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The powerful “peace dividend” trade that swept through global markets earlier this week is beginning to lose momentum, and USD/JPY is quickly emerging as one of the clearest expressions of that shift. As optimism over a rapid US-Iran agreement fades slightly and the pair resumes its climb toward the politically sensitive 160 zone, markets may soon test Tokyo’s tolerance for Yen weakness before they fully test whether Tehran is actually ready to sign a final deal.

Fresh reports of U.S. military strikes on Iranian-linked targets near Bandar Abbas, combined with renewed caution from U.S. Secretary of State Marco Rubio, forced traders to reassess expectations for an imminent US-Iran agreement and reopening of the Strait of Hormuz.

The latest strikes, described by U.S. Central Command as “self-defense” actions against boats allegedly attempting to lay mines and active missile sites, served as a reminder that the seven-week ceasefire remains fragile. Rubio also cooled expectations by warning that negotiations could still “take a few days” to finalize. Those comments effectively interrupted the aggressive market repricing that had previously pushed oil sharply lower, weakened Dollar, and fueled a broad risk rally across global equities.

As optimism receded, Brent crude recovered modestly back above $96 level while Dollar stabilized broadly in currency markets. Yen underperformed again with the geopolitical headlines. The rebound in USD/JPY reflects the market’s realization that the disinflation trade linked to a rapid Hormuz reopening may have moved too quickly.

Technically, USD/JPY now appears capable of breaking above the 159.33 temporary high to extend the rebound from 155.01. However, the move is still viewed as the second leg of the broader corrective pattern from 160.71. Strong resistance is expected near that intervention-sensitive zone, particularly with 160 still widely viewed as Tokyo’s “line in the sand” for potential intervention.

Meanwhile, break of 158.57 minor support will bring deeper fall back to 55 D EMA (now at 158.21). Sustained break there would argue that the third leg has already started and target 155.01 support next.

Overview: GBP/USD shifted into corrective mode after its upward trajectory off six-week lows was rejected near the 200-SMA, signaling fading bullish momentum and increasing downside risks in the coming sessions.

Momentum: The RSI and stochastic peaked in the overbought area and are now pushing lower. The MACD is drifting toward its red signal line, endorsing the softer price action.

Bearish scenario: A decisive break below the support trendline and the 1.3450 number could pave the way to 1.3400. Additional declines from there could extend to 1.3370.

Risk: A durable move above the 200-SMA and the 61.8% Fibonacci level of 1.3520 could revive upside pressure toward 1.3555. From there, the bulls may attempt to breach the 1.3580 mark with scope to reach May’s triple top around 1.3650.

Key Takeaways

• AUD/NZD remains in a firm medium-term uptrend after hitting a fresh 13-year high, supported by widening Australian-New Zealand bond yield spreads and stronger RBA hawkishness versus the RBNZ.
• Markets expect the RBNZ to deliver a “hawkish hold” at 2.25%, but investors continue to price in a relatively more aggressive tightening path from the RBA amid persistent inflation pressures.
• Technical indicators suggest bullish momentum remains intact above 1.2130 support, with AUD/NZD poised for a potential breakout above 1.2250 toward 1.2310 and 1.2380/2400.

New Zealand’s central bank, the RBNZ, is set to announce its monetary policy decision tomorrow, Wednesday, 27 May 2026, at 10:00 SGT, followed by Governor Breman’s press conference an hour later.

Market participants expect the RBNZ to hold its official cash rate at 2.25%. The RBNZ has maintained a “wait-and-see” approach since ending its rate-cut cycle in November 2025, citing stagflation risks arising from the US-Iran conflict during its April meeting.

The RBNZ will also publish its latest official cash rate forecast track in Wednesday’s monetary policy release, with money markets fully pricing in a 25-basis-point hike in September and additional expectations for two more 25-bps hikes in Q4 2026.

