Forex News

• US Dollar Index flatlines around 99.00 in Friday’s early European session. 
• US NFP is expected to increase by 56,000 jobs in August after declining by 23,000 in July. 
• The negative outlook of the DXY remains intact under the 100-day, with bearish RSI momentum. 
• The immediate resistance level emerges at 99.35; the first downside target is seen at 98.60.

The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 99.00 in the early European trading hours on Friday. The DXY holds steady as traders prefer to wait on the sidelines ahead of the key US August employment report later on Friday. 

Federal Reserve (Fed) Governor Christopher Waller’s remarks weighed on the US Dollar in the previous session. Waller stated on Thursday he was leaning toward keeping interest rates steady at this month’s policy meeting if the next batch of inflation data showed price pressures continuing to moderate.

Traders pared bets on a US September rate hike after the relatively dovish comments from Waller, with the implied probabilities of a move this month back to 50.2%, down from 63.2% on Wednesday, according to the CME FedWatch tool. 

The US Nonfarm Payrolls (NFP) are forecast to increase by 56,000 in August after decreasing by 23,000 in July. The Unemployment Rate is expected to hold steady at 4.1% during the same period. In case of stronger-than-expected outcomes, this could boost the DXY in the near term. 

Fed comments leave longer-dated US yields treading water

Analysts at Danske Bank observe that the initial market reaction in the US Treasury market to Fed Governor Waller’s remarks was a move lower in yields, noting that “in the US there was also an initial decline on the back of Fed Wallers comments, but then yields began to rise in the afternoon and 10Y Treasuries ended unchanged.” This left longer-dated US rates effectively flat by the close, despite the intraday volatility around the policy commentary.

Waller keeps September hike option alive as data-dependent stance tempers Dollar bulls

Fed’s Waller delivered a mildly less hawkish tone, with the FXS Speechtracker score at 6.1/10, slightly below the 6.3/10 historical average, as the message balanced emerging disinflation with still-elevated inflation above the 2% target. The key remark that policy would likely be held steady in September if August inflation shows continued progress, but that a “hot” print could still trigger a hike, underscores a finely calibrated reaction function that keeps a tightening bias alive while acknowledging better three‑month core inflation dynamics and solid growth. Overall, the speech signals a data‑dependent pause with a low but non‑negligible probability of further tightening, a mix that is modestly supportive for the Dollar but less aggressively so than in prior communications.

The FXS Fed Sentiment Index fell by 2.06 points to 125.38, indicating a pullback in perceived hawkishness even as the level remains firmly above the neutral 100 mark. This configuration suggests that, while the Fed stance is still hawkish in aggregate according to the FXS Fed Sentiment Index and FXS Speechtracker, markets are paring back expectations for imminent rate hikes and may temper the upside for the Dollar unless incoming inflation data re‑ignite tightening bets.

Technical Analysis: US Dollar Index remains capped below the 100-day SMA

In the daily chart, the Dollar Index Spot maintains a bearish near-term tone as price holds beneath the 20-day Bollinger simple moving average (SMA) and the 100-day SMA. The index is sliding within the lower half of its Bollinger envelope, with the lower band offering nearby dynamic support, while the Relative Strength Index (RSI) around 40 hints at lingering downside pressure rather than a decisive oversold condition.

On the topside, initial resistance is aligned at the Bollinger middle band near 99.35. The next hurdle is located at the 100-day SMA at 99.75, en route to the 100.00 psychological level. The upper Bollinger band around 100.15 forming a broader supply zone that would need to be reclaimed to ease the prevailing bearish bias.

On the downside, the next notable support emerges at the lower Bollinger band around 98.60. A break would open the door to further weakness toward the May 8 low of 97.83. 

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Danske Research Team highlights that Fed Governor Waller is inclined to keep rates unchanged in September if August inflation shows further progress, but would consider a hike if inflation comes in hot. His remarks pushed September hike pricing closer to a 50/50 call and weighed slightly on the Dollar, while strong ISM services data and the upcoming US jobs report keep the Fed outlook firmly data-dependent.

