US Dollar (USD) extended its slippage overnight while most other currencies, including Asian FX advanced more than G7 counterparts. DXY last at 98.01 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Risk skewed to the downside in the interim

"This can be attributed to persistent gains in RMB and supported risk sentiments. Elsewhere, solid US 2Q GDP further adds to solid global growth for now and this typically can also be supportive for pro-cyclical currencies, including KRW, MYR. At the same time, Fed may be preparing to cut rates soon. Putting these together, there is a goldilocks-like moment of Asian FX while the USD may stay backfooted unless core PCE data surprises later (830pm SGT)."

"For the ongoing momentum to continue, a soft core PCE print would be desired. Consensus looks for 2.9% y/y (vs. 2.8% prior). We will be keeping a lookout on whether data or upcoming Fedspeaks (before blackout period commences on 6 Sep) changes the narrative from 25bp cut expectation to discussion of 50bp cut at Sep FOMC or whether the expectations for trajectory of cut increases. For now, markets are still pricing in 88% chance of 25bp cut at Sep FOMC and a total of about 55bps cut this year."

"Mild bearish momentum on daily chart intact while RSI fell. Risk skewed to the downside in the interim. Support at 97.60, 97.10 levels. Resistance at 98.40 (21 DMA), 98.80 (100 DMA), 99.60 levels."