US Dollar: the only FX winner of the Middle East war?U.S. Dollar Currency IndexTVC:DXYSwissquoteThe commodities market has been shaken by the war in the Middle East, with a sharp rise in oil and natural gas prices. Are there similar disruptions in the foreign exchange (FX) market? An analysis of the performance of major FX currencies and leading emerging currencies since the start of military operations on Saturday, February 28 highlights the following dominant fundamental factors: • The US Dollar (DXY) is the only major FX currency to be rising since the Forex close on Friday, February 27 • European currencies have been under pressure, notably the euro and the British pound, and the Swiss franc has not acted as a safe haven at all • The currencies of major Asian economies have been sold off, which is logical given these countries’ dependence on energy imports via the Strait of Hormuz (South Korean won, Indian rupee, Japanese yen) • However, the Chinese yuan has shown more resilience than the Indian rupee, as China’s strategic oil reserves are significantly higher than those of India • Conversely, relative resilience has been observed in both major and emerging commodity-linked currencies. The Australian dollar, Canadian dollar, and Brazilian real have held up, as these countries are major exporters of LNG (notably Australia to China) and oil, and are geographically distant from the theater of military operations The table below shows the performance of major FX currencies and leading emerging currencies since the start of military operations on February 28 in the Middle East. It is therefore the US dollar (DXY) that stands out as the main beneficiary of geopolitical risk aversion. The sharp rise in energy prices is pushing inflation expectations higher, and the market no longer expects a cut in the US federal funds rate before 2027. Naturally, this expectation may evolve rapidly depending on developments in the Middle East. However, a question already arises: does the rise observed in the US dollar (DXY) since the beginning of the conflict confirm a medium/long-term bullish trend reversal? In other words, will the US dollar move higher in the FX market in the coming months? Geopolitics, US inflation, and the Federal Reserve are the fundamental drivers that will answer this question. But technical analysis must also be considered, and it highlights a pivot level at 101/102 points for the US dollar against a basket of major currencies (DXY). If the market breaks above this resistance, then yes, the US dollar could continue to rise in the coming months. At this stage, however, this has not yet occurred, and the US dollar has not yet confirmed a medium/long-term bullish reversal. The chart below shows the weekly Japanese candlesticks of the US dollar (DXY): DISCLAIMER: This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. 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