Just as Iran indicated that negotiations concerning the Strait of Hormuz were nearing their conclusion, Trump put forward new demands, calling for Iran to compensate for war casualties, casting a shadow once again over the prospects of the talks. As both sides are engaged in "exchanges of rhetoric," the current situation of "neither war nor peace" may persist in the long term.
With Trump oscillating between seeking talks and issuing threats, international oil prices surged 5% on Monday, climbing back above $80. Ironically, Iran continues to consolidate its control over the strait, while the US is moving further away from its strategic wartime objectives (if any exist).
The US Dollar Index halted its decline and rebounded overnight, but the key level around 99.50 still requires attention. The US CPI data on Wednesday will be crucial in influencing the direction of the dollar and forex markets.
With the Japanese yen recording its largest single-day decline in five months, USD/JPY surged above 159. The latest data shows that speculative short positions on the yen decreased significantly in the week ending August 4, following joint US-Japan intervention. However, intervention only provided temporary support for the yen and bought time for the Bank of Japan's rate hikes; weak fundamentals remain the underlying reason driving USD/JPY higher. Tuesday is a holiday in Japan. In the absence of further intervention, the exchange rate may fluctuate upward, testing the 160 level.
Gold and silver continued their upward momentum at the start of the week, with gold prices breaking through $4,400 in early Tuesday trading. Having broken a six-month downtrend, the metal is displaying strong upward momentum. Speculative long positions in gold reached their highest level since the end of January in the week ending August 4. Although the 100-day moving average and overbought signals may pose some trouble for the bulls, gold prices are likely to continue their rise ahead of the US CPI release. Maintaining a bullish view above $4,380, the next target for the bulls is near $4,580.
The three major US stock indices closed slightly lower overnight. The Nasdaq 100 index encountered resistance around 29,870, but its upward structure remains intact. Nvidia's stock fell 2.8% after it teamed up with Wall Street giants to launch a $500 billion financing project, while Intel's stock dropped 4% as it sought to issue $20 billion in new shares. This indicates lingering market skepticism about AI capital expenditures, although there has been a noticeable improvement compared to before this earnings season.
The Hang Seng Index steadied after a week of adjustments. The 26,000 level is the next target for the bulls. A breakthrough above this level would extend the rebound trend since the end of June, potentially allowing the bulls to challenge the May high near 26,900, which is a resistance level extended from the 2018 peak.
On Tuesday, attention turns to the Reserve Bank of Australia's interest rate decision (12:30 GMT). Keeping rates on hold is almost a foregone conclusion. Interest rate markets are pricing in less than a 50% probability of another rate hike by the central bank before the end of the year. However, a "hawkish pause" in the policy statement could still boost the Australian dollar.
