Markets spent last week aggressively chasing an AI-induced stock rally, while largely ignoring geopolitical tensions in the Middle East. Despite renewed uncertainty over the promised peace deal, stocks rose to new records while the dollar weakened broadly on strong risk appetite. The S&P 500 followed the Nasdaq to new records, while major high-tech indexes in Asia also rose. Japan’s Nikkei, South Korea’s Kospi, and Taiwan’s TAEX rose to new highs as investors doubled down on semiconductor infrastructure and artificial intelligence topics.
Meanwhile, the subsurface rally was much less extensive than leading indicators indicated. The traditional industrial and cyclical sectors lagged badly. The Dow struggled to break above 50,000, the FTSE drifted sideways, and Germany’s DAX actually weakened under the weight of new US tariff threats targeting European cars. Investors were not buying “the economy.” They were buying artificial intelligence.
This distinction is important because it explains what distinguishes the market “Geopolitical indifference” All week long. Traders appeared willing to ignore Middle East risks unless they directly threatened the AI growth story or caused a widespread oil shock capable of destabilizing global markets.
In fact, investors spent much of Thursday and Friday positioning themselves for potential research “Return of peace” After reports indicated that Washington and Tehran are discussing a 30-day framework for reopening the Strait of Hormuz. Oil prices fell sharply as traders priced in the possibility that commercial shipping would return to normal and that Iran might back away from an increasingly aggressive chokepoint strategy.
But reality soon complicated the optimism. Iranian officials publicly rejected Washington’s timelines for accepting the proposal, while US Central Command confirmed that US forces carried out “self-defense strikes” against ports linked to Iran after destroyers were attacked in Hormuz.
This breakup may be the most important signal from last week. Markets are not reacting to geopolitical instability the way they did earlier in the year. Investors appear increasingly convinced that AI-driven earnings growth and liquidity momentum can absorb almost any macro shock short of an outright regional war.
The dollar’s performance has captured this shift perfectly. Normally, a week of military clashes in Hormuz and a stronger-than-expected US payrolls report would have fueled broad dollar strength. Instead, the US currency weakened sharply as traders continued to shift into risk-sensitive currencies and stocks.
The jobs report itself actually reinforced the bullish macro narrative. April data came in much stronger than expected, confirming that March’s strength was not just a one-time surprise. At the same time, wage growth has remained relatively weak, reinforcing the “moderate” notion that the economy is resilient enough to avoid a recession while inflation pressures remain sufficiently under control to enable the Fed to remain in comfortable suspension.
This combination removed two major market fears at once: recession panic and hawkish Fed panic. Once these risks faded, investors simply went back to chasing the strongest momentum topic available – artificial intelligence.
Currency markets It reflects the same dynamic. The New Zealand dollar and Australian dollar led gains as optimism rose in Asia’s technology and semiconductor space, while the dollar and yen underperformed amid the broader risk environment. The Canadian dollar was hit particularly hard as collapsing oil prices and weak domestic employment data undermined the case for a Bank of Canada tightening.
The real question now is whether markets have become too comfortable ignoring geopolitical risk altogether. As the weekend approaches, investors are effectively betting that some form of agreement between the United States and Iran will eventually emerge and prevent a complete disaster in Hormuz. For now, traders appear willing to look past the risks and continue chasing the AI-driven rally, leaving the dollar under pressure – at least until these assumptions prove wrong.
Weekly Currency Performance (May 4 – May 8, 2026)
| Rank | currency | Performance driver |
|---|---|---|
| 1 | New Zealand dollar | Strong risk appetite sentiment, rising in Asia led by artificial intelligence |
| 2 | Swiss franc | Oddly enough, supported by weak global returns |
| 3 | Australian dollar | Benefited from rising Asian stocks and improved risk appetite |
| 4 | euro | Supported by broad-based dollar weakness, capped by tariff concerns |
| 5 | GBP | Neutral performance amid political uncertainty in the UK |
| 6 | JPY | The effects of the intervention faded. Under the pressure of a risk environment |
| 7 | US dollars | Weakness despite strength in non-farm payrolls, with risk appetite prevailing |
| 8 | Canadian | Affected by lower oil prices and weak local employment data |
Nasdaq approaches key projection as AI rally accelerates
The Nasdaq’s strong uptrend extended again last week, bringing the index within striking distance of the 61.8% forecast of 14,784 to 24,019 from 20,690 at 26,398. The AI-driven rally continues to dominate global stock markets, with momentum remaining solidly bullish for now.
