DXY Rises to 101.20; Oil Extends Rally - CPT Markets

Market Wrap-up: Oil Rally and Geopolitical Risks Drive Global Markets

The US Dollar Index (DXY) extended its gains in the previous session, climbing back to a near one-week high of 101.20.

The four-week average ADP Employment Change declined to 16.5K from 19.25K, pointing to softer hiring momentum. However, geopolitical risks and rising oil prices remained the dominant market drivers, outweighing the impact of weaker labor data.

The US Central Command (CENTCOM) carried out its 11th consecutive night of strikes against Iran after US President Donald Trump declared the ceasefire "over." Meanwhile, Tehran launched attacks on US military targets across the Middle East, while the Houthi movement announced a maritime blockade targeting Saudi Arabia.

Those developments pushed Brent crude up 2% to USD 91.01 per barrel, while WTI gained 2% to USD 84.91 per barrel. Brent posted its highest close since 10 June, while WTI reached its strongest level since 11 June, reflecting renewed concerns over potential disruptions to Middle East energy supplies.

Analysts believe the optimistic scenario is that the latest US strikes are intended to increase negotiating pressure before both sides reach a compromise and the Strait of Hormuz reopens. The greater risk, however, is a prolonged conflict that keeps energy flows disrupted, sustains elevated oil prices, and raises the likelihood of further military escalation.

One notable development during the session was gold's sharp rebound despite expectations that higher oil prices could reinforce inflation pressures and support a more hawkish Federal Reserve. Spot gold rose 1.7% to USD 4,071.32 per ounce and extended gains to USD 4,130 during the Asian session this morning as safe-haven demand outweighed interest rate concerns.

The stronger US dollar also pushed the Japanese yen to a fresh four-decade low of 163.20. Japanese Finance Minister Satsuki Katayama stated this morning that authorities stand ready to take necessary action in the foreign exchange market if needed, while declining to comment on any specific exchange rate levels.

Looking ahead for today, there are no major US economic releases apart from Crude Oil Inventories. Instead, the market focus shifts to the UK CPI and PPI reports, which are expected to drive volatility in the British pound.

XAU/USD: Gold Rebounds on Safe-Haven Demand Amid US-Iran Conflict 

Key takeaway:

Gold rebounded as persistent US-Iran tensions boosted demand for safe-haven assets.

Commerzbank believes USD 4,000 per ounce remains an important psychological support level for the gold market.

However, the bank also cautioned that concerns over higher US interest rates could limit further upside in the precious metal.

Investors are now turning their attention to next week's two day Federal Reserve policy meeting, along with remarks from Fed Chair Kevin Warsh.

Technical Outlook:

Daily Bias: Bearish with Rebound Potential

Support: 4,104

Resistance: 4,134

Oil: WTI Climbs Above One Month High on Supply Concerns 

Key takeaway:

Oil prices gained around 2% on 21 July, reaching their highest level in more than a month as investors grew increasingly concerned that renewed military action between the US and Iran, together with Houthi threats to impose a maritime blockade on Saudi Arabia, could further disrupt Middle East energy supplies.

At the same time, the ongoing conflict between Russia and Ukraine continued to add pressure to the global supply outlook.

Market attention now turns to the weekly US crude oil inventory report, scheduled for release later today.

Technical Outlook:

Daily Bias: Bullish

Support: 80.00

Resistance: 87.00

DXY: US Dollar Strengthens as Rising Oil Fuels Inflation Fears 

Key takeaway:

The US dollar strengthened on Tuesday as escalating tensions between the United States and Iran pushed energy prices higher and reinforced concerns that inflation could remain elevated.

The greenback also benefited from safe-haven demand, offsetting the impact of slightly weaker US employment indicators.

The four-week average ADP Employment Change fell to 16.5K from 19.25K, signaling softer hiring momentum. Nevertheless, geopolitical uncertainty and rising oil prices remained the primary forces supporting the US dollar.

Technical Outlook:

Daily Bias: Bearish with Rebound Potential

Support: 100.95

Resistance: 101.43

EUR/USD: Euro Slips as Stronger Dollar Offsets ECB Support 

Key takeaway:

The euro weakened below 1.14000 as broad-based US dollar strength weighed on the currency.

However, the European Central Bank's hawkish stance continued to provide some underlying support for the euro, with traders awaiting the ECB's interest rate decision on Thursday.

European government bond yields moved higher earlier this week as persistent geopolitical risks in the oil market and renewed inflation concerns strengthened expectations that the ECB may need to maintain a tighter policy stance.

Technical Outlook:

Daily Bias: Bearish

Support: 1.13774

Resistance: 1.14288

USD/JPY: Japanese Yen Hits Four Decade Low Against US Dollar 

Key takeaway:

The Japanese yen fell to its weakest level in four decades as investors continued to favor the US dollar amid heightened geopolitical uncertainty and safe-haven demand.

However, traders remain highly alert to the possibility of official intervention to support the yen.

Japanese Finance Minister Satsuki Katayama reiterated this morning that authorities are prepared to take necessary action in the foreign exchange market if required.

Technical Outlook:

Daily Bias: Bullish with Correction Risk

Support: 162.84

Resistance: 163.50

Markets continue to be driven primarily by geopolitical risk rather than economic data. Escalating tensions between the US and Iran have pushed oil prices higher, reinforcing inflation concerns and supporting the US dollar, while safe-haven demand has also lifted gold despite expectations for a higher-for-longer Fed.

Equities remain vulnerable as investors assess the potential impact of sustained energy price pressure on global growth and monetary policy.

In the FX market, broad USD strength continues to pressure the euro and drive the Japanese yen to multi-decade lows.

Attention now turns to today's US crude oil inventories and the UK CPI and PPI releases, with traders looking for fresh signals on inflation and the next direction for major currencies.

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