DXY Index: Safe haven / energy exporter dynamic in play. The broad USD’s tactical trajectory is tied to the US-Iran headline developments. Comments from Trump that the conflict will end soon led to a brief USD sell-off, while comments from the new Iranian Supreme Leader contributed to a renewed USD bounce. Beyond the headlines, the market is also increasingly cognizant that the Fed’s hands may be tied if higher energy prices flow through to higher inflation in the US. Market expectations for Fed rate cuts have compressed sharply. Overall, the DXY Index should stay supported for now, with a test of the 100.00 – 100.50 range highs within sight. 

USD-SGD: Tracking the broad USD higher. The USD-SGD has been capped at the stronger resistance of 1.2850/60 (100-, 200-DMAs and start of 22 Jan breakdown) thus far. In the near-term, a breach of that resistance cannot be ruled out, as the USD-SGD is effectively a DXY Index proxy for now. However, there is potential for significant downside for the USD-SGD upon de-escalation, especially if higher energy prices translate to inflationary pressures and a further step up in MAS tightening chatter. Next resistance at the year-to-date high of 1.2900, before the psychological 1.3000.    

USD-JPY: Haven appeal offset by energy exposure. The JPY is in the middle of the pack in the G-10 space since the conflict started. JPY weakness is limited by concerns over BOJ intervention and rate checks. The USD-JPY is now at 159.50 area, but there are still no signs of intervention except for some basic jawboning by Finance Minister Katayama. This may result in the USD-JPY surfacing above 160.00 in the week of 16 Mar. Note that there is chatter for intervention around the BOJ decision (19 Mar). Expect the USD-JPY to be headline-driven for now, with a bias towards the 160.00 – 162.00 range. Any intervention will see 152.00 as the first support for the USD-JPY. 

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