However, technical conditions became stretched. The daily RSI remains in overbought territory, suggesting that bullish momentum may start to fade beyond the 26398 level especially with the Nasdaq approaching the ceiling of the medium-term ascending channel, currently near 27142. A break below the 25495 support level would be the first signal of a short-term top and likely trigger a period of consolidation.
However, there is no confirmed reversal signal yet. If the Nasdaq decisively breaks channel resistance, the rally could enter another acceleration phase, opening the way towards a 100% forecast at 29,926.
Nikkei Index faces channel resistance after hitting record high
Japan’s Nikkei also extended its strong uptrend last week and is now pressing against medium-term channel resistance. The rally was driven by the global AI boom, demand for semiconductors, and renewed foreign inflows into Japanese stocks.
Short-term conditions have become overbought, as indicated by RSI D readings, suggesting that the index may have difficulty maintaining the same pace of gains near current levels. Some pullback or consolidation would not be surprising as the market tests the upper boundary of the channel.
However, the outlook remains bullish as long as support remains at 58,928. A strong break above channel resistance would signal a renewed upward acceleration and could quickly push the Nikkei towards a 61.8% forecast of 53,590 to 59,332 from 50,558 at 68,196.
The dollar index remains under pressure despite stability
The dollar index fell last week but managed to stay above the support level of 97.63. The broader technical outlook remains unchanged, with the rebound from 95.55 likely to complete at 100.64, just below the 38.2% retracement from 110.17 to 95.55 at 101.13.
More downside remains preferable while resistance at 99.34 limits recovery attempts. A decisive break below 97.63 will pave the way for another test of the 95.55 low.
For now, there is still uncertainty as to whether the corrective structure from 95.55 could develop into a more complex consolidation with another bounce leg. However, a strong break below 95.55 would confirm a resumption of the broader downtrend from both 101.17 (2025 high) and 114.77 (2022 high).
AUD/CAD targets parity as Reserve Bank of Australia and Bank of Canada diverge in policy
The Australian dollar rose strongly last week after the Reserve Bank of Australia hawkishly raised interest rates to 4.35% and indicated in updated forecasts that the cash rate may eventually rise towards 4.7%. This guidance has reinforced expectations that Australia’s tightening cycle is not yet complete.
In contrast, weak Canadian employment data sharply lowered expectations for any Bank of Canada policy tightening in the near term despite Governor Tiff Macklem’s warnings about inflation risks. Combined with lower oil prices, the weak Canadian outlook added further support to the upside of the AUD/CAD pair.
Technically, the AUD/CAD is on track to retest key resistance at 0.9991 (2021 high) with parity emerging. While some resistance may emerge on the first attempt, a decisive break above parity would likely trigger another wave of bullish acceleration towards the 100% forecast from 0.9055 to 0.9749 from 0.9510 at 1.0204. However, the near-term outlook will remain bullish as long as the support at 0.9721 remains stable.
More importantly, a sustained break above 0.9991 would confirm the resumption of the broader uptrend from 0.8058 (2020 low). In this scenario, the next medium term target would come at a 100% forecast of 0.8058 to 0.9991 from 0.8440 at 1.0373.
Weekly forecast for the USD/CHF pair
The USD/CHF pair resumed its decline from 0.8041 last week. The initial bias remains to the downside this week. A strong breakout of the 61.8% forecast at 0.8041 to 0.7774 from 0.7923 at 0.7758 would target the 100% forecast at 0.7656. On the upside, minor resistance above 0.7808 would shift the intraday bias back to neutral first.
In the bigger picture, as long as the 55 W EMA (now at 0.8051) holds, the decline from 0.9200 is expected to continue, as part of a larger downtrend. A strong break at 0.7603 would target a 100% forecast at 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382.
In the longer term picture, price action from 0.7065 (2011 low) is seen as a corrective pattern to the multi-decade downtrend from 1.8305 (2000 high). It is uncertain whether the drop from 1.0342 is the second stop of the pattern, or a resumption of the downtrend. But in both cases, the outlook will remain bearish as long as the 0.8756 support turns into resistance (2021 bottom). A retest of 0.7065 should be seen next.
