Fundamental Analysis & Market Sentiment

I wrote on 14th June that the best trades for the week would be:

1. Long of the USD/JPY currency pair following a daily close above ¥160.44. This set up on Wednesday and ended the week higher by 0.39%.

   

A summary of last week’s most important data in the market:

1. US Federal Reserve Policy Meeting – the Fed left rates unchanged as expected, but the “dot plot” took a hawkish tilt with a new expectation of one rate hike of 0.25% before the end of 2026. This sent the US Dollar Index to a fresh 1-year high which has also affected several Forex currency pairs. It also boosted US Treasury Yields.

2. Bank of Japan Policy Meeting – the Bank hiked its interest rate as expected, by 0.25% to 1.00%. This could be seen as a very minor hawkish tilt but note that the Yen lost a little relative value over the week.

3. Bank of England Policy Meeting – the Bank left its interest rate unchanged as expected, but more members than expected voted for a rate hike of 0.25%, which was a minor hawkish tilt. Note that the British Pound lost value over the week, so this wasn’t influential.

4. Reserve Bank of Australia Policy Meeting – the Bank left its interest rate unchanged as expected, but delivered a clearly hawkish hold, stressing that policy is already restrictive, yet inflation risks remain uncomfortably high. The Australian Dollar gained a little value over the week, partly as a result.

5. Swiss National Bank Policy Meeting – the Bank left its interest rate unchanged as expected and reinforced its neutral to slightly dovish approach on rates. The Swiss Franc lost a little value over the week, partly as a result.

   

6. UK CPI (inflation) – this came in slightly lower than expected, unchanged at an annualized rate of 2.8%. This may have helped the Pound lose a little value over the week as it took some pressure off the Bank of England to hike rates.

7. New Zealand GDP – as expected.

8. UK Unemployment Claims – functionally as expected.

Despite the busy schedule last week of central bank policy meetings, markets were relatively quiet. The major takeaway is surely the stronger US Dollar driven by a more hawkish Federal Reserve. This was new Chair Kevin Warsh’s first meeting, and the forward guidance element has now been abolished. Risk sentiment, which is often tied to a weaker US Dollar, is still seen as positive and firm. This is mainly because markets have responded positively to the Memorandum of Understanding (MoU) which was formally agreed between the USA and Iran last week. The MoU reopens the Strait of Hormuz, which has led to crude oil reaching 3-month low prices, and this will remove a strong inflationary pressure from the global economy. Markets like this, so stock markets remain mostly bullish, albeit off highs in most cases.

I believe that while the short-term optimism of markets is warranted, this MoU, which now opens a 60-day period during which the USA and Iran will negotiate over a potential final deal, is a disaster for the USA and for the world overall. It is the most shocking foreign policy blunder by the USA in half a century. It will rehabilitate the terrorist, supremacist regime in Iran and provide it with massive funds to continue its holy war against the non-Shi’ite world. Reading the MoU, you would think Iran won the war, with every single clause favorable to Iran. Another shocker has been the immense disrespect towards and betrayal of Israel by the USA, its ally which just fought shoulder-to-shoulder with it, and whose home front (unlike America’s) absorbed the daily Iranian war crime of ballistic missiles targeted at residential area devoid of military targets (we won’t see international courts following up on that one). Israel was not only frozen out of negotiations, the USA purported to sign the MoU on behalf of Israel and is demanding that Israel halt its military operations against Hezbollah, an organization with plenty of American blood on its hands which is sworn to the destruction of America. On this issue, it is hardly an exaggeration to say that the USA is now acting as an Iranian proxy!

The most dangerous element in all this, is that the Americans seem to be accepting an equation where Iran is shown that escalation works, financing terrorism works, blackmailing the world by an illegal closure of an international waterway works, shooting one-ton ballistic missiles at civilian neighborhoods works, and the USA cannot stand up to it but folds. What message will China be taking from this?

President Trump’s credibility is completely shot. While he has always told lots of silly lies, it was possible to believe he had some kind of pro-Western compass which guided him beyond mere short-term financial gain for the USA. That illusion has been definitively shattered, and he has been revealed to be a weak and cowardly President, signing a deal even Jimmy Carter would be ashamed of, which indicates the Americans will achieve not one of their war aims – even the enriched uranium, it seems, will stay in Iran.

