Dollar Advances as Markets Eye Possible Iran Breakthrough

EUR/USD tests 1.1600 while indicators show weak momentum.

The dollar traded at a six-week high at the end of Friday’s session, with volatility fuelled by some signs of progress in the negotiations between the US and Iran. In a Truth Social post made on Saturday, President Trump said that an agreement with Iran has been largely negotiated and would be announced soon.

As part of the deal, the Strait of Hormuz will be opened, but the final aspects of the agreement are still being discussed: “An Agreement has been largely negotiated, subject to finalization between the United States of America, the Islamic Republic of Iran, and the various other Countries […]. Final aspects and details of the Deal are currently being discussed, and will be announced shortly. In addition to many other elements of the Agreement, the Strait of Hormuz will be opened.”

Iran did not officially confirm Trump’s statement, but before his Truth Social post, Iran’s foreign ministry spokesman said the US and Iran are close to finalizing a “memorandum of understanding”. At this time, it is not clear under what conditions the Strait of Hormuz would open. Also, there are no details regarding the other stringent issue: Iran’s nuclear program.

Economic Calendar Highlights

The week ahead lacks key economic releases, and major banks will be closed on Monday. French and German banks will be closed in observance of Whit Monday, UK banks will be closed due to Spring Bank Holiday, and US banks will be closed in observance of Memorial Day.

The US Consumer Confidence survey will be released on Tuesday at 2:00 pm GMT and will be the only notable release until Thursday’s Core PCE Price Index, scheduled on Thursday at 12:30 pm GMT. The PCE Index is the Fed’s preferred inflation gauge, but it is somewhat overshadowed by the Consumer Price Index (CPI), which is released about 10 days earlier. The US Preliminary GDP will be released at the same time as the PCE Index, at 12:30 pm GMT.

Technical Outlook – EUR/USD

Although the dollar is showing signs of strength, it has been struggling for almost an entire week to break through the support at 1.1600. This line in the sand will be very important for medium-term price action, with a break triggering a move into 1.1400, most likely.

The Relative Strength Index (RSI) is moving south, but it does not have a lot of momentum, and the Bollinger Bands are moving apart, but they also lack energy. Overall, the price action is choppy, and the range is still intact. A bounce up from current levels would take the pair into the bearish trend line that capped the price since the high at 1.2000.