The FX markets reacted variably following tariff announcements, impacting growth-sensitive currencies like CNH, KRW, SGD, MYR, and THB. The DXY was reported at around 102 levels.
Bullish momentum on the daily chart has faded, with the RSI declining. Resistance exists at 103.90/10, 104.60, and 105 levels.
Key Market Events This Week
Key focuses this week include ISM services and payroll data. A weaker reading could heighten growth concerns in the US, affecting equity sentiment, with implications for the USD’s value in comparison to global currencies.
The recent response across foreign exchange markets has been uneven, largely due to newly introduced tariffs. If we take a closer look at the behaviour of currencies tightly linked to global growth — such as the Chinese yuan, South Korean won, Singapore dollar, Malaysian ringgit, and Thai baht — it’s evident that each has adjusted with varying degrees of sensitivity. These currencies tend to move in line with risk sentiment and trade expectations, reacting quickly to external shifts like changes in tariff policies. While some saw increased volatility immediately, others saw more muted responses, yet all reflected a broader caution.
The US Dollar Index (DXY), hovering close to the 102 mark, illustrates a more subdued performance. Price action on the daily timeframe indicates that earlier upwards momentum — once visibly strong — has weakened. This reflects a slowdown in conviction among traders betting on further dollar strength. The Relative Strength Index (RSI), a measure of momentum, has been ticking lower, which suggests sellers are becoming more active or at least more confident. As for resistance levels, attention naturally turns to 103.90–104.10 as the first area to watch; move above that and price could challenge 104.60 and possibly even 105, yet each of those levels carries its own pressure and may cap gains without new data providing justification.
In the near term, we’re monitoring incoming US data closely. Top of the list is the ISM services report and this week’s payrolls. These releases tend to carry weight, particularly now that questions surround the strength of the US economy. If these figures show weakness — for example, a softer-than-expected services PMI or lower job growth — it could heighten concerns that the US is not immune to the broader cooling seen in parts of Asia and Europe. This would likely dampen appetite for risk-sensitive assets, potentially lifting Treasury demand and weighing on US equities.
Impact On Dollar And Yield Sentiment
In currency terms, weaker US data would challenge demand for the dollar, especially against those currencies connected with solid or improving economic data of their own. The inverse is also true; strong data may revive dollar buying, particularly if yields respond accordingly. We’re cautious around sudden changes in positioning post-data, considering how sensitive the dollar has become to real yield differentials.
Options traders should pay extra attention to implied volatility pricing into the weekend. If skew begins favouring downside in USD pairs — measured by the cost of puts rising over calls — it may reflect an expectation of disappointing data. Hedging strategies, especially into the payroll data, might look more attractive now than in prior weeks when event risk was comparatively lighter.
It’s not just data that could move the dial. Statements from central bank members, especially anything pertaining to the inflation outlook or hinting at future policy meetings, could alter expectations. For example, should comments point to the possibility of a delay in interest rate adjustments, there may be a recalibration in short-end rate futures and, by extension, FX and related derivatives pricing.
Where we place our attention in the coming sessions is on short-term breakpoints in price action tied to known event risks, with one eye on whether current market pricing still reflects macro fundamentals or leans too far in a singular direction, making it vulnerable to correction.
