DXY: Short squeeze – OCBC

The US Dollar (USD) gets a bump up as market took cues from NABE speech from Fed Chair Powell to take profit on USD shorts. MYR and THB led declines today. DXY was last at 101.00, OCBC FX strategists Frances Cheung and Christopher Wong note.

Daily momentum turns mild bullish

“The main message exudes no sense of panic about the US economy and conveys a sense of no rush to loosen monetary policy quickly. He also referred to the dot plot to indicate 2 more 25bp cut if ‘economy is as expected’.”

“This somewhat dampened markets’ enthusiasm in pricing over 75bp cut for the year remaining. This week’s JOLTS job openings (Tue), ADP employment (Wed), initial jobless claims (Thu) and payrolls report (Fri) will be of interest. Dovish bets will further be reduced if labour-related data comes in hotter, and this may add to USD rebound momentum in the near term.”

“Daily momentum turned mild bullish while RSI rose. Risks are somewhat skewed to the upside. Resistance at 101.10 (21 DMA), 101.90 levels. Near term support at 100.20 (recent low). Break-out puts next support at 99.60, 99.20 levels. In the interim, some profit-taking on Asian FX is likely ahead of data event risks.”