DXY: Trading heavy overall – OCBC

US Dollar (USD) consolidated near recent lows, driven by tentative optimism on trade talks, comments from Trump on Fed Chair and in reaction to softer US data last Friday. DXY traded heavy; last at 97.15 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Mild bearish momentum intact

"Trump mentioned that the US probably has trade deals with around four or five countries, including the UK, China, and potentially India. Taiwan noted constructive progress while this morning, Canada said it would rescind digital services tax to advance trade talks. Last Fri, Trump spoke about selecting a Fed chair who would cut rates, a remark that could be seen as undermining Fed independence and may contribute to selling pressure on the USD."

"Regarding US data, core PCE inflation was slightly higher, but personal income and spending surprised to the downside, with personal income declining, partly due to the decrease in Social Security payments, while personal spending and the savings rate also fell. In the near term, the tariff deadline on July 9 remains a key focus, with market participants watching for potential new deals or agreements before that date, the implementation of unilateral tariff rates, and whether the deadline might be extended. However, Trump stated overnight that the deadline will not be extended."

"He also commented on sending letters within the next week and a half—or possibly sooner—to other countries, informing them about unilateral tariff rates. This week, attention will turn to ISM manufacturing and services data, as well as the payrolls report, which will be released earlier on Thursday since US markets will be closed on Friday for the Independence Day holiday. Mild bearish momentum intact while RSI is near oversold conditions. Support at 97, 96.50 levels. Resistance at 97.50/60 levels, 98.40 (21 DMA)."