The market awaits change

EUR/USD

Key zone: 1.1700 - 1.1800

Buy: 1.1750 (on strong positive fundamentals) ; target 1.1870-1.1920; StopLoss 1.1680

Sell: 1.1680 (on a decisive break above 1.1750) ; target 1.1500; StopLoss 1.1750

For the first time in the past two months, the key driver of the week may not be Middle East geopolitics, but the fundamental economic consequences of the conflict. The Federal Reserve, the ECB, as well as the monetary authorities of the UK, Canada, and Japan are expected to keep interest rates unchanged.

Amid accelerating inflation—though less dramatic than expected—conditions are forming for a rotation of capital from risk assets into defensive instruments.

On April 29, the 60-day period during which the U.S. can conduct military operations without Congressional approval expires. Despite Trump’s seemingly victorious rhetoric, the likelihood of pressure from Congress to limit involvement in the conflict remains high. The president will need to provide a solid justification for participation in the war—and, most importantly, a clear strategy.

Historically, such constraints have been bypassed through specific framing:

• military-trade blockades are presented as defensive rather than aggressive measures;
• the blockade of the Strait of Hormuz is used as leverage against competitors—China, Europe, and Japan;
• the U.S. gains a strategic advantage by forcing other countries to influence Iran.

However, timing is becoming critical. Trump needs to strengthen his negotiating position ahead of the May 14–15 meeting with Xi Jinping, as well as demonstrate political success amid the start of the election campaign. In the context of Iran, “victory” is only possible under strict conditions—control over the nuclear program and the removal of enriched uranium.

Tehran is proposing a three-stage negotiation framework:

• ceasefire;
• discussion of the Strait of Hormuz;
• nuclear program.

This approach does not suit Washington, but negotiations continue, including in a remote format. At the same time, the U.S. is increasing pressure—from visa restrictions to freezing $344 million in crypto assets linked to Iran.

On the domestic front, an important shift is underway: the Senate Banking Committee is preparing to approve Kevin Warsh, which could make the current meeting the last for Jerome Powell.

Key implications:

• the end of the Justice Department investigation into Powell reduces political pressure on the Fed;
• Senator Thom Tillis allows for Powell to remain on the Board of Governors, but much depends on Trump’s next steps;
• the market will closely monitor Fed projections, understanding that Warsh’s arrival would shift the internal balance of power.

Meanwhile, Wall Street remains resilient and continues to ignore geopolitical risks. NVIDIA shares have reached new all-time highs, pushing its market capitalization above $5 trillion, while equities continue to rise on expectations of strong earnings.

Ahead lies a key test: earnings releases from major tech companies, including Alphabet, Microsoft, and Meta Platforms.

The market is temporarily shifting focus from geopolitics to macroeconomics and corporate performance. However, the sustainability of this trend fully depends on the tech sector’s earnings.

If leaders meet expectations, the market may continue to overlook external risks and extend its rally.

If not, the “war premium” and the Fed’s hawkish stance will quickly return to focus, turning the current rally into short-lived euphoria.

So we act wisely and avoid unnecessary risks.

Profits to y’all!