20.05.202608:58 Forex Analysis & Reviews: Senate Limits Trump's Military Powers on Iran for the First Time: What This Means for the Dollar

For the first time in eight attempts, the U.S. Senate has advanced a resolution to limit the president's military powers regarding Iran. The vote was 50 to 47, with four Republicans joining Democrats: Susan Collins, Lisa Murkowski, Rand Paul, and Bill Cassidy.

The resolution, spearheaded by Democratic Senator Tim Kaine, requires the president to withdraw U.S. armed forces from hostilities against Iran unless Congress explicitly authorizes a war or passes a special authorization for the use of military force. It's important to understand that this is only the first step: the resolution still needs to pass a full vote in the Senate and then the House of Representatives, and even if successful, Trump is likely to veto it.

Nevertheless, the political signal is clear. Kaine pointed directly to the economic damage from war and high gasoline prices that have hit Americans ahead of the vacation season. According to him, public support for the war is "rapidly declining," and this is ultimately what could push the resolution through the Senate.

For the currency market, this event carries a dual signal.

On one hand, any signs of limiting Trump's military powers and a potential move towards negotiations reduce geopolitical risks, which could put pressure on the dollar. In recent weeks, the U.S. currency has risen as a safe-haven asset amid the Middle Eastern conflict. If the market begins to factor in a decline in escalation, pressure on the dollar may intensify. On the other hand, continued warfare keeps oil prices above $110, accelerates inflation, and pushes the Federal Reserve toward rate hikes— which traditionally supports the dollar and is likely to continue doing so, as regulators have increasingly mentioned.

In other words, there are currently two opposing factors pulling the American currency in different directions, and the outcome will be determined by which factor proves stronger: diplomatic progress or inflationary realities.

Regarding the current technical picture of EUR/USD, buyers need to focus on reclaiming the 1.1615 level. Only this will allow for targeting a test of 1.1635. From there, it is possible to climb to 1.1660, but doing so without support from major players will be quite challenging. The furthest target will be the 1.1690 high. In the event of a drop, significant buyers are expected to take action around 1.1590. If there are none, it would be wise to wait for an update of the low at 1.1570 or to open long positions from 1.1550.

As for the current technical picture of GBP/USD, pound buyers need to reclaim the nearest resistance at 1.3415. Only this will allow for targeting 1.3445, above which it will be quite difficult to break through. The furthest target will be the area of 1.3475. If the pair declines, bears will try to take control of 1.3380. If successful, breaking the range will deliver a serious blow to the bulls' positions and push GBP/USD down to the low of 1.3340, with the prospect of reaching 1.3300.