Global macro overview for 09/05/2018

The leaks worked, and Trump's unpredictability did not show his greatest strength. The US unilaterally withdraws from the agreement with Iran and restores economic sanctions within 3-6 months. The good news is that the US does not impose additional sanctions, but the secretary of the treasury Mnuchin said that the purpose of yesterday's decision is to open the process to a new agreement. However, this does not change the fact that the geopolitical risk premium in the Middle East is growing. Investors will also be wondering what means of pressure Washington will apply to countries supporting economic relations with Iran. Trump's earlier activities in the field of import duties show one way of exerting influence.

The main reaction relates to oil prices, which yesterday passed a fair swing due to contradictory press reports. However, breaking the agreement means that in half a year the availability of the raw material will fall by about half a million barrels per day - imports from Iran will be limited by Korea, Japan, Italy or the Netherlands. Saudi Arabia has already announced that it does not intend to loosen the mining restriction agreement because of this, although other countries within the OPEC (+ Russia) may not now be so conscientious in complying with the provisions. Thus, finally, the rally in oil prices may stop and quickly reverse, but for now, investors are in a buying rush additionally supported by positive data on US stocks (a drop in the previous week by 1.85 million barrels according to the API).

From the currency market perspective, it is more conducive to maintaining USD domination across the board. Geopolitical tensions either encourage people to withdraw capital from the markets going down, or they simply push investors to reduce their speculative positions, where the dollar sales still prevail. In addition, the world has not collapsed after Trump's decision, so business can return to normal, and this norm in recent days is favorable for the dollar.

So far, the biggest loser is AUD, so let's now take a look at the AUD/USD technical picture at the H4 time frame. As the Crude Oil was rallying after the Trump's decision, the AUD fell lower towards the level of 0.7410. The drop has ended with a pin bar called The Hammer, so this price action might indicate a possible corrective pullback towards the level of 0.7472 or 0.7490. The extremely oversold market conditions and clear bullish divergence between the price and the momentum indicator support the short-term bullish bias. The key technical resistance is seen at the level of 0.7560.

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