Donald Trump aims to end the conflict in the Middle East within 2–3 weeks, but during that time, he might leave no stone unturned in Iran. The EUR/USD pair, which had edged higher on hopes of de-escalation, plummeted. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
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Markets are disappointed by Trump’s remarks.
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April will be worse than March for the oil market.
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The TACO strategy is no longer working.
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Short trades on the EUR/USD pair can be opened below 1.16.
Weekly US Dollar Fundamental Forecast
The hardest part is done; the rest will be easy. Donald Trump intends to end the conflict in the Middle East within 2–3 weeks, but he will escalate the situation if Iran does not open the Strait of Hormuz. The markets are disappointed. They no longer believe the US president. Oil is rising, while EUR/USD quotes failed to break above 1.1625 and plummeted.
As a rule, the final step is the hardest one. Donald Trump is mistaking wishful thinking for reality. Instead of reinforcing the hope he had fostered earlier for a de-escalation of the conflict in the Middle East, he has deeply disappointed investors. Following the announcement that the standoff in the Middle East would end within 2–3 weeks, FOMO—or the fear of missing out—set in across the markets. Everyone recalled the rally in US stock indices and the EUR/USD pair after the drop on Liberation Day. However, the conflict with Iran is a completely different story.
10-Year US Treasury Yield
Source: Bloomberg.
US Treasury yields continued to fall amid concerns about a protracted conflict that will eventually push the US economy into a recession. According to the IEA, the oil market will deteriorate in April. In March, the market was buoyed by shipments ahead of the hostilities in the Middle East. This will not be the case in mid-spring. As a result, supply losses will increase, and the IEA is preparing for a new round of crude oil release from strategic reserves.
Markets are caught between the largest disruption in oil supplies in history and Washington’s growing rhetoric of de-escalation. At the same time, Iran says one should not take such statements at face value. Indeed, despite his unpredictability, Donald Trump’s approach is becoming more familiar: falling stock indices are taking money out of his pocket, making it easier to interpret his statements about ending the conflict within 2–3 weeks. The problem is that the US leader does not know how to end it.
Iran appears unlikely to agree to a peace deal, raising questions about the next steps. Further bombings, followed by a withdrawal, would do little to resolve the underlying issues. The Strait of Hormuz is unlikely to reopen fully, oil prices may remain elevated, and Tehran is not expected to abandon its nuclear ambitions. Against this backdrop, Israel will find itself face-to-face with Iran, Hezbollah, and the Houthis. In this context, a strategy based on threats followed by retreat—previously observed during trade wars—may prove ineffective. As a result, TACO trading is unlikely to work either. It remains premature to turn bullish on the EUR/USD pair, as recent market developments in early April have demonstrated.
Weekly EURUSD Trading Plan
As expected, the euro’s rally against the US dollar proved short-lived, with the pair failing to reach even the 1.1635 level. As long as EUR/USD quotes remain below 1.16, short positions can be considered. The higher Brent crude rises amid the closure of the Strait of Hormuz, the greater the likelihood that the pair will move toward the target of 1.135.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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