Waller shifts focus to inflation and jobs data

"On the wires, Fed's Waller said he is inclined to support keeping the policy rate unchanged at the September meeting if August inflation data shows continued progress. However, he also noted that if inflation comes in hot, he would consider a September rate hike."

"The comments put further emphasis on the upcoming inflation release as key for the Fed's near-term policy decision. The USD weakened slightly after the remarks, while market pricing for a September hike moved closer to a 50/50 call from around 60/40 in favour of a hike prior to the comments."

"In the US, the ISM services index rose to 55.4 in August (cons: 54.2, prior: 54.1), coming in stronger than expected and pointing to solid momentum in the services sector. The details were also firm, with business activity, new orders and prices all increasing notably, while the employment index ticked up only slightly and remained in contractionary territory."

"The US Jobs Report, the week's most important data release, is due. We expect nonfarm payrolls at +65k, slightly above consensus, and an unchanged unemployment rate at 4.1%, suggesting a still-tight labour market. We expect average hourly earnings to rise 0.3% m/m. A solid report could put further pressure on the Fed to hike rates."

"In the US there was also an initial decline on the back of Fed Wallers comments, but then yields began to rise in the afternoon and 10Y Treasuries ended unchanged."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• EUR/GBP tests support at previous highs around 0.8585 after rejection above 0.8600.
• The Pound bounced up across the board on Thursday, buoyed by hawkish comments by BoE's Pill.
• Eurozone Retail Sales and BoE Governor Bailey's comments will set the fundamental background for the pair later in the day.

The Euro (EUR) trades lower against the British Pound (GBP) on Friday, snapping a four-day rally, after hawkish comments from Bank of England (BoE) committee member Huw Pill provided a fresh boost for the Cable on Thursday. The EUR/GBP pair retreated from one-month highs, a few pips above 0.8600, and is testing support at a previous resistance area around 0.8585 at the time of writing.

Pill reiterated the need to raise the BoE’s bank rate to 4%, at a roundtable in the Edinburgh Chamber of Commerce as, in his opinion, “clear, prompt and decisive policy action and communication would help steer markets and reduce uncertainty.” The Sterling rallied against its main peers following those comments.

Eurozone Retail Sales and BoE Governor Bayley eyed

In the Eurozone, data from Germany released earlier in the day showed that Factory Orders increased 2.5% in July, well above the 0.3% rise forecast by market analysts, following a 3.7% gain in June. The main reason for the positive surprise was the higher orders for large transport equipment, such as ships, trains and military vehicles, which rose 124.6% in July.

In a few hours, Eurozone Retail Sales are expected to show that consumption bounced up 0.3% in July, reversing June’s 0.3% drop. At the same time, European Central Bank (ECB) member Philip Lane is expected to meet the press and likely reaffirm the bank's will to hike interest rates further at its next meeting.

In the UK, the focus will be on August’s S&P Global Construction Purchasing Managers Index (PMI) report, which is expected to show that the sector’s activity contracted for the fifth month in a row, although at a softer pace than in July. A few minutes later, BoE Governor Andrew Bailey, who is likely to put Pill’s comments into context.

• Gold bulls turn cautious as the USD recovers slightly ahead of the crucial US NFP report.
• Energy-driven inflation fears underpin Fed tightening prospects and further cap bullion.
• Receding Fed hike bets and soft US bond yields cap the USD, supporting the commodity.

Gold (XAU/USD) edges lower on Friday, snapping a two-day winning streak amid a modest US Dollar (USD) uptick. The commodity, however, holds above $4,450 and remains close to the weekly high it touched the previous day, as traders await the release of the closely watched US monthly employment details. The popularly known US Nonfarm Payrolls (NFP) report will provide more cues about the Federal Reserve's (Fed) policy path amid receding bets of a September rate hike. The outlook, in turn, will play a key role in influencing USD price dynamics and provide some meaningful impetus to the non-yielding bullion.

