06.04.202611:05 Forex Analysis & Reviews: Global market shifts to take place? (USD/JPY may show limited decline and gold may start narrow-range movement)

Donald Trump continues to threaten Iran, setting conditions for the end of the war and promising new "hellish punishments." Yet, it appears that he himself is in a powerless state, unable to change anything. As long as this situation persists, markets will remain in a state of extreme uncertainty.

Why should we not expect major changes? Primarily, this is because the war in the Middle East produces at least two important sources of uncertainty. The first is when it will end, or in other words, the timing of its conclusion. The second is what the outcome will be.

The first factor shows that the US and Israel have clearly underestimated Iran and its retaliatory actions, which is already leading to disruption of global trade and the economy. The inability to forecast the conflict's end could collapse the economies of entire regions that depend on gas and oil supplies from the Middle East. For example, some believe that Europe could plunge into a severe crisis within a week or ten days. Equally important is the impact of the second factor, the war's outcome, which also scares investors. Against this backdrop investors are exercising extreme caution, which is reflected in the broadly sideways dynamics of asset prices.

Another important factor, which stands apart but clearly indicates market participants' priorities, is the reaction to the release of major US economic data. The nonfarm payrolls report published on Friday showed an unexpected increase in March to 178,000 against a forecast of 60,000. Markets simply ignored that report. If one could excuse this by noting that Friday was a holiday ahead of Catholic Easter, today's market dynamics point to a complete disregard for the news. This is happening because developments in the Middle East are the main driver for markets, and they will remain so until it becomes truly clear when and how the war will end.

What can be expected in markets in the near term?

I believe that, against the background of the Middle East war, overall market dynamics will form within sideways ranges and not much beyond that.

Forecast of the day:

USD/JPY

The pair shows a probability of a local reversal downward and a possible decline first to 58.50, and then to 157.50 after breaching support at 159.40. The level for selling could be 159.24.

GOLD

The spot price of gold is also likely to trade within the 4,573.00–4,798.00 range. The most suitable trading approach could be range trading. After a rise to 4,798.00, a renewed reversal down to 4,573.00 can be expected. The level for selling might be 4,781.50.