US Dollar Price Forecast: DXY Tests $98.30 as Hormuz Blockade Returns – Are GBP/USD and EUR/USD Safe?

Market Overview

The US Dollar Index (DXY) kicked off the week on a fairly solid note, hovering around the 98.00-98.40 mark, thanks in part to the renewed tensions between the US and Iran which created a safe haven effect. But the optimism that had been building from last week’s temporary reopening of the Strait of Hormuz and ceasefire signals quickly deflated when news came in that the strait was closed again, & the US took an Iranian ship – plus reports of ships being involved in incidents. And to make matters worse, there were still nothing but stalemates in talks (they were supposed to expire on April 22). All this combined with inflation fears driven by the price of oil and a stronger dollar kept investors guessing about the Fed’s next move.

The Euro came under pressure from all the same geo-political drama, with the pair trading between 1.1750-1.1770. While it initially dropped off, the Euro managed to bounce back a bit when there was any talk of de-escalation – but then it promptly got knocked back down whenever the tensions flared up. The ECB’s policy remains very much tied to the data – and while no immediate rate changes are expected, the energy price spike is making life a lot harder for the ECB to predict what’s next.

The Pound was moving in the same direction as the Euro – but its specific range was a bit harder to pin down, trading between 1.3500-1.3540 with not a lot of conviction one way or the other. On the plus side the UK’s recent GDP numbers were a bit of a surprise, and the jobs numbers were pretty resilient too. But on the minus side energy costs are through the roof and that’s adding to the stagflation worries. As for the BoE, they’re still being pretty cautious amid all the wild swings in the dollar and oil prices.

Overall – for now it’s all about the headlines driving the markets – the developments in Hormuz are dominating the news & markets are just waiting for some clearer signals from the diplomats.

DXY Outlook: Dollar Tests $98.30 Resistance Zone

The US Dollar Index (DXY) is sort of stabilizing right now at $98.16 after that sudden big drop, now getting a good look at this key resistance zone that’s perched around $98.30. It’s still sitting beneath both the 50 day EMA and the 200 day EMA – that’s what’s keeping the general trend looking a bit bearish.

A trendline is still capping the upside and recent candle patterns are showing some weak-looking bull-follow-through – you can also see the upper wicks are pretty long.

The RSI is recovering from being way oversold but still doesn’t have much steam going on. If DXY gets rejected below $98.30, you can bet we’ll likely see it drift back down toward $97.60, but a clean break above that zone might finally get it moving toward $98.90.

GBP/USD Analysis: Pound Holds Trendline Support Near $1.3500

GBP/USD is sort of hanging around $1.3510 after that nice big bounce, now getting a good workout at this ascending trendline support. Price is still holding above the 50 day EMA, which is keeping the structure looking a bit more constructive – even with some hesitation near $1.3600 resistance.

The candles on the chart are looking a little bit smaller, which is a good sign – it suggests people are getting a bit more uncertain about what’s going on.

The RSI is sort of drifting lower from overbought levels but its not looking all that convincing. If the pound can hold above $1.3480 we’ll probably see another push towards $1.3580, but if it does break down below this trendline we might see a little pullback toward $1.3400.

EUR/USD Forecast: Uptrend Channel Faces Near-Term Pressure

EUR/USD is floating around $1.1770, pulling back just a little bit inside of this pretty defined uptrend channel. It recently got rejected from the top boundary near $1.1850 and started showing some bearish candles that indicate short term exhaustion in any case.

Still, it still looks bullish as long as it holds above the middle of the channel and that 50 day EMA at $1.1735. RSI is starting to ease itself back down from being way overbought, which is a sign of a pretty normal correction.

A bounce from these current levels could put it right back towards $1.1820 again, but a fall below $1.1730 might start exposing some deeper support near $1.1660.