Gold traders eye US jobs data as Fed tone turns more hawkish

According to TD Securities, "Non-farm payrolls this Friday will be the next piece of data with keen interest for precious metals" as markets grapple with "the renewed hawkish tone from the Fed and the latest escalation in the energy market." However, the bank strikes a more constructive note beyond the immediate data risk, adding that "looking forward, we do not anticipate material downside as the landscape for precious metals has improved amid a renewed dollar debasement theme, while Fed hikes remain far from certain."

Heading into the key data release, Governor Christopher Waller stated on Thursday that he is leaning toward keeping interest rates steady at the September FOMC meeting, provided there are no surprises from upcoming inflation data. Investors responded by pushing US bond yields and the USD sharply lower, which, in turn, assisted the Gold price to build on its recovery from a four-week low touched on Wednesday. However, inflation risks stemming from higher energy prices leave the door open for a rate hike later this month. This helps the USD Index (DXY), which tracks the Greenback against a basket of currencies, bounce off a one-and-a-half-week low and cap the upside for the commodity.

In fact, crude oil prices sit near their highest levels since July 24 amid renewed US-Iran hostilities and clashes over the Strait of Hormuz. In further developments surrounding the Middle East crisis, Iran targeted US military bases in Kuwait and the United Arab Emirates (UAE) on Thursday. Meanwhile, US Vice President JD Vance said that US President Donald Trump has a series of options available at his disposal to deal with Tehran, including economic, military, diplomatic, and covert measures. Adding to this, South Korea is reportedly preparing to deploy military assets to support freedom of navigation in the strategic Strait of Hormuz and aims to dispatch them before the end of the year.

This keeps geopolitical risk premium in play, which supports crude oil prices and might continue to underpin the safe-haven USD. However, the near-term direction hinges on the highly anticipated US jobs report. Nevertheless, the XAU/USD pair, for now, seems to have stalled its recent corrective decline from the vicinity of the $4,700 mark, or the highest level since May 14, and remains on track to register modest weekly gains. That said, sustained strength and acceptance above the $4,500 round figure is needed to back the case for any meaningful appreciating move.

XAU/USD 4-hour chart

Technical Analysis

The precious metal maintains a constructive near-term tone above the 200-day Simple Moving Average (SMA) on the 4-hour chart and the 38.2% Fibonacci retracement level of the recent leg down. The Relative Strength Index (RSI) near 56 and the Moving Average Convergence Divergence (MACD) line lodged above zero with a positive histogram suggest firm but not overextended bullish momentum while the Gold presses into the nearby 50% retracement barrier ahead of $4,500.

Further up, the 61.8% level near $4,540, followed by the 78.6% retracement at $4,609 and the swing high cluster around $4,698 could be key hurdles. On the downside, initial support is seen at the 38.2% retracement at $4,442, ahead of the 23.6% level near $4,381, with the 200-period SMA at $4,322 and the structural floor around $4,283.63 reinforcing a broader bullish bias.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• The Indian Rupee reflects broader strength amid strong FCNR receipts and receded hawkish Fed bets.
• Fed’s Waller says that recent data shows some signs of disinflation.
• Soft US ADP data for August sets a weak bar for the US NFP.

The Indian Rupee (INR) reflects strength against the US Dollar (USD) on Friday, trading close to its two-month high of 94.29 posted the previous day. The Indian currency outperforms due to strong inflows of foreign funds through the Reserve Bank of India’s Foreign Currency Non-Resident (FCNR) (B) scheme and diminished Federal Reserve (Fed) interest rate hike expectations.

