US Dollar Index

The US dollar index remained stable around 99 last week and is poised to rise by more than 1%, supported by safe-haven demand as escalating conflict in the Middle East and rising oil prices disrupted financial markets. The US-Israeli offensive against Iran has entered its seventh day, while Tehran launched a new wave of missile and drone attacks in the Gulf region. President Trump also stated that he wants to play a role in choosing Iran's next leader, believing that Mojataba Khamenei, the son of the late Supreme Leader, is unlikely to be a candidate. Rising oil prices have exacerbated concerns about a global inflation recovery, strengthened market bets that the Federal Reserve will postpone interest rate cuts, and put pressure on the currencies of major oil-importing economies. Last week, global financial markets exhibited highly sensitive volatility against the backdrop of escalating tensions in the Middle East and a rebound in energy prices. The US dollar index hovered around 99.00, showing clear signs of high-level fluctuations; overall market risk appetite tended to be cautious. Energy prices hit a new high of $80, further amplifying inflation concerns and pushing upward pressure on bond yields, which in turn strengthened the dollar's appeal as a safe-haven asset. Furthermore, if US Treasury yields break through 4.13%, the US dollar index may face pressure at the 99 level, but will generally remain within the 98.50-99.30 range. If yields stagnate and fall back, the dollar will turn to a weak consolidation. Overall, the market has entered a period of equilibrium, with price fluctuations mainly characterized by sideways movement. Attention should be paid to developments in the Middle East.

Last week, the US dollar index exhibited a pattern of strong upward movement, high-level consolidation, and weakening momentum. Technically, it remains bullish, but there is short-term downward pressure. Recent data shows that the US dollar index rose in tandem with the US Treasury yield recovery, from a low of 97.49 at the end of February to a high of 99.68, showing a strong positive correlation. This correlation stems from the fact that when bond yields rise, investors tend to flow back into dollar assets to hedge against global risk exposure. This, in turn, supports the dollar's resilience within the 98.68 (6-day moving average) - 99.68 (nearly three-month high) range. The US dollar index is currently trading around 98.92, above the Bollinger Bands midline of 97.75. The upper Bollinger Band at 99.25 provides resistance, while the lower band at 96.26 provides support. The Bollinger Bands are flat, indicating a consolidation pattern. The MACD histogram is slightly expanding, and the fast and slow lines have formed a golden cross at a low level and are rising slightly, suggesting a weak short-term rebound. The RSI (14) is at 63, neutral to slightly bullish, not overbought, indicating a slowdown in bullish momentum. From a technical perspective, the US dollar index broke through the 98.5 resistance last week, entering a consolidation range of 97.49-99.68. At higher levels, a doji and small bearish/bullish candles appeared, indicating weakening upward momentum and a potential pullback. A pullback to support is expected before further upward movement. If it breaks below 98.68 (6-day moving average), it may test the 98.38 (9-day moving average) - 98.00 (psychological level) area. Once the US dollar index stabilizes above the 99.00 level, it may attempt to test 99.68 (last week's high), or even challenge the psychological level of 100.

Today, consider shorting the US dollar index near 99.06; stop loss: 99.18, target: 98.60; 98.50

WTI Crude Oil

Last week, oil prices rose to $88.66, a high since October 2023, influenced by supply concerns in the Strait of Hormuz. Pipeline alternatives and US production capacity may alleviate pressure. If oil prices continue to rise, the supply risk in the Gulf will intensify, with a short-term target of $95-100. Crude oil has become one of the best-performing mainstream trading instruments, and the market is beginning to price in a scenario where Gulf crude oil exports may be disrupted for a long period. Traders are focusing on the significant decline in shipping volumes in the Strait of Hormuz and whether the situation will continue or ease. Recently, crude oil exports from Gulf countries have declined sharply due to significantly increased difficulty in navigating the narrow Strait of Hormuz, one of the world's most important oil shipping chokepoints. The risk of a direct attack from Iran is extremely high, and the more direct impact is a surge in shipping insurance costs. Meanwhile, OPEC+ plans to begin gradually lifting production cuts next month. Although the current geopolitical situation seems to overshadow other factors, the underlying potential supply glut remains important: many countries outside the Gulf are currently producing below capacity. At the same time, the current crude oil market exhibits a strong risk premium-driven characteristic. The logistical chain reaction triggered by the conflict in the Middle East has shifted from psychological expectations to substantial supply disruptions. The obstruction of the crucial Strait of Hormuz directly threatens approximately 20% of global oil and liquefied natural gas (LNG) supply. Currently, a large number of tankers and cargo ships are stranded in international waters, and the expectation of supply contraction has directly pushed up the valuation center of WTI contracts.

