Markets Stay Cautious Ahead of Major Geopolitical Milestone; Oil Jumps, Dollar Steady- comments by Century Financial

Monday’s ISM Services data added to the unease. While the US economy continues to broadly expand, the report painted a softer picture as prices paid climbed to the highest since 2022, while the employment component fell into outright contraction, its worst reading since December 2023. US swap markets are now pricing in a small 11% probability of a rate hike by September, reflecting growing concern that inflation could force the Fed’s hand.

Monday’s equity gains fit the familiar pattern of early-week relief rallies that have defined trading since the conflict began, with the S&P 500 having retraced roughly half its losses since the war started. But conviction remains thin. The session lacked any clean cyclical-versus-defensive split, with both trading in tandem as Iran headlines continue to drive the tape. Looking ahead, markets remain highly headline-driven.

On the charts, SPX faces resistance from support turned resistance at 6,630 levels, with the next resistance at 200 day SMA of 6,647. On the downside, support for the index remains at previous support of 6,550. The options market reinforces that cautious picture. Heavy put buying across April and May expiries has dealers short gamma, amplifying intraday moves in both directions. Skew remains elevated not just on the back of persistent put demand but also absence of call buying, leaving the market vulnerable to sharp squeezes on any positive headline, but also equally exposed to a quick air pocket lower on any escalation tonight.

Yesterday’s Non-manufacturing PMI figures came in at 54, lower than the 54.8 expected and last month’s 56.1, suggesting a slight slowdown in the services sector; however, the subcomponents from ISM’s report complicated the Dollar outlook. The Employment Index fell sharply from 51.8 to 45.2, marking a new low since December 2023. ISM Non-manufacturing Prices rose from 63 to 70.7, with ISM respondents citing higher fuel costs and Iran-related supply disruptions. The New Orders Index rose to 60.6 from 58.6, marking a 3-year high. These conditions of a slowdown in the labour market, rising costs, and persistent demand are directly pointing towards a stagflation scenario. This makes the Fed’s interest rate outlook hard to gauge, complicating the dollar’s direction. Meanwhile, tensions remain high on the war front in the Middle East with Trump’s deadline for a deal with Iran quickly approaching, keeping a lid on any significant downside for the US dollar.

From a technical standpoint, despite the slight decline on Monday, the dollar index remains supported by its 9-day EMA, currently near 99.935, and by an upward-sloping trendline formed by connecting multiple lows since late January, suggesting a strong short-term market structure. On the upside, further momentum could potentially come if the index breaks above the 100-EMA on the weekly chart. The EUR/USD pair remains under pressure, trading under its 200-day EMA, and currently its 9-day EMA resistance.

This backdrop is keeping markets cautious. Traders are largely staying on the sidelines and avoiding new positions as headline risk remains very high ahead of the deadline. The lack of clarity is limiting strong price moves in gold, keeping it range-bound despite higher volatility. At the same time, macro conditions remain a headwind. Hawkish Federal Reserve expectations continue to support the US Dollar, which is negative for gold as it’s a non-yielding asset. Any escalation after the deadline, especially around energy supply, could quickly shift sentiment, increase safe-haven demand for the dollar, and pressure gold prices.

Technically, gold is trading within a tight symmetrical triangle, showing consolidation before a breakout. A move above $4,665 could trigger buying and push prices toward $4,750–$4,800. On the downside, $4,600 remains key support. A break below this level could lead to further selling, with $4,400 as the next major support. This makes the current range very important, as the next move is likely to be strong.

Silver is also consolidating in a tight range between $69.3 and $73.5, which are acting as key support and resistance levels.

Despite some headlines suggesting a possible ceasefire, the likelihood of a quick resolution remains low. Oil flowing through Hormuz is still operating at only about 10% of normal levels, leaving a significant portion of global supply disrupted. This suggests the market may still be underestimating how tight conditions truly are.

Physical indicators also point to strong demand and limited supply, with spot prices trading well above futures. At the same time, logistical challenges like tanker shortages and higher insurance costs are adding further pressure.