Euro Gains on Ukraine-Russia Ceasefire Deal

• The euro remains bullish as Ukraine reportedly accepts the proposed ceasefire deal with Russia.

• Trump threatened Canada to raise tariffs, raise concerns over potential trade war, and push gold prices higher.

• All eyes are on today‘s U.S. CPI reading to gauge the dollar’s strength.

Market Summary

The euro rallied to a four-month high against its peers as geopolitical developments in Eastern Europe drove market sentiment. Reports suggest Ukraine is prepared to accept a month-long ceasefire, while the U.S. plans to restore military aid and intelligence sharing following Kyiv‘s acceptance of Washington’s proposal. The news boosted the euro as traders positioned for potential economic stabilization in the region.

Meanwhile, the Japanese yen extended gains, underpinned by decade-high long-term bond yields and expectations that Japanese firms will implement a third consecutive year of strong wage hikes. The prospect of rising inflation has fueled speculation that the Bank of Japan could continue its policy tightening, further supporting the yen.

In the forex market, attention turns to todays U.S. CPI report, which could be a decisive factor for the recently subdued dollar.

In the commodities market, both gold and oil prices traded within a narrow range, while copper exhibited increased volatility in response to Trumps aggressive tariff policy on metals. The White House has confirmed a 25% tariff on steel and aluminum imports, with threats to raise tariffs to 50% on the largest U.S. trade partners, adding uncertainty to the global trade outlook.

Current rate hike bets on 19th March Fed interest rate decision:

Source: CME Fedwatch Tool

0 bps (95%) VS -25 bps (5%)

Market Movements

DOLLAR_INDX, H4

The Dollar Index (DXY) extended its losses, breaking its market structure as escalating trade uncertainties and the potential for a U.S.-led trade war continued to dampen market optimism regarding U.S. economic growth. Recently, President Donald Trump announced an increase in tariffs on Canadian steel and aluminum, doubling the previous 25% rate to 50%. This decision came in response to Canadas earlier move to impose a 25% surcharge on electricity exports to Minnesota, New York, and Michigan—though Canada later agreed to suspend the hike, tensions remain elevated. As recession fears persist, selling pressure on the U.S. dollar intensified on Tuesday.

The Dollar Index is trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 27, suggesting the index might enter oversold territory.

Resistance level: 105.45, 106.50

Support level: 103.40, 101.90

USD/JPY, H4

The USD/JPY pair remains in a downtrend but saw a technical rebound in the last session. A break above the 148.20 resistance level could signal a potential shift toward a bullish bias. However, the Bank of Japan (BoJ) Governors latest remarks indicate that the central bank anticipates rising bond yields, fueled by expectations of future interest rate hikes. This reinforces speculation that the BoJ may tighten policy next week, which could further strengthen the Japanese yen, capping upside potential for USD/JPY. Traders will closely watch upcoming BoJ guidance for confirmation of policy direction.

The pair has been trading in a long-term downtrend but has seen a minor rebound lately. A break above the previous high level should be a bullish trend reversal signal for the pair. The RSI is rebounding, while the MACD is heading toward the zero line from below, suggesting that the bearish momentum is easing.

Resistance level: 149.48, 151.35

Support level: 143.80, 140.45

EUR/AUD, H4

The euro has been gaining momentum, pushing EUR/AUD to its highest level since May 2020 as the Australian dollar weakens. The euro's strength was further reinforced in the last session as markets responded positively to reports that Ukraine has accepted a U.S.-proposed ceasefire deal, signaling potential de-escalation in the conflict with Russia. Meanwhile, the Aussie dollar continues to face pressure, weighed down by global risk sentiment and uncertainty over China's economic outlook.

The pair continued to trade to new highs in nearly 5-years, suggesting a bullish bias for the pair. The RSI remains hovering closely to the overbought zone while the MACD continues to edge higher, suggesting that the pair remain trading bullish.

Resistance level:1.7670, 1.8060

Support level: 1.7000, 1.6760