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During the Asian session, USD/JPY slipped near 159.55 while maintaining its 20-day EMA amid escalation fears
USD/JPY edged down to about 159.55 in Monday’s Asian session as the US Dollar dipped, while the US Dollar Index traded near 100.15. The move came as the Dollar stayed broadly firm amid US threats towards Iranian infrastructure if no deal is reached.
Over the weekend, President Donald Trump posted on Truth.Social that Iran would face “hell” for power plants and bridges if Tehran does not reopen the Strait of Hormuz by Tuesday, April 7, 9:00 PM Eastern time. Rising Middle East tensions also supported demand for the Japanese Yen.
Markets are also watching the US ISM Services PMI for March, due at 14:00 GMT. It is forecast at 55.0, down from 56.1 in February.
Technically, USD/JPY remains in an ascending channel and trades above the 20-day exponential moving average near 158.90, with channel support around 158.10. The 14-day RSI is in the 40.00–60.00 zone.
Resistance is seen at 160.45 and then near 161.00, with levels beyond 162.00 if 161.00 breaks. Support sits at 158.90 and 158.10, with a daily close below 158.10 pointing towards the mid-157.00s.
The US Dollar is the most traded currency, making up over 88% of global FX turnover, or about $6.6 trillion a day in 2022. The Fed influences the Dollar via interest rates and tools such as QE and QT, with 2% as its inflation target.
We are seeing the USD/JPY pair sitting at a high level around 159.55, but the situation is tense. Geopolitical threats against Iran are supporting the US Dollar, while also boosting the safe-haven appeal of the Japanese Yen, creating a two-way pull on the currency pair. Traders should be prepared for sudden moves as these opposing forces battle for dominance.
The immediate focus must be on the April 7th deadline for Iran concerning the Strait of Hormuz. With such a significant event risk, we believe buying volatility through options, like a straddle, could be a prudent strategy to profit from a large price swing in either direction without having to guess the outcome. This is a classic binary event where the price could either surge on escalating conflict or drop on a peaceful resolution.
Later today, the US ISM Services PMI data for March will be a key focus. A weaker number than the expected 55.0 could test immediate support for the pair near the 20-day moving average at 158.90. Conversely, a surprise to the upside would reinforce the dollar’s strength and likely push the pair toward the recent high of 160.45.
The underlying strength in USD/JPY stems from the massive interest rate difference between the Federal Reserve and the Bank of Japan. We see the Fed holding rates firm around 5.25% to ensure the sticky inflation we saw through 2025 is fully contained, while the BoJ rate remains near 0.1%. This policy divergence continues to make holding US Dollars much more profitable than holding Japanese Yen.
However, as we approach the 160-161 level, we must be extremely cautious of potential intervention by Japanese authorities to strengthen the Yen. We saw them take decisive action back in 2022 when the dollar became too strong, and verbal warnings have been increasing since the pair crossed 155 last year. This risk places a cap on how high the pair can go without a fight from the Bank of Japan.
The bullish structure within the ascending channel remains valid for now, with key support at 158.10. We feel that while the trend is upward, the headline risks from Iran and potential central bank intervention are significant. A daily close below this channel floor would signal that the current bullish momentum has weakened considerably.
Gold maintains a bearish tone as rate-hike expectations and a stronger US Dollar restrain recent gains
Gold (XAU/USD) opened the week lower after rebounding on Friday from about $4,550. The move came alongside firmer US Dollar demand and expectations of higher global interest rates, which tend to weigh on non-yielding bullion.
Oil rose to a nearly four-week high after a threat to target Iran’s power plants and bridges if the Strait of Hormuz is not reopened by Tuesday. Iran said transit could resume if part of the revenue is allocated to compensate for war-related damages.
An adviser to Iran’s new Supreme Leader, Mojtaba Khamenei, warned that the Bab el-Mandeb Strait could also be targeted. This added to concerns about trade disruption and supported higher oil prices, which can feed inflation expectations.
Friday’s US Nonfarm Payrolls report pointed to a resilient labour market, supporting expectations that the Federal Reserve may keep rates higher for longer. Gold held above Friday’s low, with support near $4,600, while markets awaited US ISM Services PMI amid thin Easter Monday liquidity.
