DXY: Consolidation expected in the interim – OCBC

US Dollar (USD) consolidated near post-NFP lows. DXY was last at 98.80, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Bullish momentum on daily chart shows signs of fading

"ISM services data flagged risk of stagflation in US economy – headline, new orders and employment underwhelmed while prices paid rose. Markets pricing for 25bp cut in Sep saw its probability slipped slightly under 90%, from 95% yesterday. Near term, there is a flux of risk events to watch including possible announcement of sectoral tariffs, appointments of BLS chief and new Fed nominee as well as any follow-up on the expiration of China trade truce next Tuesday."

"Overnight, Trump told CNBC that planned tariffs on pharmaceuticals imported into the US could start 'small' but eventually rise to 150% 'in a year to a year and a half maximum' and then to 250%. Last week, he sent letters to 17 drugmakers calling on them to commit to steps to lower US drug prices by 29 Sep."

"Bullish momentum on daily chart shows signs of fading but decline in RSI moderated. Some consolidation expected in the interim. Support at 98.30 (21, 50 DMAs), 97.20 levels. Resistance at 99.60 (100 DMA), 100.50 levels. No tier-1 US data tonight; Fed’s Cook, Collins and Daly will speak later."