Wall Street closes at a record for the first time since end of January
Markets on repeat. Deal hopes knock oil lower, drag on the US Dollar, and lift EUR/USD and GBP/USD.
- Iran deal talk returns, easing fears around energy disruption
- EUR/USD and GBP/USD continue to track crude closely as oil pulls back
- Both pairs push to fresh highs, clearing key technical levels
Same Script, Same Reaction
US President Donald Trump says Iran wants to make a deal to end the more than month-long war, with discussions reportedly underway for a second round of talks between the two sides, according to Bloomberg sources, easing the risk of a worst-case energy shock that’s been hanging over markets for weeks.
The latest “deal” optimism delivered a familiar market reaction on Monday, with crude futures and the US dollar both coming off earlier highs, supporting currencies like the euro and pound that are far more exposed to energy fluctuations as substantial net energy importers.
At the same time, Viktor Orbán’s defeat in the Hungarian election to Peter Magyar raises the prospect of frozen EU funds being unlocked, providing scope for increased investment and a pickup in capital inflows into the region, delivering another tailwind for the euro.
Put the two together: hopes for a lasting peace deal in the Middle East and stronger growth prospects in Europe, and it pushed both EUR/USD and GBP/USD to fresh highs during the session.
Crude Moves, FX Follows
Source: TradingView
EUR/USD and GBP/USD have both tracked crude closely over the past week, with correlation coefficients of -0.8 and -0.85, respectively.
As oil has eased, that’s fed through into risk appetite and rate differentials, helping push both pairs through key technical levels, skewing directional risks higher for the first time in several weeks.
EUR/USD Technical Outlook
Source: TradingView
Having broken out of the wedge pattern it had been trading in for more than a month last week, EUR/USD has extended the bullish move, clearing a cluster of key moving averages and resistance at 1.1670 before accelerating higher on Monday, taking out 1.1743, the low from February 19.
That level may now flip to support, making it one to build bullish setups around if the price can hold above it. Longs could be set above with a tight stop beneath for protection, initially targeting 1.1837 and, beyond that, 1.1918. Given the lack of interaction around 1.1743, the preference is to see a retest and bounce before entry.
Both RSI (14) and MACD are sending a signal that favours playing the pair from the long side rather than short, with the former continuing to trend higher above 50 while the latter has flipped positive, having already crossed the signal line from below. Upside strength is building, reinforcing the case to buy dips and bullish breaks.
GBP/USD Technical Outlook
Source: TradingView
GBP/USD has a similar look to EUR/USD, having launched higher from support beneath 1.3200 last week before taking out horizontal resistance at 1.3348 and 1.3483, along with a cluster of moving averages in between.
With RSI (14) and MACD offering mildly constructive bullish signals, 1.3483 looms as a level to build bullish setups around. Entries could be placed above with a stop below, targeting 1.3575 initially, then 1.3700 where sterling ran into sellers in early February, or 1.3749 depending on desired risk-reward.
Again, the preference would be to see a backtest and bounce from 1.3483 before entry, given limited price interaction at the level.