Summary of US Dollar Price Action Setups

Market Overview

The article discusses the current state of the US dollar, particularly focusing on the EUR/USD and USD/JPY currency pairs as the deadline for Iran to reopen the Strait of Hormuz approaches. The market sentiment is leaning towards a scenario termed "TACO" (Trump Always Chickens Out), indicating expectations of de-escalation in geopolitical tensions.

Key Points

• Market Sentiment: Traders are anticipating another TACO, reflecting a pattern of aggressive rhetoric followed by last-minute de-escalation.
• Geopolitical Risks: The looming deadline for Iran's actions in the Strait of Hormuz is a significant risk event, with potential outcomes ranging from de-escalation to severe escalation.
• Central Bank Policies: Despite inflation pressures, central banks are limited in their ability to ease policies due to rising growth risks and inflation, impacting currency valuations.

Currency Analysis

EUR/USD

The EUR/USD pair is under pressure, with a sell-on-rallies bias intact. The pair has broken below key moving averages and is expected to face further downside risks if geopolitical tensions escalate. Key levels to watch include:

• Resistance at 1.1550
• Support around 1.1500 and further down at 1.1470

USD/JPY

The USD/JPY pair is currently capped below the 160 level, with potential for intervention from the Bank of Japan. Key levels include:

• Resistance at 160.46
• Support at 159.50 and further down at 158.26

Conclusion

The article emphasizes the asymmetry in the current market setups for the US dollar against the euro and yen, highlighting the significant downside risks if the anticipated TACO scenario does not materialize. The geopolitical landscape, particularly regarding Iran, remains a critical factor influencing currency movements.