DXY: Short squeeze on the day – OCBC

Dollar Index (DXY) extended its rise this morning. DXY last at 99.87, OCBC's FX analysts Frances Cheung and Christopher Wong note.

2-way trades likely to persist

"Fed Chair Powell’s comments post-FOMC – that December meeting is not a foregone conclusion provided the excuse for markets to unwind USD shorts. Looking on, the absence of US data due to government shutdown as well as a less committal and divisive Fed will likely allow for USD short squeeze to transpire in the near term."

"In addition, market expectations of Fed cut for 2026 may be overly priced for now, and any continued pare back in expectations may result in further USD upticks. This week brings ISM mfg (Monday); ADP employment change, ISM services (Wednesday). Payrolls data initially scheduled for Friday will likely be deferred until BLS announces details. Markets are likely to scrutinise Fedspeaks and US corporate earnings to get a sense of economy well-being."

"Daily momentum turned mild bullish while RSI rose. 2-way trades likely to persist, with slight bias to upside. Resistance at 100.50/60 levels (200 DMA, 76.4% fibo). Support at 99.10 levels (50% fibo retracement of May high to Sep low), 98.40 (38.2% fibo) and 98.00/20 levels (50, 100 DMAs) and 97.60 (23.6% fibo)."