As a result, markets are anticipating a “hawkish hold” from the RBNZ tomorrow, especially as New Zealand’s Q1 2026 core inflation rate remained elevated at 3.2% y/y, above the RBNZ’s long-term 1%-3% inflation target range.

RBNZ Lags RBA in Hawkish Monetary Policy Stance

Fig. 1: Australia-New Zealand 2-year and 10-year sovereign bond yield trends as of 26 May 2026 (Source: TradingView).

Despite the RBNZ’s expected “hawkish hold” guidance, it continues to lag behind its antipodean counterpart, the RBA. So far in 2026, the RBA has raised rates three times for a cumulative 75 basis points.

Fixed-income markets continue to price in a more hawkish RBA relative to the RBNZ.

The 2-year bond yield spread, which is highly sensitive to shifts in monetary policy expectations, between Australian and New Zealand sovereign bonds has maintained a major uptrend since October 2023. Recent price action rebounded to 1.07% from 0.99% recorded during the week of 18 May 2026.

A similar trend is visible in the longer-term 10-year bond yield spread, which is more sensitive to inflation dynamics. The spread has remained resilient near 0.28%, trading close to a six-year high.

As a result, a further expansion in the yield premium of Australian sovereign bonds over New Zealand bonds is likely to generate additional upside pressure on the AUD/NZD cross.

Let’s now examine the medium-term, one-to-three-week trajectory for AUD/NZD from a technical analysis perspective.

AUD/NZD – Poised for a Bullish Breakout Above 1.2250

Fig. 2: AUD/NZD medium-term trend as of 26 May 2026 (Source: TradingView).

Trend bias: Bullish above the 1.2130 key medium-term pivotal support.

Resistances: 1.2250 (15 May 2026 minor swing high), 1.2310 (Fibonacci extension), and 1.2380/2400 (Fibonacci extension, ascending channel upper boundary, and former range support from August 2011 and October 2012).

Next supports: 1.2050 (9 April and 14 April 2026 swing lows), and 1.1990 (25 March and 31 March 2026 former minor range resistance).

Key Elements Supporting the Medium-Term Bullish Bias on AUD/NZD

• The price action of AUD/NZD has continued to trade above its 20-day and 50-day moving averages since 4 February 2026, suggesting that the medium-term uptrend remains intact.
• The 4-hour RSI momentum indicator has staged a bullish breakout above a key descending resistance and entered overbought territory above the 70 level without any bearish divergence signal. These observations suggest medium-term bullish momentum conditions remain intact.

Market Overview

The crypto market remains stagnant, stuck at $2.57T and hovering around the 50-day moving average, awaiting further signals. The crypto market’s overall sideways movement looks like a juggling act for mid-tier altcoins: one after another takes the lead. Among the most popular coins over the last 24 hours are NEAR Protocol (+14%), The Graph (+5.6%) and Toncoin (+4.5%). The underperformers were Zcash (-5.9%), Dash (-4.1%) and Uniswap (-3.1%).

Bitcoin rose to $77.8K at the end of the day on Monday, but by the start of trading in Europe, it was trading $1,000 lower. The coin is finding support near the upward-sloping 50-day moving average. Earlier in May, the 200-day moving average briefly acted as strong resistance. If current trends continue, these lines will cross in just a couple of weeks, forming a golden cross, a strong bullish signal. But even before that, we may see a breakout of one of the key moving averages, the outcome of which will determine the trajectory of Bitcoin and the entire crypto market for the coming weeks.

News Background

Institutional investors have withdrawn $1.74 billion from Bitcoin ETFs over the past two weeks. Meanwhile, retail traders are increasing their leverage in anticipation of a reversal in the BTC price. In the past, such a combination has repeatedly resulted in severe waves of liquidations, according to a CryptoOnchain report.

Current Ethereum levels are suitable for building long-term positions, according to MN Trading founder Michael van de Poppe. In his view, the asset remains a crucial infrastructure element of the on-chain ecosystem, despite lagging the market in recent months due to macroeconomic factors.

