The US dollar has been strong since the middle of 2021. However, in recent weeks this strength has been a little more uncertain. The dollar (USD) has been seen as a haven asset during the war in Ukraine, but that does not mean guaranteed outperformance versus major forex. There is a key split that is occurring as commodity currencies have outperformed. We look at the current trends amongst major forex.

  • Moves on real yields have been uncertain for the USD
  • Commodity currencies have been strong, with JPY a crucial underperformer.
  • The EUR and GBP recoveries are at a key crossroads 

Major forex trends

We can see from the one-month performance chart for major currencies versus the USD, there is a clear split:

  • Commodity currencies have been consistent outperformers in recent weeks. 
  • EUR and GBP have struggled but have found support recently
  • JPY is now tracking decisively lower

Forex performance

Commodity currencies (especially AUD and NZD)have been boosted by huge rallies in oil and metals prices. After tailing off as the oil price fell away two weeks ago, it is interesting to see that as oil has rebounded again, so have the commodity currencies. 

The European currencies (especially EUR and GBP) have found support in the past week as markets took a few of potential progress towards peace in Ukraine. However, the recoveries are likely to be defined by decisive moves towards ending the war in Ukraine. Unfortunately, for this, we remain cautious and skeptical of Russian motives. 

As Treasury yields have moved sharply higher, the weakness of JPY has increased. This reflects the strong positive correlation that USD/JPY has with the moves on US Treasury yields.

The big question for these trends is whether they are reversing. The reaction around key resistance levels could be crucial for several major pairs.

EUR/USD and GBP/USD testing key resistance

Both EUR and GBP have ticked higher in recent sessions. Despite the hawkish Fed on Wednesday, we saw EUR/USD and GBP/USD rally. These moves have hit the buffers slightly around important resistance.

Looking at EUR/USD there is an important level of overhead supply around 1.1120 to overcome. The pair has been recovering in the past couple of weeks to test this resistance. A five-week downtrend is also being tested. A closing break above 1.1120 would be an important move as it would open the door towards 1.1230/1.1270. However, for now, the market has slipped back slightly. Holding on to Friday’s low around 1.1000 will be important near term. This pair looks to be at a crossroads.


GBP/USD has also recovered well recently, and once more there is a resistance barrier of overhead supply to contend with. The old November lows around 1.3160/1.3200 are now acting as a basis pf resistance that is holding back a recovery. There is also a potential small base pattern that would complete above 1.3210. There is scope for recovery within a longer-term 9-month downtrend channel, but this resistance is growing now. The pair is tailing off slightly this morning and it means that a test of the one week uptrend is being seen. Once more, this is looking to be an important few days ahead for the near to medium-term outlook.


Kiwi and Aussie both look strong 

The AUD and NZD outperformance over the past month has enabled the two pair pairs of AUD/USD and NZD/USD to drive some decisive improvement. What we are seeing is that on a technical basis, the outlook for both pairs is now strong.

On NZD/USD, Friday’s decisive strong bullish candle also came with a closing high that dates back to mid-November. It suggests that the market is looking to clear the resistance band between 0.6855/0.6890. There is a strong uptrend of the past seven weeks and we would be looking to use any unwinding weakness within this uptrend as a chance to buy. The market is slightly lower today, but any move that unwinds the RSI towards 50 and finds support around 0.6800/0.6850 would be a good buying opportunity.


AUD/USD has been slightly more volatile in its recent price moves. The sharp yo-yo down to 0.7160 and back higher last week was a prime example of this. However, given the strong momentum configuration, we would be looking to use any unwinding weakness that finds support around 0.7275/0.7315 should be seen as a chance to buy.


USD/JPY is still trending higher

One final thought is the huge run higher on USD/JPY. Driven by the moves higher on US bond yields, if yields continue to go higher, then so will USD/JPY. The pair has broken out to levels not seen since February 2016. We have to show this move on the monthly chart to give it some context. The next key basis of resistance above the psychological 120.00 level is at 121.50 and then at 123.75. 

The main caveat is that the Relative Strength Index is so overbought. The daily RSI is at 77, which is very stretched, whilst even on the monthly chart, it is over 70. Despite this though, when USD/JPY trends are higher, it can be very difficult to stop. However, snapback corrections can also be common, so being nimble with stops is important.


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