U.S. Dollar (DXY) Tests New Highs Amid Rising Demand For Safe-Haven Assets

Key Insights

• U.S. Dollar Index tested the 110 level. 
• EUR/USD made an attempt to settle below 0.9900 level after Russia’s Gazprom halted supplies via Nord Stream 1. 
• GBP/USD is volatile as traders prepare for the first moves of Britain’s new Prime Minister. 

U.S. Dollar Starts The Week On A Strong Note

U.S. Dollar Index (DXY) made an attempt to settle above the 110 level today amid flight to safety.

Traders focused on the problems of the European economy after Russia’s Gazprom halted supplies via Nord Stream 1. As a result, demand for the safe-haven U.S. dollar increased, pushing the U.S. Dollar Index to new highs.

While the U.S. dollar looks overbought, it remains to be seen whether the American currency will face material resistance due to profit-taking in the upcoming trading sessions.

EUR/USD Made An Attempt To Settle Below 0.9900

EUR/USD found itself under pressure as traders reacted to the developments in the European natural gas markets and evaluated the final readings of the Euro Area PMI reports.

The reports indicated that Euro Area Services PMI declined from 51.2 in July to 49.8 in August, compared to analyst consensus of 50.2. Euro Area Composite PMI decreased from 49.9 to 48.9. Numbers below 50 show contraction.

Euro Area Retail Sales increased by 0.3% month-over-month in July. On a year-over-year basis, Euro Area Retail Sales declined by 0.9%.

EUR/USD found support near 0.9880 and managed to get back above the 0.9900 level. In case EUR/USD settles above this level, it will head towards the resistance at 0.9950. A move above 0.9950 will push EUR/USD towards the resistance at 1.0000. If EUR/USD settles above this level, it will head towards the next resistance at the 20 EMA at 1.0020.

On the support side, EUR/USD needs to settle below 0.9900 to have a chance to gain downside momentum in the near term. The next support level is located at the recent lows at 0.9880. If EUR/USD declines below 0.9880, the sell-off may intensify.

GBP/USD Is Volatile As Liz Truss Becomes Britain’s New Prime Minister

GBP/USD tested the 1.1450 level but moved back above 1.1500 as traders reacted to the political developments in the UK. Liz Truss will become Britain’s next Prime Minister, and traders will be waiting for her first steps.

Meanwhile, the yield of UK 10-year bonds is moving towards the 3.00% level, which indicates that markets remain worried about the health of the UK economy. These worries may put additional pressure on the pound in the upcoming trading sessions.

Commodity-Related Currencies Decline As Traders Stay Focused On The Safety Of The U.S. Dollar

AUD/USD moved below the 0.6800 level despite the rebound in commodity markets. NZD/USD retreated below 0.6100, while USD/CAD moved towards the 1.3150 level.

Traders ignored the rally in the oil markets and focused on the rising demand for safe-haven assets, which was bearish for commodity-related currencies.

USD/JPY Is Moving Towards New Highs

USD/JPY managed to settle above the key 140 level and moved above 140.50 as traders continued to sell the Japanese yen.

There are no signs of interventions from the Bank of Japan, so USD/JPY bulls look ready to push USD/JPY to new highs. However, it should be noted that potential interventions from BoJ remain the biggest risk for the bulls in the upcoming weeks.

For a look at all of today’s economic events, check out our economic calendar.