Why has Trump done this? While the USA could have withstood the long-term closure of the Strait of Hormuz, most of the rest of the world couldn’t, and Trump could not face dealing with the blow-back which would have come from that. I suspect a combination of threats and bribes were sent his way by China, Turkey, Pakistan, Qatar, and certain other nations, maybe even Gulf States. This, combined with the inability of the American public to countenance significant casualties, is probably what led to Trump folding. Another factor is that the US midterm elections this November are starting to approach, and if Republican candidates do badly, Trump will have a much tougher second half of his term and could even be impeached.

The issue will cause long-term damage to America and will certainly cause a new war in the Middle East driven by Iran within the next few years. The fallout from that war will certainly send the price of crude oil shy-high and send US stock markets tumbling. There is even a prospect of a nuclear strike or exchange in this scenario. The economic pain has been deferred, while American officials indulge their pipe dreams that the IRGC might beat its swords into ploughshares.

The world is watching America this week, and the world will be concluding that being an ally of the United States of America is a dangerous enterprise. US VP JD Vance quipped a few days ago that Israel might be wise not to criticize the only head of state left that likes it. If he had any self-awareness, he would be asking himself instead how many heads of state like the United States of America and will be prepared to stand by it during its next hour of need. Gulf states will be planning to kiss the Iranian ring, and Israeli will be preparing for the day after America with a massive expansion of its domestic armaments industry.

President Trump is hinting that when it comes to the negotiations with Iran over an actual deal, which are beginning now, he will be tough and will even be prepared to return to war if necessary. I doubt there is a single human being who believes him. However, over the short term, American weakness will be positive for global stock markets, although there are strong reasons to believe the tech sector particularly is generally highly over-valued and due a strong correction.

Finally, UK prime minister Keir Starmer is expected to resign tomorrow. He will be replaced by another member of parliament from the governing Labour Party, which could lead to some policy changes, so markets will be watching that.

The Week Ahead: 22nd – 26th June

Next week is relatively light. The coming week’s most important data points, in order of likely importance, are:

1. US Core PCE Price Index

2. US Final GDP

3. Canadian CPI (inflation)

4. Australian CPI (inflation)

5. Australian Unemployment Rate

Monthly Forecast June 2026

Currency Price Changes and Interest Rates

For the month of June, as there was still no clear trend in the US Dollar, I made no monthly forecast.

Weekly Forecast 21st June 2026

Last week, I made no weekly forecast.

This week, I again make no forecast, as there were no exceptional price movements last week.

Volatility increased a little last week, with 19% of the notable currency pairs and crosses moving by more than 1% in value. Next week’s volatility is likely to remain low or decrease even further, although surprises in the US data could produce strong movement in many currency pairs.

You can trade these forecasts in a real or demo Forex brokerage account.

Technical Analysis

Key Support/Resistance Levels for Popular Pairs

Key Support and Resistance Levels

US Dollar Index

The US Dollar printed a large bullish candlestick last week, closing not very far from the high of the range. The price made a fresh 1-year high, and a valid long-term bullish trend has clearly been established. The only factors bulls will find concerning are the upper wick and the resistance level marked in red in the price chart below which is not far away from the current price.

The new bullishness in the US Dollar is partly due to the Federal Reserve’s more hawkish tilt which it made at its policy meeting last week. Markets are now expecting the Fed will make a rate hike before the end of 2026. This has sent the greenback and its treasury yields higher.

I think it makes sense to be attentive to trade opportunities over the coming week which are long of the US Dollar, but if the price is already testing 101.39 it might not move much higher over the short term.

US Dollar Index Weekly Price Chart

USD/JPY

The USD/JPY currency pair finally made its long-awaited bullish breakout last week, rising quite strongly to a new near 2-year high price, after weeks of declining volatility.

In my analysis above concerning the US Dollar Index, I explained what boosted the US Dollar Index last week, and why I have a bullish outlook on it for now. Turning to the Japanese Yen, the Bank of Japan hikes its interest rate by 0.25% to 1.00% last week as was widely expected, and it could be said that the takeaway from the policy meeting was slightly hawkish, but the Yen has enough residual weakness to be an acceptable short currency.

Potentially a bigger question is why the Bank of Japan has not intervened to try to prop up the Yen, as it did the last time this currency pair reached the level we saw last week. It might be that Japan feels it cannot justify intervention when the moves do not look speculative or disorderly but reflect changing fundamentals like last week’s hawkish Fed tilt.

