US Dollar Talking Points:
- Yesterday, after market close, a quick run of fear enveloped global markets as reports of a missile strike from Iran hit the headlines. This created moves of strength in Oil, Gold, the Yen and US Dollar.
- A later tweet from Iran Foreign Minister Javad Zariff seemed to soothe matters, indicating that the strike was a ‘one and done.’ Since, those gains have dissipated from Gold, Oil and the Yen, while the US Dollar has continued to push-higher.
Quick Run of Fear, Mostly Priced Out
The big item for today was a quick run of fear from last night that, largely, has been priced-out of markets. Upon news that Iran had sent a series of missiles towards a military base in Iraq, the initial response was one of fear with US equity futures tumbling as Gold and Oil prices spiked. Those moves proved to be temporary, however, as a tweet from Iran’s Foreign Minister indicated that the missile strike was a ‘one and done’ in response to the US drone strike that killed Qassem Soleimani. S&P 500 equity futures are already back above yesterday’s close, Gold prices have given back most of that spike and Oil prices have taken all of those gains out, and then some.
The big question now is what President Trump may say or do on the matter, as he’s expected to offer comments later this morning.
Gold Hourly Price Chart
Chart prepared by James Stanley; Gold on Tradingview
That quick run of fear had reverberations through FX markets as well, with both the Yen and US Dollar showing quick spurts of strength. In the Dollar, that strength has continued while the Yen has given back gains. This highlights the potential for strength in the US Dollar, as looked at in yesterday’s webinar as the Greenback has found support around a longer-term level or zone so far in early-2020 trade, very similar to the support that was helping to hold the lows through much of December.
US Dollar Weekly Price Chart
Chart prepared by James Stanley; US Dollar on Tradingview
Also looked at yesterday, the US Dollar had put in some bullish items on a shorter-term basis as well, with a range building through early 2020 trade that carried a potential topside bias. While resistance had held in around the 97.05-97.20 area, support was coming from a rising trendline, making for an ascending wedge like backdrop that will often be approached in a bullish manner. With last night’s quick run of fear, combined with this morning’s continuation of strength, the Greenback has now broken out to a fresh 2020 high. The big question now is for how long that move might run.
US Dollar Hourly Price Chart
Chart prepared by James Stanley; US Dollar on Tradingview
EUR/USD Range
As looked at in yesterday’s webinar, there’s a few likely places that US Dollar strength could remain as attractive. The current backdrop in EUR/USD may be one as the pair has put in tendencies of a range marked by a test of a key resistance zone in the early-portion of this year. As looked at on Monday, EUR/USD was testing the 1.1187-1.1212 zone that’s been in-play in a number of ways over the past few years. Most recently, this zone helped to set swing highs in the pair in early-August of last year, after a rather busy first-half of 2019 saw this level come in as support multiple times.
This can keep the door open for longer-term range potential, in which a deeper test towards longer-term support, taken from around the 1.1000 handle, could remain as an item of interest for those looking at long USD or short-Euro exposure.
| Change in | Longs | Shorts | OI |
| Daily | 11% | -7% | 5% |
| Weekly | 2% | -12% | -2% |
EUR/USD Daily Price Chart
Chart prepared by James Stanley; EURUSD on Tradingview
--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