Technically, $4,600 aligns with the 38.2% Fibonacci retracement, while price remains below the 200-period EMA. MACD is below its signal and under zero, RSI is 52, resistance sits at $4,758, then $4,791 and $4,913, with supports at $4,411 and $4,300.
Central banks added 1,136 tonnes of gold worth around $70 billion in 2022, the highest annual total on record. Gold often moves inversely to the US Dollar and US Treasuries, and higher interest rates can pressure prices.
Looking back to last year, we saw gold struggling under the weight of a strong US Dollar and the threat of aggressive interest rate hikes. Geopolitical tensions in the Strait of Hormuz were spiking oil prices, leading to fears that the Federal Reserve would have to maintain its hawkish stance. This environment in 2025 favored those who were betting against the precious metal.
The picture on April 6, 2026, is markedly different, creating new opportunities for traders. Inflation has shown signs of cooling, with the latest March CPI report coming in at 3.1%, below economists’ expectations and down from the peaks we saw last year. As a result, market expectations have shifted, with CME FedWatch data now indicating a 65% probability of a rate cut by the September meeting.
This pivot in monetary policy outlook has put significant pressure on the US Dollar, which has since retreated from its 2025 highs. Gold has benefited directly, breaking convincingly above the old resistance levels of $4,750 and $4,913 that capped rallies last year. We are now seeing prices consolidate around the $4,950 mark as traders eye the psychological $5,000 level.
For derivative traders, this suggests a bullish stance is now more appropriate. With the underlying trend pointing upwards, purchasing call options or establishing bull call spreads could capture further gains while defining risk. These strategies are well-suited for a market where the fundamental drivers, like a weaker dollar and falling rate expectations, support a continued move higher.
The key levels to watch have reversed; the resistance from last year around $4,913 should now be viewed as a potential support zone on any pullbacks. Recent CFTC data showing a steady increase in net-long positions by money managers further supports this positive outlook. A strategy buying a May-expiry $5,000 call while selling a $5,100 call could offer a cost-effective way to trade the anticipated break of this key barrier.
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Natural Gas Stays Weak Despite Iran Risk
Key Points
- US natural gas futures are around $2.84 per MMBtu, still close to their lowest level since August 2025.
- The EIA reported a 36 Bcf injection for the week ending March 27, versus a five-year average 4 Bcf withdrawal for the same week.
- Middle East tension is lifting oil and LNG risk, but US gas remains cushioned because domestic fundamentals stay loose and export terminals are already running near capacity.
US natural gas is trying to bounce, but the broader tone remains soft. NG-C trades at 2.893, up 0.035 or 1.22%, while broader pricing sits around $2.84 to $2.89 per MMBtu. Even with the small uptick, futures are still sitting close to the weakest levels since August 2025.
Spring weather is doing most of the work. Mild temperatures are cutting heating demand just as the market shifts from winter withdrawals into refill season. That soft demand backdrop is strong enough to overpower a large part of the geopolitical premium.
A cautious near-term view still favours a heavy market unless weather turns hotter or supply tightens more clearly.
Storage Data Keeps Balance Loose
The latest storage report reinforced the bearish setup. Working gas in storage rose by 36 Bcf in the week ending March 27, taking inventories to 1,865 Bcf. For the same week, the five-year average shows a 4 Bcf withdrawal.
That contrast is the key point. At this stage of the calendar, the market would usually still be drawing gas from storage. Instead, inventories are already building. That tells traders supply is outrunning current demand by a wide enough margin to keep pressure on prices.
That is why natural gas has struggled to rally even while broader energy markets remain tense.
Iran Risk Matters Less for Henry Hub Than for Oil
The geopolitical threat is still real. Trump warned that the US could strike Iranian infrastructure if the Strait of Hormuz is not reopened, and that has kept oil and global LNG markets on edge.
Henry Hub reacts differently. Oil is directly exposed to Hormuz. US natural gas is much less exposed because domestic production remains abundant and LNG export terminals are already operating near practical limits.
A global gas shock can lift sentiment, but it does not automatically create room for materially higher US exports when the export system is already close to full.
That caps the international spillover into US gas pricing.
A cautious forecast still allows for short-lived spikes on war headlines, but the market needs a domestic tightening signal before it can hold them.
