Dollar rises on oil, Ukraine jitters

March 2, 2022 Share Print 0

The US dollar rallies on higher energy and deepening Ukraine crisis

Overnight, saw another flight to safety that benefited the US dollar as the dollar index surged 0.67% to 97.39, edging slightly higher to 97.42 in Asia. The flight to safety was more uneven this time – EUR/USD and GBP/USD sank, AUD, NZD and Asian EM currencies held their own, although the reasons for that are not immediately obvious to me.

EUR/USD sank 0.86% to 1.1120, where it remains this morning. Notably, it once again held the 1.1100 support region and although there are not many reasons to be long on Euros at the moment, from a technical perspective, the potential seems to be building for a short-squeeze. A new Ukraine-Russia meeting or progress by China in brokering some sort of ceasefire would be enough to spark a 200 point rally in my option. The fall in US yields is also a supportive factor.

Notably, AUD/USD, NZD/USD, Asian EM and the JPY are all holding their own, suggesting that the potential for a short-squeeze is developing in currency markets as they become temporarily overlong US dollars. Any sell-off of the US dollar is likely to be temporary though. A wavering Jerome Powell tonight, or any glimmers of Ukrainian hope as I managed, could be enough to spark a washout of US dollar positions. That is likely to be an opportunity to load up on greenbacks once again, as one theme that has pervaded recent developments is that relief rallies have been short-lived in nature, nothing has changed on that front.

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.

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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.