of the edge off the dollar and put a bit more of a spring in investors’ steps.

As people start to relax a bit about the risk of long-term energy disruptions, they’re starting to shift their money out of the dollar and into the higher-yielding currencies. The euro got a lift from the improved mood and the expectation that Europe’s energy markets might be a bit less of a worry – and the pound did pretty well too, as its normally takes a bit of a hit when things are looking fragile, but then benefits when things start to look up.

Analysts are still saying that the peace is still pretty fragile, with the details of how things are supposed to work out and what happens next – like the potential for further talks in Islamabad – still up in the air. Now though US inflation data is going to be the big news and it will give investors some clues about what the Fed is going to be doing next. For the moment though the dollar doesn’t have the same safe-haven appeal, but if the ceasefire does break down then all bets are off and the dollar could quickly go back to being the place to hide.

DXY Fails to Break $99 Barrier – A Channel Break Down Looks Increasingly Likely

US Dollar Index is stuck at $98.48 on the 2 hour chart, wedged beneath the white trend line that’s been descending since the highs in April. Red 50 period MA is capping the price at $98.87, meanwhile the blue support line is holding firm at $98.22. The last few candles have been trying to make a little comeback with a small bullish hammer form at the $98.00 floor, but even that didn’t quite have the strength to clear the $98.87 barrier.

The whole price action is consistent with lower highs and the RSI is pretty much stuck in neutral at 52, not really showing any clear direction. There’s a Fib retracement from that May swing low that’s targeting the $99.00- $99.33 cluster area. Meanwhile volume profile is pointing towards $98.50 as the immediate pivot point.

Trade Idea: Buy at $98.45 and aim for $99.00. Stop loss at $98.10.

GBP/USD Can’t Get Past $1.358 – Now the Channel Floor is in View

GBP/USD is trading at $1.3544 on the 2 hour chart – and is having a bit of a struggle with $1.358. It’s rejected that red MA and the $1.358 zone with a nice fat upper wick. The blue ascending trendline from April lows has been good for support at $1.350. We’ve just had a bunch of red candles that are pretty clearly showing that the price is in distribution mode, after that failed breakout attempt.

The price is now printing lower highs within the short term range. The Fib extension is pointing towards $1.344 as the next major downside target. RSI is cooling off from 65 all the way down to 55, so that’s definitely telling us that the bullish momentum is fading fast.

Trade Idea: Sell $1.3545 and target $1.344. Stop loss at $1.3585.

EUR/USD is Stuck in a Bearish Channel – $1.164 is the Key Support Zone

EUR/USD is currently plumbing the depths at $1.1690 on the 1 hour chart, and as it’s still sliding along that blue descending trendline. The red moving average is acting as resistance at $1.173. The candles have been printing lower highs after the rejection at $1.178, the green bodies just can’t seem to get any traction. For now support comes in at $1.164 – that’s a key Fib level and also the price of a prior swing low.

RSI is still stuck at 48, that’s a pretty neutral position – and the momentum is pretty flat. So as long as the price stays below $1.173 it’s looking bearish, and it’s doing its level best to hug the channel midline.

Trade Idea: Sell at $1.1690 and target $1.164. Stop loss at $1.172.