Key Takeaways:
GBP/USD fell to $1.3371 on Tuesday, retreating from a near three-week high as attacks on vessels in the Strait of Hormuz drove demand for the safe-haven US dollar.
The pound weakened to $1.3371, down from an overnight high of $1.3398, after vessel attacks in the Strait of Hormuz boosted demand for the US dollar. The US Dollar Index gained ground as traders focused on the rally in oil markets, with an LNG carrier from Qatar and a Saudi oil tanker both sustaining damage in the waterway, according to shipping reports. Iran insisted ships should use approved routes.
GBP/USD failed to settle above the $1.3400 level and pulled back toward $1.3370. The nearest support sits in the $1.3335 to $1.3350 range, with the 50-day moving average at $1.3285 providing the next floor if the pair breaks lower. EUR/USD also retreated, testing support at $1.1420 to $1.1435 as demand for risk assets declined after the maritime incidents.
The dollar's safe-haven rally threatens to extend if Middle East tensions persist, with the DXY facing resistance at 101.15 to 101.30. A break above that level would open the path toward 101.80 to 101.95, putting further pressure on the pound and other risk-sensitive currencies.
The move lower in cable coincided with a broader risk-off shift across currency markets. USD/CAD tested the $1.4200 level, stuck below resistance at $1.4225 to $1.4240 despite a strong rally in oil prices that typically supports the Canadian dollar. Gold and silver lost ground, adding to the bearish tone for commodity-linked currencies.
The catalyst for the dollar's advance was a series of maritime incidents in the Strait of Hormuz, through which about a fifth of the world's oil passes. An LNG carrier from Qatar was hit in the waterway, and a Saudi oil tanker also suffered damage. Iran said vessels should travel through approved routes, raising the prospect of further disruptions.
Traders are now watching for any escalation that could push the dollar higher. The DXY's next resistance zone at 101.80 to 101.95 would represent a test of levels not seen since early June, potentially driving GBP/USD toward the $1.3250 to $1.3265 support area.
This article is for informational purposes only and does not constitute investment advice.
