DXY: Bias for downside play - OCBC

USD continued to trade under pressure, as Fed fund futures shifted to fully price in a 25bp cut at the Sep FOMC. Treasury Secretary Scott Bessent said on Bloomberg TV interview that 'We could go into a series of rate cuts here, starting with a 50bp cut in September'. He went on to say that we should probably be 150, 175bps lower if you look at any model. DXY was last at 97.84 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Markets favour selling rallies

"It is typically not common for Treasury secretaries to make specific comments on rate cuts. Separately in an earlier interview with Fox Business, he said that the "Fed could have been cutting in June, July" had it had the revised figures (referring to job market data) in hand at the time. For the week remaining, PPI, initial jobless claims data are due later while IP, retail sales, empire manufacturing, Uni of Michigan sentiment, inflation expectations data are due tomorrow."

"Data releases this week and upcoming Fedspeaks may shape expectations on the trajectory of Fed cut. If US data continue to come in softer and that more Fed officials start to tilt dovish, then the probability of 50bp cut at Sep FOMC may rise. While the next FOMC is more than a month away, next week's (over 21-23 August) Jackson Hole symposium is one key event to watch."

"Historically, Jackson Hole has served as a platform for signalling shifts or reinforcing monetary policy directions. This may offer Fed Chair Powell an opportunity to adopt a more dovish tone, given the softening of US labour market and that inflation so far shows limited tariff-related price pressures. Daily momentum shows signs of turning mild bearish while RSI fell. Bias for downside play but favour selling rallies. Support at 97.20, 96.40 (2025 low). Resistance at 98.10/40 levels (21, 50 DMAs), 99.30 (100 DMA)."