DXY: Dragged lower by UST yields – OCBC
04.03.2025, 08:49

DXY: Dragged lower by UST yields – OCBC

USD continued to trade lower, owing to the precipitous fall in UST yields and continued moderation in US exceptionalism. DXY was last at 106.27 levels. US data - ISM mfg, new orders and employment - continued to surprise to the downside overnight, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Consolidation likely with risks skewed to the downside

"Today, Trump’s 25% tariff on Canada and Mexico alongside 10% additional tariff on Chinese imports come into effect, with no room for negotiations. China’s state-backed media Global Times reported that China is preparing countermeasures that include both tariffs and a series of non-tariff measures, and US agricultural and food products will most likely be listed (timing uncertain)."

"Canada and Mexico have also pledged retaliatory tariffs in response. A tit-for-tat can undermine sentiments and lead to demand for safe haven proxy, including USTs and JPY. High-beta risk proxy FX including AUD, NZD stayed under pressure but selected AxJ FX, including THB and IDR found a breather thanks to softer UST yields."

Daily momentum turned flat while RSI fell. Consolidation likely with risks skewed to the downside. Support at 106.35 (38.2% fibo retracement of Oct low to Jan high), 106.10 before 105.00/20 levels (50% fibo, 200 DMA). Resistance here at 107.30 (21 DMA), 107.80/108 levels (23.6% fibo, 50 DMA) before 108.50.

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