The US Dollar (USD) inched higher overnight after FOMC minutes unveiled details of pushback at the September FOMC. DXY was last at 102.99, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
“On Fedspeaks, Daly said she expects 1 or 2 more cut this year while Collins said that 50bp cut in Sep was prudent given risks. Elsewhere, Logan said she supported a slower path of interest rate reduction. Dovish expectation on Fed cut have now been priced out. Markets are just eyeing about 45bp cut for the rest of the year, as opposed to 75bps cut seen just 2-3 weeks ago. Markets and Fed’s dot plot are now in alignment.”
“USD has also rebounded, partially retracing the earlier ~5% decline seen in 3Q. To some extent, USD may have settled into this temporal state of equilibrium where the risks from here can largely be 2-way. Daily momentum remains bullish but rise in RSI shows signs of moderation near overbought conditions. 2-way trades likely. Resistance here at 103.30 (100 DMA). Support at 101.75/90 levels (50 DMA, 23.6% fibo retracement of 2023 high to 2024 low), 101.30 (21 DMA).”
“Apart from US CPI, initial jobless claims (Thursday) and PPI (Friday), there is no clear major US data catalyst until the next payrolls or core PCE data in a few weeks’ time. In terms of event risks, geopolitical tensions in middle east and US elections deserve monitoring. Even at this point, Harris and Trump are polling neck-and-neck. Markets adopting a cautious stance ahead of US elections may imply that USD may still stay supported on dips.”
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