OCBC’s Christopher Wong notes the US Dollar (USD) strengthened after hotter United States (US) Consumer Price Index (CPI) data lifted UST yields and revived Fed hike expectations, with focus now on US Producer Price Index (PPI). He highlights that higher front-end and long-end yields have restored USD support, though the CPI mix does not yet signal a broad inflation breakout. Wong sees USD dips staying supported if markets keep pricing a more hawkish Fed reaction function.

Rates and inflation keep DXY supported

"Near term, USD may remain supported on dips if markets continue to price a more hawkish Fed reaction function, especially with oil prices still elevated and inflation risks skewed to the upside."

"That said, the CPI mix does not yet point to a broad-based inflation breakout, so USD upside may still require either further upside data surprises, firmer oil, or a deeper deterioration in risk sentiment."

"DXY rose; last seen at 98.30 levels. Mild bearish momentum on daily chart faded while RSI rose. 2-way risks likely."

"Resistance at 98.70 (38.2% fibo), 99 levels (50 DMA). Support at 98.10 (50% fibo retracement of 2026 low to high), 97.50/60 levels (double bottom, 61.8% fibo retracement of 2026 low to high)."

"On the data docket today, PPI is up next (830pm SGT)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)