From a technical perspective, WTI crude oil has formed a clear strong breakout structure on the daily chart. The price has now risen above multiple short-term moving averages, with the 5-day and 10-day moving averages beginning to diverge upwards, indicating a shift to a bullish short-term trend. Momentum indicators show the RSI has risen rapidly to the extreme overbought zone of 88, suggesting continued upward momentum, while the MACD indicator has formed a golden cross above the zero line, further strengthening the short-term uptrend. Looking at key price levels, the area around $80 is gradually becoming a short-term support/resistance level. If oil prices can hold above this level, $90.00 (a psychological level) and $93.98 (the September 2023 high) are important resistance levels. A break above these levels could open up further upside potential towards $97.27 (the August 2022 high), with the next target being $100 (a psychological level). However, if geopolitical risks ease, oil prices may experience a technical pullback, with initial support around $85.66 (April 2024 high), and stronger support at the $80 level, a psychological support level based on market consensus. The bears' target is to fill the previous gap to around $67, but unless the conflict is resolved quickly (e.g., a diplomatic breakthrough or supply recovery), this is highly unlikely in the short term.

Today, consider going long on crude oil around $88.35; Stop loss: $88.00, Target: $93.00; $95.00

Spot Gold

At the beginning of last week, spot gold plummeted 4-6% from its historical high of $5420, hitting a low of around $4997.50, a rare single-day drop in recent years. Subsequently, with stable US weekly initial jobless claims data, gold prices rebounded above $5100, exhibiting a typical volatile pattern of "rise-plunge-rebound". In the early stages of the conflict, the situation in the Middle East escalated rapidly, with the US and Israel launching airstrikes against Iran, and Iran retaliating in the Strait of Hormuz. Safe-haven funds quickly flowed into gold and silver. During this phase, geopolitical uncertainty became the core factor driving a short-term rise in gold prices. As the conflict continued, the US dollar index rebounded to around 99. High yields and a strong dollar increased the opportunity cost of holding gold, and the short-term safe-haven effect was overshadowed by macroeconomic pressures, resulting in a 4% drop in gold prices in a single day. This demonstrates the double-edged sword effect of war: the geopolitical safe-haven benefits exist, but are offset by inflation expectations and a stronger dollar. Overall, this round of gold price drops is not due to a failure of the safe-haven logic, but rather a result of the short-term dominance of macroeconomic repricing caused by war-induced inflation. Historical experience shows that after short-term fluctuations (including retesting lows), gold still has strong medium- to long-term upside potential. The current price range (especially around $5,100-$5,200) may be a window for positioning after panic selling, providing an opportunity for a continuation of a structural bull market.

The current decline in gold prices is essentially due to the suppression of safe-haven demand by the "dollar + yield" factor, rather than a deterioration in fundamentals. The oil price and inflationary pressures brought about by the Middle East conflict are a double-edged sword: short-term bearish for gold, but long-term support for a solid bottom. The 14-day Relative Strength Index (RSI) has fallen from overbought to neutral, while the MACD has formed a death cross but the histogram is narrowing, indicating a predominantly volatile market with an unclear trend. Implied volatility has risen to historical highs, indicating market tension, making options strategies more suitable than naked long positions. Current prices have rebounded significantly from last week's low of $4,997.50, but if macroeconomic headwinds intensify (such as a continued strong dollar and rising US Treasury yields), there is a possibility of retesting the $5,000.00 psychological level and $4,997.50. It could even test the $4,864.60 50-day moving average, which represents a technical retest of the bottom (approximately 40-50% in the short term). Caution is needed if bond yields continue to rise, increasing the risk of further declines in gold prices. On the other hand, if yields stagnate, the gold rebound could target the $5,180.80 (10-day moving average) and the $5,200 (psychological level) area. A break above this level would target $5,265 (February 27 high) and further challenge the $5,316 (Bollinger Band upper trendline) level.

