Risk proxies come under pressure while safe-haven proxies were better bid into NY close last Friday following the unexpected twist in US-China relations, from Friday into the weekend. Trump plans to impose additional 100% tariff on China and export controls on 'any and all critical software' in response to China’s recent export controls on rare earth and other critical materials amongst other measures. DXY last at 99.25 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Trade policy unpredictability may restrain USD bulls

"Over the weekend, China said that US should stop threatening it with higher tariffs and urged more negotiations on outstanding issues to agree on a trade deal. Early this morning, Trump administration signalled openness to a deal with China while Vice President JD Vance called on Beijing to 'choose the path of reason'. Developments are expected to remain fluid in the lead up to APEC meeting in Gyeongju at end month, and the range of outcomes and scenarios could see volatility go higher."

"Caution however remains warranted in the interim though TACO trade may prevail. Risk-sensitive FX to growth and sentiments including AUD, NZD, MYR, RMB may be more sensitive to swings, safe-haven proxy FX such as gold, JPY and CHF could remain better bid if uncertainty heightens while trade policy unpredictability may restrain USD bulls. Bullish momentum on daily chart shows early signs of fading while RSI fell from overbought conditions. Double-bottom bullish reversal and a breakout of the descending wedge may still see DXY finding some momentum though a pullback is not ruled out in the interim."

"Support at 98.40 (38.2% fibo) and 98 levels (21, 50 DMAs). Immediate resistance at 99.80 (61.8% fibo), 100.20 levels. This week, NFIB small business optimism (Tuesday); empire manufacturing, Fed’s Beige book (Wednesday); Philadelphia Fed business outlook, NAHB housing market index (Thu); industrial production (Friday). US CPI initially scheduled for release on 15 October, will now be released on 24 October, as confirmed by BLS."