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Talks of a ceasefire spark US Dollar selloff

March 29, 2022 11:41 AM

Headlines were abundant this morning as Ukrainian and Russian delegates left their first face to face round of talks in nearly two weeks. After entering the meetings Zelensky hoping for a ceasefire, top Russian negotiator Medinsky said that the talks between the 2 sides were constructive and Russia agreed to scale back military operations near Kyiv.  Zelensky was willing to say that Ukraine would go to neutral status, without foreign military bases, if a security guarantee is put into place.  Possible backers of the security guarantors could be Turkey, Israel, Canada, and Poland according to sources.  Ukraine is saying that this is enough of a compromise for a Zelensky and Putin meeting, however this has not been confirmed by either side.

As result of the positive news out of the Russia/Ukraine war, the US Dollar index (DXY) pulled back dramatically.  On a 60-minute timeframe, the DXY had been trying to break above 99.30 for days but failed to close above it.  With today’s selloff, the US Dollar Index pulled back aggressively and broke below the upward sloping trendline from March 17th.

Source: Tradingview, Stone X

However, as dramatic as the move was on a 60-minute timeframe (over 100 pips), the DXY has been trading in a range between 97.71 and 99.37 since March 4th.  Price must break either side of that range for the price move to be meaningful.  If the DXY breaks below 97.71, the next support level is the bottom trendline of the upward sloping channel that the pair has been in since May 2021, near 96.60, then horizontal support at 96.23. If price reverses and shrugs off this move lower, resistance above 99.37 isn’t until the highs from April 2020 near 100.87.

Source: Tradingview, Stone X

As the Euro makes up 57.6% of the US Dollar Index, one could expect that EUR/USD would move opposite the DXY.  On the 60-minute timeframe, EUR/USD broke above the downward sloping trendline dating back to February 25th and is attempting to take out horizontal resistance at 1.1143, the highs of the range dating back to March 2nd.

Source: Tradingview, Stone X

On a daily timeframe, notice that the top, downward sloping trendline of the channel crosses just above the horizontal resistance  at 1.1165. Above there is horizontal resistance at 1.1280 and again near 1.1500.  Support is at the lows from Monday at 1.0945, then the low from March 7th at 1.0813.

Source: Tradingview, Stone X

With the positive headlines regarding the Russia/Ukraine conflict, the DXY has been selling off and EUR/USD has been bid.  However, keep a close eye on the headlines.  Any sign of negative news and the currency pairs can reverse quickly. 

 

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