Brent crude breaks to the upside
Geopolitics has been front and centre this week with brinkmanship between the US and Iran, alongside the American military build-up in the Med and Middle East. Comments from President Trump at the end of last week, saying that regime change would be best for Iran, has obviously underpinned support for Brent. Trump suggests Iran now has 10 days to reach a nuclear agreement. Betting markets put a 51% probability of a military strike by March 15. Currently, the huge massing of US military hardware makes it increasingly hard to find a path to de-escalation. The question now seems to be how long will action take and what the goal of the US is. A short and limited campaign like we saw in June 2025 could see an initial spike in oil prices retrace. The flip side to this would be a tone which is more de-escalatory and should see the market start pricing in a smaller risk premium, which would allow more bearish oil fundamentals to take centre stage, driving prices lower. After consolidating around a major Fibonacci retracement level (38.2%) of last year’s high and low at $67.24, Brent has pushed higher above the midpoint of that move at $70. The late July top is $72.79 which tallies with the next major Fib (61.8%)
S&P 500 rangebound
The benchmark broad-based US index has been going nowhere this year and is virtually flat so far. In contrast the Dow Jones, less tech-heavy and full of more defensive stocks, has risen close to 3% while overseas indices like the FTSE 100, full of energy, healthcare and consumer staples stocks is up over 7% year-to-date. Tech has been the major drag, with initial rotation and the AI disruption trade taking centre stage. On the other side, utilities and real estate have risen 5% only in the last week. Consumer staples have surged 10% in the past month. Health care is up almost 20% in the past six months. But is this defensive comeback premature, as it is not supported by a big weakening macro backdrop. Instead, these “HALO” sectors as they have been called, have provided refuge for investors in the current catch-all AI market selling. Will there be some reversion for cyclicals when focus shifts back to fundamentals? Obvious major resistance sits around 7,000 while the 50-day simple moving average (SMA) is 6,894 and the first minor Fib level at 6,698.
EUR/USD clings to 50-day SMA
The euro is mid pack among its peers versus the dollar% month-to-dat., currently losing around 0.7%. Shifting geopolitical risks and rising oil prices have weighed on EUR sentiment and its terms of trade as an importer of crude. But the single currency remains supported by interest rate yield spreads that sit near multi-year highs. After hitting levels last seen in June 2021 at 1.2082 in a few weeks ago, prices found support at the 21-day SMA before rebounding, but finding resistance at the September 2025 spike top at 1.1918. The recent dip has seen prices fall to the 50-day SMA at 1.1770 as the daily RSI slides into bearish territory below 50. Bear targets include the 200-day SMA at 1.1646 which worked as good support in mid-January, and the 100-day just above at 1.1687.