Germany's exposure to the war in the Ukraine and the resulting plunge in the euro is triggering a familiar bifurcation in the US dollar index. 58% of the DXY is held in the euro, which overlooks 3 ½ month highs in AUD/USD and USD/NZD.
It is nothing new to see a breakout in the dollar index (above 97.50) alongside persistent bullishness in gold and silver. The charts below highlight the latest divergence between DXY and USD's showing vs the antipodean currencies. Meanwhile, equity indices are charting a gradual bottoming, consistent with Bitcoin and Ethereum.
The case for metals and rest of commodities remains the following: Fed tightening will cap inflation at its 5-6% high, and any pullback will settle at a higher low of 3-4%. Once the Fed is forced to “fiddle” with the yield curve (prevent it from inverting), the short-end will peak out, letting 2-year-breakevens extend higher, to the benefit of metals. The above prospect is considered as a durable positive for metals, overriding any double-blow from a nuclear deal with Iran and cease-fire in Ukraine as is shown here.