DXY: Still operations in both directions – OCBC

The USD strengthened broadly after Trump’s victory. The market reaction was well noted and expected. In the short term, we could still see the USD supported, largely due to tariffs, inflation and fiscal concerns. We also hope that policymakers will be more attentive to the potential policy risks associated with Trump as President. Therefore, excessive and one-sided movements in currency markets can be countered with smoothing pressure. The DXY was last at 104.80 levels, note OCBC FX analysts Frances Cheung and Christopher Wong.

Fed not expected to cut 25 basis points at meeting

“On the other hand, China’s NPC (November 4 – 8) should not be ruled out. The meeting is likely to take into account the US election risk premium and we believe that Chinese policymakers still should be determined to implement support measures to repair the economy and improve sentiment. A larger than expected stimulus could help support sentiment and partially offset the depreciation of the CNH. In the next 24 – 48 hours, we should expect the FX. Continue trading with two-way risks as markets digest the election outcome, including who takes the House and whether existing lawsuits against Trump will have any implications.

“FX volatility should continue to decline but remain elevated relative to the year’s average. Trump’s threat of tariffs is clearly one of the biggest risks worrying markets, but we don’t know how long it will take to implement those policies. Said “This uncertainty may be enough to keep USD/AXJs supported.”

“Daily momentum is flat while RSI rose. Resistance at 105.20, 105.60 levels (76.4% fibo). Support at 104.60 (61.8% fibo), 103.70/80 levels (21, 200 DMAs, 50% retracement of Fibonacci 2023 high to 2024 low. Going forward, the FOMC is on the agenda (3am SGT Friday morning We don’t expect the election outcome to impact this particular FOMC meeting and we still expect the Fed to hold). a cut of 25 basis points in the meeting. The focus is on tone and language.”