Last week saw no shortage of market-moving headlines, but there were a few notably decisive market moves. Investors had to look past renewed tensions between the US and Iran, tight FOMC minutes, surprise rate hikes from the Reserve Bank of New Zealand, stronger-than-expected Canadian hiring, and signs of structural shifts in policy in Japan. Despite the unusually heavy news flow, most major asset classes ultimately remained confined to familiar ranges, suggesting that markets were gathering evidence rather than reaching firm conclusions.
This pattern was particularly evident across currencies, commodities and stocks. Oil briefly rose above US$80 as the fragile ceasefire between the US and Iran appeared to unravel before falling back towards US$75 as the two sides resumed technical talks. Gold and silver initially extended declines on renewed geopolitical uncertainty and stronger Fed expectations, but recovered some of those losses as fears of a broader escalation subsided. Stocks showed similar resilience. The Dow Jones briefly reached another record high, but ended the week lower, while the S&P 500 and Nasdaq advanced but remained below recent highs. Across the markets, price action reflected repeated shifts in sentiment without producing sustained directional conviction.
But one market remained separate. US Treasury yields quietly provided what may be the most important signal of the week. Following the minutes of the June Federal Open Market Committee (FOMC) meeting, the 10-year Treasury yield broke above key near-term resistance and closed at its highest level in weeks, suggesting that investors are becoming increasingly convinced that the Federal Reserve may need to tighten policy further if inflation proves persistent. This breakout now places next week’s US CPI report at the center of the overall calendar. Rather than determining whether inflation will remain high, the data will more likely determine whether the Treasury market’s recent move marks the beginning of another rise in yields — or just another false breakout in a headline-driven market.
Oil finds balance with the escalation of tensions with Iran, but the war installments fail to return
The Middle East once again dominated the headlines last week, but the market’s final judgment was noticeably restrained. What initially looked like a serious deterioration in U.S.-Iran relations — including attacks on commercial ships near the Strait of Hormuz, retaliatory U.S. airstrikes, Washington’s decision to revoke a waiver for Iran on oil exports, and President Donald Trump’s declaration that the ceasefire was “over” — briefly reignited fears that the conflict would move back toward open confrontation. Brent crude responded by rising above the psychologically important $80 level, reviving fears of a geopolitical risk premium returning to energy markets.
However, the gathering quickly lost momentum as events failed to develop into a broader military escalation. Despite exchanging hostilities, both Washington and Tehran gradually returned to technical discussions by the end of the week, suggesting that neither side was ready to abandon negotiations completely. Trump’s statements reflected this ambiguity. While he declared that the ceasefire was effectively dead, he simultaneously left the door open for the talks to continue. The conflicting messages reinforced the market’s growing view that the outbreak of violence had become part of the negotiation process and not conclusive evidence of the collapse of diplomacy. As a result, Brent crude gave up much of its earlier gains to end the week near US$75, leaving a weekly gain of 4.6% – a notable but modest increase compared to the extreme volatility it has seen since hostilities first escalated in late March.
The price action highlights an important shift in how investors interpret geopolitical developments. Earlier this year, each military incident was enough to trigger a strong repricing of supply risk. This makes Brent’s short move above $80 look more like a temporary squeeze driven by short covering than the start of a new bull run. Looking ahead, the USD 80-81 area remains the key technical and psychological threshold. A sustained break above that area would indicate that markets are once again anticipating a real deterioration in supply conditions. Until then, energy markets appear content to treat the renewed hostilities as another episode in an unresolved – but still manageable – geopolitical standoff.
Tight Fed minutes lift yields, but dollar still awaits confirmation
The minutes of the June Federal Open Market Committee meeting provided one of the clearest hawkish surprises of the week, reinforcing the view that the Fed remains firmly focused on inflation risks despite keeping interest rates unchanged. The minutes revealed that the committee was almost evenly split between those who favored raising interest rates again this year and those who preferred to stay there, while inflation risks were clearly assessed as leaning to the upside. Officials pointed not only to tariffs and rising energy prices as a result of renewed conflict in the Middle East, but also to the continuing demand generated by AI-related investment, with rising electricity consumption and technology sector costs increasingly seen as additional sources of inflationary pressures.
However, the most surprising revelation was that “a small number of participants” believed there was actually “an argument for raising the target range” at the same June meeting before ultimately agreeing to wait for additional evidence. This language indicates that the debate within the Committee has already moved beyond whether a further increase is necessary to whether the evidence has become sufficient to justify immediate action. While the decision to retain was unanimous, the minutes made clear that the unanimous vote masked a more divided debate beneath the surface. Markets responded by increasing the likelihood of a September rate hike to about 70%, up from about 63% before the release, reflecting growing confidence that the Fed’s tightening cycle may not be over yet.
