Currencies: Renewed interest

The US military attack on Iranian nuclear facilities has allowed the dollar to regain some ground against several G10 currencies. However, it is still struggling against the euro; however, there are growing reasons for hope.

In critical moments, the dollar traditionally acts as a safe haven. The current period therefore seems particularly favorable due to the accumulation of geopolitical uncertainties. The dollar did not hesitate to rebound against the Japanese yen and commodity-linked currencies. The USD/JPY has just broken through its resistance at 145.70/146.60, which is now a support, marking the end of the congestion that had been in place since May. The recovery targets are 149.22/38 before 151.00. The Aussie and the Kiwi have fallen sharply, undermining the recovery scenario and are currently testing key levels at 0.6390 and 0.5900.

The situation regarding European currencies is more delicate, however. The USD/CHF is only moving slightly, but the formation of a double bottom pattern is entirely possible after resisting at 0.8040. In this case, the top of the pattern and resistance point is at 0.8450/95. However, we would need to see a break above 0.8225 to give more credence to this scenario. The EUR/USD is of particular interest as many readers in the eurozone are exposed to US stocks. The currency pair's YTD performance has already cost them many performance points, and any further decline in the dollar would therefore have significant consequences.

Source: Bloomberg

The chart above shows the EUR/USD over the last three years. It is interesting to note that, for the moment, the currency is stalling in the zone mentioned in these columns for several weeks now (1.1575/1.1675). Last week's high corresponds to the amplitude of the rise recorded between September 2022 and January 2023, projected onto the lows of 2025. At the same time, counter-trend indicators are beginning to show bearish divergences similar to those that accompanied the peaks at the end of 2023 and then in the summer of 2024. However, we will have to wait for the 50-day moving average, currently supporting the currency at around 1.1365, to break before we can give credence to a scenario of a dollar recovery. Conversely, a break above 1.1675 would confirm a continued rise in the euro in the medium term, with targets of 1.2340 and 1.2600. You will find a video on this topic on our YouTube channel in a few days.