The Petrodollar trade is over, Dollar tumbles – EUR/USD, AUD/USD & Dollar Index (DXY) overview

The US Dollar has seen its best days throughout the last two months, with the infamous Petrodollar trade grabbing all the attention from Market participants and flows.

Crude Oil prices, denominated and traded in US Dollars, rose by close to 100% from mid-February to just yesterday, amid a historic and brutal conflict in the Middle East.

A 6-week-long operation led by the US and Israeli armies against the Islamic regime of Iran completely changed the geopolitical picture, which in turn affected Markets in a striking manner.

The de facto closure of the Strait of Hormuz, which facilitates the movement of close to 20% of global Energy commodity flows, has completely rocked inflation expectations and, for the regular Economy and all its participants, prices at the pump.

With much higher petrol prices, entire regions, particularly those dependent on Middle Eastern oil, had to race to hedge against the risk of shortages, and, by doing so, convert their currencies to the US Dollar, which created its own self-fulfilling prophecy.

Add to it pre-existing short-positioning, and a Fed that was starting to get priced for rate hikes as Inflation expectations exploded, and the cocktail for the Greenback was a profitable one.

However, since yesterday evening, the situation has taken quite an unexpected turn. Markets were slowly pricing the potential for a truce, with US pressure to reach a ceasefire extending, but less than 36 hours before the headline, Iran had just rejected a US proposition.

Yet, the pressure from the Trump Administration actually worked, and the two sides reached a deal, albeit still quite a foggy one for now.

The prior ease in tone had formed a double top in the Dollar Index, but the lack of progress in the situation had kept angst high in the currency Markets.

However, yesterday's Ceasefire headline brought the hammer to the US Dollar.

After the news, the Dollar lost close to a percentage point against most of its FX peers, and has boarded a similar move in today's action.

A short-term pullback has emerged in the past few hours, but the uptrend from the past months has taken a decisive turn.

We will look at the Dollar Index, EUR/USD, and AUD/USD to assess the current state of the Market and whether the Dollar will actually suffer from the latest geopolitical truce.

Discover:

• Bulls are back in vengeance after the US-Iran Ceasefire – Dow Jones and US Stock Market Outlook
• Wall Street in ecstasy! It's almost like nothing happened – North American Mid-Week Market Update
• Ceasefire Crash: Oil tumbles 15% as US-Iran deal unwinds global 'fear trade'

The US Dollar has officially broken its January uptrend after today's gap lower in the Dollar Index.

After forming a double top in recent action, sellers have now officially taken control by breaking the 20-Day Moving average (99.75), but stalled at the quintessential 98.70 - 99.00 War Support.

With WTI correcting higher, the USD is following suit, but this for now only hints at a pullback from oversold conditions (in shorter timeframes) – The counter move has now stalled; any continuation higher should stall around 99.50 (Gap fill) and this would offer optimal entries on Dollar shorts.

Levels of interest for the Dollar Index:

Resistance Levels

• 99.40 to 99.50 Momentum Pivot (and Gap Fill level)
• Initial War Spike 99.68
• Weekly range highs 100.00
• 100.00 to 100.50 Main Resistance Zone
• War Highs 100.544

Support Levels

• 98.70 to 99.00 Support (War support)
• 98.57 50 and 200 4H MA (recent lows)
• 98.00 2025 Support
• Support 97.40 to 97.60
• 2025 Lows 96.40 to 96.80 Support

AUD/USD largely reversed its mid-March tumble lower, stalling around its 0.618% Fibonacci level (0.7080).

With a short-term pullback in the US Dollar, AUD/USD bulls could take the advantage again when the RSI eases enough as long as the narrative does not turn again.

The 4H 200-period MA could provide an interesting entry point (0.70170).

Levels of interest for AUD/USD:

Resistance Levels

• 0.7080 rebound highs
• 2023 Highs from 0.71 to 0.7150 Resistance
• 0.71867 March highs
• June 2022 Extremes 0.72 to 0.7230

Support Levels

• 4H 200-period MA - 0.70170
• 0.6970 - 0.70 Major Pivot
• 0.69 to 0.6935 Early Feb Support
• 0.68340 War lows
• Micro-support 0.6850 (+/- 30 pips)
• October 2024 Mini-support 0.6750 (+/- 100 pips)

EUR/USD has officially broken its 1.14 to 1.16 War consolidation zone, and will look to confirm the breakout.

Retesting and rejecting the Major Pivot zone would guarantee a stronger phase ahead for the most popular FX pair.

Levels to place on your EUR/USD charts:

Resistance Levels

• 1.17 to 1.1720 March Resistance
• Rebound highs 1.17213
• Resistance Zone around 1.18 (+/- 150 pips)
• 1.1830 June 2025 highs
• Sep 2021 Highs – Resistance 1.19 to 1.1950 Zone

Support Levels

• Major Pivot 1.16250 to 1.16350
• 1.1540 to 1.1570 War Support
• 1.1475 to 1.15 November Support
• War lows 1.1410

Safe Trades and keep a close eye on Ceasefire news!

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