DXY: Dip may find support in the interim – OCBC

FXStreet Insights Team FXStreet

US Dollar (USD) was a touch softer overnight, helped by dovish comments from Fed’s Waller. He said that Fed may cut rates more this year and sooner than investors expect if future inflation data fall in line with Dec CPI report. DXY was last seen trading at 109.01 levels, OCBC's FX analyst Frances Cheung and Christopher Wong notes.

Risk of pullback still likely

"He also added that Fed could lower rates again in 1H 2025 if data remains favorable. Timing of next rate cut shifted earlier to Jun (vs. Oct previously) while the quantum of rate cut expectations have also risen back to 42bps. This morning’s release of data shows China growth and activity data came in better than expected. This helped to keep Asian FX supported."

"But into the weekend and ahead of Trump inauguration (20 Jan), markets may turn slight cautious on positions (USD dip maybe shallow), fearing that tariffs may soon be announced. On Truth social platform, President-elect Trump recently said that he will create an external revenue service to collect tariffs, duties and all revenue that come from foreign sources. That said, tariff uncertainty remains in terms of timing, magnitude and scope of products."

"Daily momentum turned mild bearish while RSI eased. Bearish divergence observed on RSI. Risk of pullback still likely. Support at 108.70 (21 DMA), 107.33 (50DMA). Resistance at 110.10, 110.90 levels. Today brings housing starts, building permits and IP data."

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

EUR/USD meets initial support around 1.1800

EUR/USD remains on the back foot, although it has managed to reverse the initial strong pullback toward the 1.1800 region and regain some balance, hovering around the 1.1850 zone as the NA session draws to a close on Tuesday. Moving forward, market participants will now shift their attention to the release of the FOMC Minutes and US hard data on Wednesday.

GBP/USD bounces off lows, retargets 1.3550

After bottoming out just below the 1.3500 yardstick, GBP/USD now gathers some fresh bids and advances to the 1.3530-1.3540 band in the latter part of Tuesday’s session. Cable’s recovery comes as the Greenback surrenders part of its advance, although it keeps the bullish bias well in place for the day.

Gold remains offered below $5,000

Gold stays on the defensive on Tuesday, receding to the sub-$5,000 region per troy ounce on the back of the persistent move higher in the Greenback. The precious metal’s decline is also underpinned by the modest uptick in US Treasury yields across the spectrum.

RBNZ set to pause interest-rate easing cycle as new Governor Breman faces firm inflation

The Reserve Bank of New Zealand remains on track to maintain the Official Cash Rate at 2.25% after concluding its first monetary policy meeting of this year on Wednesday.

UK jobs market weakens, bolstering rate cut hopes

In the UK, the latest jobs report made for difficult reading. Nonetheless, this represents yet another reminder for the Bank of England that they need to act swiftly given the collapse in inflation expected over the coming months.

Ripple slides to $1.45 as downside risks surge

Ripple edges lower at the time of writing on Tuesday, from the daily open of $1.48, as headwinds persist across the crypto market. A short-term support is emerging at $1.45, but a buildup of bearish positions could further weaken the derivatives market and prolong the correction.