US Dollar Index : Rates-led support persists – OCBC

OCBC's FX Strategist Christopher Wong observes the Dollar Index (DXY) remains supported as higher UST yields and a softer risk tone underpin demand for the greenback. Christopher Wong emphasises the move is driven more by rates and risk-off dynamics than strong US fundamentals. He notes USD may stay bid near term, but upside could fade if yields turn lower and upcoming US data soften.

Greenback buoyed by higher yields

"USD regained some footing as higher UST yields and a softer risk tone brought back demand for the greenback."

"The latest move still looks rates-led, with long-end yields staying elevated. This move is less driven by a strong US fundamental story but more due to rates/risk-off story. So in the interim, USD may stay bid but the move may not extend if yields turn lower."

"There is no tier-1 data today, focus this week on FOMC minutes, US flash PMIs, initial jobless claims (21 May). The minutes may provide some colour on officials’ concern over inflation persistence while the PMIs will test whether US activity momentum is holding up or starting to soften under tighter financial conditions. A softer PMI print or less hawkish read from the minutes would be needed to take some heat out of the recent move."

DXYwas last at 99.30 levels. Daily momentum is bullish while RSI is near overbought conditions. Resistance here at 99.40 (23.6% fibo), 100.50/60 levels (2026 high). Support at 98.30/50 levels (21, 100, 200 DMAs), 98.10 (50% fibo retracement of 2026 low to high) and 97.50/60 levels (double bottom, 61.8% fibo retracement of 2026 low to high).

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)