Dollar extends gains in European morning trade

The dollar is making some decent strides on the session and that is despite broader markets taking a more measured stance towards the Iran-Israel conflict today. Oil prices are now roughly flat at $73.90 after a push to $77 at the open while S&P 500 futures are seen up 0.2% on the day, shrugging off losses of 1% at the lows in early Asia trading.

So, what gives in the currencies space?

EUR/USD is now down 0.5% to 1.1465 while USD/JPY is up 1.2% to 147.83 on the day. The latter does owe in part to a focus on the oil market with regards to Japan, as noted here. However, there is a broad bid in the dollar with AUD/USD also marked down by 1.0% to 0.6381 currently.

If anything, it looks like the geopolitical tensions between Iran and Israel have given traders some scope to pull back on dollar shorts. Or should I say it is reason enough for some covering after some relative weakness in May trading. For the time being, the bids here don’t look to be amounting to much. But as always, the technicals are our best friend in determining that.

In the case of AUD/USD, the failure to firmly shake off the 0.6500 handle on any upside push is now starting to see the exhaustion kick in. The pair is now falling back and looking towards a test of its 100-day moving average (red line) at 0.6360 instead. Hold above that and buyers are still in with a shout but break below and the bias then turns more bearish.

In the bigger picture though, keep in mind that the impact of geopolitical tensions on market moves is always going to be a temporary one. And once that fades, we’ll go back to focusing on what we did before. Has everyone forgotten we still got a bunch of trade deals that is supposed to be wrapped up?

16 days to go before the 9 July deadline. There will definitely be an extension but still, going to be interesting to see how things play out in the next two weeks. So much for 90 deals in 90 days. We didn’t even get one. Nada. Nil. Zilch. Nothing. Good stuff, eh?

And when we start to move back towards focusing on the policy incoherence by the US administration and more tariff concerns, the dollar could start to falter again as it did before. So, just be wary of that in relation to the gains we’re seeing today.

This article was written by Justin Low at www.forexlive.com.