Dollar index

While one can argue the greenback has made a short-term peak, the overall dollar forecast remains positive, especially against currencies subject to increased tariff risks from Trump’s administration.

Traders are pricing in roughly a 1-in-10 chance that the Fed leaves interest rates unchanged at its November, but it may take 4 more better-than-expected US economic reports in a row.

Meanwhile, most major foreign currencies remain week, further alleviating pressure on the US dollar. The sharp decline in Chinese markets over the last couple of sessions has put some pressure on commodity currencies. Additionally, the RBNZ cut rates by 50 basis points, sending the kiwi lower.

The leading indicators point to a potentially better-than-expected reading in this month’s NFP report, with headline job growth potentially coming in somewhere in the 130K-200K range

The greenback is likely to remain on the front-foot while geopolitical risks remain elevated and ahead of the US jobs report on Friday. The latter could then determine which direction the greenback will want to take in the near-term, before the focus turns to US presidential election.

Judging by price action in the FX and rates markets, investors are certainly looking for a dovish rate decision. This could be in the form of a surprise 50 basis point cut, or 25 bps cut with a strong hint of at least one 50 bps cut in the remaining 2 meetings later this year. Ahead of next week’s central bank bonanza, when the Bank of England and Bank of Japan will also decide on their own monetary policies, the US dollar forecast remains bearish.

Despite the uptick in wages, this was a rather weak jobs report. Not only did the headline data show only a modest +142K rise in nonfarm jobs in August (vs. +165K expected), revisions reduced reported employment for June and July sharply - by a good 86K.

USDJPY, EURUSD Outlook: Following the negative weight of the US Dollar amid a dovish Fed, leading inflation indicators are due this week that might alter the course of the DXY, USDJPY, and EURUSD.

Recent macroeconomic data points to a weakening US economy, and if that trend continues then it could spell trouble for the dollar in the months ahead. This puts today’s upcoming data in focus.

EURUSD Outlook: The EURUSD chart managed to extend a wick beyond its yearly consolidation before dropping back to the 1.09 zone, while the US Dollar index (DXY) maintained its trend within the borders of its consolidation. Is a reversal on the horizon?

USDJPY Forecast: The USDJPY erased its 2024 gains and is poised to retest a key support level respected in December 2023.