US dollar clings to gains

US dollar stays firm

The US dollar finished higher overnight, but only marginally so as the peak-Ukraine rally in equities caused the greenback to give back much of its intraday gains. The dollar index finished 0.21% higher at 96.75, before climbing another 0.12% to 96.86 in Asia today.

Given the bargain hunter mentality sweeping the equity markets, it is interesting that the US dollar continues to trade firm, even more so given the move lower by US yields across the curve overnight. That implies that haven flows are still quite substantial and are heading into the US dollar and the US bond market. Buying the US dollar remains the easiest way to express the war on Ukraine by Russia, and as such, despite the noise in equity and energy markets, I expect currency markets to continue reflecting those concerns. A powerful set of US data this week or hawkish testimony from Powell will put a 0.50% hike this month by the FOMC front and centre, another bullish US dollar factor.

EUR/USD remains at 1.1200 and seems to be weathering the storm at these levels. 1.1100 remains its critical support. GBP/USD is holding at 1.3400 with 1.3300 and 1.3550 its immediate support/resistance. The US/Japan rate differential is back in play on USD/JPY, with the fall in US yields overnight dragging USD/JPY back to 115.15. Only a loss of 114.50 suggests a deeper correction.

AUD/USD and NZD/USD rallied impressively by 0.45% overnight, before retreating by 0.20% today to 0.7255 and 0.6755 respectively. Like the euro, both antipodeans are weathering the Eastern European storm at the moment and looking at the charts, both could be in the process of forming longer-term inverse head-and-shoulder formations, bullish structures. There is still water to flow under the bridge before this is confirmed though, and a mid-March FOMC and Ukraine developments to negotiate.

While the USD/CNY remains anchored at 6.3100, Asian currencies also rallied overnight, although only back to their starting points from the open yesterday morning. Asian FX remains acutely vulnerable to inflation developments, oil rallies and negative developments in the Ukraine-Russia situation.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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