US dollar, Brent, gold, EUR/USD: Traders unwind war hedges as Iran deal emerges

• US-Iran MOU paves the way for a formal peace deal within 60 days
• Brent tumbles while the US dollar weakens as traders unwind war hedges
• Gold breaks higher even as markets remain wary of unresolved nuclear risks
• EUR/USD bulls eye significant resistance zone overhead

After more than 100 days of war, we now officially have an MOU signed that may act as a launchpad for a formal peace deal within 60 days. Importantly, Iran has confirmed the agreement, with the official signing set to take place in Switzerland on Friday.

As you would expect, we've seen a big unwind of geopolitical risk hedges, although we're still a long way from a return to pre-war levels given understandable concern over just how quickly negotiations could unravel, especially with Iran's nuclear program and uranium still major sticking points. Only a few hours earlier, Israel and Hezbollah were lobbing missiles at each other, underlining that point.

Source: Truth Social

However, as ever, Donald Trump painted a far more optimistic picture on Truth Social, declaring that "the Deal with the Islamic Republic of Iran is now complete". He announced the reopening of the Strait of Hormuz and the removal of the US naval blockade, adding: "Ships of the World, start your engines. Let the oil flow!"

Brent crude nears major support

Source: TradingView

Following the breakthrough, Brent, the global crude benchmark, hit fresh multi-month lows, falling into the low-$80 region for the first time since mid-April when another Strait of Hormuz reopening deal was flagged. Perhaps this one may have more success!

Having broken below the 100DMA and the 50% retracement of the Iran war high-low move late last week, the price is now approaching an important support level at $80. It has acted as both support and resistance for lengthy periods and, when last tested from above during the conflict, sparked major bullish reversals, making it the key level to focus on immediately beneath where the price now trades.

If it were to give way, the 200DMA just above $77 would be the next focal point, along with a gap that exists between $76 down to $73.55, the level Brent closed at on February 27, just before the Iran war began.

Overhead, the 50% retracement of the Iran war move at $88.65 would be the first level to watch should we see some form of reversal, likely accompanied by renewed doubts over the future of the peace talks.

RSI (14) and MACD favour short setups over longs, with downside momentum continuing to strengthen.

DXY support zone under pressure

Source: TradingView

The US dollar index (DXY) has gapped lower on the open to trade beneath the important support zone comprising the May uptrend and horizontal support at 99.51. It's now the immediate focal point, with a clean break lower opening the door for a run towards the May 29 low of 98.75 and the confluence of the 50DMA, 100DMA and 200DMAs clustered nearby.

Should the DXY manage to reclaim the support zone, last week's high of 100.31 would be the level of focus immediately overhead.

The oscillators look to be in the early stages of flipping bearish but have yet to deliver an outright signal. RSI (14) is pushing back towards the neutral 50 level, while MACD looks set to cross over from above while remaining in positive territory. It's more a cautionary message for bulls than an outright bearish signal for shorts, so far.

EUR/USD bulls face a roadblock

Source: TradingView

EUR/USD has pushed above a resistance zone comprising the 23.6% Fibonacci retracement of the January-March bear move and the May 21 low at 1.1577 on the open to test the uptrend running from the lows set in March. It kissed the level before retreating, making it the immediate level overhead to watch today.

If the pair were to get a foothold above it, a tough resistance zone comprising the 50DMA, 100DMA and 200DMA, horizontal resistance at 1.1670, and downtrend resistance from the January highs is located not far above, creating a major roadblock for euro bulls. Even in the current environment, you get the sense it may prove tough to crack.

If the March uptrend continues to repel bullish advances, the breakout zone at the 23.6% retracement/May 21 low at 1.1577 may now flip to offering support. Should that give way, the June lows at 1.1500 would come into view.

RSI (14) and MACD are generating neutral messages, with the former breaking its downtrend while the latter has just crossed over from below while remaining in negative territory. Downside momentum that had been building is now quickly dissipating.

Gold: Bullish signals begin to align

 

Source: TradingView

Gold has broken out on the back of the deal news, convincingly pushing above $4240, a level that had capped advances late last week. It may now flip to offering support should we see a pullback.

Overhead, $4352, the low set on March 23, is now the level to watch, having acted as resistance at periods earlier this month. The May 28 low at $4370 and former support at $4427 should also be on the radar if the bull move really gets a wriggle on, along with the key 200DMA at $4450 seen on the daily chart on the right.

Momentum looks to be in the early stages of shifting higher, with RSI (14) pushing above 50 while MACD has crossed over from below and is now rapidly moving towards flipping positive.