The dollar dropped yesterday as the anticipation ahead of US president Trump's address fueled market optimism. There was some expectation that Trump would see this as an opportunity to hang a "mission accomplished" banner on the war. But alas, it wasn't exactly the case when the time came.
There was plenty of speculation on what Trump might announce and it more or less covered the necessary details. However, it wasn't an exactly a clear signal that the war is over as he says that they still need at least 2-3 more weeks to wrap things up.
Trump framed it in a way that Iran's military capacity has taken a heavy knock and things will start to settle down. But as mentioned before, that is not what really matters to markets. At the end of the day, nothing changes for markets until something changes on the Strait of Hormuz.
That is and will continue to be the key factor driving market sentiment come what may. And with the status quo now being prolonged for a few more weeks, it just means that the oil and gas market will continue to be heavily disrupted through April. That is not what risk trades will be wishing to see continue as the energy market gets stressed further day after day.
And after Trump's address, we are seeing market sentiment reverse in the other direction to yesterday. The dollar is now back in favour with EUR/USD down 0.3% to 1.1530 currently. The pair is hanging in there now, amid a test of its 100-hour moving average (red line) on the day.
A firm break below that will see the near-term bias switch back to being more bearish again in the pair. And that will signify a stronger momentum for the dollar into the long weekend with broader markets also looking to de-risk.
AUD/USD is also seen down 0.7% to 0.6878 now, down over 80 pips from the overnight high of 0.6960. The pair has also fallen back below both its key hourly moving averages, putting sellers back in near-term control. The 100-day moving average at 0.6825 might very well be a plausible target if the risk selling intensifies ahead of the weekend.
Elsewhere, USD/JPY is also seen up 0.5% to 159.60 with eyes on the 160.00 mark once again. Tokyo intervention is what is helping to limit upside potential in the pair, so just be wary of that. And we also have GBP/USD already erasing yesterday's gains with the pair down 0.7% to 1.3215 currently.
