The escalating conflict in the Ukraine, less-than-dovish Fed speakers, and solid US manufacturing survey data pushed the US dollar index (DXY) to a multi-year high of 97.80 on Wednesday. Investors scrambled to buy US dollars for a second consecutive day as they weighed up increasingly more punitive sanctions on Russia and intensified fighting in the Ukraine.
Markets are volatile, and the US dollar, as the ultimate safe-haven asset, is fully mixed up with the Ukraine conflict. As we pointed out in early February, the DXY had more-or-less been trading within a range of 96.940 and 95.495 since December last year. Short breaks to the upside and downside of that range had occurred in the past but failed on the retest.
This time around, however, the DXY has broke above its range, retested, and then continued to new highs. Furthermore, the DXY has suddenly moved further away from its 4-hour 200 EMA. Whilst much of the recent move is driven by geopolitical risk concerns that can easily ebb and flow, the latest shift higher in the DXY is not insignificant.