RBI reports strong foreign inflows through FCNR scheme

Strategists at Societe Generale highlight that the RBI has materially strengthened its firepower, noting that “the RBI yesterday disclosed that it had raised $136.38 billion through its FX mobilisation schemes, including the FCNR(B) window launched in early June, significantly bolstering reserve buffers and intervention capacity.”

Fed Waller says recent data indicates signs of slowing inflationary pressures

On Thursday, Fed Governor Christopher Waller said at the Reuters NEXT Newsmaker event, “Finally seeing some signs of disinflation in recent data.” Waller pushing back upside inflation risks resulted in a sharp decline in the US Dollar, with traders paring hawkish Fed bets.

The CME FedWatch tool shows traders see a one-in-two chance that the Fed will hike interest rates at the September meeting, down from a two-in-a-three chance seen before Fed Waller’s speech.

Regarding the Fed’s monetary policy outlook, Governor Waller said that he would “support holding interest rates steady” at the September meeting if the Consumer Price Index (CPI) growth cools down. Waller also kept the option of a rate hike on the table in case the inflation data remains hot. "If August inflation data shows progress has reversed, small adjustment to policy rate would help ensure progress resumes," Waller said.

US NFP data awaited

The next major driver for the US Dollar’s outlook is expected to be the US Nonfarm Payrolls (NFP) data for August, which will be published at 12:30 GMT.

Brown Brothers Harriman’s Elias Haddad points out that the latest US labor market read from ADP did little to dispel concerns about cooling demand. He notes that “the ADP August private payrolls data showed labor demand remains unimpressive,” with the economy adding “+38k private sector jobs in August (consensus: +47k) vs. +46k in July, the lowest reading since January.” Haddad cautions, however, that “the correlation between monthly change in ADP private payrolls and nonfarm payrolls (NFP) is weak,” limiting the extent to which investors can extrapolate the ADP miss into Friday’s official employment report.

According to estimates, the US economy created 56K fresh jobs after laying off 23K employees in July. The Unemployment Rate is seen as steady at 4.1%.

Technical Analysis: USD/INR sees more downside towards 94.08

In the daily chart, USD/INR trades at 94.4925, extending a downside bias as price holds below the 100-day simple moving average (SMA) at 95.2909. The break under this medium-term gauge suggests sellers remain in control, while the Relative Strength Index (RSI) near 28 signals oversold conditions that could slow, but not yet reverse, the prevailing downtrend.

On the downside, the immediate focus remains on how price behaves around the current 94.49 area, as a sustained close beneath it would expose further weakness toward the May low at 94.08. On the topside, a recovery back above the 100-day SMA at 95.29 would be needed to ease bearish pressure and hint at a corrective rebound toward higher levels.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Waller keeps September hike option open as data-dependent stance tempers Dollar bulls

Fed’s Waller delivered a mildly less hawkish tone than usual, with the FXS Speechtracker score at 6.1 versus a 6.3 historical average, but still underscored that inflation remains “significantly elevated” and that only a “small adjustment” in rates may be needed if August data runs hot. The key remark that Waller is inclined to hold rates steady in September if disinflation continues, yet stands ready to hike on a single upside surprise, reinforces a finely balanced reaction function that keeps markets on edge over the next inflation print. Overall, the message leans data-dependent rather than decisively dovish, limiting immediate downside for the Dollar while capping aggressive hawkish repricing.

The FXS Fed Sentiment Index fell by 2.06 points to 125.38, signaling a modest pullback in perceived hawkishness relative to recent communications captured by the FXS Speechtracker. However, with the index still well above the neutral 100 mark, the Fed remains firmly in hawkish territory despite the softer tone, leaving the Dollar supported but more sensitive to incoming inflation data.

ING analysts Warren Patterson and Ewa Manthey note that Oil prices, including ICE Brent above US$95/bbl, remain supported by heightened US-Iran tensions and robust Iraqi exports routed via the Strait of Hormuz. However, they highlight that if Hormuz flows remain uninterrupted and Saudi Arabia’s unchanged official selling prices signal looser fundamentals, upward pressure on Oil may fade despite tight refined product markets.

