Dollar remains weak on Fed rate cut expectations, eyes release of key US data

The dollar index remains in red for the fifth straight day and probes again through key supports at $97.61/52 (daily cloud base / Fibo 61.8% of 95.97/100.04) which have so far contained a number of attacks and marks solid supports.

The dollar keeps negative tone on rising bets for Fed rate cut in September (the latest dovish comments from two Fed policymakers added to the outlook), as well as the most recent political turmoil in the US after President Trump’s attempt to fire Fed Governor Cook and court ruling that most of Trump’s tariffs are illegal.

However, markets are likely to be more cautious ahead of releases of key economic (US August labor data) that will be in focus this week for the final signal ahead of Fed’s September policy meeting.

US labor sector showed significant signs of slowing in past couple of months that is now Fed’s biggest worry, after Chair Powell said that elevated inflation is likely to be a temporary phenomenon.

Economists expect significant drop in job openings and private sector hiring (JOLTS / ADP) but predict that non-farm payrolls will remain almost unchanged and unemployment tick higher.

Disappointing NFP would be the last signal confirming September rate cut and open prospects for potential further easing towards the end of the year.

In such scenario, pressure on greenback will increase, with firm break of cloud base / Fibo triggers to expose next targets at $96.93/82 (Fibo 76.4% / July 24 higher low).

Conversely, upbeat August NFP (unlikely scenario) would provide temporary relief, but not expected to result in major dollar’s direction changes.

Res: 97.61; 98.01; 98.15; 98.49
Sup: 97.41; 97.15; 96.93; 96.48