Not the beginning of a downward trend for the dollar just yet - Credit Agricole
US-Iran Negotiations Collapse and Oil Prices Surge
Credit Agricole had anticipated little progress from the US-Iran discussions, and their skepticism proved justified after the weekend's events. Talks between the two nations failed, prompting the US to impose its own restrictions on the Strait of Hormuz. As a result, oil prices have soared past $100 at the start of the week, raising concerns that the situation may deteriorate further.
Dollar Strength and Market Sentiment
The US dollar is showing gains against other currencies, though the increase remains modest for now. This may reflect lingering optimism among investors. Credit Agricole commented late last week that a reversal in the dollar's trend is not imminent.
"We do not believe the recent movements in foreign exchange mark the start of a sustained decline for the USD. Two main factors support this view: First, considerable uncertainty persists in the Middle East, indicating that the conflict is unresolved and normal shipping through the Strait of Hormuz is unlikely soon. Second, a lasting drop in global energy prices appears unlikely, meaning energy-importing economies such as the Eurozone may still face negative impacts from the supply disruptions caused by the conflict."
This suggests that demand for the safe-haven US dollar may remain steady, potentially diminishing the attractiveness of assets denominated in euros, for instance."
EUR/USD Technical Outlook
Today, EUR/USD opened lower but continues to hover near its major daily moving averages in the 1.1670-1.1690 range. For dollar bulls to gain stronger momentum, they will need to push the pair below this crucial technical zone.
EUR/USD daily chart
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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