Export Constraints Are Limiting the Upside Response
The export ceiling is what keeps the market grounded. A disrupted Hormuz route threatens a large share of global crude, products, and LNG flows, which supports international gas prices. US natural gas still cannot fully capture that upside when liquefaction capacity is already near max.
Without a meaningful new export outlet, extra overseas demand does not translate into the same kind of runaway move seen in crude. Domestic balances still matter more than foreign panic.
That leaves US gas in a different category from oil. Oil is trading on the shipping shock directly. Natural gas is trading with weather, storage, and export bottlenecks first, then adding a modest geopolitical premium on top.
Technical Analysis
Natural gas (NG) is trading near 2.89, hovering just above recent lows as the market continues to struggle for direction following its sharp decline from the 5.69 peak earlier in the year. Price action remains subdued, with the latest candles reflecting weak rebounds and a lack of sustained buying interest.
The recent low around 2.83–2.84 is holding for now, but the broader structure still shows a series of lower highs and lower lows, keeping pressure on the downside.
From a technical standpoint, the trend remains bearish. Price is trading below all key moving averages, with the 5-day (2.90) and 10-day (2.95) acting as immediate resistance, while the 20-day (3.08) continues to slope downward, reinforcing the underlying weakness. The compression of price near recent lows suggests consolidation, but without a clear reversal signal, this appears more like a pause within a broader downtrend.
Key levels to watch:
- Support: 2.84 → 2.80 → 2.70
- Resistance: 2.95 → 3.10 → 3.40
In the near term, price is consolidating just above 2.84, a level that has provided recent support. A break below this zone could trigger another leg lower toward 2.80 and potentially 2.70 if selling accelerates.
On the upside, 2.95 is the first level to reclaim. A move above this could lead to a short-term recovery toward 3.10, though any upside is likely to remain corrective unless price breaks and holds above the 3.40 region.
Overall, natural gas remains under sustained bearish pressure, with weak rallies and persistent selling defining the structure. Unless buyers can reclaim key resistance levels, the bias stays tilted to the downside, with consolidation near current levels likely preceding the next directional move.
What Traders Should Watch Next
The next move depends more on domestic balance than on foreign headlines. Weather comes first, then the next EIA storage report, then any change in LNG feedgas flows.
If injections keep running this far above normal, the market can stay pinned near the lows even with oil and global LNG under pressure. If hotter forecasts arrive or output slips enough to tighten balances, natural gas can recover from the $2.84 to $2.89 area. If mild weather persists and storage continues to build early, the market may remain trapped near the recent floor at around 2.837.
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Trader FAQs
Why is US Natural Gas Weak Even With Iran Risk in the Background?
US natural gas is trading more off domestic fundamentals than Middle East headlines. Mild weather has reduced heating demand, storage is building early, and LNG export capacity is already near full use. That combination has limited the risk premium.
What is the Main Reason Prices Are Near Their Lowest Since August 2025?
The biggest reason is loose supply-demand balance. The market is moving out of winter with weak weather demand, while inventories are already rising instead of falling.
What Did the Latest Storage Report Show?
The latest EIA data showed a 36 Bcf injection for the week ending March 27, compared with a five-year average 4 Bcf withdrawal for the same period. That is a much looser result than normal for this time of year.
Why Does a 36 Bcf Injection Matter So Much?
It shows supply is comfortably outpacing demand. At this stage of the calendar, traders would usually expect storage to still be drawing down or at least building more slowly.
Why is Natural Gas Not Rallying Like Oil?
Oil is directly exposed to Hormuz disruption. US natural gas is less exposed because domestic production is strong and LNG export terminals are already operating near maximum capacity. Global gas stress helps sentiment, but it does not translate into unlimited extra US demand.
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Traders weigh BoJ hike chances, keeping EUR/JPY near 183.80 after prior losses, under 184.00
EUR/JPY was little changed in Asian trading on Monday, near 183.80, after modest losses in the prior session. The pair may weaken further if the Japanese Yen gains on expectations of a Bank of Japan policy tightening in April.
These expectations are linked to rising inflation pressures tied to higher energy costs. The International Monetary Fund supported the Bank of Japan’s current course of rate increases after a policy consultation on Friday.
