Forex today: Risk sentiment improves as Middle East tensions ease

Geopolitical de-escalation lifts risk-sensitive currencies, while the dollar faces intraday pressure despite broader weekly strength.

Shifting geopolitical landscape

• Market sentiment saw a notable shift as reports indicate a suspension of attacks between the United States and Iran, following a period of heightened Middle East tensions. This easing led to sinking oil prices.
• The Australian dollar gained ground amid these reduced tensions, with expectations building around the Reserve Bank of Australia (RBA) rates. FXStreet analysts note that the Australian dollar's rally potential hinges more on developments in Washington than Canberra.
• On an intraday basis, our strength gauge ranks the US dollar as the weakest major currency. This comes even after the dollar posted its largest weekly gain in over a month last week, suggesting a session-specific pullback against a stronger medium-term trend.

Currency movers and upcoming policy

• The New Zealand dollar stands out as the strongest currency today, though technical analysis from FXStreet indicates the NZD/USD pair is testing 0.5800 as bullish momentum appears to wane.
• The Japanese yen firms today as oil retreats, after capping its worst week since May last Friday; investors now await key central bank decisions. The EUR/JPY cross is consolidating below 187.00, with bulls aiming for 188.00.
• Looking ahead, traders are focusing on a busy week featuring policy decisions from the Federal Open Market Committee (FOMC), the Bank of England (BoE), and the Bank of Japan (BoJ). Also on tap are US PCE and GDP data, and Eurozone CPI figures.

Market metrics snapshot

• Our proprietary gauges show the MRS at 60, indicating moderate market readiness, while the CTS remains high at 80. The FSI stands at 58 (Neutral), reflecting a balanced market sentiment.