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The US dollar is trading lower against major currencies at the start of the new trading week, reversing sharp gains from Friday. This follows a volatile session where the NASDAQ index fell over 1100 points due to geopolitical tensions and a stronger-than-expected US jobs report. Market expectations now lean toward potential Fed rate hikes in 2026, with the probability of rate cuts fading. However, optimism emerged after former President Trump's remarks suggesting a possible ceasefire between Israel and Iran, leading to a rebound in risk-on sentiment. Iran also announced an end to military operations against Israel, though warnings of future attacks remain. The USD fell 0.19% against the EUR, 0.22% against the JPY, and 0.20% against the GBP, while declines against the NZD and AUD were more pronounced. Crude oil prices retreated from intraday highs, and gold rose modestly as markets digested the mixed signals.
The shift in USD momentum highlights the sensitivity of currency markets to geopolitical developments and central bank policy expectations. Traders are closely monitoring the Fed's stance on inflation and labor market strength, which could delay rate cuts. The potential for a ceasefire in the Middle East introduces uncertainty, with markets likely to react sharply to any further developments. Technical analysis of EUR/USD, USD/JPY, and GBPUSD pairs suggests key support and resistance levels to watch, particularly if the USD's decline continues. The mixed performance of US stock indices in premarket trading also reflects investor caution ahead of potential follow-through selling.
For MENA investors, the interplay between geopolitical risks and monetary policy will shape short-term market dynamics. The Gulf region's exposure to energy markets means oil price fluctuations will remain a critical factor. Traders should monitor the Fed's policy trajectory, Israel-Iran tensions, and technical levels in major currency pairs. The USD's ability to rebound from current levels will depend on whether the ceasefire holds and how quickly inflationary pressures ease.