Imf Backs Gradual Boj Tightening
The IMF also noted Japan’s economic resilience and backed a gradual removal of monetary stimulus. It expects inflation to move towards the 2% target by 2027. The Yen also faced headwinds as oil prices rose after US President Donald Trump increased threats against Iran. Japan is exposed to supply risks due to its dependence on oil imports from the Middle East. Trump set a deadline for Iran to reopen the Strait of Hormuz and threatened attacks on power plants and civilian infrastructure. Iranian officials warned of retaliation against US-linked infrastructure and said the strait would stay closed until war damage is paid. EUR/JPY losses may be capped by support for the Euro from the European Central Bank’s restrictive policy stance. ECB officials said policy will remain restrictive until inflation returns to the 2% target.Carry Support Versus Oil Risk
We recall observing EUR/JPY around the 183.80 level this time in 2025, when the market was torn between a hawkish Bank of Japan and rising oil prices. The fundamental conflict between expected policy tightening and geopolitical risk created significant tension. That dynamic continues to shape our view on the cross today. The Bank of Japan did follow through on its policy normalization, but its pace has been exceptionally slow. With the overnight call rate currently at only 0.25% and recent core inflation holding at a stubborn 2.5%, the BoJ remains far behind its global peers. This makes the Yen an attractive funding currency for carry trades. In contrast, the European Central Bank has maintained a restrictive stance, with its main deposit rate holding at 3.50%. Eurozone inflation recently came in at 2.3%, still slightly above target, giving the ECB little reason to signal imminent rate cuts. This has preserved the wide and favorable interest rate differential that supports a higher EUR/JPY. The specific tensions involving former President Trump and Iran have shifted, but the underlying risk to energy prices has not disappeared. With Brent crude currently trading over $91 per barrel, the high cost of energy imports continues to weigh on Japan’s trade balance. This acts as a persistent, structural negative for the Japanese Yen. For the weeks ahead, traders should focus on strategies that capitalize on the significant positive carry while hedging against volatility. The clear interest rate advantage favors being long EUR/JPY, but the risk of sudden market shifts or official intervention is ever-present. A simple long spot position is therefore exposed to sharp drawdowns. We believe that using options to structure this trade is the most sensible approach. Buying EUR/JPY call options allows for participation in any further upside while strictly limiting the downside risk to the premium paid. For a more cost-effective method, consider a bull call spread to cheapen the entry. Create your live VT Markets account and start trading now.
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AUD/JPY trades near 110.20 in Asia, lifted by RBA hike expectations, maintaining a mild bullish bias
AUD/JPY trades near 110.20 in Monday’s Asian session, drifting higher and staying above 110.00. Buying interest is linked to expectations of further Reserve Bank of Australia interest rate rises.
Further gains may be capped if demand for the safe-haven Japanese Yen increases amid rising Middle East tensions. Iran’s central military command warned on Monday of “devastating and widespread” retaliation if civilian targets are hit, after US President Donald Trump threatened to destroy Iran’s power plants and bridges unless Tehran agreed to fully reopen the Strait of Hormuz.
Daily Chart Signals
On the daily chart, the bias remains mildly bullish while price holds above the rising 100-day exponential moving average near 107.35. The RSI has eased towards the midline, pointing to possible near-term consolidation. Resistance is seen at 111.25, then 112.61 (March 19 high) and 113.65 (upper Bollinger Band). Support sits at 110.00, followed by 108.75 (lower Bollinger Band) and 107.35 (100-day EMA). The Yen is influenced by Japan’s economic performance, Bank of Japan policy, Japanese–US bond yield spreads, and risk sentiment. The BoJ’s ultra-loose policy from 2013 to 2024 weakened the Yen, while the 2024 shift away from that stance has offered some support and narrowed 10-year yield differentials. We recall the analysis from last year, around this time in 2025, when AUD/JPY was holding above 110.00 with a mildly bullish bias. The situation has shifted significantly since then, as the pair now trades closer to 101.50. This change suggests the expected strength in the Australian dollar did not last.Policy And Positioning
The expectation of Reserve Bank of Australia rate hikes, which supported the pair in early 2025, has now completely reversed. With Australia’s latest CPI data for the first quarter of 2026 showing inflation has cooled to 2.8%, the market is now pricing in potential rate cuts later this year. This has removed a key pillar of support for the AUD. On the other side, the Bank of Japan has continued its slow but steady policy normalization, which was just beginning when we looked at this in 2025. This has narrowed the interest rate differential that previously weakened the yen for years. The spread between 10-year Australian and Japanese government bonds has tightened by over 50 basis points in the last year, making the yen more attractive. While the specific Middle East tensions mentioned in 2025 have subsided, ongoing global trade uncertainties continue to support the yen’s safe-haven appeal. Consequently, the technical levels from last year, like the 111.25 resistance, are no longer relevant. We are now watching for a potential break below the 100.00 psychological level, which would signal further downside. For the coming weeks, traders should consider positioning for further downside or range-bound trading. Buying put options on AUD/JPY with a strike price below 100.00 could be a viable strategy to profit from a continued decline. Selling call options with strikes well above 103.00 would be another way to express the view that significant upside is unlikely. Create your live VT Markets account and start trading now.