A breakout in the 10-year Treasury yield may be the most important signal of the week
While most major asset classes spent the past week oscillating between competing narratives, the US Treasury market provided a clearer message. The benchmark 10-year yield rose from 4.49% to 4.57%, clearing important near-term resistance at 4.56% before the week’s close held much of the gain. Unlike moves in stocks, commodities or foreign currencies — which have repeatedly been affected by shifting headlines surrounding Iran and shifting risk appetite — the rise in yields can largely be explained by a single factor: markets increasingly repricing the possibility that the Fed may not yet be finished tightening monetary policy.
Technically, the picture has improved significantly for Treasury yields. A decisive break above 4.56 strongly suggests that the pullback from the May high of 4.69 was merely a correction within the broader advance from the March low of 3.96%. As long as the 55 hour moving average, now near 4.48, continues to offer support, further gains remain favoured. The first target is to retest the top 4.69. A decisive breakout there would resume the entire rise from 3.96 to 61.8% expected from 3.96 to 4.69 from 4.36 at 4.81. This is close to the 2025 high of 4.81.
The dollar index is waiting for confirmation of the yield to rise
In contrast to Treasury yields, the dollar index ended the week without a decisive technical breakthrough. Despite an increasingly hawkish Fed forecast and a surge in US bond yields, the dollar spent another week holding below the 101.80 resistance level. This restrained performance suggests that currency markets remain reluctant to fully embrace another phase of dollar strength until incoming inflation data provides clearer evidence that the Fed will indeed need to tighten policy further.
Technically, the broader outlook remains bullish despite the recent consolidation. The price action from 101.80 is still viewed as a pause within the larger advance from this year’s low at 95.55 and not the start of a reversal. As long as the important 100.20-100.31 support zone – which includes the 38.2% retracement of the 97.62-101.80 high and nearby structural support – remains in place, the bullish bias remains intact.
A decisive break above 101.80 would confirm a resumption of the broader uptrend and target a 100% forecast of 95.55 to 100.64 from 97.62 at 102.71. However, on the downside, a sustained break below the 100.20/31 support area would significantly weaken the bullish case, opening the door for a deeper correction towards the 55 D EMA, now near 100.04, and possibly beyond.
New Zealanders lead as domestic fundamentals outweigh global uncertainty
The currency’s performance last week was driven less by broad shifts in risk appetite and more by mixed local fundamentals. The New Zealand dollar emerged as the strongest major currency during the week after the Reserve Bank of New Zealand raised interest rates by 25 basis points, surprising part of the market. While opinion was divided before the meeting, the decision was quickly reinforced by a surprisingly strong June manufacturing PMI, which rose to its highest level since mid-2021.
The British pound was the second best performer, with continued gains driven primarily by domestic developments rather than changes in global risk appetite. The fading political uncertainty following the resolution of the Labor leadership transition continues to fuel the unwinding of large speculative short positions built up before Prime Minister Keir Starmer’s resignation.
The Canadian dollar took third place despite continued uncertainty surrounding the future of the USMCA following Washington’s decision not to automatically extend the trade agreement. Instead support came from stronger-than-expected employment data, which largely removed lingering speculation that the Bank of Canada may eventually need to consider easing policy later this year.
On the other side of the rankings, the Swiss franc performed less than expected, as rising US and European bond yields reduced demand for low-yielding defensive currencies. The Japanese Yen also finished among the weakest performing markets. Although Finance Minister Katayama’s proposal to encourage more investment in domestic pension funds led to a brief appreciation of the currency, the absence of concrete policy measures and the still wide interest rate differential between the United States and Japan limited subsequent purchases.
The dollar, euro and Australian dollar finished the week in the middle of the performance chart, reflecting the broader market’s reluctance to establish strong directional positions ahead of next week’s US CPI report.
Weekly forecast for EUR/USD
EUR/USD continued to be consolidated from 1.1323 last week and the outlook remained unchanged. Initial bias remains neutral this week. With support at 1.1499 turning into healthy resistance, further decline is expected. On the downside, a break of 1.1323 will resume the decline from 1.2081 to 100% prediction from 1.2081 to 1.1408 from 1.1848 at 1.1175. However, a decisive break of 1.1499 will bring back the upside bias to resistance at 1.1621.
In the bigger picture, focus is back on the 38.2% retracement level from 1.0176 to 1.2081 at 1.1353. A decisive breakout there would revive the medium-term bearish trend reversal case after the rejection of the 1.2 key cluster resistance level. Further decline we should see to 61.8% retracement levels at 1.0904. However, a strong bounce from 1.1353, followed by a break of resistance at 1.1621, will sustain the upside in the medium term.
In the long-term picture, the 38.2% retracement from 1.6039 to 0.9534 at 1.2019, which is close to the psychological level of 1.2000 is key to the outlook. Rejection at this level would keep the multi-decade downtrend from 1.6039 (2008 high) intact, and keep the outlook neutral at best. However, a decisive break of 1.2000/19 would signal a reversal of the long-term upside trend, targeting the 61.8% retracement levels at 1.3554.
