DXY: Boosted by tariff threats – OCBC
31.01.2025, 10:31

DXY: Boosted by tariff threats – OCBC

USD dipped after 4Q GDP disappointed but erased losses after Trump drummed up tariff threats. Specifically, he spoke about 25% tariffs on about $900bn worth of goods from Canada and Mexico on 1 Feb (Sat). Cautious trading dominated sentiments. DXY was last seen trading at 108.24 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Rebound momentum likely still intact

"Prices of gold surged while JPY, USD were better bid. He also continued the tariff rhetoric, saying that US will make a determination on what the China tariff will be. On comments directed at BRICS nations, he said that there is no chance that BRICS will replace the USD and warned that any country trying to replace USD will face tariffs."

"Earlier, there was a report on US officials probing whether DeepSeek circumvented US restrictions and bought advanced Nvidia semiconductor chips through third parties in Singapore. Tariff concerns ahead of 1 Feb deadline should keep USD supported in the interim unless there is a surprise twist."

"That said, we cautioned that USD longs risk liquidation if tariffs were not imposed on 1 Feb or if they are being deferred. Bearish momentum on daily chart shows signs of fading while RSI continued to rise from near oversold conditions. Rebound momentum likely still intact. Resistance at 108.60 (21 DMA) and 109.50 levels. Support at 107.70/80 levels (50 DMA, 23.6% fibo retracement of Oct low to Jan high), 106.40 (38.2% fibo). Day ahead brings personal income, spending, core PCE and Chicago PMI data."

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