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During Asian hours, traders kept EUR/JPY near 183.80, remaining under 184.00 amid rate-hike expectations
EUR/JPY was little changed on Monday in Asian trading, near 183.80, after modest losses in the prior session. The pair may drift lower as the Japanese Yen strengthens on expectations the Bank of Japan could tighten policy in April due to inflation linked to higher energy costs.
The International Monetary Fund supported the Bank of Japan’s current path of rate rises after a policy consultation on Friday. It forecast inflation moving towards the 2% target by 2027 and backed a gradual reduction of monetary stimulus.
Yen Drivers And Oil Risk
The Yen also faced pressure as oil prices rose after US President Donald Trump increased threats against Iran. Japan is exposed to supply risks because it relies heavily on oil imports from the Middle East. Trump set a new deadline for Iran to reopen the Strait of Hormuz and increased threats against power plants and civilian infrastructure. Iranian officials said they would retaliate against US-linked infrastructure and that the strait would remain closed until war damage is compensated. Any further fall in EUR/JPY may be limited as the Euro is supported by the European Central Bank’s restrictive policy stance. ECB President Christine Lagarde and other policymakers said policy will stay restrictive until inflation returns to the 2% target. Given the conflicting pressures on the EUR/JPY, we see a recipe for significant volatility in the coming weeks. The Bank of Japan’s expected policy tightening in April suggests a stronger yen, while the escalating US-Iran conflict and subsequent oil price surge point toward yen weakness. This setup makes simple directional bets risky and favors strategies that profit from large price swings.Strategies For Higher Volatility
For those anticipating a major move, option structures like straddles or strangles could be effective, allowing a trader to profit whether the pair breaks sharply higher or lower. We’ve seen implied volatility on major yen pairs jump from an average of 8% to over 15% during past geopolitical oil shocks, so the cost of these options is a critical factor. The key will be whether the actual price move outpaces the already elevated volatility premium. If we believe the Bank of Japan’s actions will be the dominant driver, a cautious short position on EUR/JPY makes sense. Overnight Index Swaps now suggest a greater than 75% probability of a 15-basis-point hike from the Bank of Japan, a sharp increase in expectations. To manage the geopolitical risk, this short position could be hedged by purchasing out-of-the-money call options to protect against a sudden spike if the Hormuz situation deteriorates further. Conversely, a trader betting that geopolitics will overwhelm central bank policy could take a long position. With WTI crude pushing past $115 a barrel, a level not sustained since the supply scare we saw in mid-2025, the risk of a sharp JPY depreciation is significant given Japan’s import dependency. A protective stop-loss or buying put options would be essential to guard against a sudden de-escalation of tensions or a surprisingly hawkish move by the BoJ. The hawkish European Central Bank provides a solid floor for the euro, likely limiting the downside for the EUR/JPY cross. This suggests that even if the yen strengthens, the decline may be cushioned compared to other yen pairs like USD/JPY. This makes buying the pair on significant dips an interesting strategy for those who believe the oil price shock will ultimately be the more powerful force. Create your live VT Markets account and start trading now.
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During Asian hours, AUD/JPY rises near 110.20, supported by RBA hike expectations and bullish bias
AUD/JPY traded up to about 110.20 in Monday’s Asian session, keeping a mild bullish tone. Support was noted at 110.00, with resistance at 111.25.
