US Dollar Price Forecast: Dollar Hits 99.35 as Hormuz Shuts – Can GBP/USD or EUR/USD Hold?

Market Overview

The US dollar got off to a flying start this week, and it’s held up well so far. As of right now, the US Dollar Index (DXY), which is a measure of the value of the US Dollar in relation to six key currencies, is trading at 99.25, and that’s a gain of 0.26%.

But the main reason its doing well could be that investors are getting a bit spooked about inflation, due to the big jump in oil prices.

Geopolitical Tensions Send Oil Prices Soaring

Oil prices have gone crazy this week – up by over 25% and now over $100 a barrel, that’s where they were back at the start of the Russia-Ukraine war in 2022. The weekend saw airstrikes launched by Israel and the US against Iranian oil facilities, while Iran hit back with missiles at several oil sites across the Middle East.

Make things worse, they even blocked the Strait of Hormuz by attacking vessels in the shipping channel. The Strait is a key route for Asian oil imports, and if it shuts down, it could cause all sorts of problems with getting oil to where it needs to be.

As you can probably guess, all this is adding to the inflation risks in the US – and that’s why the dollar is doing so well.

Safe Haven Buying in Dollar Strengthens it Further

Plus, the tensions in the Middle East have also made investors feel like they need a safe haven – and the US dollar is looking more attractive than ever. Now everyone’s on tenterhooks waiting to see what happens next in the Middle East – and whether there’ll be any more disruption to the global oil supply.

Think about it – another round of airstrikes or a blockage at the Strait of Hormuz and oil prices will probably go even higher – which means more pressure on inflation and the Fed’s decision-making.

U.S. Dollar Index (DXY) Technical Outlook: Rising Channel Tests 99.68 Supply

The U.S. Dollar Index is trading at 99.35, still stuck inside a rising channel on the 2-hour chart. Price managed to test the 99.68 resistance level – which just so happens to be that 0 Fibonacci mark and a prior swing high – but isn’t really holding on. You can see it’s actually pulled right back down.

The channel structure is pretty clear with higher highs and higher lows, price is supported by the channel base and the 50-EMA which are both sitting pretty low down near 98.90. Those 0.382 and 0.5 Fibonacci retracement levels at 98.87 and 98.62 are pretty much layered support blocks.

Trade Idea: When you see price dip down to around $98.90, it’s time to start looking for a buy signal – target’s $99.68, but make sure price drops below $98.50 before you even think about closing that trade.

GBP/USD Technical Outlook: Descending Channel Keeps Pressure Below $1.3400

GBP/USD is knocking around $1.3340, still pretty much stuck inside a pretty clear bearish channel on the 2-hour chart. Price did bounce up from the $1.3280–$1.3300 support zone, but – like all the other times it’s been up there – it can’t even get over the channel resistance and the 50-EMA, which are both sitting pretty high up near $1.3370–$1.3400.

If price does manage to break above $1.3400 you can probably expect to see $1.3490 come into focus, but if we can’t even manage that and price starts to break down through $1.3300 you might be looking at $1.3250 and the channel base as the next thing on the menu.

Trade Idea: Look to sell near $1.3390 – the obvious resistance level – target’s $1.3300, but keep an eye out in case price suddenly shoots up through $1.3430.

EUR/USD Technical Outlook: Bear Channel Pressures $1.1600 Breakdown

EUR/USD is hovering around $1.1547, stuck inside a pretty clear bearish channel on the 2-hour chart. Price just clawed its way below the $1.1600 level – which was about the 0.236 Fibonacci mark – and is now taking a run at the swing low near $1.1530, which just so happens to be where horizontal support drops in.

The trend is pretty clear too: both the 50-EMA and 200-EMA are generally trending downwards, which tells you the sellers are still in charge. When those recent candles show those tiny little up-ticks with their bars stuck at $1.1600–$1.1640, that’s a pretty clear sign that sellers are hanging around at rallies to knock the price down again.

If price does manage to break below $1.1530, you can expect to see $1.1486 on the radar, but if we see a recovery above $1.1600, that might start to nudge thoughts toward the $1.1679 resistance mark instead.

Trade Idea: Look to sell below $1.1530, with a target at $1.1486, but don’t get caught short if price suddenly kicks up and blasts through $1.1600.