The US Securities and Exchange Commission (SEC) has approved the listing of options on a Bitcoin index calculated based on BTC prices across multiple exchanges. This is the first such instrument on US stock exchanges currently; only options linked to the value of spot crypto ETF shares are traded there.

Strategy skipped its weekly Bitcoin purchase last week, instead buying back $1.5 billion of its own convertible bonds. The company’s founder, Michael Saylor, publicly revealed for the first time the tactic that Strategy has been using for five years.

GBP/USD retreated slightly on Tuesday after a positive Monday, moving down to 1.3486. The market continues to assess the economic data released late last week. The US dollar has so far drawn support from lingering uncertainty in the Middle East, which has encouraged investor caution and supported demand for safe-haven assets.

April data showed UK retail sales fell 1.3% month-on-month, the sharpest decline in nearly a year and noticeably worse than market forecasts. Consumers are cutting back on spending amid high fuel prices, rising energy bills, and concerns around the Middle East conflict.

Earlier labour market data also signalled a weakening outlook. Unemployment continues to rise, while real wage growth remains weak amid accelerating inflation.

Additional pressure on British assets comes from deteriorating public finances. The UK budget deficit in April was the highest since the COVID-19 pandemic, with borrowing rising to £24.3 billion, the second-highest April figure on record.

Despite this, the pound has partially recovered from the political pressures of recent weeks. The market continues to monitor the situation surrounding Prime Minister Keir Starmer following the Labour Party's weak results in local elections.

Technical Analysis

On the H4 chart, the GBP/USD pair has reached the 1.3500 level and is trading within a broad consolidation range above 1.3434. A move lower towards 1.3393 is likely in the near term. After this, the pair may consolidate, with potential for a move towards 1.3455 on the upside or a decline towards 1.3290 on the downside. The MACD indicator supports this scenario, with its signal line above zero and pointing firmly downwards, indicating weakening bullish momentum.

On the H1 chart, GBP/USD is trading within a compact consolidation range around 1.3494, currently extending up to 1.3500. A move lower towards 1.3393 is likely. The Stochastic oscillator confirms this scenario, with its signal line below 50 and pointing firmly downwards towards 20.

Conclusion

GBP/USD remains under pressure amid weak domestic data, deteriorating public finances, and political uncertainty, which continue to weigh on sterling. UK retail sales posted their sharpest decline in nearly a year, while the budget deficit rose to its highest post-pandemic level. Labour market conditions are also softening, with rising unemployment and weak wage growth despite accelerating inflation. Although the Middle East conflict continues to support safe-haven demand for the dollar, sterling has shown some resilience by recovering from recent political pressures. However, technical indicators point to further near-term downside towards 1.3393 and potentially 1.3290. The pound's trajectory will likely depend on whether domestic economic concerns intensify or geopolitical developments shift the broader risk environment.

Fundamental backdrop

In late April 2026, Japan’s Ministry of Finance moved from verbal warnings to direct action, carrying out a currency intervention worth roughly ¥5.5 trillion ($35 billion) — the first since July 2024. The move was triggered by the yen weakening beyond the psychologically significant level of 160 against the dollar.

Additional context comes from the divergence in monetary policy between the ECB and the Bank of Japan: the European regulator continues to leave the door open to tighter policy amid rising inflation expectations, while Tokyo maintains a cautious normalisation path without providing clear guidance on the timing of its next move.

Technical picture

After reaching a local peak near 188 in mid-April, the EUR/JPY pair experienced two impulsive declines. The first occurred on 30 April, when the candlestick recorded an abnormal spike in vertical volume — a direct consequence of the Japanese Ministry of Finance intervention, which saw the yen strengthen by roughly 3% during the session. A second bout of sharp selling pressure followed in early May.

As a result, a horizontal profile formed with boundaries at 183.800–185.000, while the point of control is concentrated within the 184.50–184.70 range.

