Tuesday saw markets continue the trend established on Monday as investors digested further details of the U.S.-Iran agreement.
Reuters reported that the agreement would reopen the Strait of Hormuz and allow Iran to resume oil exports during the negotiation period.
The implications for inflation remained significant.
Oil prices stayed under pressure, Treasury yields drifted lower, and investors continued reducing expectations for future Federal Reserve tightening.
The dollar consequently remained on the defensive.
EUR/USD
Technical Analysis
EUR/USD extended Monday’s gains and moved closer to recent highs.
Momentum remained firmly positive, with buyers consistently stepping in during intraday pullbacks.
The pair continued developing a constructive bullish structure.
Fundamental Analysis
The euro continued benefiting from the same drivers that fueled Monday’s rally:
- lower oil prices
- reduced inflation risks
- weaker Treasury yields
- improving global sentiment
The prospect of a more stable energy market remains particularly supportive for Europe.
USD/CAD
Technical Analysis
USD/CAD declined sharply and became one of the weakest dollar pairs of the session.
The pair broke below key support levels and extended its recent downtrend.
Technically, bearish momentum accelerated significantly.
Fundamental Analysis
Despite lower oil prices traditionally weighing on CAD, broader dollar weakness dominated the session.
Markets viewed the Iran agreement as positive for global growth and risk appetite, encouraging investors to rotate away from the dollar.
At the same time, Canada’s economic outlook improved alongside the broader global recovery narrative.
USD/CHF
Technical Analysis
USD/CHF continued moving lower and failed to sustain any meaningful recovery attempts.
The pair traded with a consistently bearish tone throughout the day.
Technically, the broader downtrend strengthened.
Fundamental Analysis
The franc benefited from falling Treasury yields and weaker dollar demand.
Although improving sentiment reduced some demand for traditional safe havens, the dollar weakened even more as investors reassessed the inflation outlook.
This allowed the Swiss franc to outperform.
Market Outlook
The market remained focused on one dominant theme:
The Iran agreement is reducing inflation fears faster than expected.
As long as:
- oil remains under pressure
- yields remain contained
- and negotiations continue progressing
the dollar is likely to face continued headwinds.