USD/TWD remains depressed below mid-29.00s amid easing trade tensions

• USD/TWD trades with a negative bias and remains close to over a one-month low set on Friday.
• The fundamental backdrop favors bearish traders and backs the case for further depreciation.
• Traders, however, seem reluctant and opt to wait for the crucial FOMC decision on Wednesday.

The USD/TWD pair continues with its struggle to attract any meaningful buyers and trades with a mild negative bias below the 29.50 area during the Asian session on Monday. Spot prices remain close to over a one-month low touched last Friday and seem unaffected by a modest US Dollar (USD) uptick.

Despite the fact that the first round of tariff discussions between Taiwan and the US ended without disclosed results, the latest optimism over easing US-China trade tensions is seen as a key factor behind the Taiwan Dollar's (TWD) relative outperformance. Furthermore, the relatively upbeat performance of technology stocks in the US benefits the TWD and acts as a headwind for the USD/TWD pair.

Meanwhile, the USD is looking to build on Friday's modest bounce from a multi-year low amid some repositioning trade ahead of the crucial two-day FOMC monetary policy meeting starting on Tuesday. This holds back traders from placing aggressive bearish bets around the USD/TWD pair. However, bets that the Fed will resume its rate-cutting cycle in September support prospects for further near-term losses.

Hence, any attempted recovery might still be seen as a selling opportunity and remain capped near the 29.70 region. A sustained strength beyond the latter, however, might trigger a short-covering rally and pave the way for some meaningful appreciating move for the USD/TWD pair.