Macro Environment
The United States and Iran have developed a framework that extends their ceasefire 60 days as the two sides move toward a final deal to end the war, with the Strait of Hormuz set to be demined and reopened in the interim. That headline, which broke during the weekend, is the single most important driver for markets as London opens this Monday morning. The tone is cautiously risk-on: equity futures are higher, oil has sold off sharply, and the dollar has slipped in Asia.
The dominant theme is de-escalation premium being priced out of energy and precious metals, while at the same time the market must square this with a notably hawkish shift in Federal Reserve thinking. Federal Reserve Governor Christopher Waller signalled a major hawkish shift, warning that the US central bank may need to raise interest rates due to inflation risks from the Iran conflict. He indicated that the Fed's current hold is appropriate for now, but said he can "no longer rule out rate hikes further down the road if inflation does not abate soon."
Two-year Treasury yields hit their highest since February 2025 as Waller supported making clear the next rate move is just as likely to be a hike as a cut. Money markets have fully priced in a hike this year. That creates a bifurcated environment: geopolitical relief is pulling risk assets higher, but a potential Fed tightening cycle is simultaneously anchoring the dollar and pressuring gold and silver on the rate-expectations side.
Clear sticking points between the two sides remain. Iran's Fars news agency reported the Strait of Hormuz would remain under Iran's management, and dismissed Trump's announcement of reopening the strait as part of a largely negotiated deal as "incomplete and inconsistent with reality." The deal is not signed. The environment is better, but it is fragile. Treat risk-on headlines with discipline, not excitement. Geopolitical headlines can reverse intraday.
The June 16-17 FOMC meeting - the first under incoming Chair Kevin Warsh - is the next major scheduled event horizon. Far from overseeing rate cuts, Warsh may face strong support from among his colleagues to push his first policy statement as chair in a hawkish direction. The April PCE inflation print, due 28 May, will be the week's most important data release and could significantly shift Fed pricing before that meeting.
Commodities
Wti Crude Oil
WTI crude is currently trading around $92.07 per barrel, well below its previous close of $96.60, with today's range spanning $91.31 to $93.54. The move lower is substantial and directly driven by the ceasefire framework news. Brent fell as much as 5.2% to $98.12 earlier, while WTI was near $92. Trump said in social media posts that he would not rush into a deal, which is not even fully negotiated yet.
Directional bias: Bearish for today. The near-term supply-risk premium that had sustained oil at elevated levels is being unwound on deal optimism. However, the move will not be clean or linear. It remains unclear how key differences, including the fate of Iran's nuclear programme, will be addressed. Iran's Tasnim news agency said the draft agreement could still collapse because the US was obstructing some key clauses, including unfreezing Iranian assets. Any headline that suggests the deal is stalling will see crude reverse sharply.
Key levels to watch: Support at $90.00, a psychologically significant round number and the region where buyers may re-enter if de-escalation optimism stabilises. Resistance at the prior close of $96.60. A failure to hold $90.00 would open a move toward $87.00. Any deal-collapse headline would rapidly push WTI back above $96.
XAU/USD GOLD
XAU/USD is currently trading around $4,509, having opened today at $4,542 and printing a session range so far from $4,491 to $4,552. Gold is caught in the crossfire of competing forces: ceasefire progress reduces safe-haven demand and the energy-driven inflation premium, but the hawkish Fed repricing is keeping a floor under yields and capping gold's upside potential.
Gold is deep into a three-month triangle pattern, with the apex now just days away. This compression means a directional resolution is imminent. The risk is to the downside in the near term given the combination of risk-on sentiment and hawkish Fed expectations. The prospect of prolonged conflict sent oil prices toward four-year highs earlier, adding to inflation concerns and raising expectations that central banks may need to tighten monetary policy. FOMC minutes showed most officials believed a rate increase could still be warranted if inflation remains above the Fed's 2% target.
Directional bias: Neutral to mildly bearish. The triangle pattern resolution and the competing drivers make conviction difficult on either side for a single session. The market's second consecutive weekly decline heading into last Friday tells the broader story.
