DXY: Bulls are squeezed – OCBC

US Dollar (USD) longs are caught wrongfooted. Even as Trump signed an executive order to impose reciprocal tariffs, they will not come into effect until 1 Apr. These reinforced our view that tariffs – be it sectoral or reciprocal – is a bargaining chip for Trump to negotiate in attempt to unlock some agenda favouring America (to level playing ground, fair trade etc.). DXY was last seen at 107 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Risk remains skewed to the downside

"Markets have been positioning for tariff trade (i.e. long USD) but the repeated delay in tariffs seem to gradually build up expectations that Trump may not deliver tariffs as much as feared, depending on how trade negotiations go and if he gets any concession. With the tariff delay, prospects of Ukraine peace talks, US CPI and PPI data out of the way, the focus goes back to US data tonight – retail sales and industrial production. Softer US data may see USD longs bail."

"Daily momentum turned bearish while RSI fell. Risk remains skewed to the downside. Support at 106.20/40 levels (100 DMA, 38.2% fibo retracement of Oct low to Jan high). Resistance at 107.80 (23.6% fibo), 108.00/10 (21, 50 DMAs), and 108.50 levels."

"With regards to reciprocal tariffs, we have earlier highlighted that Korea, India, Thailand and Japan impose a higher weighted average tariff rate than the US does on these countries. Reciprocal tariff rate adjustments from US may potentially impact these countries more."