The price is now testing the upper boundary of the profile — an area where sellers have already shown activity on two separate occasions. The 182 region has held since February and could once again come into focus if pressure resumes: both May sell-offs reversed precisely from this zone, failing to break lower. Meanwhile, the 185.500 area could act as resistance should the current advance continue.

RSI + MA readings stand at 57 / 55 / 53 respectively — all three lines remain in neutral territory, with no clear signs of momentum.

Key takeaways

The current situation is shaped by the clash between interest-rate differentials and the willingness of the Japanese authorities to intervene again if necessary. For now, with RSI offering no directional impulse, the point of control and the profile boundaries remain the key reference levels for assessing the current trading range.

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Markets

Markets yesterday embraced weekend comments by US president Trump suggesting that the US and Iran were close to completing an agreement. They found more comfort in messages that Iran’s parliamentary speaker and foreign minister were travelling to Qatar yesterday to try to reach a deal which would extend the ceasefire by two months and reopen Hormuz. Brent crude prices dropped from closing levels last week around $104/b to opening levels of $98 on Monday. After that initial move, they stabilized. As we’ve seen more since the start of the war, the US media campaign didn’t resonate through official Iranian comments with the foreign ministry’s spokesperson warning that the signing of an agreement isn’t imminent despite recent progress. There are also new reported US attacks against Iranian missile launch sites and boats this morning which threaten to derail/delay negotiations.

Bond futures opened stronger and managed to add some momentum intraday. We wait to draw firm conclusions as trading was thinned by public holidays in the US (Memorial Day), the UK (Spring Bank Holiday) and several European countries (Whit Monday). US stock markets were closed, but the EuroStoxx50 rallied 2% to its highest level since the start of the war in the Middle East. EUR/USD started with a move from 1.16 to 1.1650 but treaded water afterwards.

Apart from Iran-related headlines, today’s eco calendar is thin with US consumer confidence and a $69bn 2-yr Note auction. Comments by central bankers remain interesting. ECB Schnabel told Reuters this morning that the ECB should hike its policy rate in June even if there’s a peace deal. She believes that looking through the supply shock is no longer an option, arguing that it is already beyond the central bank’s adverse scenario in terms of persistence. Increasing sings of spillovers leave the ECB no other option. She joins calls by colleagues Kazimir, Kocher, Wunsch and Muller who suggested that a June rate hike would be the default option. Over the weekend, ECB President Lagarde also suggested that March inflation projections were likely to be revised upward at the June 11 policy meeting. Later today, ECB Sleijpen is scheduled to speak. From the US Fed, we retain Friday evening’s comments by heavyweight Fed governor Waller. He supports removing the easing bias language in the policy statement to make it clear that a rate cut is no more likely in the future than a rate hike. Inflation is not headed in the right direction and Waller doesn’t want to rule out raising rates if price pressures doesn’t abate soon.

News & Views

Czech economic confidence declined further in May (101.3 to 99.7). Both business confidence (100.4 to 99) and consumer confidence (106 to 103.4) suffered a setback. The former only showed sentiment in the construction sector (+ 2.4 points) improving while decreasing in the industry (-2.6 points), trade (-2.2 points) and selected services (-0.5 points) sectors. Regarding consumer confidence, the proportion of respondents assessing their current financial situation as worse than in the previous twelve months increased, while the share of households expecting an improvement in their financial situation decreased slightly. Still the share of consumers expecting a deterioration in the overall economic situation in Czechia over the next twelve months remained almost unchanged. Separately from the data, Czech Prime Minister Babis called the Czech National Bank to lower its policy rate as he is of the view that there is no reason for Czech citizens to pay a higher interest rate than in the EMU. The CNB in May left its policy rate unchanged at 3.5% and Governor Mich indicated that a moderately restrictive policy is needed. He couldn’t rule out rate hikes if necessary to prevent a rise in (core) inflation.

