USD Drops as US-Iran Draft Deal Eases Geopolitical Tensions, Oil Falls

The US dollar is facing downward pressure following reports from Iran's ILNA news agency that the US and Iran have reached a draft agreement mediated by Pakistan. The deal reportedly includes an immediate and comprehensive ceasefire on all fronts, mutual commitments to refrain from targeting infrastructure, and guaranteed freedom of navigation in the Persian Gulf and the Strait of Hormuz under a joint monitoring mechanism. Critically, sanctions on Iran would be gradually lifted in exchange for compliance, with negotiations on outstanding issues set to begin within seven days. This development carries significant forex implications: crude oil prices are expected to decline on the prospect of increased Iranian supply returning to global markets, pressuring USD/CAD lower as the Canadian dollar's oil correlation weakens alongside falling crude. Safe-haven flows into JPY and CHF may unwind, supporting USD/JPY and pushing EUR/CHF higher. The Iranian rial and regional currencies could see relief rallies. Traders should monitor official confirmation expected in the coming hours, as any breakdown in negotiations could swiftly reverse these moves. Key levels to watch include WTI crude support near recent lows and USD/JPY resistance zones.