DXY: Technical rebound is under way – OCBC

Relative calm continues to be observed this week amid Trump’s de-escalation. Trump continued to speak about how his administration was talking to China about trade even as Beijing denied the existence of negotiations. Chinese Commerce Ministry spokesman He Yadong said that 'any reports on development in talks are groundless' and urged the US to 'show sincerity' if it wants to make a deal. DXY was last seen at 99.60 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Bearish momentum on daily chart fades

"Separately, we also shared that the Ministry of Foreign Affairs spokesman Guo Jiakun said that China's stance on the tariff war initiated by the US is clear: we do not wish to fight, nor are we afraid to fight. If it comes to a fight, we will see it through; if it comes to talks, our door is open. He emphasised that if the US truly wants to resolve issues through dialogue and negotiation, it should stop threatening and coercing and engage in dialogue with China on the basis of equality, respect, and mutual benefit."

"This morning, Bloomberg headlines reported that China was said to exempt some US goods from tariffs as costs rise. The case of a de-escalation narrative persisting for a while more should not be ruled out and can aid USD short covering (especially against safe haven proxies), following the >10% decline (at one point) since Jan peak. The broad USD bounce may also see some AxJs come under pressure in the interim, despite conciliatory tone towards a trade truce/deal."

"Bearish momentum on daily chart faded while RSI rose. Resistance at 100.10, 100.80/101.20 levels (23.6% fibo retracement of 2025 peak to trough, 21 DMA). Support at 99.10, 98.60 levels. Elsewhere, we caution that month-end USD rebalancing flows may risk distorting FX price action."