The move was linked to expectations of further RBA interest rate rises, which supported the Australian Dollar against the Yen. Gains could be capped if Middle East tensions lift demand for the Yen as a safer currency.
Middle East Risks And Safe Haven Flows
Iran’s central military command warned on Monday of more “devastating and widespread” retaliation if civilian targets are hit. This followed a threat from US President Donald Trump to destroy Iran’s power plants and bridges if Tehran did not make a deal to fully reopen the Strait of Hormuz. On the daily chart, price stayed above the rising 100-day EMA near 107.35, keeping the broader uptrend despite a pullback. The RSI eased towards the midline, pointing to possible near-term consolidation. If price rises, the first barrier is the Bollinger middle band at 111.25, then 112.61 and 113.65. On dips, levels to watch are 110.00, 108.75, and the 100-day EMA near 107.35. Looking back at 2025, we saw a mildly bullish bias for AUD/JPY, with the cross trading above the 110.00 level. This was largely driven by expectations that the Reserve Bank of Australia would continue hiking interest rates. The main risk to that view was geopolitical tension, which could have boosted the safe-haven yen.Current Macro Backdrop And Key Levels
As of April 6, 2026, the situation has shifted considerably, and that bullish case has weakened. We are now seeing the AUD/JPY trade closer to 104.50, as the policy divergence between the central banks has reversed course. Australia’s Q1 2026 inflation data came in at 3.1%, continuing its downward trend and leading the RBA to hold its cash rate steady for a fifth consecutive meeting. Conversely, the Bank of Japan has continued its path of policy normalization, executing a second small rate hike in March 2026. This has narrowed the interest rate differential that previously favored the Australian dollar. The yield spread between Australian and Japanese 10-year bonds now sits at 3.6%, down from over 4.2% in mid-2025. For derivative traders, this environment suggests positioning for further downside or range-bound trading. Buying AUD/JPY put options could be a prudent strategy to capitalize on potential drops toward the 103.00 support level. Implied volatility has recently increased to 11.2%, making strategies like put spreads attractive to manage premium costs while maintaining a bearish outlook. We should watch key levels carefully in the coming weeks. Resistance now sits near the 105.50 mark, which was a support level last year. A key risk to a bearish stance would be a sudden surge in commodity prices, particularly iron ore, which could provide unexpected strength to the AUD. Create your live VT Markets account and start trading now.
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Dividend Adjustment Notice – Apr 06 ,2026
Dear Client,
Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume”.
Please refer to the table below for more details:
The above data is for reference only, please refer to the MT4/MT5 software for specific data.
If you’d like more information, please don’t hesitate to contact [email protected].
During Asian trading, the US Dollar Index rose above 100, supported by strong US jobs, heightened tensions
The US Dollar Index (DXY) traded near 100.25 during Asian hours on Monday, edging up after stronger US jobs data and uncertainty in the Middle East. The index measures the US dollar against a basket of six major currencies.
US Bureau of Labor Statistics data released on Friday showed the economy added 178,000 jobs in March. This followed a revised 133,000 fall in February (revised from -92,000), and beat forecasts for a 60,000 increase.
The Unemployment Rate eased to 4.3%. The drop was linked mainly to a sharp fall in the labour force.
After the report, futures implied almost no chance of a move at the 28–29 April Federal Open Market Committee meeting. The CME FedWatch tool showed a 77.5% probability the Federal Reserve will stay on hold through the end of the year.
Tensions between the US and Iran also supported the dollar as a safe-haven asset. President Donald Trump set a Tuesday deadline for Iran to reopen the Strait of Hormuz and threatened strikes on power plants and bridges, while Iran said it would respond by targeting similar US-owned or related infrastructure.
Traders awaited the US March ISM Services PMI data due later on Monday. A weaker reading could weigh on the DXY in the near term.
Looking back to this time in April 2025, we saw the US Dollar Index push higher on strong jobs numbers and rising tensions in the Middle East. The dollar found support as a safe haven even though the market expected the Federal Reserve to hold interest rates steady for the rest of that year. This created a complex environment where economic strength was at odds with a neutral monetary policy outlook.