Brent strength tested by Hormuz flows

"Oil prices remain elevated, with ICE Brent holding above US$95/bbl amid a pickup in hostilities between the US and Iran this week. This included Iran firing missiles into neighbouring Gulf countries. Escalation is propping up crude, but the rally may lose traction if Hormuz shipments keep moving smoothly."

"According to reports, Iraq exported the highest amount of oil since the start of the US-Iran war in August – a total of 2.35m b/d. Of that, around 2.26m b/d was exported from southern routes. This would need to eventually go through the Strait of Hormuz."

"Furthermore, Saudi Arabia kept its official selling price for its flagship Arab Light unchanged at a $2/bbl discount for October loadings. The expectation had been for an increase, suggesting the market is not as tight as thought."

"However, refined product markets remain significantly tight. The latest data from Insights Global shows that refined product inventories in the ARA region fell by 118kt week-on-week to 4.15mt. The decline was led by naphtha, gasoil and jet fuel."

"Unless Persian Gulf and/or Russian diesel flows recover, the market is likely to tighten further as we head towards winter. This tightness in middle distillates is not isolated to Europe. US diesel cracks remain above $100/bbl, while retail diesel prices in the US have hit their highest level since mid-2022."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• NZD/USD rises as the US Dollar weakens amid shifting Fed policy outlook.
• Fed Governor Waller favored keeping interest rates unchanged in September, provided upcoming inflation figures remain stable.
• The RBNZ delivered its second consecutive interest rate hike earlier this week.

NZD/USD gains ground for the second successive day, trading around 0.5900 during the Asian hours on Friday. The pair appreciates as the US Dollar (USD) struggles amid softening hawkish expectations surrounding the Federal Reserve's (Fed) monetary policy path. Fed Governor Christopher Waller recently signaled a preference for holding interest rates steady at the upcoming September meeting, assuming upcoming inflation figures offer no major shocks.

Fed Waller’s dovish tone contrasts sharply with the hawkish remarks delivered by Chairman Kevin Warsh a week earlier. Following Waller’s comments, market pricing shifted noticeably, with the CME FedWatch tool showing the probability of a September rate hike falling to 50.4%, down from 63.2% the previous day.

Traders are now turning their attention to the upcoming US August employment report for clearer guidance on the Fed's next moves. Consensus estimates project Nonfarm Payrolls to expand by 56,000 jobs, with the national Unemployment Rate expected to hold firm at 4.1%.

The Reserve Bank of New Zealand (RBNZ) implemented its second consecutive interest rate hike earlier this week. However, the central bank signaled a less aggressive approach toward future monetary tightening.

New Zealand trade rebound underpins mixed Kiwi outlook

BNY’s Geoff Yu points out that New Zealand’s external accounts are showing a solid rebound in activity, noting that June-quarter international trade data recorded “two-way trade rising 16% y/y to NZ$64.9bn.” According to BNY, this improvement was broad-based, with “total exports of goods and services increased to NZ$32.5bn from NZ$28.5bn a year earlier, while imports rose to NZ$32.4bn from NZ$27.5bn.” Yu frames these figures as evidence of robust trade flows that help offset softer merchandise terms of trade and a weaker commodity price backdrop, leaving the fundamental picture for the Kiwi more nuanced than headline growth alone might suggest.

RBNZ Assistant Governor Karen Silk noted that policymakers are more inclined to postpone the next rate increase until December, emphasizing that the central bank remains flexible and is not following a predetermined path. Financial markets currently reflect a modest 31% probability of an October rate hike, whereas a December increase is almost fully priced in by investors.

Here is what you need to know on Friday, September 4:

The US Dollar stabilizes after suffering losses against its major rivals on Thursday. Later in the American session, August employment report from the US, which will feature Nonfarm Payrolls, Unemployment Rate and wage inflation figures, will be watched closely by market participants.

