Currency markets have been significantly influenced by ongoing geopolitical tensions in the Middle East, particularly the lack of progress in the US-Iran peace process and recent military actions in the Strait of Hormuz. The US Dollar (USD) has traded higher for the third consecutive day against the Swiss Franc (CHF), reaching one-week highs above 0.7840, though upside momentum remains capped below 0.7860 [1]. This move is attributed to a decline in risk appetite as Iranian forces seized at least two vessels in the Strait of Hormuz, and the US military redirected three Iranian vessels in the Indian Ocean, escalating concerns over the fragile ceasefire [1][4].
Technical analysis indicates that while the USD/CHF near-term trend remains bearish, recent price action suggests a potential bullish correction, with the pair piercing the neckline of a double bottom pattern at 0.7840. Resistance is noted at 0.7870 and 0.7930, while a pullback below 0.7840 could refocus attention on 0.7775 [1]. The USD was the strongest against the New Zealand Dollar (NZD) and showed marginal changes against other majors, with a 0.01% decline versus CHF on the day [1].
Strategists at OCBC highlight that stronger US equities and higher oil prices are creating an unusual risk mix, limiting USD weakness. US tech leadership and resilient US growth are supporting the Dollar, with US equities rallying to fresh all-time highs and Brent crude surpassing USD100/bbl due to shipping attacks and the Strait of Hormuz blockade [2]. While a softer USD is plausible later in 2026 if the US-Iran conflict de-escalates, OCBC expects resilient US growth to cap any sharp decline in the Dollar [2].
Commerzbank's Antje Praefcke notes that EUR/USD is likely to trade sideways due to multiple uncertainties, including the Middle East war and unclear US policy direction, but sees a slight bias toward a stronger USD as long as no new US-Iran talks are scheduled [3].
The Australian Dollar (AUD) has edged lower against the USD, with the AUD/USD pair trading around 0.7150. This comes despite positive Australian PMI data—manufacturing PMI rose to 51.0 from 49.8 and services PMI to 50.3 from 46.3—due to risk aversion stemming from Middle East tensions [4]. UOB strategists expect AUD/USD to remain range-bound between 0.7130 and 0.7180 in the short term, with a broader 1–3 week range of 0.7060–0.7210 and a longer-term bearish technical outlook [5].
Overall, the market remains cautious, with risk-sensitive assets subdued and the USD supported by safe-haven flows, strong US equities, and higher oil prices. Forward-looking statements from analysts suggest that unless there is a breakthrough in US-Iran diplomacy, the USD is likely to retain a slight upside bias, while range trading persists in major pairs such as EUR/USD and AUD/USD [2][3][5].
CONCLUSION
Geopolitical tensions in the Middle East and the US-Iran standoff are supporting the US Dollar, which is trading higher against major currencies despite positive economic data elsewhere. Analysts expect the USD to maintain a slight upside bias and range-bound trading to persist in the absence of diplomatic breakthroughs. Market sentiment remains cautious, with risk aversion limiting moves in risk-sensitive currencies.