Breach of debt ceiling should see risk-off trades favouring USD but could be a medium-term negative – OCBC

Economists at OCBC Bank analyze the USD outlook amid the debt-ceiling issue.

Bullish momentum easing

“We opined that US debt-ceiling issue does not quite matter for FX until it happens. That said, there is no room for complacency. Knee-jerk reaction on breach of debt ceiling should see risk-off trades favouring USD but subsequently, this could be a medium-term negative for USD as implications of a breach/default could accelerate the de-dollarisation story and undermine the USD's safe haven characteristic.” 

“Bullish momentum on daily chart shows signs of fading while RSI fell from overbought conditions. Risks to the downside.”

“Support at 102.75/90 levels (61.8% fibo retracement of 2023 low to high, 100-DMA), 102.30 (50-DMA) and 102 (76.4% fibo, 21-DMA).” “Resistance at 103.40 (50% fibo), 103.95 (38.2% fibo).”