U.S. Dollar Tests New Highs As Oil Markets Gain 7%: Analysis For EUR/USD, GBP/USD, USD/CAD, USD/JPY

U.S. Dollar Rallies As Traders React To War In The Middle East

U.S. Dollar Index tested new highs as traders focused on the war in the Middle East and reacted to rising energy prices.

Oil prices are up by almost 8% as traders realize that military action in the Middle East will not end anytime soon. Qatar and Iran have been forced to halt production at certain energy sites. The Strait of Hormuz, which is the world’s key waterway for energy exports, is de-facto closed.

The American currency benefited from rising demand for safe-haven assets as other assets like precious metals or stocks have found themselves under pressure.

From the technical point of view, U.S. Dollar Index settled above the previous resistance at 98.90 – 99.05. In case U.S. Dollar Index climbs back above the 99.50 level, it will get to the test of the next resistance level, which is lcoated in the 99.70 – 99.85 range.

EUR/USD Pulls Back As Euro Area Inflation Rate Jumps To 1.9%

EUR/USD retreats as traders focus on the huge rally in the oil markets and react to the inflation report from the EU.

The report indicated that Euro Area Inflation Rate increased from 1.7% in January to 1.9% in February, compared to analyst forecast of 1.7%. Core Inflation Rate grew from 2.2% to 2.4%, while analysts expected that it would remain unchanged at 2.2%.

The EU may have to deal with rising inflation at a time when energy prices are rising. European natural gas prices gained roughly 75% since the start of the conflict in the Middle East. In case the conflict does not end soon, the European economy will find itself under strong pressure.

Currently, EUR/USD is trying to settle below the support at 1.1585 – 1.1600. In case this attempt is successful, EUR/USD will move towards the next support level at 1.1500 – 1.1515. RSI is in the oversold territory, so the risks of a rebound are increasing.

GBP/USD Tests New Lows

GBP/USD tested new lows as traders remained focused on geopolitical developments. Rising energy prices are bearish for the British pound.

If GBP/USD stays below the support at 1.3315 – 1.3330, it will move towards the next support at 1.3200 – 1.3215.

USD/CAD Retreats From Session Highs

USD/CAD pulled back from session highs as traders reacted to the strong rally in the oil markets. Other commodity-related currencies found themselves under strong pressure as precious metals prices collapsed.

The nearest support level for USD/CAD is located in the 1.3650 – 1.3665 range. A successful test of this level will open the way to the test of the next support at 1.3585 – 1.3600.

USD/JPY Gains Ground As Traders Bet On Dovish BoJ

USD/JPY continues to move higher as traders bet that high oil prices will put significant pressure on the Japanese economy. As a result, BoJ will be forced to keep rates unchanged and will ignore inflation reports. At this point, there are no positive catalysts for the Japanese yen.

It remains to be seen whether BoJ is ready to defend the yen in case USD/JPY climbs above the nearest resistance at 158.00 – 158.50. If USD/JPY manages to settle above this level, it will gain additional upside momentum and move towards the next resistance, which is located in the 161.50 – 162.00 range. RSI is close to the overbought territory, but there is enough room to gain momentum in the near term.

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