EUR/USD falls to a yearly low on USD strength. Oil falls to a 4-month low as vessels transit the Strait of Hormuz.EUR/USD Falls to a Yearly Low on USD StrengthEUR/USD has fallen to a yearly low as the U.S. dollar climbs to a 13-month high on hawkish Fed expectations, combined with safe-haven flows amid a sell-off in mega-cap tech stocks.The Fed’s policy meeting last week, the first under Chairman Kevin Walsh, has been interpreted as hawkish by markets, with investors pricing in higher odds of a rate hike this year, even as oil prices have cooled to four-month lows.Expectations for a 25-basis-point hike at the July meeting have risen to 36%, up from 8.5% a week ago, whilst the market is pricing in around a 70% chance of a September hike, up from 30% a week ago.Higher rate hike expectations come amid a resilient U.S. labour market and sticky inflation. U.S. Core PCE data this week will be a key focus and could provide further insight into the likelihood of a hike from the Fed.This contrasts with the euro, where the ECB hiked rates in June and could hike rates again. However, investors appear far more concerned about the weak growth outlook than the prospect of higher rates. As a result, the market is increasingly pricing a wider policy divergence between the Fed and ECB, supporting further dollar strength.Data yesterday showed that Eurozone PMIs contracted again in June, with services activity remaining weak. While the pace of contraction slowed compared with May, the data still point to a stagnant economy rather than a meaningful recovery.Meanwhile, in speeches this week, ECB President Christine Lagarde downplayed concerns over second-round inflation effects in a slightly dovish tone. Inflation in the region remains above 3%; however, Lagarde insists there is no evidence yet of inflation expectations becoming de-anchored.Her comments suggest that even if there is another rate hike, the ECB is unlikely to move aggressively beyond the neutral range. That limits the euro’s ability to benefit from higher rates and leaves the currency vulnerable to a stronger U.S. dollar.For now, EUR/USD appears caught between a Federal Reserve that is becoming more hawkish and an ECB that is constrained by weak growth. Unless U.S. inflation shows clearer signs of easing or Eurozone activity improves materially, rallies in the pair may continue to attract sellers.EUR/USD Forecast – Technical AnalysisEUR/USD has broken below its symmetrical triangle pattern and fallen beneath both the 50 and 200 SMA, reinforcing the bearish outlook. The pair dropped to a low of 1.1350.The RSI is approaching oversold territory, suggesting the pace of the decline may slow. However, momentum remains firmly bearish and oversold conditions alone are rarely enough to reverse a strong trend.Sellers will look to extend losses towards 1.1300, the round number, ahead of 1.1200.Any recovery would first need to rise above 1.1400, the March low. Above here, 1.1500 comes into focus. It would take a rise above 1.1620, the mid-June high, to create a higher high.Oil Falls to a 4-Month Low as Vessels Transit the Strait of HormuzOil prices have extended declines, falling more than 1% to a four-month low as shipping activity through the Strait of Hormuz gradually resumes, easing supply concerns.Vessel crossings through the Strait have increased in recent days, although they remain below pre-conflict levels. Estimates suggest around 6 to 7 million barrels per day have recently moved through the Strait, compared with roughly 20 million barrels per day before the conflict.However, with Saudi Arabia and the UAE increasingly using alternative pipeline routes, flows through the Strait may only need to recover to around 14 million barrels per day for Gulf oil exports to return to pre-conflict levels.In effect, the market is no longer trading the risk of disruption but the speed of supply normalisation. The faster exports recover, the greater the risk that the market shifts back towards oversupply later this year.Increased supply, combined with ongoing ceasefire negotiations and expectations of additional Iranian crude returning to global markets, has seen much of the geopolitical risk premium evaporate from oil prices.Investors will now focus on how quickly Middle Eastern producers can ramp up production and restore exports. If supply returns faster than demand improves, oil prices could remain under pressure despite ongoing geopolitical uncertainty.Meanwhile, U.S. crude stockpiles rose by 765,000 barrels in the week to June 19, according to API data.Oil Forecast – Technical AnalysisOil has broken below its symmetrical triangle pattern and recently fell beneath the 200 SMA, dropping to a four-month low of $72.Sellers will look to extend losses towards $69, the March low. Below here, attention could turn to $62.Any recovery would need to push back above the 200 SMA at $73.70. A rise above this level brings $80 into focus, the 61.8% Fibonacci retracement of the $55 low and $120 high.A move above $80 would bring $88 into focus, the 50% Fibonacci retracement.Original Post