Consider going long on gold today around $5,148; Stop loss: $5.142; Target: $5,190; $5,200

AUD/USD

The Australian dollar has performed strongly across the board due to market expectations that the Reserve Bank of Australia may soon raise interest rates again. However, it is poised for its first weekly decline since mid-January as global risk sentiment deteriorates due to escalating tensions in the Middle East. The conflict between the US and Israel and Iran entered its seventh day, pushing oil prices higher on supply concerns and reigniting worries about persistent inflation. At its February policy meeting, the RBA raised the Official Cash Rate (OCR) by 25 basis points to 3.85%, with Governor Michelle Bullock clearly stating that monetary conditions needed to tighten due to upside risks to inflation. Driven by soaring oil prices due to the Middle East conflict involving the US, Israel, and Iran, market expectations for a near-term RBA rate hike have risen to a 33% probability of 4.1%. The market fully anticipates a rate hike in May and expects another before the end of the year. Meanwhile, President Trump claimed the power to influence Iran's next leader, and the US House of Representatives rejected an effort to halt its airstrikes. Rising energy prices and escalating geopolitical risks have strengthened the dollar and prompted changes in interest rate expectations among major central banks. Overall, due to the Middle East conflict, market sentiment remains risk-averse, and the dollar has outperformed its peers.

The AUD/USD pair traded in a sideways pattern last week, initially testing 0.6944 before rebounding strongly, driven by better-than-expected Australian GDP data, and stabilizing above the 0.70 level, indicating short-term bullish dominance. The daily chart shows the AUD/USD pair remaining near the psychological level of 0.7000 last week. The short-term bias appears stable, with prices trading within a narrow range between the 40-day moving average (0.6969) and last week's high (0.7122). The 14-day Relative Strength Index (RSI) has rebounded from a low to around 50, indicating strengthening bullish momentum and no overbought conditions. The MACD shows a golden cross below the zero line, with the green bars turning red, indicating weakening bearish momentum and a confirmed rebound trend. Currently, the AUD/USD exchange rate is turning upwards along the Bollinger Bands, but below them, with widening bands. A sustained hold above the 0.70 psychological level and a break above the upper limit of the short-term trading range would reclaim bullish dominance. On the upside, immediate resistance is at 0.7074, near the 20-day moving average, followed by the psychological level of 0.7100 and 0.7122 (last week's high). A sustained break above 0.7122 would signal a resumption of broader gains towards 0.7141-0.7157 (the February 2023 high + technical resistance). Initial support is seen at 0.7000, a psychological level relatively close to the recent intraday low; a break below this level would expose the 40-day moving average at 0.6969. Further down, deeper support lies at 0.6900 (the psychological level) and the February 6 low of 0.6897.

Consider going long on the Australian dollar around 0.7010 today; Stop loss: 0.7000; Target: 0.7050; 0.7060

GBP/USD

Last week, the pound fell as low as $1.3253, its lowest level since December 3, as investors weighed the potential economic impact of the escalating Middle East conflict against rising inflationary pressures and the possibility of a more hawkish stance from the Bank of England. Regional tensions escalated following reports that US President Trump encouraged Iranian Kurdish forces in Iraq to target Iran, Azerbaijan warned of retaliation after an Iranian missile attack, and Kuwait stated it was intercepting missiles and drones in its airspace. A surge in energy prices is expected to keep European inflation high, limiting the likelihood of a Bank of England rate cut. The UK money market currently assesses less than a 20% chance of a rate cut this month, compared to over 80% before the conflict; meanwhile, UK interest rate futures show less than a 50% chance of a rate cut by the end of 2026. Meanwhile, the pound has recently been one of the better-performing G10 currencies, supported by reduced expectations of further easing from the Bank of England. The bank no longer expects further rate cuts this year due to persistently high UK inflation, rising gas prices, and the UK's sensitivity to energy costs, which could keep UK CPI above target and put pressure on growth and confidence. Since last weekend, the pound has been the fourth best-performing G10 currency, outperforming the euro, which is hovering at the bottom of the table. The pound's recent outperformance of the euro may stem from market disappointment regarding the prospect of a Bank of England rate cut in the coming months.

