The markets are starting Wednesday with a familiar problem: the US and Iran are reportedly still talking, but the headlines continue to pull traders in different directions.
Crude oil has already traded above $100 and back below it. US Treasury yields are modestly lower, stock futures are pointing higher, and the dollar is mixed. There is movement, but there is no consistent message across markets.
In the morning video above, I take a look at the three major currency pairs—EURUSD, USDJPY and GBPUSD—from a technical perspective. For each pair, I outline the bias, the risk-defining levels and the targets that would give either the buyers or sellers more control.
Oil and the Middle East: Talking does not mean a deal is done
At 7:30 AM ET, crude oil was trading at $98.66, up $0.80 on the day. The high reached $100.40, while the low extended to $97.91. That is a $2.49 trading range, with the price well off its high but still higher on the day.
Yesterday’s initial optimism followed reports that Qatar and Pakistan had presented a compromise proposal addressing demands from both Washington and Tehran, including an element related to Iran’s frozen funds. Oil fell as hopes for an agreement increased, before reversing when a diplomat involved in the talks pushed back against suggestions that a deal was close.
Giuseppe Dellamotta’s latest oil analysis outlines the competing forces: a breakthrough could reduce the supply-risk premium, while a continued stalemate would keep that risk in the market.
The latest headlines underline the uncertainty:
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Iranian Foreign Minister Araghchi says indirect negotiations are continuing through intermediary countries, including Pakistan and Qatar.
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Araghchi says Iran’s proposal includes reopening the Strait of Hormuz if the US fulfills its commitments. Those are Iran’s stated terms, rather than confirmation of an agreed reopening.
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Iran’s president says dialogue cannot take place alongside a blockade and threats.
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A separate report carried by Al Hadath says Iran rejected American demands conveyed through Pakistan.
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President Trump says the US is doing “very well” with Iran, while indicating that a final decision remains on how he wants to win the war.
Meanwhile, the Saudi-Houthi fighting remains another supply-risk concern. Progress between Washington and Tehran would be significant, but traders also need to watch whether that separate conflict eases.
For traders, the distinction matters. A proposal is a step. An agreement is another step. Implementation is another. The price action needs to confirm which step the market believes has actually been taken.
The US dollar is mixed
In the morning snapshot (7:30 AM ET), the greenback is modestly higher against the EUR, CHF and CAD, but lower against the GBP, JPY, AUD and NZD.
From the dollar’s perspective:
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Against the CAD: higher by about 0.07%.
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Against the CHF: higher by about 0.06%.
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Against the EUR: higher by about 0.04%.
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Against the NZD: lower by about 0.09%.
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Against the GBP: lower by about 0.12%.
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Against the JPY: lower by about 0.15%.
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Against the AUD: lower by about 0.40%.
The Australian dollar is the clear outperformer. RBA Deputy Governor Andrew Hauser said monetary policy is working, but the inflation outlook has deteriorated and appears worse than forecast. He also indicated that quarterly trimmed-mean inflation looks likely to exceed expectations.
Those comments keep inflation risks in focus. However, Hauser also said the RBA is still finalizing its forecasts and that the next Board decision remains uncertain.
Currency ranges: Most pairs still have room to roam
The 22-day average-range indicator (about a month of trading) shows relatively contained trading across most of the major pairs:
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EURUSD: 24 pips versus a 66-pip average—about 36% of normal.
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GBPUSD: 37 pips versus a 75-pip average—about 49%.
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USDJPY: 50 pips versus a 93-pip average—about 54%.
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USDCHF: 23 pips versus a 52-pip average—about 44%.
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USDCAD: 29 pips versus a 63-pip average—about 46%.
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AUDUSD: 41 pips versus a 49-pip average—about 84%.
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NZDUSD: 22 pips versus a 43-pip average—about 51%.
The EURUSD has used the smallest share of its normal daily range and has the greatest relative room to extend. The AUDUSD has already completed much more of its average range after its stronger move higher.
That does not mean the EURUSD must move another 42 pips or that the AUDUSD cannot extend further. The average provides context. Direction still needs to come from the price action, a technical break or the next catalyst. Be on the lookout though.
US stock futures point higher
US equity futures are implying gains at the opening:
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Dow industrial average: up 89 points.
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S&P 500: up 18 points.
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Nasdaq 100: up 168 points.
European shares are also generally higher:
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Germany’s DAX: up 0.71%.
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France’s CAC: up 0.60%.
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UK’s FTSE 100: up 0.01%.
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Spain’s Ibex: up 0.57%.
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Italy’s FTSE MIB: up 0.62%.
The UK market is lagging the gains elsewhere in Europe.
Treasury yields edge lower
US yields are modestly lower across the key maturities:
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2-year: 4.7804%, down 0.66 basis points.
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5-year: 4.9272%, down 0.68 basis points.
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10-year: 5.1086%, down 0.84 basis points.
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30-year: 5.4199%, down 0.51 basis points.
The declines are small, but the direction gives dollar buyers less help from yields this morning.
Elsewhere, gold is near $4,132, up about 0.17%. Silver is near $57.63, down about 0.60%, while Bitcoin is near $83,441, up about 0.60%.
What comes next?
The scheduled US data calendar is relatively light today, leaving the market particularly sensitive to developments in the Middle East.
Looking ahead, Thursday brings the latest US jobless claims figures, followed by the flash PMI reports on Friday. Claims will provide another labor-market checkpoint, while the PMIs will help traders assess business activity and price pressures.
In the meantime, another headline can change the tone quickly. The practical approach is to know the levels before that headline arrives.
This article was written by Greg Michalowski at investinglive.com.