US Dollar Price Forecast: Hormuz Tensions Boost DXY – Are GBP/USD and EUR/USD Trapped?

Geopolitical Heat And Economic Crosscurrents – Global Fundamental Analysis

The US Dollar Index ended its last March session at $100.44, just shy of its daily high of $100.65. As the Middle East situation becomes more volatile, investors are stuck between Washington’s hawkish rhetoric and the rumors of a potential ceasefire. This should come as no surprise : the Dollar has been the safe-haven of choice throughout the month, thanks to the added bonus of a resilient job market.

Yesterday’s Impact – The End of Risk Aversion and a Flare in Energy Prices

March 30th was an eventful Monday, to put it mildly. The DXY jumped up roughly 0.2% as tensions in the Strait of Hormuz went from bad to worse. This sent the market into a “risk-off” panic mode, putting the Euro and British Pound through the wringer. Just when we thought all was calm, a glance at crude oil showed it was still hovering around $85, a painful reminder of the ongoing inflationary pressures.

In the US, the focus shifts over to the JOLTs Job Openings numbers – which are expected to be 6.9M (down from 6.9M last time). A stronger than expected print would further cement the idea that the job market is still super tight – and that the DXY will stay strong for the foreseeable future.

The CB Consumer Confidence numbers are also coming in, with a forecast of 88.0 (down from an already pretty low 91.2 last time). A huge drop would be the only thing that might give the Pound and the Euro a bit of breathing room by making the Fed think twice about their big plans.

DXY: Dollar Index Tussling Against Multi-Month Resistance

The U.S. Dollar Index (DXY) is locked in an intense struggle at the $100.637 resistance level. On its 4-hour chart, the price is stuck in an unmistakable rising trendline that has been like a net for the index since way back in February, largely guiding it upwards.

Looking at the candlesticks it’s pretty clear that we’re seeing a series of tops that are just barely failing to crack on – and that’s a pretty telling sign of the significant selling pressure that the bulls are facing as they try to push the price above the psychological $101.00 handle.

If the dollar can’t clear that $100.637 barrier then it’s pretty likely that we’ll see some kind of mean-reversion move kicking in and sending the price back down to the $99.59 support zone. On the flipside, if the dollar can manage a solid 4-hour close above the recent peak then the doors will be wide open for a bit of a rally up to the $101.125 mark.

Trade Idea: Long above a break and retest of $100.70 targeting $101.50 with a stop-loss below $100.10.

GBPUSD: Fib Support Level is Where the Battle Rages On

The GBPUSD pair is fighting to hold on to the critical $1.3233 support level which happens to be the 0.236 Fibonacci retracement – after being knocked back by that sharp rejection from the descending trendline and the blue moving average, the price has shifted into self-preservation mode.

Looking at the candlesticks, we can see a nice “Hammer” formation poking up at the recent low of $1.3159. The RSI bounced up out of oversold territory but is still lingering below 40, which tells us that while the immediate bleeding has stopped the bears are still very much in charge of this story. If GBP can’t make a comeback and get back above $1.3278 then we’re going to see a retest of the $1.3158 floor.

Trade Idea: Long above $1.3250 targeting $1.3350 – or short on a break below $1.3150 targeting $1.3085.

EURUSD: Taking a Plunge Below Key Trendline

The EURUSD pair is really feeling the pinch on its 4-hour chart right now – having finally broken through a long-term ascending trendline it’s slipped on down below the $1.15016 support-turned-resistance level, and it’s just got a bad feeling about it.

Looking at the candlesticks, we can see a run of bearish engulfing patterns which have been followed by some tiny little ‘inside bars’, which are a pretty good sign that we might be seeing a pause before the price plummets even further.

At the moment, the RSI is hovering down around the 40 mark, which tells us that the bears have got some pretty solid momentum going on here, but it’s not quite extreme enough to suggest that the price is going to go crashing to the floor just yet. If this pair stays pinned below $1.15491 then the next logical stop is going to be the swing low at $1.14099.

Trade Idea: Short on a retest of $1.1490 targeting $1.1410 with a stop loss above $1.1530.