Polish Finance Minister Domanski yesterday said that there is no political support in Poland to join the euro anytime soon. He assessed having an independent currency as still being beneficial to the Polish economy. The comments probably have to be put in the context of political developments in Hungary where the new government has engaged in a process that should enable the country to meet the requirements for joining the single currency as soon as possible.

Even a successful US-Iran peace agreement may no longer be enough to stop the European Central Bank from tightening policy next month. ECB Executive Board member Isabel Schnabel warned today that the energy shock unleashed by the conflict has already gone too far, arguing that inflation pressures are now spreading through the wider Eurozone economy.

“Given the size and the persistence of the current shock, looking through is no longer an option in my view,” Schnabel told Reuters. She added bluntly: “From today’s perspective, I think a rate hike in June will be needed.” Most importantly for markets, Schnabel said the ECB may already have passed the point where falling oil prices alone can reverse the inflation problem. “Even if the war ended today, a lot of damage has already been done to energy infrastructure and global supply chains,” she said.

Schnabel warned that “we are seeing increasing signs that the shock is spilling over to other parts of the consumption basket,” pointing to PMI surveys, consumer expectations data, and sentiment indicators as evidence that second-round effects may already be materializing.

At the same time, Schnabel acknowledged that the Eurozone economy itself is weakening. She warned that the hit to growth “will also be stronger,” while confidence indicators continue deteriorating.

That leaves the ECB facing an increasingly uncomfortable stagflationary setup: slowing growth alongside inflation that remains too high and potentially more persistent than policymakers initially expected.

The short‑term Elliott Wave view on Oil indicates that after spiking to $119.48 in response to the war with Iran, prices have moved sideways for several months. The initial decline from that peak to $76.73 on March 11, 2026 appeared impulsive and likely completed wave (A). Following that move, Oil consolidated in a triangle‑like structure until recently. Within this formation, wave (B) was identified at $109.62, as illustrated in the one‑hour chart.

From that level, Oil resumed lower in wave (C). However, a decisive break below the $76.73 low of wave (A) remains necessary to confirm this bearish view. Down from $109.62, wave ((i)) ended at $105.65, while the corrective rally in wave ((ii)) concluded at $109.2. Oil then extended lower in wave ((iii)) towards $96.94, followed by a bounce in wave ((iv)) that ended at $102.66. The market is now expected to push to a few more lows to complete wave ((v)), thereby finishing wave 1 of a higher degree.

Once wave 1 concludes, Oil should rally in wave 2 to correct the cycle from the May 19, 2026 high. This correction is anticipated to unfold in 3 or 7 swings before the broader downtrend resumes. As long as the pivot at $109.62 remains intact, rallies are expected to fail in 3, 7, or 11 swings, favoring further downside. The structure highlights a mature bearish cycle, with near‑term risks skewed toward continuation of weakness rather than sustained recovery.

Light Crude Oil (CL_F) 60-Minute Elliott Wave Chart

CL_F Elliott Wave Video:

https://www.youtube.com/watch?v=sRGW2RPhzjM

In focus today

Today in Sweden, April PPI figures are released. Together with the NIER survey on Thursday, the print will be a key input in the Riksbank's assessment of whether firms have started to feel the impact of rising global price pressures. Recent months' have seen an uptick in the PPIs globally, as well as in Sweden, and we expect these tendencies to continue in today's print.
Additionally, the Riksdag Committee on Finance holds its annual open hearing with the full Riksbank executive board to evaluate the previous year's monetary policy, live streamed on the Riksdag website (in Swedish only).

In Hungary, the Central Bank of Hungary is expected to keep rates steady at 6.25% today.
Overnight, we receive New Zealand's cash rate decision, where we and markets expect them to stay on hold at 2.25%.