The pound/dollar pair traded in a low-level consolidation pattern last week, with a bearish correction. Its short-term direction is highly dependent on expectations of escalating conflict in the Middle East, while the medium-term downtrend structure remains intact. The pound/dollar pair found initial support again near the 1.3300 (psychological level) and 1.3308 (lower Bollinger Band) area on the daily chart, which should now be key pivot points for short-term traders. The MACD histogram remains negative, indicating that the MACD line is below the signal line and close to zero. The 14-day Relative Strength Index (RSI) is at 39.84 (neutral to bearish) after rebounding from earlier lows, suggesting that upward attempts may remain fragile. Bullish momentum is limited. Regarding the moving average system, the 50/100/200-day simple moving averages on the daily chart are all flat/downward, with the exchange rate trading below these moving averages, indicating a medium-term bearish bias. The 200-day moving average (around 1.3444) serves as a short-term support/resistance level. Since the spot exchange rate has broken below the 200-day simple moving average at 1.3444, the bias is cautiously bearish, suggesting a correction phase within a broader uptrend. The recent pullback from the 1.3869 (January high) area coincides with weakening momentum, with the Relative Strength Index (RSI) falling to 39.84 and remaining below the 50 midline, reinforcing downward pressure rather than indicating oversold conditions. This will likely pressure the deeper 1.3300 (psychological level) and 1.3308 (lower Bollinger Band) retracement areas, consistent with sellers regaining short-term initiative. The next level to watch is the 1.3253 level, the low of last week. If the closing price rises above 1.3400 (the psychological level), the initiative will be handed over to the buyers. Once the rebound reaches above the 200-day moving average at 1.3444, a short-term support/resistance level, it may reverse the recent weakness and continue to rise to the 1.3500 level.

Today, consider going long on GBP around 1.3380; Stop loss: 1.3370, Target: 1.3440; 1.3450

USD/JPY

Last week, USD/JPY fluctuated slightly above its six-week high of 158. After a pullback from the previous high of 159.45, it quickly found support at the trendline and rebounded. The current market context is clear: escalating geopolitical tensions between the US and Iran have triggered safe-haven flows into the US dollar, leading to a significant reduction in market expectations for a Fed rate cut this year; in Japan, the latest consumer price index rose by 1.5% year-on-year, falling below the Bank of Japan's 2% inflation target, further delaying expectations of a rate hike. Fundamental and technical factors combined to create a distinct divergence in the USD/JPY exchange rate. The core driver of the current dollar strength is the waning expectations of a Fed rate cut. The market initially believed that a slowing US economy would prompt the Fed to accelerate easing, but a series of recent data indicates robust economic growth. January's non-farm payrolls exceeded expectations, and coupled with rising oil prices due to geopolitical conflicts leading to inflationary stickiness, Fed policymakers remain highly cautious about cutting rates too quickly. Higher oil prices are pushing up the consumer price index. In this environment, safe-haven funds are shifting from risky assets to dollar-denominated assets, creating a positive cycle. In contrast, while low-interest-rate currencies still retain their financing attributes, the widening yield gap has reduced their relative attractiveness. The USD/JPY exchange rate thus benefits from two supports: firstly, expectations of a tighter Fed policy path, and secondly, US economic data confirming resilience.