Key levels: Support at $4,490, the lower end of today's range. Below that, watch $4,460, a structural level referenced across multiple technicals this morning. Resistance at $4,550 and then $4,600. A confirmed break of $4,460 would be a meaningful technical signal of further downside. A surprise deal collapse would see gold rip sharply higher toward $4,700.
XAG/USD SILVER
Silver rose to $77.66 per troy ounce on May 25, up 3.07% from the previous day. Silver climbed toward $78 on Monday, recovering losses from last week as increasing optimism over a potential US-Iran agreement eased concerns about inflation and interest rate hikes. Reports indicated the proposed deal could reopen the Strait of Hormuz, end hostilities, and lay groundwork for additional nuclear negotiations.
Silver's bounce is sharper than gold's in percentage terms, which is typical in early risk-on episodes where silver's dual role as both a precious and industrial metal attracts additional buying. However, the structural picture remains challenging. Despite Monday's rebound, silver remains roughly 17% lower since the Middle East conflict began, as fears of an energy-driven inflation shock fuelled expectations that central banks may need to maintain tighter monetary policy.
Directional bias: Cautiously bullish for today on momentum from the overnight move, but the recovery is fragile and dependent on deal headlines holding. The gold/silver ratio bears watching: if gold underperforms, silver's beta will cut both ways.
Key levels: Resistance at $79.00, then the more important $80.00 level. Support at $76.00. The 52-week range from $31.64 to $121.67 illustrates the extraordinary volatility this market has experienced since February, and traders must size accordingly.
Forex Positioning
USD/JPY
The USD/JPY exchange rate fell to 158.88 on 24 May, down 0.19% from the previous session. The pair is currently quoted around 157.97 in early European trading. The dollar's weakness in Asia is the primary driver, consistent with the ceasefire-driven risk-on sentiment reducing safe-haven dollar demand.
The CFTC Commitments of Traders data (latest report: 19 May) shows the JPY at a net non-commercial position of -93,905 contracts, placing it at the 4th percentile of its 52-week range. This is a crowded short at an extreme level, and it is a critical warning flag. Positioning this extended means any bullish catalyst for the yen - whether intervention, a BoJ hike signal, or a significant deal in negotiations - could trigger violent short-covering. Traders remained alert for possible currency intervention as the yen continued to trade near the 160-per-dollar level that reportedly triggered Tokyo's intervention efforts in late April and early May.
Directional bias: Bearish USD/JPY (yen strength). The combination of extreme short positioning, intervention risk at 160.00, and today's dollar weakness creates a more comfortable environment for sellers of the pair.
Key levels: The 160.00 level remains the critical upside threshold and the Ministry of Finance's apparent line in the sand. Support at 157.50 and then 156.00. A clean break below 157.50 on volume would indicate more meaningful yen strength emerging. Catalyst to watch: any BoJ commentary today or any acceleration in deal progress.
GBP/JPY
GBP/JPY is trading around 213.72 in early European hours. The pair is a composite of two separate stories: sterling, which is supported by the Bank of England's hawkish hold at 3.75%, and the yen, which is heavily shorted and intervention-vulnerable. The BoE's 8-1 hawkish hold - with Chief Economist Huw Pill dissenting for a hike to 4.00% - was firmer than markets expected.
The CFTC data (19 May) shows GBP at a net position of -64,307 contracts, at the 15th percentile. GBP is not at a crowded extreme, but the weekly change of -21,248 contracts is a sizeable move in one week that shows fresh selling pressure on sterling. That said, on GBP/JPY specifically, the yen weakness has been the dominant driver.
Directional bias: Neutral. The competing dynamics of a modestly pressured sterling against a heavily shorted yen create a range-bound environment. The pair offers more noise than trend today without a clear catalyst.
Key levels: Watch 215.00 as resistance and 211.50 as support. An intervention-driven yen move would see this pair drop rapidly toward 210.00. A risk-on acceleration without yen intervention would see the pair grind toward 215.
EUR/USD
EUR/USD is currently trading around 1.1629 in early European trade. The pair fell for a second consecutive week, settling near a fresh multi-week low of 1.1576 last week. War-related headlines kept driving financial markets, coupled with mounting speculation that the Fed will deliver a rate hike before year end.
