Good morning everyone, I hope you had a great weekend.
Over the weekend we saw ongoing negotiations between the US and Iran, and at the end of last week markets reacted positively with stocks rebounding and oil holding support, but those negotiations failed, which is not surprising as these were only early discussions and both sides are still testing each other. As a result, we are seeing some risk-off flows at the start of the week, especially with Trump threatening an immediate blockade of the Strait of Hormuz. This situation is critical, as any disruption in oil supply would push inflation higher and could have negative consequences for the global economy, so markets may remain unstable for some time.
Looking at the Dollar Index, it appears we could see another leg lower, as we are tracking an ongoing bearish impulse from around 100.30. The gap from Sunday is likely to be filled near 98.70, and since we see this as part of a wave four bounce, we should still be aware of a move to new lows in wave five before a more meaningful recovery can begin, possibly later this week. Also keep in mind that weekend gaps rarely stay open, so at least some near-term weakness remains likely.
GH
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