Author: Mr.Amar – Technical Analyst

To say that the past month has been tumultuous for global markets is clearly an understatement, as Russia’s invasion of Ukraine and existing inflation concerns are impacting growth expectations and interest rates around the world on a daily basis. Unsurprisingly, market fears and the resulting volatility in risk assets benefited the US dollar, with the DXY index rising from 95.3 to a high of 99.3, +4.2%, before falling to 99.1, +4.0%. This safe-haven bid for the US dollar, as measured by the DXY index, was compounded by the disproportionate impact of Russia’s invasion of Ukraine on Europe given its reliance on Russian energy imports.

The US dollar hit a 5-year high against the Japanese yen today, trading above 118. In a risk-off environment, the yen would normally see buyers emerging, however, higher oil and commodity prices are countering it for now. The expected Fed rate hike against the dovish Bank of Japan is also undermining them. USD/JPY rallied to break above an uptrend line. The next potential resistance level is 118.551 January 2017 high and 118.665 December 2016 high.

The outlook is clouded by a high level of uncertainty, but in the view of economists, there is some evidence that the outcome for Europe will not be as bad as market participants have recently feared. In the short term, it is important to recognize that markets lack both depth and concrete information. Therefore, as has happened in the past few days, a significant portion of risk moves can be reversed quickly. More importantly, it must be remembered that economies are dynamic entities. In particular, the authorities in the region are able to act.