The CFTC data (19 May) shows EUR at +33,513 contracts and the 81st percentile. This is an elevated positioning reading. EUR longs are not yet at a crowded extreme above the 90th percentile, but the weekly change of -6,687 contracts shows that longs are being trimmed. If the Fed repricing continues to push US yields higher and reduce the relative rate advantage of the euro area, this long position could unwind further.
Markets have priced an 86% probability of a 25bp ECB hike at the 11 June meeting, taking the deposit rate to 2.25%. An ECB hike would narrow the BoE-ECB rate gap and could provide EUR with a medium-term floor. The dollar's weakness today on ceasefire headlines provides a near-term bid for EUR/USD.
Directional bias: Cautiously bullish intraday, with the caveat that the broader trend of the past two weeks has been bearish for EUR/USD. The risk-on session provides a tailwind, but the pair must reclaim 1.1650 to regain momentum.
Key levels: 1.1576 was the recent multi-week low and should be treated as near-term support. Resistance at 1.1650 and then 1.1730. The intraday catalyst today is any further confirmation of the Iran deal framework, which would sustain dollar weakness.
USD/CAD
USD/CAD closed around 1.3778 on 21 May. As of 07:10 UTC on 25 May, the USD/CAD implied rate from CAD/USD data was approximately 1.3820. The Canadian dollar is a direct proxy for oil prices given Canada's energy-export dependence. WTI's sharp overnight decline is a net negative for CAD, creating a push-pull dynamic: the broader dollar weakness is CAD-positive, but lower oil is CAD-negative.
The CFTC data (19 May) shows CAD at a net position of -31,231 contracts, at the 79th percentile. This is notable: CAD short positioning is elevated and approaching a crowded level. A further leg lower in oil - should the deal progress - could add to those shorts, but the positioning itself limits the room for further aggressive CAD selling without a material oil breakdown.
Directional bias: Neutral to mildly bullish USD/CAD. Oil weakness is the swing factor. If WTI breaks below $90, USD/CAD should push toward 1.3850. If oil stabilises, the broader dollar weakness theme wins.
Key levels: Resistance at 1.3850 and then 1.3920. Support at 1.3700. The Bank of Canada next meets 10 June, and any shift in their rate guidance based on lower oil prices would be CAD-negative.
USD/CHF
USD/CHF opened at 0.7867 today. The pair is currently trading around 0.7861. The Swiss franc serves as a safe-haven currency, and on a day when geopolitical risk is diminishing, CHF should face mild headwinds. However, the inflation pressure from the Iran conflict has been globally transmitted, and the SNB holds rates at 0%, leaving CHF with very little yield buffer. The BoE's 3.75% rate sits well above the SNB at 0% and the BoJ at 0.75%, supporting sterling against those currencies.
The CFTC data (19 May) shows CHF at -36,937 contracts, at the 27th percentile. Positioning is moderately short but not at an extreme, and the weekly change of -740 contracts shows little directional conviction from institutional players.
Directional bias: Neutral. The risk-on environment reduces safe-haven demand for CHF, which should prevent meaningful CHF appreciation. But absent a strong directional catalyst, the pair is likely to consolidate.
Key levels: Resistance at 0.7920. Support at 0.7800. A sharp reversal in geopolitical sentiment - deal collapse headlines - would push USD/CHF sharply lower as CHF safe-haven demand surges. The pair's recent range of 0.77 to 0.79 is the operative envelope.
Institutional Pressure Watchlist
WTI CRUDE OIL. The most live instrument today. WTI is sharply lower, down more than 4%, as oil and gasoline prices fall on optimism that diplomacy may resolve the Strait of Hormuz situation. The volatility is extreme and the headlines are moving the market in real time. Both direction and magnitude of moves are likely to be larger than any other instrument today.
USD/JPY. The 4th-percentile JPY short in the CFTC data (19 May) represents the most asymmetric positioning setup in the FX complex. The crowded nature of yen shorts, combined with the yen approaching the intervention threshold and the broad dollar softness today, creates conditions for a meaningful directional move. Any official comment from Japanese authorities amplifies the risk.
