The US Dollar (USD) continued its decline against major currencies on Tuesday, reaching a six-week low below 98.50 on the USD Index and posting marginal losses against the Canadian Dollar (CAD), with USD/CAD trading below 1.3790 after dropping from a high of 1.3878 on Monday [2][3]. The Euro (EUR) traded higher against the USD for the seventh consecutive day, with EUR/USD reaching session highs at 1.1790, its highest price since the war began [1]. This movement was driven by increased risk appetite amid reports suggesting the possibility of further US-Iran negotiations, despite US President Donald Trump's enforcement of a blockade on Iran's ports and the Strait of Hormuz [1][2][3]. Trump stated that the US had been approached by 'the right people on Iran' and that they want to have a deal, while Vice President JD Vance noted meaningful progress in talks, although no breakthrough was achieved. According to Reuters, the main sticking point was Iran's uranium enrichment capabilities, but both sides have left the door open for further dialogue [1][2][3]. The New York Times reported that Iran proposed suspending nuclear activities for five years, while the US insisted on a 20-year suspension [2].
The blockade of the Strait of Hormuz has kept oil prices elevated, with West Texas Intermediate (WTI) dropping from highs near $99.00 on Monday to $92.00 on Tuesday, still nearly 40% above pre-war levels [3]. This has supported the CAD, given oil's significance as Canada's main export [3]. On the macroeconomic front, German and Spanish inflation figures confirmed a positive impact from the war in Iran, with Germany's Wholesale Price Index rising to 4.1% year-on-year, up from 1.2% previously [1]. The US Producer Price Index (PPI) for March is expected to show higher inflationary pressures, mirroring Friday's Consumer Price Index (CPI) and adding pressure on the Federal Reserve to potentially reverse its easing cycle [1][2][3].
Wall Street's main indexes closed mixed on Monday, with the S&P 500 Index down about 0.1% and the Nasdaq Composite Index up more than 1%. US stock index futures traded virtually unchanged early Tuesday [2]. In Canada, Prime Minister Mark Carney's Liberal Party secured a majority in parliament, winning 173 of 343 seats, which strengthens his mandate to oppose US tariffs and annexation threats [3].
Technical analysis for EUR/USD shows persistent buying pressure, with the pair trading at 1.1794 and the 4-hour Relative Strength Index (RSI) reaching overbought territory near 72. The Moving Average Convergence Divergence (MACD) histogram has turned positive, indicating continued bullish momentum. Initial resistance is at 1.1825, with immediate support at 1.1720-1.1730 [1].
CONCLUSION
The US Dollar's weakness is primarily attributed to optimism surrounding renewed US-Iran negotiations and the ongoing blockade of the Strait of Hormuz, which has kept oil prices elevated and supported the Canadian Dollar. Inflationary pressures in both Europe and the US are expected to remain high, with upcoming PPI data in focus. Market sentiment is constructive for risk assets, as evidenced by the EUR/USD rally and mixed performance in US equities.