US Dollar: Consolidation with two-way risks – OCBC

US Dollar (USD) is currently consolidating around 99.5, according to OCBC strategist Christopher Wong. The index is buoyed by higher oil prices, elevated US Treasury (UST) yields, and softer risk sentiment. Wong identifies potential bullish momentum with a slight risk of two-way risks. Resistance is seen near the 99.80-100.30 range, while support lies between 99.30-98.00.

Wong suggests that a further USD upside would require the Federal Reserve to maintain the option for additional tightening. The USD rebounded due to rising oil prices, higher UST yields, and a less risky environment. Rising oil pushed Brent above $108/bbl, driven by concerns about Middle East supply disruptions. Simultaneously, the 10-year UST yield hit 5%, providing rate support for the USD.

Softening risk sentiment, driven by a decline in AI-related equities, has also contributed to the USD's rise. Although near-term support is likely, a further upside would require the Fed to keep the door open to additional rate hikes. The DXY is currently at 99.5, with tentative bullish daily momentum and an RSI that has slightly increased.

Two-way risks are expected to persist, with resistance at 99.80/100 (50, 100-day moving averages) and 100.3 (23.6% Fibonacci retracement), and support at 99.30/40 (21-day moving average, 38.2% Fibonacci retracement), 98.60/70 (50% Fibonacci retracement of 2026 low to high), and 98 (61.8% Fibonacci retracement).