XAG/USD SILVER. Silver's 3% overnight surge and its beta characteristics relative to gold mean it will amplify whatever gold does. With the triangle pattern in gold approaching resolution and silver's own bounce from heavily depressed levels, the white metal is the highest-volatility precious metals trade today. The risk is two-directional.
EUR/USD. The combination of elevated EUR longs at the 81st percentile (CFTC, 19 May), a potential ECB hike in June, and today's dollar weakness creates the conditions for a trending day. US stock futures rose on Monday while the dollar and oil prices slipped as investors reacted to the Iran deal news. A sustained dollar bid from hawkish Fed repricing would test EUR bulls, but today's risk-on tone leans the other direction.
USD/CAD. The direct oil price linkage makes this pair mechanically responsive to every headline on the Iran deal. CAD's 79th-percentile short positioning means there is a natural ceiling on further CAD weakness, but it also means any oil recovery would see rapid covering. The pair is trading on headline risk today and will require tight management.
Execution Guidance
Today is a headline-driven session. The playbook for London open and into New York is not about setups in isolation - it is about managing the interaction between the geopolitical catalyst and the underlying technical levels.
The primary approach should be continuation trades on established breakout moves, with reduced position sizes to account for headline reversal risk. WTI below $93 with momentum suggests continuation selling toward $90, but only with tight stops above $93.50 because a single headline confirming deal collapse would reverse the move 5% in minutes. Do not chase an extended move on oil. Wait for a retest of broken support levels.
On EUR/USD, the risk-on tone creates a short-term bullish bias, but the pair must demonstrate a hold above 1.1600 before treating any upside as a continuation rather than a dead-cat bounce from last week's selling. Look for a London session open above 1.1600 with volume confirmation before adding exposure.
On USD/JPY, the extreme short positioning in the CFTC data creates the most dangerous asymmetry. Do not chase short USD/JPY into a potentially intervention-sensitive zone. If the pair pushes toward 156.50 on yen strength driven by dollar weakness, look for consolidation entries rather than breakout chases. The intervention risk means the reward-to-risk on aggressively shorting USD/JPY near 157 is poor.
On silver, the 3% overnight move has already delivered a significant portion of the day's range. Buying into extended strength is not advised. If XAG/USD pulls back to $76.50 in London, that offers a better risk-defined entry with a stop below $75.50 and a target of $79. Do not enter at market.
On USD/CHF, this is a secondary instrument today. Monitor for how it interacts with gold. If gold falls on continued risk-on sentiment, CHF safe-haven selling should add a modest bid to USD/CHF. The entry above 0.7880 with a target of 0.7920 and stop at 0.7850 is the cleanest structure available, but it is a low-conviction trade today.
The overarching rule for today: widen your stop buffers modestly compared to normal, reduce position size by at least 25%, and avoid trading around the 1400-1500 BST window unless a specific catalyst is known, as US market open volatility will be elevated.
What Would Surprise The Markets Today
A FORMAL IRANIAN REJECTION OF THE CEASEFIRE FRAMEWORK. Iran's top negotiator told a Pakistani counterpart that Iran would not compromise its legitimate rights and expressed distrust of the US. A public repudiation of the framework by Tehran would catch markets severely off guard given the optimism priced in overnight. The immediate reaction would be a 6-10% spike in WTI, a rapid sell-off in equities, a sharp safe-haven bid for gold and the Swiss franc, and a rapid strengthening of the Japanese yen as carry trades unwind.
A BANK OF JAPAN VERBAL INTERVENTION OR RATE HIKE SIGNAL. Given that USD/JPY sits near the 158-159 range and Japanese authorities have repeatedly signalled discomfort above 160, an unexpected BoJ statement or Ministry of Finance comment today would trigger abrupt short-covering in JPY. The CFTC data (19 May) showing a 4th-percentile extreme in JPY shorts means this move could be violent - 200 to 300 pips in USD/JPY in a short timeframe. GBP/JPY and EUR/JPY would fall in sympathy. This would catch most traders positioned short yen entirely off guard.