During the American trading hours on Thursday, cautious comments from Federal Reserve Governor Christopher Waller on a potential tightening step at the next meeting caused the US Dollar to come under pressure, with the USD Index losing more than 0.5% on the day. In the European morning on Friday, the USD Index fluctuates in a narrow range at around 99.00.

Fed’s Waller delivered a mildly less hawkish tone, with the FXS Speechtracker score at 6.1/10, slightly below the 6.3/10 historical average, signaling a modest softening in policy rhetoric. The key remark that Waller is inclined to support holding the policy rate steady in September if August inflation shows continued progress, but would consider a hike if the data come in hot, underscores a finely balanced, data-dependent reaction function that keeps upside rate risk alive. Acknowledgement of “finally” seeing disinflation alongside still-elevated inflation and a low tolerance for renewed price pressures caused the US Dollar to lose interest.

According to the CME FedWatch Tool, the probability of a 25 basis points rate hike at the upcoming meeting declined to 50% from about 63% earlier in the week.

Nonfarm Payrolls in the US are forecast to rise 56K in August following July's unexpected 23K decline. The Unemployment Rate is seen holding steady at 4.1% in this period.

US Dollar reaction seen as limited even on strong US jobs beat

According to TD Securities, a robust US jobs report on its own is unlikely to tip the balance toward a September move from the Fed. The bank argues that “a strong payrolls report is a necessary but not a sufficient condition for the Fed to hike in September,” noting that “the more important piece of the puzzle is inflation as part of the strength in the NFP can be considered to be a reversal of the July weakness.” In terms of market impact, TD expects only a modest currency response, estimating that “in the case of a +40-50k upward payrolls surprise to consensus median as we expect, historical sensitivity and current positioning would suggest +0.2% knee-jerk USD reaction on the day.”

USD/JPY recovers modestly following a sharp two-day decline and trades above 156.00 in the European morning on Friday. Still, the pair is down about 2.5% for the week. Japanese Finance Minister (FM) Satsuki Katayama said on Friday that the officials will closely monitoring bond markets with heightened urgency.

Gold (XAU/USD) rose nearly 2% on Thursday and climbed above $4,500 before correcting lower. In the early European session, XAU/USD moves in a narrow band above $4,450.

EUR/USD gained more than 0.3% on Thursday and closed above 1.1600. The pair stays relatively quiet early Friday and trades below 1.1650. Later in the session, Eurostat will publish Retail Sales data for July.

GBP/USD continues to edge higher toward 1.3550 after closing in positive territory on Thursday, supported by hawkish comments from Bank of England (BoE) Chief Economist Huw Pill.

Pill signals front-loaded BoE hike but downplays extended tightening

Pill’s latest remarks score 8.2 on FXS Speechtracker, modestly above the 7.9 historic average, indicating a slightly more hawkish tone than usual. The explicit call to raise Bank Rate to 4% and the warning about stronger second-round effects versus the “halcyon days” of inflation targeting underscored concern about entrenched inflation pressures and support a firmer stance toward GBP.

At the same time, the message that such a move “need not be the start of a prolonged and aggressive series of increases” tempered expectations of a full-blown tightening cycle, framing the shift as front-loaded rather than open-ended.

Commerzbank’s Thu Lan Nguyen argues that recent interventions by Japanese authorities and the US Treasury have largely lost impact, with the Japanese Yen giving back gains against the Dollar and US yields returning to prior levels. She highlights unclear policy objectives and credibility issues, noting that fiscal concerns remain a headwind for the US Dollar and that markets still view USD/JPY 160 as a key line.

Policy signals and fiscal headwinds

"Both the interventions by the Japanese authorities and those by the US Treasury have more or less fizzled out. The Japanese yen has already surrendered part of the gains it made against the US dollar following the historic intervention at the end of July, all within just a few weeks. Likewise, US Treasury yields have returned to the levels seen before the Treasury announced increased bond buybacks."

