25.05.202610:58 Forex Analysis & Reviews: Talks between US and Iran enter finishing line?

The US dollar plunged after reports that talks between the US and Iran have entered the home stretch. But is that really the case, or was it once again another "leak" that led markets and traders to react to the statements?

Yesterday, several reputable US news outlets — the NYT, CBS, and Axios — reported, citing official sources, that a framework agreement is about 95% ready. Secretary of State Marco Rubio also confirmed significant progress on May 24 and for the first time publicly outlined the contours of a possible deal.

According to available information, the Strait of Hormuz will be opened without charging passage fees for 60 days — a clause that had been one of the main sticking points in recent weeks, and its inclusion in the framework agreement would be a substantive breakthrough. At the same time, a mechanism for Iran to hand over enriched uranium is being discussed — the exact format is still being agreed, but the mere fact that this issue has moved into the technical realm speaks volumes. Negotiations on lifting sanctions and unfreezing Iranian assets, frozen since 2018, are proceeding on a separate track.

Interestingly, Iran's leader has supposedly approved a broad template of the agreement, but all of this is still just rumors circulating in the media. For traders, however, this is crucial: all previous rounds of talks collapsed precisely because Iran's top leadership was unwilling to authorize concrete concessions. If the information is confirmed, it would mean the deal has moved from diplomatic maneuvering into technical details — a completely different level of readiness.

For markets, the news is predictably positive on several fronts. Oil is getting a strong downward impulse — opening the Strait of Hormuz would return millions of barrels stranded in the Persian Gulf to the market, and lifting sanctions on Iran could add several hundred thousand barrels per day in the medium term. Lower oil prices, in turn, ease inflationary pressure — and that changes the calculus for the Fed and the ECB, which in recent months have seriously discussed rate hikes partly because of the energy shock. Risk currencies and assets should also return to growth. Still, until final signatures are in place, this remains in a waiting mode — the remaining 5% of details in nuclear agreements have historically been the most difficult.

As I noted above, these reports favored risk assets on the FX market.

EUR/USD technical view

Buyers now need to focus on taking out the 1.1650 level. Only that will allow them to target a test of 1.1680. From there, they can try to climb to 1.1700, but doing so without support from large players will be difficult. The furthest target is the high at 1.1721. On the downside, I expect any serious buying only around 1.1635. If there is no bid there, it would be better to wait for a new low at 1.1610 or open long positions from 1.1585.

GBP/USD technical view

Pound buyers need to take out the nearby resistance at 1.3490. Only then can they target 1.3530; breaking through it will be quite difficult. The furthest target is around 1.3560. On the downside, bears will try to take control of 1.3445. If they succeed, a breakout of the range would deal a serious blow to bulls' positions and push GBP/USD toward the low at 1.3390 with a prospect of extending to 1.3345.