For the remainder of the week, the calendar is relatively light on the first days, with activity picking up towards the end of the week. On Thursday, the key releases are Norway's Q1 2026 GDP, the ECB minutes from the March meeting and the US PCE reading for April, followed on Friday by May flash inflation figures from Spain, Italy, Germany and France.

Economic and market news

What happened overnight

In the US-Iran war, the US conducted strikes on Iranian missile launch sites and mine-laying boats in southern Iran overnight, with Centcom citing self-defence. The attacks once again put the fragile ceasefire from April under pressure. This follows a weekend in which President Trump signalled the two sides were close to a deal, posting that talks were "proceeding nicely". The strikes have pushed Brent crude up to 98.1 USD/bbl, although this remains well below Friday's close of 103.5.

What happened over the weekend

In the US, Kevin Warsh was sworn in as new Fed chair on Friday, stepping into the four-year role and officially replacing Powell. Separately, Fed Governor Waller made a significant shift on the rates outlook in his first public remarks since April, arguing the Fed should drop its "easing bias" and open the door to a possible rate hike. Notably, Waller's views have often better reflected the consensus within the Fed than known hawks like Hammack and Logan, who have also advocated for removing the easing bias. US yields ticked higher on the remarks, and markets are now pricing in a full hike by December, in line with our Fed call.

Hopes of a US-Iran agreement grew over the weekend after President Trump stated that the "final aspects and details" were being discussed, with the proposed framework unfolding in three stages, according to Reuters: formally ending the war, reopening the Strait of Hormuz and opening an extendable 30-day window for broader negotiations on nuclear issues and sanctions relief. Efforts to finalise details continued into Monday, with Iran's foreign minister Araghchi travelling to Doha for talks with Qatar's prime minister. However, Secretary of State Rubio tempered expectations early on Tuesday, saying a deal could "take a few days", and warned that the Strait of Hormuz would be opened "one way or the other" following overnight US strikes on Iranian mine-laying boats and missile launch sites.

In the euro area, the ECB's negotiated wage indicator for Q1 2026 came in slightly below expectations, falling to 2.5% y/y from 2.9% y/y in Q4 2025. The indicator clearly shows that wage pressures are easing in the euro area economy, a finding supported by the ECB's separate wage tracker, which points to a continued easing in wage growth based on actual contracts for 2026. This should keep a disinflationary pressure on services inflation, partly countering higher transport services costs from the energy shock. We believe this supports a more muted reaction by the ECB than is currently priced by markets.

In Germany, the Ifo indicator for May improved slightly more than expected, following the large decline in April, offering a modestly more positive picture than Thursday's PMI suggested. Yet, the indicator remains well below pre-war levels. Business expectations have taken a large hit following the Iran war, while the assessment of the current business situation is only marginally down, likely as companies work through order backlogs which keeps activity up temporarily.

Equities were higher on Monday in thin trading, as US and many other markets were closed for holiday. European equities closed a full 1.1% higher. It was a risk-on session in every angle; cyclicals beat defensives. Small caps beat large caps. Growth beat value. Peace talks and oil prices were some of the catalysts. However, it those were not the only factors driving equities higher. It is also the reversal in long end yields that begun already last week. US futures indicate an opening around 0.7% and Asia is generally higher. Kospi is the standout, with SK Hynix and Samsung rebounding 7% and 3%, respectively following last week's brief pause to the semi trade.

FI and FX: US conducted strikes on Iranian vessels in the Strait of Hormuz and on launch sites in Iran overnight. The strikes are said to be defensive in nature, according to a US spokesperson, and the market seemingly agrees with Brent oil trading around USD 98/bbl, the same level at which it traded most of yesterday after the initial drop. US yields are trading lower overnight, catching up with the European moves yesterday. EUR/USD has stabilized around 1.1640, despite the sense of optimism in energy market. The SEK was supported yesterday by the positive risk sentiment, with EUR/SEK moving toward the 10.80 level, but over the past months the SEK gains in risk-on has been more contained than the losses in risk-off.