The dollar has not reacted to the bombing of Israel and has remained within a narrow range against all currencies. The U.S. banking holiday may have impacted the volatility, but given the immense disruption in the energy market, it is perplexing the FX markets are so calm. The difficulty in monitoring markets resulting from a tragedy with this potential impact is nearly impossible. Oil ($86) is higher by almost 5% but remains below its recent high.

Last week, the dollar rallied but failed to extend its strength to new highs as it quietly fell back as positions were unwound heading into the weekend.

Trading a market impacted by breaking news is best done by picking levels to buy or sell, regardless of the short-term momentum.

Inflation numbers in the U.S. will be released this week. Unless these are much different than expected, the focus will be on the Middle East.

EUR (1.0565): Last week’s low of 1.0488 held for the second time in as many weeks. The resistance level of 1.0620 is critical for further euro strength. Above this level, 1.0800 will be the next objective. Support is at last week’s low of 1.0488. A close below that should extend the single-currency’s weakness to 1.0250.

GBP (1.2240): The current rally in the GBP is running out of momentum. Last week’s low of 1.2037 will now be support. 1.2260 should be a critical resistance level. The pound may move to 1.2400, but the current rally is losing steam. Selling GBPs against 1.2400 is an excellent way to recover if one missed selling quid earlier in the month.

JPY (148.50): USD/JPY has had the strangest couple of weeks. Pushing to 150.16 was followed by a fall to 147.25. The market is nervous about BoJ’s intervention. This move was quick, and there was no indication that the central bank was “sniffing” around the market. The dollar then rallied back to 149.50 where it has traded since. With the Middle East bombing, the market quietly bought the yen as a haven. 147.25 and 150.16 are the levels to trade around. Sell dollars above 150.00 and buy them below 148.00.

CAD (1.3590): We have discussed the dull and weakening Canadian dollar as oil rallied to near $95/bbl over the last several weeks, which has been perplexing. Last week, oil fell to $82/bbl, and the CAD rallied! Now, USD/CAD is showing some weakness. The high last week was 1.3765, traded briefly before the Canadian buyers took over. 1.3450 is a significant support level. Below that, it is 1.3200 and 1.2850.

MXN (18.1600): The dollar’s rally against the peso touched 18.5000 before the sell-off. Resistance is 18.50 and above; the dollar can target 19.00! We expect consolidation in USD/MXN as this week begins to unfold. 17.7000 is support.

CNH (7.2900): The Chinese currency has settled (with the help of the PBOC) into a very narrow range. Identifying factors that would create a reason for USD/CNY to make a meaningful move in either direction is difficult. There will likely be no change until the week begins to unfold. Remember that a weaker CNY is more welcome to the Chinese than a stronger one.