Hormuz Tensions Lift Oil Ahead of NFP - CPT Markets

Market Wrap-up: Hormuz Risks Lift Oil & USD Before NFP

Oil prices reversed sharply higher during the previous session after details of a draft proposal between Oman and Iran were released. Under the proposal, Iran would prohibit US and Israeli vessels from transiting the Strait of Hormuz. Ships from countries that Tehran accuses of causing damage to Iran would also be barred from using the strategic waterway until full compensation has been paid.

Geopolitical tensions intensified further after Yemen's Houthi forces, an Iranian ally, claimed responsibility for attacks targeting Saudi Arabian military positions.

The developments pushed Brent crude up 3.8% to USD 82.49 per barrel, while US WTI crude gained around 2.8% to USD 77.29 per barrel during yesterday's trading session.

The sharp rise in oil prices also lifted the US 10-year Treasury yield to 4.672%, up nearly six basis points, signalling that market participants have begun repricing the risk of higher inflation and the possibility of further Federal Reserve rate hikes.

St. Louis Fed President Alberto Musalem reinforced this view, stating that inflation remains too high and monetary policy should remain focused on bringing price pressures under control. He also reiterated that he supported a rate hike at the latest meeting and believes the probability of inflation remaining above target has increased.

The repricing of rate expectations strengthened the US dollar, with the DXY rising around 0.26% to approach the 100.00 mark. Higher yields and a stronger dollar weighed on gold prices, sending the precious metal down more than 1.8% from USD 4,300 to USD 4,225 per ounce.

Risk sentiment also deteriorated across US equities, with the Dow Jones, S&P 500 and Nasdaq all closing lower. The Dow Jones fell more than 460 points, snapping its five-session winning streak.

Looking ahead for today, traders will closely monitor the July Non-Farm Payrolls report. The US economy is expected to add 85,000 jobs, up from 57,000 in June, while the unemployment rate is projected to remain unchanged at 4.2%.

XAU/USD: Gold Falls as Rising Yields Strengthen the Dollar

Key takeaway:

• Gold weakened as proposed restrictions on shipping through the Strait of Hormuz pushed Treasury yields higher.
• The US 10-year Treasury yield climbed to 4.672%, rising nearly six basis points, reflecting growing market expectations of stronger inflationary pressure.
• Although gold is traditionally viewed as an inflation hedge, higher interest rates reduce its appeal because the metal does not generate yield.

Technical Outlook:

• Daily Bias: Bearish
• Support: 4,166
• Resistance: 4,300

Oil: WTI Jumps on Hormuz Shipping Restrictions

Key takeaway:

• Oil prices rallied sharply during the August 6 session after Iranian state media published draft regulations imposing stricter conditions on vessels transiting the Strait of Hormuz.
• Iran and Oman continue negotiations over shipping arrangements through the Strait of Hormuz. However, under the current draft, Iran would ban US and Israeli vessels, as well as ships from countries accused of damaging Iran, from using the waterway.
• Adding to supply concerns, Yemen's Houthi forces claimed attacks on Saudi Arabian military positions.

Technical Outlook:

• Daily Bias: Bullish
• Support: 75.00
• Resistance: 82.00

DXY: US Dollar Climbs Ahead of Non-Farm Payrolls

Key takeaway:

• The US dollar advanced against all major currencies on renewed risks surrounding the Strait of Hormuz boosted demand for the greenback.
• The dollar also received support from encouraging US labour market data.
• Markets are now awaiting the official US employment report from the Department of Labor, scheduled for release later today.

Technical Outlook:

• Daily Bias: Bearish
• Support: 99.41
• Resistance: 100.00

EUR/USD: Euro Slides on Weak Eurozone Retail Sales

Key takeaway:

• EUR/USD moved lower as escalating geopolitical tensions around the Strait of Hormuz weighed on global market sentiment.
• Additional pressure came from weaker than expected economic data. Eurozone retail sales unexpectedly fell 0.3% month on month in June, compared with expectations for a 0.1% increase, almost fully reversing May's revised 0.4% gain.
• On an annual basis, retail sales rose only 0.7%, the weakest pace since July 2024, below the expected 1.0% increase and sharply lower than May's 1.9% growth.

Technical Outlook:

• Daily Bias: Bullish
• Support: 1.15000
• Resistance: 1.15591

USD/JPY: Japanese Yen Weakens as Markets Watch NFP

Key takeaway:

• The Japanese yen remained under pressure as the impact of previous intervention continued to fade, while Thursday's US labour market data had only a limited impact on the currency pair.
• FX markets continue to watch for signs of renewed intervention or broader structural measures that could provide additional support for the yen.

Technical Outlook:

• Daily Bias: Bearish with Rebound Potential
• Support: 155.54
• Resistance: 160.00

Oil remains the dominant macro driver after renewed tensions around the Strait of Hormuz reignited supply concerns and pushed energy prices sharply higher.

The move lifted Treasury yields, reinforced expectations that inflation risks remain elevated, and provided fresh support for the US dollar.

Higher yields weighed on gold, while stronger rate expectations and geopolitical uncertainty pressured US equities and kept risk appetite subdued across FX markets.

Attention now shifts to today's US Non-Farm Payrolls report, which will be critical in shaping expectations for the Federal Reserve's next policy move and determining whether the latest USD strength can be sustained.

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