Dollar Muted Despite Oil Price Spike
USD Lower on Monday
The US Dollar continues to tread ground on Monday with the DXY holding beneath the 99.15 level support, now turned resistance, but avoiding a deeper sell off so far. Over the weekend, the first round of peace talks between the US and Iran failed leading to Trump announcing a blockade on the Strait of Hormuz where the US intends to stop any ships from passing (in a bid to deliver a blow to Iran which has continued to ship oil to China). Oil prices have gapped higher at the start of the week accordingly though USD has failed to follow energy prices higher. This perhaps suggests that traders are taking some comfort in the fact that talks have at least begun (after fears that Iran would not engage). Additionally, Trump has so far held off from announcing any strikes on Iranian energy infrastructure. Still, if oil prices continue to push higher, USD should start to find fresh support before long.
US Inflation Jumps
On the data front, Friday’s inflation reading showed headline annualised CPI surging to 3.3% from 2.4% prior, just below the 3.4% the market was looking for. With inflation soaring and energy prices still showing no signs of moving lower, hawkish Fed expectations should keep USD underpinned moving forward particularly if we start to hear the Fed turning more hawkish accordingly. For now, though, the war remains the key driver and any positive headlines around negotiations should keep USD anchored lower.
Technical Views
DXY
For now, the index remains below the 99.15 level and with momentum studies bearish, risks of a further push lower are seen. 98.24 is the local support to note, with a retest of the broken bear channel sitting below. Above 99.15, focus will turn back to the highs around the low 100s.
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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.