Trend traders will be long of this currency pair and I am long also.

USD/JPY Weekly Price Chart

USD/CAD

The USD/CAD currency pair made a strong bullish breakout last week, showing more bullish momentum than most other USD currency pairs, breaking out with a large bullish candlestick to a new 1-year high. I’ve already gone over the reasons why the US Dollar is showing some strength. The Canadian Dollar is interesting because, as a major exporter of crude oil, the Canadian Dollar can act as a proxy for crude oil. With the sharp decline in the price of crude oil to a new 3-month high as the MoU between the USA and Iran was concluded, the Canadian Dollar has tumbled strongly. As the weakest major currency last week along with the New Zealand Dollar, this pair was at the heart of Forex market volatility, which is very unusual.

As the US and Canadian economies are so intertwined, this currency pair usually moves little and tends to range in line with commercial demands for currency exchange. We are in one of the rare periods where we see strong directional movement.

This is all well and good and you might think that you want to go long here. While the US Dollar may well have more upside, you might want to ask how much further crude oil is likely to fall. I will cover crude oil later, and for now I will just say that there seems to be a technical floor in the $69 area, where the price traded before the USA/Iran war broke out. So, I am not sure there is much upside here. Day traders might be able to find a long trade here during the early part of the coming week.

USD/CAD Weekly Price Chart

NASDAQ 100 Index

The NASDAQ 100 Index printed a small inside candlestick last week, consolidating not far below recent all-time high prices.

There has been very strong bullish momentum in tech stocks in recent months, with enormous gains made within just a few months. There is definitely a strong trend and probably another bullish breakout to a record high coming. The big question is, how much further can this rally go, with valuations still over extended?

As a trend trader, I will go long here again where there is a new record high daily close, but I am not confident that this bull market will continue for much longer. Another factor which dampens my enthusiasm on the long side is that we are now in the summer months when the stock market tends to consolidate or fall in value.

I will go long if we get a New York close at or above 30,716.

NASDAQ 100 Index Daily Price Chart

Gold

Gold continued its medium-term bearish trend last week, breaking down to a fresh 1-year low closing price just above the big round number at $4,000.

Note how in April, we saw a bullish retracement to the 50% level of the crash move down, and then a bearish rejection of that price.

There is a descending trend line suppressing the price.

The failed breakdown and the fact that $4,000 was not even touched may encourage long-term buyers to think there is some value in buying now. However, there are still plenty of bearish indications. If you are thinking of buying, it will likely be wiser once the trend line I mentioned is decisively broken. Next week, this trend line will be sitting at about $4,350.

The sustained fall in the value of precious metals is getting a tailwind from the more hawkish policies of central banks which have begun to prevail anew in recent months, most notably the Federal Reserve.

Gold Weekly Price Chart

WTI Crude Oil

WTI Crude Oil made its lowest close at the end of last week since the war between the USA and Iran broke out last February. This is not surprising as the belligerents have just signed an MoU and practically the only thing the Americans get out of it is the reopening of the Strait of Hormuz. Progress towards this, and the news of the MoU signing, have driven down the price of crude oil and removed a recessionary and inflationary input into the global economy.

Ironically, the Iranians are now saying they have closed the Strait because Israel has been firing back against Hezbollah when Hezbollah shoots at the Israeli army. I’m not sure when Lebanon became a wholly owned Iranian property, but the US administration seems to view it so and has foolishly handed the Iranian regime another weapon with which to blackmail the global economy.

The Americans are saying, at the time of writing, that the Strait remains open and the Iranian claim is fictional. We will see because if it is true, we can expect the price of Crude Oil to open higher tomorrow.

I would refrain from trading crude oil right now, as I don’t think it can go much lower, and any rise it might have could be very short-lived. The American are making it very clear they are afraid and desperate, and the Iranians will exploit this for every drop, and Hormuz is their main weapon by far. Yet I think the Iranians will be careful not to push it too far, and we can probably rely upon VP Vance to hand them a suitable extra concession or two that might keep them happy for a week.

WTI Crude Oil Weekly Price Chart

Bottom Line

I see the best trades this week as:

1. Long of the USD/JPY currency pair.

2. Long of the NASDAQ 100 Index following a daily close above 30,716.

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