DXY: Temporary boost on the day – OCBC

US Dollar (USD) saw a bump higher overnight after payrolls report came in stronger than expected – NFP +147k (vs. 106k expected) while unemployment rate dipped to 4.1% (vs. 4.3%), initial jobless claims also fell. DXY was a touched firmer; last at 97 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Risk of USD bounce in the short term

"ISM services also surprised to the upside, alongside new orders. Timing of next cut was pushed back to Oct, from Sep and markets now implied about 52bps cut for the year (vs. 65bps cut the day before payrolls report was released). Elsewhere overnight, the House voted 218-214 to pass a $3.4tn fiscal package that cuts taxes, curtails spending on safety-net programs and reversed much of Joe Biden’s efforts to move the country toward a clean-energy economy. Trump is likely to sign this on 4 July."

"Mild bearish momentum on daily chart shows tentative signs of fading while RSI rose from near oversold conditions. Resistance at 97.50/60 levels, 98 (21 DMA). Support at 96.40, 96.10 levels. Technically, we continue to caution that the decline in the USD may see a slower speed or even pause in the interim while we continue to keep a look out if there are more trade deals before the 9 Jul truce deadline. This week, Indonesia and Vietnam reached some agreement with US while there is still some uncertainty with regards to US-Japan. Overnight, Trump told reporters that US might start sending letters today informing partners on specific tariff levels – a risk that may potentially see a more restraint risk appetite heading into the long weekend."

"While there is risk of USD bounce in the short term (like what we’ve seen thus far), we continue to expect USD to trade weaker as USD diversification/ re-allocation trend takes centre-stage while Fed cut cycle potentially comes into focus in 2H 2025. US policy unpredictability, and concerns of about the rising trajectory of debt and deficits in the medium term should continue to underpin the broad (and likely bumpy) decline in the USD. Note that US markets are closed today for holidays."