• US dollar strengthens to 18-month highs.
  • EURUSD implodes amid dollar strength.
  • GBPUSD is trying to bounce back.
  • Oil prices are closing in on $90 a barrel level.
  • Cryptocurrencies remain under pressure.

The US dollar is headed to its best week in seven months after strengthening to one and half year highs against the majors. The greenback has powered through key levels, with the dollar index powering to highs of 97.20.

The rally comes at the backdrop of a hawkish Federal Reserve Chairman, Jerome Powell. Chatter that the Fed is likely to hike interest rates four times this year continues to fuel the USD strength. The upswing is also supported by the rallying US treasury yields, with the 10-year yield powering to highs of 1.83%.

EURUSD sell-off

Amid the dollar strength, EURUSD remains the biggest casualty ahead of its worst week in months. The pair has slumped to levels not seen since June of 2020 after sliding to lows of 1.1131 levels. While the pair remains oversold, a drop to lows of 1.1100 is in the cards due to the downside pressure’s strength.

Chart showing  EURUSD strong sell-off

EURUSD will have to bounce back and find support above the 1.1210 mark to avert the risk of further sell-offs. The deep pullback has been fuelled by the European Central Bank failing to hint at any measures it is planning to avert the growing inflation. In addition, EURUSD has been hit hard by fears of Russia invading Ukraine, something expected to fuel some risks on the block.

GBPUSD bounce back

GBPUSD is another pair feeling the brunt of the dollar strength after dropping to one-month lows of 1.3357. However, the pair started the Friday session on the front foot ahead of key US inflation data later in the day.

Chart showing GBPUSD trying to bounce back

A pullback to highs of 1.3415 was fuelled by upbeat headlines concerning Brexit and improved optimism about UK politics, with Prime Minister Boris Johnson expected to overcome political challenges. Additionally, GBP is trying to overcome dollar strength amid expectations that the Bank of England will hike interest rates next week to clamp down on runaway inflation.

Oil bull’s eye $90 mark

In the commodity markets, oil is headed for a sixth weekly gain supported by strong demand amid growing concerns about supply. Brent crude futures were up 0.5% Friday morning to highs of $89.79 a barrel as US oil gained 0.6% to $87.11 a barrel.

Chart showing strong oil upward momentum

Oil remains bullish and likely to continue edging higher as major oil suppliers continue with their policy of limited output in a bid to fuel a spike amid rising demand. Since the start of the year, oil prices have gained 15%, fuelled by growing geopolitical tension in Russia and Ukraine and threats to UAE from Yemen.

US benchmark indices pull back.

US stocks are also headed for their worst week in months, with major benchmark indices edging lower amid growing concerns about FED tightening of monetary policy. The S&P 500 IS already down by about 9.8% from its record highs, with the Russell 2000 down by 20% from previous high. The NASDAQ is already down by more than 10% from record highs and officially in correction mode.

Chart showing S&P 500 pull back from all time highs

The sell-off affirms the difficulties investors are having in responding to the Fed moving to ease accommodative monetary policy. Tensions in Europe between Russia and Ukraine also continue to fuel concerns at the back of one of the most pivotal earning sessions.

Bitcoin and Ethereum are struggling for direction

Meanwhile, Bitcoin and Ethereum are struggling for direction in the cryptocurrency market after a recent slump to six-month lows. BTCUSD is struggling to find support after the recent bounce back above the $37,000 following a sell-off to lows of $33,130.

Chart showing BTCUSD retreat from $37,000

ETHUSD is on a bounce-back mode after bouncing to above the $2,400 level. Failure to hold above the $2,400 level could reignite a sell-off that could see the pair sliding to lows of $2,160.

Chart showing ETHUSD struggling for direction

Bitcoin and Ethereum have come under immense pressure in recent days on investors shunning riskier assets amid the ongoing monetary policy tightening by the FED. Additionally, reports signaling that Russia intends to ban crypto mining and trading have only fueled the sell-off.