DXY: Interim bounce – OCBC

US Dollar (USD) extended its rebound momentum post-Fed cut. Cautious remarks from Fed officials dampened bearish bets on USD. DXY last seen at 97.80 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Daily momentum turned mild bullish

"Fed’s Goolsbee told FT that he could be less willing to support “overly frontloading a lot of rate cuts” on the presumption that inflation will just be transitory and go away as many midwest businesses are still concerned that inflation was not under control. He also added that a new set of labour statistics produced by Chicago Fed showed only a 'mild' cooling and did not suggest the US economy was in a sharp slowdown."

"Earlier on Tuesday, Fed Chair Powell said that market expectations for another 2 cuts this year were far from a done deal. He struck a cautious tone in highlighting challenges for policymakers in deciding to prioritise fighting inflation or protecting jobs. Near term, a corrective rebound islikely, but core PCE data awaits on Friday."

A softer print may stall the corrective rebound but the risk is that a higher print may extend USD’s rebound momentum. Daily momentum turned mild bullish while RSI rose. Immediate resistance at 98 levels (50 DMA), 98.40 (100 DMA, 38.2% fibo retracement of May high to Sep low). Support at 97.60 (21 DMA, 23.6% fibo), 97.10 levels. Intraday to see consolidation.