Renewed US-Iran tensions trigger risk-off in US stocks while WTI crude surges on supply fears. The US dollar gains while gold underperforms and silver rallies ahead of key central bank events.
Trump’s threat to Iran triggered risk-off, while gold underperformed against silver
Risk-off sentiment re-emerged in the US stock market yesterday, as all the major US stock indices ended the session with intraday losses; S&P 500 (-0.8%), Nasdaq 100 (-1%), Dow Jones Industrial Average (-0.7%), and Russell 2000 (-1%).
US President Trump’s threat to Iran was the risk-off catalyst as he posted on social media a demand for Iran’s “unconditional surrender” and warned of a possible strike against the country’s leader. These comments from Trump have increased the odds of the US joining Israel’s attack on Iran.
WTI crude oil exploded to the upside over supply disruption fears in the Middle East, as Iran may close the Strait of Hormuz as an indirect form of “counterattack” to trigger an upward spiral in oil prices to create economic damages to the US.
WTI crude oil rallied by 5.3% on Tuesday, 17 June, which erased all of Monday’s losses and retested last Friday’s 13 June swing area of US$76.20/barrel.
Suppose higher oil prices persist in the medium term. In that case, it may pose a challenge to central banks’ expansionary monetary policy tools to counter potential cyclical economic slowdown inflicted by US global trade tariffs, especially for the US Federal Reserve, which has paused its interest rate cut cycle since the start of this year. All eyes and ears will focus on the FOMC’s monetary policy decision, the latest “dot plot” of economic projections, and Fed Chair Powell’s press conference later today.
The US dollar rallied yesterday, and the worst performer among the major currencies was the sterling, where the US dollar gained by 1.1% against the GBP on Tuesday, 17 June, versus a rally of 0.7% seen on the US Dollar Index.
Despite the up moves seen in the US dollar, the US Dollar Index is still trading below its 20-day moving average, which is acting as an intermediate resistance at around 99.00 at this time of writing. The worst hit, GBP/USD, has almost dropped towards its 50-day moving average support at 1.3370 ahead of today’s UK inflation data release.
On the contrary, safe haven Gold (XAU/USD) has started to underperform despite the latest flare-up between Israel and Iran. Since last Friday’s high of US$3,452, Gold (XAU/USD) has slipped by -2.5% to print an intraday low of US$3,366 yesterday but remained above its 20-day moving average support at US$3,350.
In contrast, Silver (XAG/USD) staged a rally of 3.5% over the same period to record an intraday high of US$37.26 on Tuesday, 17 June. Hence, the recent short-term weakness seen in Gold (XAU/USD) is likely due to positioning and rotation plays, where short-term speculators switch their focus to the prior laggard, Silver (XAG/USD).
The latest intraday technical analysis on US Wall Street 30, US Nas 100, US SPX 500, Hong Kong 33, Japan 225, Germany 30, EUR/USD, GBP/USD, AUD/USD, USD/JPY, Gold (XAU/USD), and West Texas Oil can be found in our YouTube video above.
