US Dollar Jumps on Iran Headlines as Oil Rebound Faces Resistance

Good morning everyone, I hope you had a wonderful weekend.

As you know, in the last 24 hours Trump received a proposal for a deal from Iran, but he said it was unacceptable. As a result, we have seen some renewed strength on prices, while European stocks are turning slightly lower and the dollar gapped higher. However, these kinds of gaps are very common, especially after weekends when geopolitical tensions are involved, and usually those gaps tend to get filled.

So far, after the initial rally on the dollar, we can already see some reversal signs back to the downside, while is trying to recover toward the gap around 1.1780. Other pairs like also still have unfilled gaps higher. My assumption is that markets could stabilize again and that we may eventually see another leg lower on energy this week. If that happens, then this could support risk markets, while the dollar may continue lower.

Looking at crude oil, we can see that price is still unfolding in corrective price action from last Wednesday. More importantly, the recovery so far is overlapping, which suggests its corrective, but it could still extend a bit higher, either into wave E as the final leg of a higher degree triangle or possibly as subwave “b” of D.

But in both cases, we would still expect another reversal lower, at least toward the latest gap near 96 or even the lower gap around 88 from April 20, especially if we get some positive headlines from the Middle East. So limited upside on energy would likely be bullish for stocks and could send the dollar lower, which also fits with the two Elliott Wave counts we are tracking on , either a triangle with more sideways movement early this week before currency fall further, or a direct move lower into wave three of an ending diagonal. In both cases, I would still look for a retest of the May lows soon.

GH

Also, we will be livestreaming analysis on all markets today 11th of May – https://youtu.be/XBWojYBGxfQ