Financial markets are navigating through geopolitical turbulence as the deadline on the US-Iran ceasefire is looming. The talks on the weekend failed to produce any breakthrough, but the doors are not yet closed, which means that the sides will search for diplomatic solutions. However, the main demand from the US is for a 20-year pause in uranium enrichment can’t be accepted by Iran.

The situation with the Strait of Hormuz remains unclear as well. The route was reopened last week for a day or so, but was closed after the US seized a ship belonging to Tehran. This puts pressure on oil and industrial metals as the Strait is a vital supply route for aluminum and copper in the region. 

In the US, the inflation data showed a surge of 3.35 YoY, which is an 11% monthly jump. The Fed is now trapped between higher inflation and slower economic growth. Risks of deflation will prevent the central bank from making any further steps on both sides. 

EUR/USD: Diplomatic Glimmers Keep the Euro Afloat

The currency pair made an upside attempt this week amid rumors of further talks between the US and Iran. However, the blockade of the Strait of Hormuz and pessimism over the results of negotiations still weigh on the euro. Mediators from Pakistan, Turkey, and Egypt are pushing for more negotiations before further escalation takes place. If any positive scenario occurs, the currency pair may take an upside.

From a technical analysis perspective, EUR/USD is trading close to the lower band of the Bollinger Bands indicator. The bands are widening, which means that the volatility is surging. Buyers can engage above 1.1770, targeting 1.1850 and 1.1900. Sellers can step in below 1.1750, targeting 1.1700 and 1.1650.

GBP/USD: The Stagflation Red Flag

The currency pair remains under pressure due to stagflationary risks. The blockade of the Strait of Hormuz supports not only oil prices but also pushes aluminum and copper prices higher. The Bank of England is trapped in a worse position than the Fed. This almost stopped economic growth, but the central bank couldn’t signal any rate cut due to higher inflation pressure.

From a technical analysis perspective, the currency pair is trading close to the lower band of the Bollinger Bands indicator, with the bands expanding, which indicates the volatility growth. Buyers can engage from 1.3530 targeting 1.3600. Sellers can step in below 1.3500, targeting 1.3450 and 1.3400.

WTI Crude Oil: The Blockade Premium

Crude oil remains the ultimate barometer of geopolitical supply risks. The Strait of Hormuz has cut off over 9 million barrels per day, forcing economies to find alternatives. Cushing storage levels at their lowest since 2022. In case of further escalation in the Middle East, WTI may reach $100 and even higher.

From a technical analysis perspective, WTI is trading in the middle of the Bollinger Bands indicator. The bands are tight, which means that volatility remains low. Buyers can step in above $87, targeting $91. Sellers can engage below $85, targeting $79. 

Gold: The Crossfire Between Safety and Yields

XAU/USD is still trading below $5,000 as it faces two opposing forces. On one hand, geopolitical turbulence is driving safe-haven demand. On the other hand, the strong US inflation data support the US dollar as the Fed is unlikely to cut rates this year.  This week, the direction of the precious metal depends on which side wins. If diplomatic efforts collapse, gold may receive support and move towards $5,000. 

However, if talks help solve the crisis, appetites for risks may increase, and this may put pressure on the precious metal.

From a technical analysis perspective, Gold is trading close to the middle line of the Bollinger Bands indicator. Buyers can step in at above $4,800, targeting $4,840 and $4,860. Sellers can engage below $4,780, targeting $4,740 and $4,700.