A STRONGER-THAN-EXPECTED PCE PREVIEW OR HAWKISH WARSH REMARKS. With Kevin Warsh now installed as Fed Chair and the June 16-17 FOMC meeting approaching, any unexpected commentary from Warsh suggesting the Fed is actively preparing to hike - rather than merely holding - would cause a sharp repricing. The CME Group FedWatch Tool has priced the probability of a 25 basis point rate hike at 43% at the December FOMC meeting. A more hawkish signal pointing to an earlier move would compress equity valuations, push the dollar sharply higher, and force gold through $4,460 support.
A CONFIRMED AND UNCONDITIONAL REOPENING OF THE STRAIT OF HORMUZ. This is the upside surprise. If an official, formal announcement of Hormuz reopening emerged before the New York close - rather than the conditional framework currently in place - WTI could fall to $85 or below rapidly. A full reopening of the waterway, which in peacetime handled around a fifth of the world's oil and LNG supplies, would be a relief for energy importers across Asia. Such a move would accelerate the disinflationary narrative, increase the probability of Fed cuts, weaken the dollar broadly, and provide a significant boost to equities and non-energy assets.
Early Warning Signals To Watch Today
WATCH WTI AT THE $90.00 LEVEL. If WTI crude approaches $90.00 per barrel and fails to hold it - with volume - that is the first signal that the de-escalation trade has legs and is not yet exhausted. Conversely, if WTI finds a bid at $90-91 and reverses sharply, it indicates that the market does not believe the deal is done and that buyers are re-entering on headline risk. A failure to hold $90 would be a signal to reduce long risk broadly and monitor for deterioration in equities.
MONITOR USD/JPY AROUND THE 157.00 LEVEL. If USD/JPY breaks cleanly below 157.00 with conviction during the London session, that signals the yen strengthening story is gaining genuine traction beyond just dollar weakness - possibly on BoJ-related news or an acceleration in carry unwind. That would be a signal to reduce long risk across GBP/JPY and EUR/JPY, and to re-evaluate USD exposure across all pairs.
WATCH EUR/USD AROUND 1.1600. The pair settled not far above a fresh multi-week low of 1.1576 last week. If EUR/USD cannot sustain above 1.1600 during the London session despite today's dollar weakness, it is an early warning that the dollar's safe-haven and yield-differential appeal is reasserting itself. That signal would also warn of potential downside pressure for EUR/USD toward 1.1500 and would shift the week's narrative from risk-on to renewed USD bid.
WATCH GOLD'S BEHAVIOUR AROUND THE $4,460 STRUCTURAL SUPPORT. Multiple technical frameworks point to $4,460 as a meaningful support level. If gold breaks below $4,460 during the London session on a sustained basis - not just a brief wick - the triangle pattern mentioned by analysts resolves to the downside. That signal would indicate the market is choosing the Fed hawkish repricing narrative over the geopolitical risk narrative, and it would have implications for silver, which would likely underperform sharply.
WATCH FOR CONFIRMED IRAN DEAL COMMENTARY FROM OFFICIAL US CHANNELS. The trigger for a change in tone is not another Trump social media post but rather a statement from Secretary Rubio or a briefing from the State Department. If no such official confirmation emerges during the London session, the overnight optimism risks fading as traders become cautious ahead of the US open and reality of deal complexities reasserts itself.
Markets Mastered - Today's Focus
WTI crude is the session's primary instrument: the Iran deal is the catalyst, the $90.00 level is the line, and every headline is a potential trade trigger - size accordingly and use tight stops. USD/JPY deserves close attention because the 4th-percentile extreme in JPY shorts from the CFTC report (19 May) makes it the most asymmetric position in the FX market if anything accelerates yen demand. Silver's 3% overnight bounce from depressed levels is the commodities trade to watch for a pullback entry toward $76.50, with risk defined and a clear line in the sand at $75.50. EUR/USD holds the key to the broader dollar story: if 1.1600 holds through the London session, the path of least resistance is higher toward 1.1650 and that confirms the risk-on tone is intact.