DXY hovers near lows as trade uncertainty weighs – OCBC

Dollar Index (DXY) inched modestly higher overnight but continues to trade near recent lows. Trump launched a probe into the need for tariffs on critical minerals, the latest action in an expanding trade war that has targeted key sectors of the global economy. DXY was last at 99.52, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Trump’s tariff probe on minerals fuels dollar doubts

"Tariff and Trump policy uncertainty, alongside ongoing protectionist measures, fading US exceptionalism and ballooning US debt are some catalysts that should keep the 'sell USD on rally' trade intact as USD’s status as a reserve currency and safe haven continues to come under scrutiny."

"While tariff concerns remain, it does appear to suggest that Trump and his team may be ready to cut a deal with some nations. In the event a watered-down deal is reached between US and several nations, including India, Japan and South Korea (ex China), there may be a tactical chance safe haven proxy FX may unwind. FX with moves that have moved outside of 2 standard deviations such as USD/CHF and USD/JPY may be exposed to rebound risk."

"Daily momentum is bearish but RSI shows signs of turning higher from oversold conditions. Resistance at 100.5, 101.20 levels. Support at 99.5, 99.1 levels. Week ahead brings retail sales and IP today, followed by housing data on Thursday."