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FX Tactical Ideas: Geopolitics Takes Over
Near-term, expect the broad USD to be headline-driven.
Global Financial Markets6 Mar 2026
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DXY Index: Safe haven bid in play. The USD’s trajectory saw another abrupt turn at the start of March as the US-Iran conflict took over the FX narrative. In line with previous Middle East conflicts where US air strikes are involved, the USD is getting bid higher on safe haven flows. Near-term, expect the broad USD to be very headline-driven – any signs of further escalation will give the USD an additional boost towards the key 100.00 resistance. Nevertheless, the baseline view is for the conflict to be one-off, and not to materially change the macroeconomic landscape. Thus, the market should revert to a USD-negative stance once the conflict eases. In the interim, do not rule out further headline-driven USD upside, with the DXY Index resistance at 100.00 within sight. 

USD-CNH and USD-CNY: Range-bound. The RMB further retraced its gains against the USD as the US-Iran conflict led to a stronger USD. Higher energy import costs also threatens the Chinese economy, and have a negative impact on the RMB. Having said that, with a strong CNY fixing, USD-CNH increased by a modest 1.7% from its recent low of 6.8267 to the high of 6.9437 on 3 March. As a result, the RMB index rose in tandem with the DXY index and reached its one-year high, indicating limited room for further RMB outperformance. Expect USD-RMB to consolidate in the range of 6.8500 – 6.9500, should the DXY Index remain supported.

EUR-USD: Hit due to higher energy prices. EUR is a surprise underperformer on the US-Iran conflict. The Eurozone is heavily reliant on imported energy, specifically natural gas. The spike in natural gas prices is much sharper than Brent thus far. The timing is also unfortunate. This terms of trade collapse affects industrial competitiveness at a time when the German fiscal expansion is finally coming through. 1.1600 is the near-term anchor for the EUR-USD, with a risk of further drawdown towards 1.1500. 
 
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