Morning Note: Ceasefire Boosts Markets; Dovish Fed & RBA Rate Cut Bets Emerge

Stocks Rise as Trump Talks Ceasefire

U.S. stock futures rose following President Donald Trump’s announcement of a ceasefire timeline between Israel and Iran, referring to the recent conflict as “The 12-Day War.” The development eased investor concerns after a tense weekend during which the U.S. launched strikes on Iranian nuclear facilities, signalling deeper involvement in Israel’s confrontation with Tehran.

Iran’s limited retaliation, a strike on a U.S. base in Qatar that caused no casualties, helped soothe markets by reversing a spike in oil prices and weighing on energy stocks. Meanwhile, investors are turning their attention to Federal Reserve Chair Jerome Powell’s testimony before Congress on Tuesday and Wednesday, seeking more insight into the central bank’s interest rate outlook.

(S&P 500 Index Daily Chart, Source: Trading View)

From a technical analysis perspective, the S&P 500 index has been in a bullish trend since early April 2025, rebounding from the support zone of 4,900 – 4,960, as evidenced by a series of higher highs and higher lows. Recently, it broke above the swap zone of 5,800 – 5,850, retested it, found support, and continued moving upward. This valid bullish structure may potentially drive the index toward a retest of the resistance zone at 6,100 – 6,150.

Bowman Turns Dovish, Dollar Under Pressure

The U.S. dollar weakened on Monday after Federal Reserve Governor Michelle Bowman, a known policy hawk, signalled support for potential interest rate cuts in the near future. Bowman, the Fed’s vice chair for supervision, stated that growing risks to the labour market and reduced concerns about inflation despite ongoing tariffs suggest the time to ease monetary policy may be approaching. Given her typically hawkish stance, markets interpreted her comments as a notable shift toward dovishness, increasing pressure on the greenback.

Adding to the dollar’s decline were rising expectations that Iran’s response to recent U.S. airstrikes on its nuclear facilities would remain limited, helping reduce geopolitical risk. Fed funds futures now price in 58 basis points of rate cuts by year-end, implying two 25-basis-point reductions are almost certain, with growing odds of a third.

(U.S Dollar Index Daily Chart, Source: Trading View

From a technical analysis perspective, the U.S. Dollar Index has been in a bearish trend since January 2025, characterised by lower highs and lower lows. Recently, it retested the swap zone of 98.40 – 98.70 but was rejected, pushing the index lower. This valid bearish structure may potentially lead to further downside movement.

Aussie Rallies on Ceasefire Hopes, Rate Cut Bets

The Australian dollar rebounded from recent lows on Tuesday as optimism over a potential ceasefire between Israel and Iran boosted global risk sentiment, pushing oil prices lower and easing inflation concerns. The Australian dollar, often perceived as a liquid proxy for risk appetite, climbed to $0.6490, recovering sharply from a five-week low of $0.6373 touched earlier in the session.

If the ceasefire holds, it could remove a key obstacle to the Reserve Bank of Australia (RBA) cutting interest rates at its upcoming meeting on July 8. Markets are currently pricing in an 80% chance of a 25-basis-point cut from the current 3.85% cash rate. However, that probability may shift depending on Wednesday’s Consumer Price Index (CPI) report.

(AUD/USD Daily Chart, Source: Trading View)

From a technical analysis perspective, the AUD/USD currency pair has been moving in a choppy but overall bullish trend since April 2025. Recently, it rebounded from the support zone of 0.6360 – 0.6390 with strong bullish momentum. This valid price action may potentially continue driving the pair higher to retest the resistance zone of 0.6520 – 0.6560.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.