FOREX: Israeli Strikes Can Only Provide So Much for Support For Dollar
Jun-13 16:25
- The USD Index rallied sharply on the back of the initial reports that Israel was pursuing broad military strikes against Iranian nuclear facilities, partially reversing a decent part of the week's trade-led weakness. EUR was among the hardest hit, prompting EUR/USD to post a near 150 pip fade off the cycle high at the Friday low.
- This price action soon reversed, however, as markets parsed the contained fallout for oil prices, production and supply from the Israeli strikes. As a result, the USD Index faded well, ensuring the definitive downtrendline resistance drawn off the early February high was never really under threat - a key theme that stays in focus headed into next week's Fed meeting.
- Looking ahead, any material escalation in geopolitical tensions could reignite risk-off. Iran's leadership have pledged a firm response to the Israeli strikes, and any action made toward US interests in the area could see increased ire from Trump - who has continued to press for a nuclear deal with Tehran. This continues to support front-end vols - with AUD, NZD seen among the most sensitive across early Friday trade.
- Sizeable options influence could play a part in spot vol in the coming few sessions - next week sees a major strike rolling off on Monday in USD/JPY at Y145.00: $4.9bln, as well as E4.6bln in EUR/USD at $1.1700.
- Central banks are of more interest next week, with both the BoJ, BoE and Fed rate decisions all due. No change is expected at any of the three meetings, however their views on policy further down the line - particularly into year-end, will be carefully watched.
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- +7,500 TYQ5 108 puts, 36 vs. 109-29/0.26% at 1156:00ET
US TSY FUTURES: BLOCK: Jun'25 2Y & 5Y Buys
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US STOCKS: Midday Equities Roundup: Bouncing on Middle East Trade Headlines
May-14 15:55
- Stocks have bounced off recent Wednesday session lows after Pres Trump "signed an agreement with Qatar to generate an economic exchange worth at least $1.2 trillion," according to a fact sheet issued by the White House.
- Currently, the DJIA trades up 2.3 points (0.01%) at 42143.74, S&P E-Minis up 9.5 points (0.16%) at 5914.25, the Nasdaq up 119.1 points (0.6%) at 19130.52.
- Information Technology and Communication Services sectors outperformed for the second consecutive session, chip makers leading the former after the Trump admin lifts curbs and touted deals with Saudi Arabia yesterday.
- Leading gainers included: Super Micro Computer +17.10%, Advanced Micro Devices +4.73%, NVIDIA +3.27%, Enphase Energy +3.00% and Dell Technologies +2.83%.
- Interactive media and entertainment shares supported the Communication Services sector: Alphabet +2.98%, Take-Two Interactive Software +1.22%, Match Group +1.11% and Netflix +1.01%.
- On the flipside, Health Care and Utilities underperformed in the first half, pharmaceuticals weighing on the former: Bio-Techne -4.81%, Solventum -4.54%, Revvity -4.44%, Moderna -4.24% and AbbVie -3.76%.
- Shares weighing on the Utility sector included: Eversource Energy -2.88%, Exelon -2.35%, WEC Energy Group -2.31%, Consolidated Edison -2.10% and Constellation Energy -2.04%.
