EURUSD Explodes as GBPUSD Rally Stalls and Oil Prices Poised for 7-Straight Weekly Gain

Feb 4, 2022 01:14 PM ET
EURUSD Explodes as GBPUSD Rally Stalls and Oil Prices Poised for 7-Straight Weekly Gain
  • US dollar remains under pressure.
  • EURUSD turns bullish.
  • GBPUSD rally stalls.
  • Oil prices are poised for a seven-straight weekly gain.
  • Cryptocurrencies bounce back.

The US dollar is poised to cap the worst week in nearly two years after coming under pressure against the majors. The dollar index, which tracks the greenback strength against the majors, has dropped to three-week lows near the 95.20 level.

The dollar sell-off comes on the backdrop of the Bank of England and the European Central Bank tightening monetary policy, thus sending the British pound and euro higher. The greenback sell-off comes barely a week after it powered to 19-month highs amid expectations of faster than expected rate hikes from the US Federal Reserve.

EURUSD explodes

The euro is poised for its biggest weekly gain in nearly two years after powering to three-month highs on Thursday following a hawkish tilt by the European Central Bank. A rally past the 1.1450 level has left EURUSD on the cusp of reaching the 1.1500 level.

Charting showing EURUSD strong move up

Standing in the way of the pair edging higher is the 1.1480 resistance level. The positive tone on the EURUSD stems from the ECB speculation about the pace and timing of interest rates. President Christine Lagarde acknowledging the mounting inflationary risks has fuelled potential rate hike chatter.

Compared to other major central banks, the pair had slumped to levels not seen in one and half years on the ECB remaining dovish.

GBPUSD rally stalls

GBPUSD has also followed the EURUSD in powering high to two-week highs near the 1.3600. The rally on the GBPUSD stems from traders reacting to the Bank of England hiking interest rates to 0.5%.

Charting showing GBPUSD trying to edge higher

The pair pulling back to the 1.3580 does not come as a surprise, given that the rate hike push had already been telegraphed and priced in. The rally came on reports that most policymakers were pushing for a much bigger interest rate hike.

However, the GBPUSD rally has been curtailed by growing uncertainty in the UK’s political scene, with Prime Minister Boris Johnson under pressure. Brexit concerns also continue to weigh on the pair.

Oil rally persists

The oil prices continue their stellar showing in the commodity markets, with US oil closing in on the $90 a barrel level. Brent crude was up 0.4% Friday morning, powering to highs of $91.45 a barrel. Both oil benchmarks are headed for a seven straight weekly gain.

Charting showing strong oil uptrend

Possible supply shortages have fueled the surge in oil prices. Anxiety around the impact of escalating Russia and Ukraine tensions has continued to elicit supply concerns. Frigid weather conditions sweeping across the US are already threatening to disrupt supply channels, something that could trigger further upswings amid high demand. Demand growth outpacing supply continues to support higher prices.

Benchmark sell-off

Major US indices are struggling for direction in the equity markets, with the NASDAQ posting its worst day in more than a year. On Thursday, the index fell 3.7%, with the S&P 500 sliding 2.4% and the Dow falling 518.17 points.

Charting showing NASDAQ pull back

The sell-off came on Facebook delivering disappointing quarterly results that spooked investors. The focus is on the release of the US January jobs report that could help paint a picture of the US economy.

Bitcoin-Ethereum bounce back

Bitcoin and Ethereum are in recovery mode in the cryptocurrency market after coming under pressure following a bounce back from seven months low. BTCUSD has found support above the $37,000 handle, waiting to see if it will hold on to gains above $38,000.

Chart showing BTCUSD bounce back

ETHUSD remains bullish above the $2,600, with $2,800 insight ahead of $3,000.

Charting showing ETHUSD edging higher

The rally in the crypto market comes at the backdrop of the US dollar slumping to three-week lows hurt by the majors strengthening across the board.

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