OCBC strategist Christopher Wong notes that firmer United States (US) Consumer Price Index (CPI) and a near-90% chance of a September Fed hike have not translated into lasting Dollar strength, with US Dollar Index (DXY) stuck around 99.1. He highlights stretched long-Dollar positioning, fading yield moves and improving risk sentiment. The focus now shifts to Fed communication on further tightening beyond September and key DXY support/resistance levels.
"Firmer core CPI and a near-90% probability of a September Fed hike failed to generate sustained USD upside. The hurdle for further gains looks higher; focus shifts to whether the Fed can steer expectations towards additional tightening beyond September."
"Recent price action reinforces an increasingly important theme that positive US macro surprises are still lifting yields and Fed expectations, but USD is getting less mileage from the same impulse. This leaves the Fed as the key test this week."
"DXY last at 99.1 levels. Daily momentum is not showing a clear bias while RSI rose slightly. 2-way risks likely to persist."
"Resistance at 99.30/40 levels (21DMA, 38.2% fibo), 99.77 (100 DMA). Support at 98.60/70 levels (50% fibo retracement of 2026 low to high), 98 (61.8% fibo)."
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