The US Dollar Index (DXY) fell 0.31% to 99.492, hitting its weakest level since June 5 as news of a US-Iran peace deal framework sent risk appetite soaring. According to The Hindu BusinessLine, US and Iranian officials agreed on Sunday to a framework for a deal to end their war, halt the US blockade of Iran and reopen the Strait of Hormuz. The agreement has lifted demand for riskier assets and sent oil prices tumbling, with Brent crude futures down more than 4% to $83.82. However, caution remains as President Trump told the New York Times on Sunday that if Iran failed to reach a final nuclear accord, he would restart military attacks or make the US "the guardian of the Middle East" in return for 20% of the region's revenues. Traders were digesting unprecedented demand for shares in SpaceX, which raised $75 billion in an initial public offering and jumped about 20% in its Nasdaq debut, as per The Economic Times.
US producer prices increased more than expected in May, leading to the largest annual gain in 3-1/2 years as Middle East conflict drove up energy costs. However, traders found encouragement in the details of the report, with core PPI reading at 4.9% year-on-year, well below the 5.4% expected, according to Tony Sycamore, market analyst at IG in Sydney. The more important core PPI reading, which typically feeds directly into core PCE inflation, came in below expectations, combined with falling energy prices helping calm inflationary concerns. Fed funds futures now price in an implied 63.3% probability of a 25-basis-point hike at the U.S. central bank's two-day meeting ending October 28, compared with an even chance a day earlier, as per The Economic Times.
The euro strengthened 0.35% to $1.1607 and sterling rose 0.3% to $1.3448 as the dollar's weakness provided support for major global currencies. According to The Hindu BusinessLine, the risk-sensitive Australian dollar fetched $0.7075, up 0.50%, while the kiwi was up 0.4% at $0.5854. Nick Twidale, chief market strategist at ATFX Global in Sydney, noted that "we'll see the dollar fall over the course of the next few sessions. We'll probably see some of the risk currencies like Aussie and yen appreciate a little bit. But I don't think we're going to see any huge moves." He added that "there's going to be a lot of wait and see, on how quickly the Strait really reopens and how long it's going to take for oil flow to really get back to normal. It's certainly going to be months rather than weeks."
The Japanese yen weakened to as much as 160.150, continuing to hover around the 160 level widely seen as a line in the sand for potential official intervention. According to The Hindu BusinessLine, the Bank of Japan is set to raise interest rates to a 31-year high at the two-day meeting concluding on June 16, and signal its readiness to keep pushing up borrowing costs. The decision would align the BOJ with other central banks shifting towards tighter policy, including the European Central Bank, which delivered a much-anticipated hike on Thursday. The ECB is now widely expected to lift interest rates again in September, with the central bank offering little guidance on future action.
The daily chart provides detailed technical analysis showing a support area near 97.5 has been retested twice, forming a double bottom or W pattern with a measured target at 101.07. However, the pattern remains unconfirmed with resistance at 100.4 to 100.5 still capping the index, and DXY was rejected from this zone twice in March. Recent price action has formed an ascending wedge pattern that typically resolves downward with a target near 98.5, which coincides with the 0.618 Fibonacci retracement at 98.547. The daily RSI stands at 67 and approaches the overbought threshold of 70, suggesting a rejection on the first attempt looks likely. Analysts have recently called DXY the most accurate macro indicator for Bitcoin's direction, making these levels crucial for crypto traders to monitor closely.
