Fed rate cut bets hit dollar; euro, pound rise, yen and loonie lag: Analysis for EUR/USD, GBP/USD, USD/CAD, USD/JPY

Dollar Wobbles as Global Fundamentals Shift; Key Majors Signal Divergence

The U.S. Dollar Index (DXY) remains under pressure following a weaker-than-expected nonfarm payrolls report, which saw August job creation slow to 22,000 and the unemployment rate climb to 4.3%. Markets have priced in a near-certain rate cut by the Federal Reserve at its upcoming meeting, with a 10% chance of a larger 50 bps cut.

Technically, the DXY has broken below the 98.00 support level, undermining bullish momentum. A sustained break below this zone would signal further downside toward 97.00, especially as Treasury Secretary Bessent and President Trump amplify political pressure on the Fed. The near-term outlook remains bearish, with monetary policy expectations and weak U.S. data weighing on the greenback.

Euro (EUR/USD)

The euro steadied near 1.1727 after touching a one-month high on Friday. Sentix investor confidence data surprised sharply to the downside, falling to -9.2 in September, reflecting renewed eurozone economic anxiety. Political uncertainty is intensifying in France, where Prime Minister Bayrou faces a likely lost confidence vote. Despite this, EUR/USD has shown resilience, buoyed by dollar weakness.

Technically, the pair is trading above the 50-day SMA (1.17), with a bullish breakout evident. A close above 1.1750 could open the door to a move toward 1.18. Given dollar softness and positive euro positioning, the outlook is mildly bullish in the short term.

British Pound (GBP/USD)

Sterling is holding firm above 1.35, benefiting from diverging rate expectations. With the Bank of England not expected to cut rates soon due to stubborn inflation, the policy gap with the Fed supports GBP strength. The pound shrugged off a political reshuffle and continues to trade on macro fundamentals.

On the chart, GBP/USD is pushing above both the 50- and 200-day SMAs near 1.30–1.31, confirming bullish momentum. A break above recent resistance at 1.3550 would reinforce this trend. The near-term bias for GBP/USD remains bullish, driven by yield differentials and solid technical support.

Canadian Dollar (USD/CAD)

The Canadian dollar is consolidating around 1.3830, after recovering from lows driven by a poor Canadian jobs report showing 65,500 jobs lost in August. Expectations for a Bank of Canada rate cut on September 17 are strong (92% probability), yet markets still view the Fed as more likely to move aggressively.

USD/CAD is capped below the 200-day SMA (1.4021) and hovering near the 50-day SMA (1.40), indicating technical indecision. While fundamentals point to loonie weakness, technical resistance at 1.39 is firm. The outlook is neutral to slightly bearish for USD/CAD, with further gains likely capped.

Japanese Yen (USD/JPY)

The yen remains under pressure after Prime Minister Ishiba announced his resignation, ushering in fresh political uncertainty. Investors are eyeing potential successors who may favor looser fiscal policy, further weakening the yen. USD/JPY touched 147.62 and is holding near 147.73, despite softer U.S. yields.

Technically, the pair is consolidating between the 50-day SMA (147.4) and 200-day SMA (148.75), forming a tight wedge. A break below 147.00 would signal a pullback, while upside remains capped unless political clarity emerges. The short-term bias is slightly bullish, though constrained by resistance and BOJ policy uncertainty.

More Information in our Economic Calendar.