US Dollar (USD) was a touch softer overnight, helped by dovish comments from Fed’s Waller. He said that Fed may cut rates more this year and sooner than investors expect if future inflation data fall in line with Dec CPI report. DXY was last seen trading at 109.01 levels, OCBC's FX analyst Frances Cheung and Christopher Wong notes.
"He also added that Fed could lower rates again in 1H 2025 if data remains favorable. Timing of next rate cut shifted earlier to Jun (vs. Oct previously) while the quantum of rate cut expectations have also risen back to 42bps. This morning’s release of data shows China growth and activity data came in better than expected. This helped to keep Asian FX supported."
"But into the weekend and ahead of Trump inauguration (20 Jan), markets may turn slight cautious on positions (USD dip maybe shallow), fearing that tariffs may soon be announced. On Truth social platform, President-elect Trump recently said that he will create an external revenue service to collect tariffs, duties and all revenue that come from foreign sources. That said, tariff uncertainty remains in terms of timing, magnitude and scope of products."
"Daily momentum turned mild bearish while RSI eased. Bearish divergence observed on RSI. Risk of pullback still likely. Support at 108.70 (21 DMA), 107.33 (50DMA). Resistance at 110.10, 110.90 levels. Today brings housing starts, building permits and IP data."
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