DXY: Rangebound for now – OCBC

US Dollar (USD) remains a touch firmer amid geopolitical escalation between Israel and Iran. DXY was last at 97.93 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Geopolitical risks may keep risk sentiment fragile

"This morning, Bloomberg headlines stated that Iran’s new Israel strike was 'more crushing' than before. While USD rebounded last Friday, the constrained price action suggests it has yet to fully reclaim its safe haven status. Geopolitical risks—especially renewed tensions between Israel and Iran—may keep risk sentiment fragile. As such, high-beta FX such as AUD and NZD may trade on the back foot if tensions continue to rise."

"That said, de-escalation would likely weigh on the dollar and bring support back to risk proxies. Focus this week is on FOMC (Thursday 2am SGT). Status quo likely, but all eyes are on the dot plot and the press conference. Markets look for 2 cuts by year-end. If the Fed signals just one cut (last dot plot looks for 2 cut) or pushes back easing expectations, then USD could get another lift, but anything less hawkish/more dovish could trigger USD selling."

"Daily momentum is mild bearish bias while RSI shows signs of rising from near oversold conditions. Resistance at 99.20 (21 DMA), 99.70 levels (50 DMA). Support at 97.60 (recent low). Day ahead bring empire manufacturing data."