EUR/USD, Oil forecast: Two trades to watch

EUR/USD holds above 1.0650 as the mood steadies

Geopolitical tensions calm after Iran attacked Israel at the weekend
Fed – ECB rate divergence could limit the upside
EUR/USD falls to 1.0622 YTD low
EUR/USD is inching higher after falling to a YTD low on Friday of 1.0622.

Improving risk appetite and a subdued US dollar are supporting the pair as the markets weigh up the escalation in Middle East geopolitics over the weekend.

Over the weekend, Iran retaliated against Israel, launching drone and missile attacks. These appeared to be more of a symbolic attack given the advance notice allowing measures to prevent casualties. President Joe Biden has also told Israel that he will that the US will not participate in a retaliatory move by Israel.

Gains could be limited given diverging Fed- ECB rate cut expectations after the ECB signaled to a June cut, whilst hotter than expected US inflation data means the Fed is likely to keep rates high for longer.

Looking ahead, attention will be on eurozone industrial production data, which is expected to increase 1.1% in February after falling 3.2% in January. Stronger-than-expected numbers could help support expectations of an improving economic outlook.

ECB chief economist Philip Lane is also due to speak, and any commentary regarding the path of interest rates or signaling to a June rate cut could impact the euro.

Meanwhile, March US retail sales figures could also influence the Federal Reserve’s path for interest rates. Retail sales are expected to rise 0.3% in March after rising 0.6% in February. Strong retail sales could add evidence to the view that the U.S. economy remains resilient despite high-interest rates.

EUR/USD forecast – technical analysis

EUR/USD has fallen to a low of 1.0622, just below the May 2023 low and has steadied just above these levels. Sellers, supported by the RSI below 50 will look to break below 1.0622 to head towards 1.0525 and 1.0450 the October 2023 low.

Any recovery would need to rise above the 1.07 February low to extend gains towards 1.0725.

Oil prices fall as geopolitical tensions steady.

Iran attacked Israel in a forewarned move
The US has said that it won’t support a retaliation by Israel
Oil trades in a holding pattern

Oil prices are falling at the start of the week after booking solid gains in the previous week and as the market reined back risk premiums following Iran's attack over the weekend.

Iran attacked Israel with over 300 missiles and drones but gave plenty of warning regarding the attack, which was in retaliation for an air strike on its Damascus consulate.

The attack caused only modest damage, with most of the missiles shot down by Israel's defense system.

The attack had been largely priced in at the end of last week, which, combined with the fact that there was also limited damage and no loss of life, means that any retaliation from Israel is likely to be limited. The fact that the US is not supporting a retaliation adds to the view that Israel may not respond, although that's not to say a retaliation is entirely off the table.

Iran is a major producer within the OPEC group, so supply risks or more strictly enforced sanctions could be a concern should the conflict ramp up further.

For now, it would appear that the markets are just waiting to see how Israel responds, which could determine whether the escalation ends or continues.

Any sense that the escalation will ramp up further could increase oil prices, which is the last thing that central bankers will want to see as they fight inflation.

Oil forecast – technical analysis

Oil prices are consolidating after a strong rise across the start of the year. The price is capped on the upside by 87.70 on the upside and 85.00 on the downside.

Sellers will look for a move below 85.00 to extend the selloff towards 83.10 at the March high.

Buyers will look to rise above 87.70 to head towards 90.00 and fresh higher highs.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.