Dollar Surging on Higher Oil/Hawkish Fed Risks
Dollar Rallying Again
The US Dollar is pushing higher into the end of the week, tracking the moves we’re seeing in oil as hopes of a near-term end to the Iran war fade. Reports that the US is considering sending a further 10,000 troops to the Middle East is fuelling an uptick in safe-haven demand on Friday with DXY on course for its best month since July last year. Trades have been grappling with conflicting news flow this week and a lack of clarity over whether the US and Iran are engaged in talks or not. However, news of US troop movement and reports that Iran has mobilised up to 1 million troops is creating plenty of uncertainty ahead of the weekend with D likely to continue higher into early trading next week.
Higher Oil/Hawkish Fed Risks
Along with the uptick in safe-haven demand we’re seeing, USD is also pushing higher on the perception that elevated energy prices will force the Fed to turn more hawkish. At its recent meeting, the central bank cut its projected rate cuts this year to one from two previously. This is slightly at odds with the market which is now no longer pricing in a cut this year. We’ve also heard some Fed members this week warning that rates might need to stay higher for longer as a result of inflationary risks. As such, there is room for USD to push higher if oil prices stay up with the view that the Fed will eventually change course on projecting any easing this year unless we get a positive breakthrough on US/Iran talks.
Technical Views
DXY
The correction lower has found strong support into a test of the 99.15 level with price now turning back up towards the 100.36 level. This is a key resistance level for the market having acted as a high watermark since may last year. A such, a break of this level will be an important development, putting focus on 101.91 as the higher target.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.