Last week, the USD/JPY pair generally exhibited a high-level, slightly bullish trend. After a significant gap up at the open, it fluctuated repeatedly within the 156.50-158.00 range. The daily bullish structure remains intact, but upward momentum is slowing, facing key resistance levels, and a short-term directional decision is imminent. The USD/JPY exchange rate recently retreated from its highs to near the trendline before quickly stabilizing and rebounding, currently trading steadily above 157.50. Technically, the MACD indicator remains positive, with the histogram showing a gradual recovery in momentum. The RSI fluctuates around 62.29, remaining in a neutral range, neither overbought nor oversold, indicating a balance between bullish and bearish forces with no clear directional signal. Fundamental drivers are more crucial. Signs of renewed acceleration in the US economy and escalating geopolitical risks are jointly boosting the US dollar's safe-haven appeal, while the yen continues to be supported by interest rate expectation discrepancies. The daily chart shows a "piercing pattern" in the latter half of last week, suggesting that buyers outnumber sellers at current price levels. However, the risk of intervention by Japanese authorities could limit the pair's upside potential near 158.00. To resume its bullish trend, USD/JPY must break through the March 3 high of 157.97 and the psychological level of 158.00. This would present an opportunity to expose the 158.69 (upper Bollinger Band) level, followed by 159.45 (January 14 high), and then the 160.00 level. On the downside, watch the 156.09 (14-day moving average) and 156.00 (psychological level) area; a break above these levels would target 155.38 (20-day moving average) and the 155.00 level.

Today, consider shorting the US dollar near 158.10; stop loss: 158.30; target: 157.30; 157.20

EUR/USD

Last week, the euro traded below $1.16, near its lowest level since January 16, as investors weighed escalating Middle East conflict against rising inflation risks. Tensions have escalated in the region as US President Trump encouraged Iranian Kurdish forces in Iraq to target Iran, prompting Azerbaijan to warn of retaliation and Kuwait to say it was intercepting missiles and drones in its airspace. The surge in energy prices triggered by the conflict is expected to keep inflationary pressures in Europe high, reinforcing market expectations that the European Central Bank may shift to a tighter monetary policy. Several policymakers warned on Thursday that eurozone inflation could rise while economic growth could weaken if the war with Iran continues and spreads to other countries. Higher energy prices negatively impact the euro/dollar exchange rate, but recent repricing by the ECB has narrowed the euro/dollar swap spread to some of its tightest levels since 2024. Therefore, while high energy prices have a clear negative impact on the euro/dollar, interest rate differentials provide a modest offset. This provides some support for the euro, with the 1.1500–1.1530 area considered short-term support, while German data and energy price movements will guide the direction. The currency market currently prices a roughly 60% probability of a rate hike by the ECB in December and a 90% probability by June 2027.

The euro traded with a generally weak and volatile bias against the dollar last week. The pair has found support and stabilized after bottoming out. While short-term bearish sentiment is dominant, oversold signals are emerging, suggesting the latter half of last week will likely see low-level consolidation and correction. On the daily chart, EUR/USD is trading around 1.1600. The short-term bias is slightly bearish as the pair has broken below the 65-day and 100-day simple moving averages, which have flattened out around 1.1756–1.1696 and lost upward momentum in front of the still-rising 200-day simple moving average (around 1.1673). The 14-day Relative Strength Index (RSI) has fallen to 33.42, nearing oversold territory, reinforcing downward pressure rather than indicating a completed weakness. The Average Directional Index (ADX) has risen from the low 20 area, suggesting the bearish trend is strengthening after the previous consolidation period. Immediate resistance is at the 200-day simple moving average at 1.1673; a break above this level would target 1.1696 (the 100-day simple moving average). And the 1.1700 (psychological level) area. To alleviate the current downward momentum, a rebound above this area is needed, with 1.1756 (65-day simple moving average) being the next hurdle. On the downside, the pair is testing support at 1.1530 (this week's low) and the 1.1500 (psychological level) area; a clear break below this level would pave the way for 1.1468 (last November's low). A deeper decline would expose support at the 1.1400 level.

Consider going long on the Euro today near 1.1595; Stop loss: 1.1583; Targets: 1.1640, 1.1650

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