Oil falls over 5% on US-Iran diplomacy as AUD/USD lags before the RBA

Oil fell more than 5% as traders welcomed US-Iran diplomatic efforts, FXStreet said, and gold rose 1.82% to $3,945.88 on our feed. AUD/USD closed below 0.70 for the first time since 19 October, before the RBA decision, and USD/CHF fell 0.76%.

Oil slid and gold bounced

• WTI fell more than 5%, FXStreet said, after slipping below $100 in European trade from Friday's five-month high of $104.03. investingLive, citing Iranian news agencies, reported that President Pezeshkian said the Supreme Leader had granted the government some authority on dialogue and, later, that Tehran and Washington were reportedly nearing a preliminary agreement.

• FXStreet said lower crude pulled the dollar down. On our feed the dollar closed lower against the euro, the pound and the Swiss franc and higher against the other four: USD/JPY rose 0.24% to 157.935, its fifth close in a row above 157.50, as yen bears shrugged off a fresh intervention warning from Finance Minister Satsuki Katayama, FXStreet said. In the European session, Action Forex said, the odds of a December Fed hike on CME's FedWatch rose to 76.6% from 70.7% at Friday's settlement.

• Gold rose 1.82% to $3,945.88 on our feed, its first higher close after three lower ones, though still below the $4,000 it closed above four times last week. It dipped to $3,856.72 as trading reopened at 23:00 UTC, below Friday's low. On Friday it had kept falling in European trade even as the dollar declined; this time FXStreet tied the rise to cheaper crude and a weaker dollar, while Action Forex, early in the European session, said the bounce looked like relief within an established downtrend. Silver rose 2.74% to $50.48, back above $50.

Currencies at the close

• AUD/USD fell 0.48% to 0.69973, its first close below 0.70 since 19 October, ending a run of nine closes above it and giving the dollar its biggest gain on our feed. FXStreet said the Australian dollar underperformed all its major peers before the Reserve Bank of Australia's decision, and investingLive said 31 of 32 economists tipped a hike.

• USD/CHF fell 0.76% to 0.81872, the dollar's largest move, for the lowest of the pair's last eleven closes. That left it below 0.8190, where Action Forex's daily outlook said a firm break would extend the corrective fall towards 0.8092.

• EUR/USD rose 0.24% to 1.11867, with a high of 1.12371 at 09:19 UTC, and stayed between the 1.1103 and 1.1269 that our weekly wrap set as its tell. FXStreet said lower oil prices offset weak German retail sales.

• GBP/USD rose 0.12% to 1.34063, its fourth higher close in a row and the highest of its last eleven. In a note after the close, FXStreet said the session high, just under 1.3450, was the pair's highest since mid-September; ING said markets fully priced a 25-basis-point Bank of England hike to 4.00% on Thursday.

• USD/CAD rose 0.09% to 1.39867 and closed back above 1.3985, the level whose break on Friday fired our previous weekly wrap's tell, after trading below it for most of the session. The close was less than a pip above 1.3986, the figure Action Forex's weekly outlook now uses for that same level; it said sustained trading below it would target 1.3792. FXStreet said a softer dollar and falling oil pulled the pair in opposite directions.

What the data showed

• USD · ISM manufacturing PMI: 55.5, against a 54.5 forecast; prices paid eased to 75.2, against 77.5 expected, investingLive said. FXStreet said that, for the pound, the oil rout outshone the strong US data.

• EUR · German retail sales: −2.0% on the month in September, against a 0.4% rise expected, according to Destatis via FXStreet.

Market gauges and what's next

Our proprietary metrics at the close of the session:

• Readings: an MRS of 70, from 80, with its news component at its full 20 on both days, so the drop was not the calendar; a CTS of 47, from 54, with its carry backdrop unchanged at 60 out of 100; and an FSI of 54, Neutral, from 59.

• Top of our strength table: no clear leader. The Australian dollar spent the most minutes first, 292 of the session's 1,437, just ahead of the New Zealand dollar on 272, inside the noise margin, and both lost ground against the dollar.

• Bottom: the Swiss franc, last for 26% of the minutes, a clear laggard, even though it was the currency that gained the most against the dollar in the session. The table counts minutes in each place, not the session's net move.

After the close: the RBA raised its cash rate to 4.85% from 4.60%, as forecast. Iran said contacts on ending the war with the US were continuing after talks finished without a breakthrough, Reuters reported via FXStreet, and FXStreet said the Wall Street Journal, citing US officials, reported a US strike on Iran's Qeshm Island, near the Strait of Hormuz, on Monday.

This week: the US midterms are today, and MUFG said a Republican loss of Congress would be seen as dampening dollar strength; the Bank of England decides on Thursday, and the US and Canadian jobs reports are due on Friday.