The situation today in April 2026 shows a similar pattern, but with greater intensity. The US economy just added an impressive 303,000 jobs in March, far stronger than the 178,000 we saw in March 2025. This robust labor market continues to provide a solid foundation for dollar strength against other currencies.
However, a key difference now is the Federal Reserve’s stance. Unlike in 2025 when markets priced in no rate changes, the CME FedWatch Tool currently shows traders are pricing in at least two rate cuts by the end of 2026. This expectation of future easing could put a ceiling on how high the dollar can go, creating a push-and-pull dynamic for traders to navigate.
Geopolitical risks also remain elevated, echoing the US-Iran standoff from 2025, which reinforces the dollar’s safe-haven appeal. With ongoing conflicts in Eastern Europe and the Middle East, any escalation could trigger a flight to safety, benefiting the dollar. Traders should consider using options on currency ETFs to hedge against or profit from sudden spikes in volatility, as the VIX remains sensitive to global headlines.
Given these conflicting signals, a viable strategy for the coming weeks involves selling volatility. Traders could look at selling out-of-the-money call and put options on the US Dollar Index, creating a range-bound position. This approach profits from the dollar remaining stable, caught between strong economic data and the prospect of future rate cuts.
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During Asian trading, the Dollar Index climbed to 100.25, supported by strong NFP and geopolitical risks
The US Dollar Index (DXY) traded near 100.25 during Asian hours on Monday. It moved up after stronger US jobs data and uncertainty in the Middle East.
US Bureau of Labor Statistics data on Friday showed the economy added 178,000 jobs in March. February was revised to a 133,000 job decline from -92,000, while forecasts had pointed to a 60,000 gain.
Labor Market Update
The Unemployment Rate eased to 4.3%. The fall was linked mainly to a sharp drop in the labour force. After the report, futures implied almost no chance of a policy move at the April 28–29 Federal Open Market Committee meeting. The CME FedWatch tool showed a 77.5% probability that the Federal Reserve will stay on hold through the end of the year. US–Iran tensions also supported the dollar. President Donald Trump set a Tuesday deadline for Iran to reopen the Strait of Hormuz and warned of strikes on power plants and bridges if it does not comply. Iran’s foreign ministry said it would respond to attacks on its infrastructure. It also said it would target similar infrastructure owned by the US or linked to it.Key Levels And Market Focus
Markets are awaiting the US March ISM Services PMI later on Monday. A weaker reading could weigh on the DXY in the near term. With the US Dollar Index holding firm above the 100.00 mark, we see its strength being supported by both a robust labor market and rising global uncertainty. The current situation suggests a bullish outlook for the dollar in the near term. This environment creates clear opportunities for traders positioning for continued dollar strength against other major currencies. The recent jobs report, showing an addition of over 303,000 jobs last month, significantly surpassed expectations and pushed the unemployment rate down to 3.8%. This kind of economic strength suggests the US economy is on solid footing, reinforcing the dollar’s appeal. It signals that the underlying economy is much stronger than many had anticipated. This strong economic data complicates the Federal Reserve’s path forward, making it less likely they will consider cutting interest rates soon. The market is now pricing in a reduced probability of rate cuts for the year, as seen in the CME FedWatch tool, which supports a stronger dollar. We must now position for a scenario where US interest rates remain higher for longer than our European and Asian counterparts. Geopolitical tensions in the Middle East are also providing a significant tailwind for the dollar, driving a flight to safety among global investors. Historically, during periods of international conflict, such as the initial phases of the Ukraine invasion in 2022, we have seen capital flow into US assets. The current threats involving key shipping lanes like the Strait of Hormuz amplify this effect, enhancing the dollar’s status as the world’s primary safe-haven currency. Given these factors, we should consider strategies that benefit from a rising dollar, such as buying call options on the DXY or USD-centric currency pairs like USD/JPY. Volatility is likely to increase, making options a useful tool for defining risk while capturing potential upside. Looking back at the sharp dollar rally during the global uncertainty of early 2020 provides a clear example of how quickly these trends can accelerate. However, we must remain watchful of incoming data, particularly the upcoming ISM Services PMI. The latest reading showed a slight cooling to 51.4, missing expectations and indicating that the services sector’s growth may be slowing. A surprisingly weak report could introduce short-term headwinds and challenge the dollar’s upward momentum. Create your live VT Markets account and start trading now.
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