The US Dollar Index (DXY) has regained momentum, supported by elevated US Treasury yields and a risk-off tone in global markets, according to OCBC's FX Strategist Christopher Wong. Wong notes that the current move is rates-led rather than driven by strong US fundamentals, suggesting that the USD may remain bid in the near term but could lose steam if yields decline or upcoming US data soften. The DXY was last reported at 99.30, with daily momentum bullish and RSI near overbought conditions. Key resistance levels are at 99.40 and 100.50/60, while support is seen at 98.30/50 and 98.10 [1].
ING strategists Francesco Pesole, Frantisek Taborsky, and Chris Turner echo this sentiment, highlighting that higher real US yields and a bond market sell-off are reinforcing Dollar strength. They attribute the move to inflation concerns, which are unambiguously positive for the USD. ING sees upside risks for the Dollar, with DXY potentially breaking above 99.50, especially if the FOMC minutes released today hint at further hawkishness. Their USD safe haven gauge indicates the strongest appeal since late 2022, and they believe the ongoing bond market sell-off is creating ideal conditions for dollar strengthening. Any hints of rate hikes in the FOMC minutes could further support the Dollar [3].
Meanwhile, the Canadian Dollar (CAD) remains weak against the US Dollar following a downside surprise in Canada's Consumer Price Index (CPI), as reported by Scotiabank strategists Shaun Osborne and Eric Theoret. USD/CAD is trading around 1.3773, more than one standard deviation above its fair-value estimate of 1.3567. The soft CPI data has kept the Bank of Canada on hold, and front-end swap spreads have widened. The strategists note that USD gains through the 50% retracement resistance at 1.3758 support a near-term outlook for further USD strength towards 1.3800/15 [2].
Market participants are closely watching the release of the FOMC minutes, US flash PMIs, and initial jobless claims. The minutes may provide insight into officials’ concerns over inflation persistence, while the PMIs will test whether US activity momentum is holding up under tighter financial conditions. A softer PMI print or less hawkish tone from the minutes could ease the recent USD rally [1][3].
CONCLUSION
The US Dollar is currently supported by higher yields and inflation concerns, with both OCBC and ING highlighting rates and risk-off dynamics as key drivers. The Canadian Dollar is underperforming following a soft CPI print, further boosting USD/CAD. Market focus is now on the FOMC minutes and US data releases, which could determine whether the Dollar's strength persists or fades.