"Fiscal concerns therefore remain a headwind for the US dollar."

"Interventions do not work solely through the physical purchase or sale of assets. Equally, if not more, important is their signaling effect: policymakers use them to indicate a change in policy stance or hint at future policy measures."

"Nevertheless, the 160 level is likely to be viewed as an implicit line in the sand for the time being, particularly because the Bank of Japan adopted a markedly hawkish tone after that level was recently reached, as my colleague noted yesterday."

"As long as governments fail to credibly address market concerns about the trajectory of public debt, investors are likely to continue demanding a risk premium on both the yen and the US dollar."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• USD/CAD consolidates around 1.3790 as the US NFP data takes centre stage.
• Fed’s Waller said that recent data shows some signs of disinflation.
• Traders have trimmed down Fed interest rate hike expectations to 50%.

The Canadian Dollar (CAD) trades broadly sideways against the US Dollar (USD) at around 1.3790 on Friday after a strong Thursday, with investors awaiting the United States (US) Nonfarm Payrolls (NFP) data for August, which will be published at 12:30 GMT.

The USD/CAD fell sharply on Thursday as the US Dollar faced sharp selling pressure after Federal Reserve (Fed) Governor Christopher Waller said recent data signals some cool-off in inflationary pressures. This led to a downward revision in the Fed’s interest rate expectations.

Waller flags data-dependent September Fed call, keeps Dollar bulls on alert

Fed’s Waller delivered a mildly less hawkish tone, with the FXS Speechtracker score at 6.1/10, slightly below the 6.3/10 established baseline, as the speech balanced recognition of “finally” emerging disinflation with a clear willingness to hike if August inflation runs hot. The key remark that Waller is inclined to hold rates steady at the September 15-16 meeting if data show continued progress, but would support a “small adjustment” higher if progress reverses, underscores a finely tuned reaction function that keeps a tightening bias alive while tempering immediate rate-hike expectations. Overall, the message is data-dependent and conditionally hawkish, supportive of the Dollar on upside inflation surprises but limiting aggressive repricing of near-term hikes.

The FXS Fed Sentiment Index fell by 2.06 points to 125.38, signaling a modest pullback in perceived hawkishness relative to recent communications captured by the FXS Speechtracker. However, with the index still well above the neutral 100 mark, the Fed remains firmly in hawkish territory, indicating that markets should continue to price a meaningful risk of further tightening even as the tone edges incrementally toward patience.

The CME FedWatch tool shows that the odds of the Fed hiking interest rates at the September meeting have diminished to 50% from 63.2% seen on Wednesday.

Looking ahead to the official labour market report, TD Securities says, "We expect August NFP to rebound to 95k after July posted a decline of 23k," and stresses that "risks to our payrolls forecasts appear hawkish, and we would not rule out an outsized positive surprise." On the jobless rate, the bank expects limited movement, noting that "the UE rate likely went sideways at 4.1% with balanced risks." TD Securities concludes that "a modestly hawkish employment report will reaffirm the Fed's attention on inflation, but it will be by itself unlikely to push the Committee towards hikes."

USD/CAD Technical Analysis

In the daily chart, USD/CAD trades at 1.3791, keeping a bearish near-term tone as spot holds beneath the 100-day Simple Moving Average (SMA) at 1.3920. The pair’s failure to reclaim this medium-term gauge suggests rallies remain capped for now, while the Relative Strength Index (RSI) at about 38 sits in bearish territory but shy of oversold, hinting at lingering downside pressure rather than exhaustion.

On the topside, the 100-day SMA at 1.3920 is the first meaningful resistance that bulls would need to clear to ease the current downside bias and open the way for a more sustained recovery. On the downside, the pair might enter a fresh downside leg if it fails to hold the August 21 low at 1.3732.

(The technical analysis of this story was written with the help of an AI tool. Know more.)