DXY: Bears pause for now – OCBC

US Dollar (USD) firmed overnight on comments from Fed’s Waller. He spoke about preferring to keep rates on hold for now until it is clear that inflation is fading (like it did in 2024). DXY rebounded modestly; last at 106.96, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Near term rebound risks not ruled out

"But Waller did question if Jan CPI figures had been properly adjusted for seasonal factors as there were some patterns over the past few years of higher inflation readings at the start of the year. He went on to emphasise that Fed’s favoured gauge of inflation is still the PCE price index – and that was less alarming. Next release of Jan core PCE price index is on 28 Feb."

"Waller acknowledged that the new Trump administration’s policies had introduced a degree of uncertainty but cautioned against allowing that to delay the Fed’s response to economic data. He also reiterated that tariffs imposed by Trump administration would ‘only modestly increase prices in a non-persistent manner'."

"Daily momentum is bearish while RSI shows signs of turning higher from near oversold conditions. Near term rebound risks not ruled out. Resistance at 107.30, 107.80 (23.6% fibo, 21 DMA) and 108.50 levels. Support at 106.20/40 levels (100 DMA, 38.2% fibo retracement of Oct low to Jan high)."