The US dollar (USD) slipped following Friday’s weak US nonfarm payrolls (NFP) report and retains a soft undertone. The 22,000 job gain in August fell well below expectations, while downward revisions to prior months left the three-month average at just 29,000, below the estimated breakeven range needed to keep the unemployment rate stable. June’s data was revised to –13,000, marking the first negative print since December 2020, according to Scotiabank’s chief FX strategists Shaun Osborne and Eric Theoret.
Fed easing expectations underpin USD
The soft labor data makes a 25-basis-point rate cut at the September 17th FOMC meeting highly likely. Analysts note that the negative June print raises concerns that the Fed may opt for a bolder easing move. Swaps currently price in 28 bps of easing risk for the September meeting and 70 bps through December. USD volatility was visible on Friday, with EUR briefly pushing above major consolidation resistance in the low 1.17s and the DXY reaching its lowest level since late July, though the sell-off did not extend significantly.
Political developments add caution
While USD remains soft, markets may hold steady ahead of the Fed. Political events are also influencing currency dynamics: the Japanese yen underperformed after PM Ishiba resigned following LDP election setbacks, French PM Bayrou faces a confidence vote, and UK PM Starmer conducted a major cabinet reshuffle amid challenges from Farage’s Reform Party. EUR and GBP were little changed after rebounding from early lows, while gold continued to rally.
Technical outlook for DXY
No significant US or Canadian data is scheduled for today. Upcoming US CPI and PPI releases may have limited impact. Technical analysis shows the DXY’s short-term risks remain tilted to the downside. Resistance is seen in the 97.75–98.00 region, with key support at 96.30–96.35. Intraday and daily DMI readings align with the ongoing bearish trend on weekly charts, indicating a preference to fade index gains above 98.
