Global financial markets experienced mixed performance last week, shaped by a threefold convergence of U.S. monetary policy developments, evolving inflation expectations, and escalating geopolitical tensions in the Middle East.
Investor sentiment remained cautious ahead of the upcoming Federal Reserve meeting, while rising fears of a broader regional conflict—particularly the intensifying standoff between Israel and Iran—cast a shadow over risk appetite. In this context, safe-haven assets and commodities came under focus, with notable movements in gold and major currency pairs.
US Dollar Index and Treasury Yields: A Cautious Rebound Under Geopolitical Pressure
The posted a modest recovery last week after hitting a three-month low, supported by stronger-than-expected and data. These figures helped offset the impact of softer CPI inflation readings, reinforcing market expectations of a potential Fed rate cut, possibly starting in September.
US Treasury yields remained volatile, initially falling in response to weak inflation data before rebounding on the back of more robust economic indicators. Nonetheless, the persistent yield curve inversion reflects deep-rooted concerns about long-term growth.
Geopolitical stress added another layer of complexity, with heightened tensions in the Middle East driving demand for U.S. Treasuries as a safe haven. This, in turn, limited yield increases and offered indirect support to the greenback against risk-sensitive currencies.
Looking ahead, all eyes are on the Federal Open Market Committee (FOMC) meeting this Wednesday, which will include the release of an updated dot plot—a graphical tool that displays each Fed member’s interest rate forecasts and offers insight into the likely direction of monetary policy. Fed Chair Jerome Powell’s post-meeting press conference will also be key. A hawkish tone could strengthen the dollar and lift yields, while dovish signals may weigh on both.
Gold: Supported by Real Yields and Regional Conflict
climbed toward the $3,450 level last week, reaching its highest point since April, driven by several key factors. Most notably, a drop in U.S. real yields following weaker inflation data bolstered the metal’s safe-haven appeal. Growing expectations of a Fed rate cut added further tailwinds for gold demand from investors.
However, the dominant force last week was geopolitical: mounting conflict in the Middle East triggered a wave of defensive buying. That said, some end-of-week profit-taking and a mild rebound in the U.S. dollar limited upside momentum.
Technical Outlook
Gold continues to trade within a well-defined short-term ascending channel. The key resistance level lies at $3,500, a psychological and historical ceiling last tested in April. A decisive daily close above this zone could open the door toward $3,525–3,550. On the downside, initial support lies near $3,400, followed by the channel’s lower bound around $3,360.
Oil: A Risk-Driven Rebound
staged a sharp recovery last week, with WTI gaining approximately +13% to close near $77.62, and rising over +12.5% to around $74.23. This robust rally was fueled by a combination of larger-than-expected U.S. inventory drawdowns, optimism over summer driving demand, and—most critically—heightened fears of supply disruption stemming from the escalating conflict in the Middle East.
This week, market attention will remain fixed on geopolitical headlines, the IEA Monthly Report due Wednesday, and updated EIA inventory data. These developments will likely shape short-term price action across energy markets.
EUR/USD: Between Central and Regional Risk
remained firm near its highest levels since 2021, buoyed by post-CPI dollar weakness and a relatively hawkish tone from the European Central Bank, which signaled a limited easing cycle ahead. However, late-week demand for the U.S. dollar as a safe haven, driven by geopolitical tensions, capped the euro’s gains.
Traders now await forward guidance from the Fed to determine whether the pair can push higher toward 1.1700, or fall back below the 1.1500 threshold if the Fed adopts a hawkish stance.
Technical Outlook
The pair has been moving within a rising channel since early May and is currently testing key resistance at 1.1570–1.1600. A breakout could pave the way toward 1.1660, then 1.1700. On the downside, initial support stands at 1.1500, with stronger support near 1.1435, the channel’s lower boundary.
USD/JPY: Caught Between Fed Uncertainty and Geopolitical Demand
The pair retreated to around 144.30 by the end of last week, pressured by falling US yields and increased demand for the yen amid escalating Middle East tensions. While interest rate differentials still favor the dollar, investor caution ahead of this week’s Fed and Bank of Japan meetings weighed on bullish momentum.
Technical Outlook
The pair is currently trading below key resistance at 144.75–145.00, which has acted as the ceiling of a sideways consolidation range since early June. As long as this level holds, a bearish bias remains, with the next support levels at 143.50 and 142.75. A break above 145.00, however, could shift momentum in favor of buyers, targeting a move toward 146.20.
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Michel Saliby.is a Senior Market Analyst at FxPro.