* US-Iran talks could happen over next two days in Pakistan

* Europe drafts postwar plan to free up Hormuz without US

* S&P 500 retraces all Iran losses, Big Tech, bonds, bitcoin and bullion all bid

* Dollar and Treasury yields lower as risk mood picks up

FX: USD broke down having closed below its 200-day SMA at 98.51 on Monday. The 50-day and 100-day SMAs were also pierced just above. The Dollar Index reached the midpoint of this year’s low to high move at 98.09 before paring losses. The major Fib level (61.8%) of that move sits at 97.49.  Positive risk sentiment and softer energy prices are seeing the dollar war premium erode on hopes for more US/Iran talks this week. We note seasonals are weak for the greenback in April and the buck is underperforming all its peers apart from the yen.

EUR enjoyed a seventh straight days of gains, which hasn’t been seen since the start of December. ECB speakers have still been mildly hawkish with a slight moderation from recent weeks. There’s around 10bps of hikes priced in for the end of April ECB meeting. At least two rate rises are becoming fairly entrenched into money markets. President Lagarde spoke just after the market closed and this was written. The February high around 1.19 is a bull target, with the major Fib level of this year’s high to low move at 1.1826.

GBP pushed higher for a seventh straight day too, last seen just under a year ago. The daily RSI is now firmly in bullish territory and pushing above 60, with fresh cycle highs above 1.35. There seems to be limited resistance between current levels and the mid-February tops around 1.37, with support below 1.3450 where the long-term SMAs reside.

JPY strengthened but prices were still in the consolidation zone around the January 2025 high. PM Takaichi offered a public rebuke of Trade Minister Akazawa’s comments on the BoJ, reinforcing the central bank’s independence. Media are reporting a meaningful price forecast adjustment for the BoJ and possible growth cut at their next meeting on April 28. That could pave the way for more tightening in either June or July. There’s currently around 7bps of hikes priced in from 14bps at the end of last week. That move chiefly came after BoJ Ueda who refrained from providing a clear signal that the bank is preparing to hike rates imminently while adding that there were two-sided risks for inflation.

US stocks: The S&P 500 added 1.17% to close at 6,967, the Nasdaq was 1.81% higher at 25,842 and the Dow Jones settled up by 0.66% at 48,536. The broad-based benchmark S&P 500 index has regained all its losses from the start of the Iran conflict and is less than half of one percent away from record highs. Investors are under-risked and do not want to miss out on the rebound. The wall of worry amid AI disruption, inflation concerns and the fog of war are not putting off buying. Communication Services, Consumer Discretionary and Tech led the gains while Energy was the biggest loser amid three red sectors, as crude prices fell between 4 and 6%. The semiconductor index posted its fifth straight record close. BlackRock rallied as it reported a rise in profits and strong inflows into its ETFs. JP Morgan full-year guidance fell short of estimates though EPS and revenue beat. It shares were lower by 0.82%. United Airlines and American Airlines rallied on reports of a potential merger.

Asian stocks: Futures are green. APAC stocks moved higher on the improved risk mood as Trump said Iran wants to make a deal very badly. The ASX 200 was helped by tech and miners. The Nikkei 225 jumped to near 58,000 with tech dominating and SoftBank and Nec outperforming. The Hang Seng and Shanghai Composite gained but lagged their regional peers on mixed China data.

Gold rose to levels above $4,800 and near the early Apri spike high at $4,857, as signs of diplomatic engagement slightly eased inflation concerns. Copper hit a one-month high and other industrial metals also advanced on optimism around talks, though investors remain cautious over escalation risks.

Chart of the Day – Nasdaq record highs soon?

The equity rebound has been led by the tech sector which means the tech-laden Nasdaq has outperformed. The downtrodden software sector has done the heavy lifting this week with US software rebounding near 7%, and companies like Oracle rallying 18%. The earnings season is likely a big reason along with more positive sentiment. The US is expected to deliver another impressive quarter of results. Consensus looks for 12% earnings growth in Q1 for the S&P 500 as a whole, with an impressive 9% coming from the top line. Tech is the standout as it is expected to print close to an astounding 40% earnings growth. With valuations slightly discounted after the recent slide, equities were cheap and are being snapped up in a 10-day win streak. The record high sits just above 26,000 with the 100-day SMA below at 25,033. The 50-day SMA looks like it is going to move below the 200-day SMA around 22,679/602, which would typically be a bearish death cross.