Dollar Under Pressure Ahead of NFP as Soft Labor Data Fuels Dovish Fed Bets

Key Takeaways:

*Softer U.S. labor signals, including weak ADP jobs growth and higher jobless claims, have fueled expectations for a Fed dovish pivot.

*Markets increasingly anticipate policy easing at the September 17 FOMC meeting, with NFP seen as the decisive input.

*A weak jobs print could deepen dollar losses, while a stronger report may offer only temporary relief for the greenback.

Market Summary:

The U.S. dollar is facing renewed selling pressure ahead of today’s highly anticipated Nonfarm Payrolls report, as markets increasingly price in a dovish pivot from the Federal Reserve at its September 17 policy meeting. The greenback’s weakness follows a series of softer labor market indicators, including a significantly weaker-than-expected ADP employment report—which showed just 54,000 jobs added in August—and higher-than-forecast weekly initial jobless claims.

These developments have reinforced expectations that the Fed may prioritize supporting the labor market over combating lingering inflation pressures, leading traders to increase bets on imminent rate cuts. While the dollar index remains above the psychologically significant 98.00 level, it has relinquished earlier gains driven by optimism that the return of Congress could help avert a government shutdown.

Today’s NFP release is widely seen as a critical input for the Fed’s upcoming decision. A print below the consensus estimate of approximately 170,000 jobs added—particularly if accompanied by softer wage growth—could intensify selling pressure on the dollar by solidifying expectations for policy easing. Conversely, a stronger report may temporarily bolster the greenback by giving the Fed more room to maintain its current stance.

Market volatility is expected to remain elevated throughout the session as participants recalibrate positions based on the payrolls outcome and its implications for the September FOMC meeting.

Technical Analysis

USDCAD, D1:

The USDCAD pair has established a strong base after forming a triple bottom above the 1.3565 support level. This consolidation was followed by a bullish sequence of higher highs and higher lows, but the structure was interrupted when the pair slipped 1.3% from its recent peak. A modest rebound has since emerged, yet the price action now appears to be shaping into a potential head-and-shoulders pattern. Should the pair remain capped below its short-term resistance at 1.3820 and turn lower, it would reinforce a strong bearish signal. 

Momentum indicators are aligning with this outlook: the RSI is moving sideways near the mid-level, offering a neutral bias, while the MACD is edging lower and looks poised to cross beneath the zero line, signaling that bullish momentum is fading in the pair.

Resistance Levels: 1.3890, 1.3985

Support Levels: 1.3790, 1.3705