DXY started the week on a softer footing as risk sentiments held up for Asian equities, OCBC FX strategists Frances Cheung and Christopher Wong note.

Closing in on the 104.80 resistance

“Focus this week on JOLTS report (Tue), ADP employment (Wed), FOMC (Thu 2am SGT), ISM mfg (Thu) and payrolls report (Fri). Markets will keep a look out on whether the tightness in labour markets continue to ease and on FOMC, what the guidance may be. Markets expect the Fed to lay the groundwork for a Sep cut especially with data coming in softer and Fed’s rhetoric turning less hawkish.”

“The US Dollar (USD) bears would face disappointment if Fed restraints dovish guidance. That said, the bigger driver for USD would be on payrolls report and the next few inflation readings – to get a sense of the possible extent of rate cuts. Another surprise for the USD would be an unexpected Fed cut at the upcoming FOMC.”

“Bearish momentum on daily chart faded but RSI shows signs of turning lower. Bearish crossover observed earlier as 21 DMA cuts 50, 100 DMAs to the downside. Support at 103.98 (50% fibo), 103.65 (recent low) and 103.20 (38.2% fibo). Resistance at 104.80/90 (61.8% fibo retracement of Oct high to 2024 low, 21, 50, 100 DMAs), 105.40 levels.”