US Dollar Index: Two-way risks within bearish channel – OCBC

OCBC’s Christopher Wong notes that the Dollar Index (DXY) has eased alongside lower UST yields after Fed Governor Waller signalled a preference to keep rates unchanged in September if disinflation persists. September Fed hike odds have fallen towards 50%, with upcoming US payrolls, CPI and PPI seen as decisive. Wong highlights DXY trading around 99, with two-way risks inside a broader bearish trend channel.

Dollar index holds within bearish channel

"USD eased alongside UST yields after Fed Governor Waller leaned towards keeping rates unchanged in September should the recent disinflation trend continue. He argued for giving “disinflation a chance”, said he expects a reasonable CPI print and noted that the current policy setting could still bring inflation back towards 2%."

"Waller also appeared relatively sanguine about some recent inflation drivers, judging that much of the tariff impact has already passed through while higher energy prices have yet to spill meaningfully into broader prices."

"That said, he kept the door to a hike open, noting that policy is only slightly restrictive and that renewed inflation acceleration could still warrant tightening. "

"Taken together, his comments reinforce that there is no clear consensus around a September hike yet and that the burden of proof rests increasingly on the incoming data. September hike pricing subsequently slipped towards 50% (vs. 68% on 1 Sep)."

"Payrolls tonight (830pm SGT) are the immediate focus, although next week’s CPI and PPI may ultimately prove more decisive for the September decision. US markets will be close on Mon for labour day holidays."

"DXY last seen at 99 levels. Mild bullish momentum on daily chart remains intact though RSI turned lower. 2-way trades likely with the bearish trend channel. Immediate support at 98.60/70 levels (50% fibo retracement of 2026 low to high), 98 (61.8% fibo). Resistance at 99.40 (21DMA, 38.2% fibo), 99.75 (100 DMA). "

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