Global financial markets started this week with a serious decline as the war between the US and Israel on one side and Iran on the other continues. However, the US president mentioned on Monday that he is ready to waive some oil restrictions from sanctioned countries to stabilize oil markets and curb inflation expectations. By the way, the US inflation data will be released on Wednesday. YoY CPI is expected to accelerate from 2.4% to 2.5%, which may prevent the Fed from more aggressive rate cuts in the near future.

Energy prices remain the main risk factor this week. Tensions in the Middle East may lead to serious oil supply disruptions and push global inflation higher. The International Energy Agency is discussing the release of oil reserves in order to support the balance on the energy market. This supports the growth of risk appetites in the short term. However, over a longer period, these steps are not enough as reserves are limited, and if the Strait of Hormuz is closed for months, oil prices may surge above $150 per barrel.

The US economy continues to show mixed signals. Manufacturing and services activities remain strong as both indices are above 50, with a level of separation indicating expansion from contraction. However, the situation in the labor market remains complex, with the unemployment rate growing and the employment weakening. This will put some pressure on the Fed. However, with inflation still above the Fed’s targets, the central bank may be required to make difficult decisions

A stronger-than-expected inflation reading will push the US dollar higher as expectations of the next rate cut by the Fed will be postponed. On the other hand, weaker inflation data from the US may increase selling pressure on the US dollar as the Fed will be free to engage earlier.

EUR/USD: Geopolitical Risks Continue to Pressure the Euro

The euro is attempting to reach 1.1700 after a significant gap on Monday as the risk appetite shows up. In general, the currency is supported by the latest comments and data from the Eurozone, demonstrating that the ECB is unlikely to make any adjustments to the monetary policy in the near term. On the other hand, the ongoing conflict between the US and Iran puts pressure on the currency pair as the US dollar is traditionally stronger in times of geopolitical turbulence.

Eurozone’s inflation pressure remains firm, while economic growth is still fragile, which makes it a tough choice for the European Central Bank. However, in case of any sharp changes in figures, the ECB will likely act accordingly.

From a technical analysis perspective, the currency pair is trading right below the upper band ofthe Bollinger Bands indicator with the bands looking upwards, which confirms the uptrend. Buyers are advised to enter above 1.1660, targeting 1.1700 and 1.1740. Sellers can join the market if the price plunges below 1.1620, targeting 1.1580 and 1.1550.

GBP/USD: The Pound Remains Under Pressure Amid Global Turbulence

The British pound remains under pressure due to rising geopolitical and global inflation risks. Recent UK GDP figures disappointed markets, reinfocing fears that the economy is losing momentum. The unemployment rate reached 5.2%, indicating weakness in the labor market. 

The inflation in the UK, meanwhile, remains at 3.1%, which is still above the target range of 2-3%. With such elevated inflation, the BoE has less room to react to the weakening economic conditions and cooling labor market. Tensions between the US and Iran may spur additional inflationary pressure, which will, in turn, make it more complex for the Bank of England to make any further monetary policy decisions.

From a technical analysis standpoint, the currency pair is testing the middle line of the Bollinger Bands indicator. Buyers can get in above 1.3480, targeting 1.3550 and 1.3600. Sellers can engage right below 1.3430, targeting 1.3350 and 1.3300.

WTI Crude Oil: Supply Risks Grow as Middle East Tensions Intensify

Oil prices remain supported by geopolitical tensions as risks of supply disruptions in the Middle East still prevail. WTI plunged on Monday after the plans by the IEA were announced and Donald Trump promised to consider waiving some restrictions. However, all of these are temporary measures that are unable to break global trends. If the Strait of Hormuz remains closed for longer, WTI is likely to skyrocket to 150 and even higher.

From a technical analysis standpoint, WTI is breaking above the middle line of the Bollinger Bands indicator. Buyers can engage above 92.20, targeting 95 and even 100. Sellers can get in below 85, targeting 80.

Gold (XAU/USD): Safe-Haven Demand Balances Dollar Strength

Gold remains supported by geopolitical tensions when market sentiment shifted to a risk-off mood. However,  after Monday’s announcements from the IEA and the US president, the situation turned in the dollar’s favor. 

From a technical analysis perspective, gold is trading below the upper band of the Bollinger Bands indicator. Buyers can step in above 5,190 targeting 5,250 and 5,270. On the downside, you can go short below 5,150.