DXY: Hold losses for now – OCBC

US Dollar (USD) drifted lower, on softer-than-expected US consumer confidence and in response to Fed Chair’s comments overnight. While Powell reiterated the message that Fed need not rush to cut, he did suggest that the Fed may cut rates sooner rather than later if inflation pressures remain contained (when asked the question about the possibility of a rate cut next month). But he was careful in not committing to a timeline. Earlier, other Fed officials have indicated that a rate cut in July is a possibility. DXY was last seen at 98.01, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Two-way risks remain warranted

"Governor Bowman expressed support for a potential rate cut if inflation remains subdued, while Goolsbee suggested that Fed should cut rates if tariff ‘dirt’ clears. Last Friday, Waller noted that the Fed could be positioned to cut rates in July. Elsewhere, IsraelIran ceasefire appears to hold as both countries said they will not break ceasefire unless the other does so first. Separately, CNN also reported that US military strikes on three of Iran’s nuclear facilities last weekend did not destroy the core components of the nuclear program and likely only set it back by months."

"This may be in contrast with Trump’s claims that the strikes “completely and totally obliterated” Iran’s nuclear enrichment facilities. There is still uncertainty whether the nuclear program is destroyed – is the CNN report not accurate or if it turns out to be true, will there be follow-up strikes? As such, geopolitical tensions can be fluid, and two-way risks remain warranted (though it is likely a reduced risk than before)."

"Softer USD and easing geopolitical conditions allow for previously battered Asian FX to recover. PHP, TWD, THB and MYR are leading gains in early trade. Mild bullish momentum on daily chart faded while RSI fell. Support at 98.10, 97.60 levels (recent low). Resistance at 99.50 (50 DMA), 100.2 and 100.60 levels (23.6% fibo retracement of 2025 high to low). Later tonight, Powell will deliver face Senate Committee on Banking, Housing and Urban Affairs (10pm SGT). Goolsbee is also scheduled to speak tonight on a podcast. Data focus this week is on core PCE (Friday)."