Dollar stumbles as Fed cut bets surge – Gold and Oil rebound, risk sentiment recovers

Market overview

Risk assets start the week on a firmer footing, as a sharp US jobs disappointment forces markets to radically rethink the Fed’s next move.

Asian and European equity futures bounce in early trade sessions on Monday, helped by a wave of buy-the-dip flows and the near-certainty of lower US rates by autumn. The US Dollar Index (DXY) trades below 99, giving up all gains from the post-tariff rally, while US yields tumble after Friday’s historic payroll shock. Meanwhile, Brent crude and gold both rebound, and FX volatility returns as US political drama and OPEC+ supply shifts inject fresh uncertainty. Global liquidity and central bank credibility are front and center as traders parse weaker US data, Fed leadership turbulence, and the real-world impact of trade policy on inflation.

Macro and sentiment drivers

US NFP shock: July payrolls rose just 73,000, missing consensus by a wide margin; prior months revised lower by 258,000. Markets now price a 63bps Fed rate cut by year-end; September is nearly fully priced.

Political overhang: President Trump’s firing of BLS Commissioner McEntarfer raises questions over data integrity and the Fed’s future independence, as he is expected to soon fill a vacant Fed governorship.

OPEC+ output: Brent crude reverses early losses as the group confirms a 547,000 bpd output hike for September. Focus shifts to Russian supply risks and US secondary sanctions.

FX flows: The dollar weakens versus pro-cyclical currencies (GBP, AUD, NZD) but is more resilient versus the euro and yen. BoE is 87% priced for a rate cut this week. Sterling remains capped.

Equity sentiment: US and EU futures rally as lower global yields support risk, even as underlying US growth momentum continues to moderate.

Technical and instrument analysis

Brent Crude Oil (Brent) – Hourly chart

• Price action: Brent rebounds above $69.50, recovering from a steep slide that found support at the lower channel boundary and 61.8% Fibonacci retracement ($69.49).

• Indicators: Stochastics turn up from oversold. RSI is still subdued near 38, signaling recovery but not full bullish momentum. WMA (~$70.92) is a key dynamic resistance.

• Scenario: As OPEC+ output hike is absorbed and markets watch for secondary sanctions fallout, Brent’s immediate resistance lies at $69.85 (Last top), then $70.10/70.42 (127%/161% extensions). If the dollar remains weak and geopolitical risk returns, a break above $70.50 could trigger a quick move toward the upper channel ($71.25+). Downside risk remains to $68.92 if risk appetite fades.

• Outlook: Recovery underway but fragile; supply policy and US sanctions are in focus.

Gold Spot (XAU/USD) – Four-hour chart

• Price action: Gold rallies toward $3,360 after rebounding from the $3,280s, contained within a broad horizontal range ($3,279–$3,439) and now testing the mid-range and Bollinger band resistance.

• Indicators: Stochastics are in overbought, signaling some risk of short-term exhaustion. RSI is near 62—bullish but not stretched.

• Scenario: With the Fed credibility under scrutiny and lower US rates now the base case, gold’s safe-haven bid could extend. Bulls eye $3,383 then $3,439 as resistance; above there, momentum could accelerate. On pullbacks, $3,348 is initial support; major range floor at $3,279.

• Outlook: Bias remains constructive on policy and credibility uncertainty, but overbought conditions argue for tactical caution near resistance.

USD/CAD – Hourly chart

• Price action: USD/CAD has broken short-term trend support and now consolidates near $1.3773 after a failed retest of $1.3817. Below WMA, Bollinger bands flatten.

• Indicators: Stochastics and RSI both signal oversold (RSI ~39). Price is holding above minor support at $1.3763 (Fibo 100%), with room for a technical bounce.

• Scenario: Downside risks persist as soft US data, a weaker dollar, and stable oil all support CAD. If $1.3763 fails, watch for $1.3748/1.3729 (127%/161% extensions). Resistance stands at $1.3784, then $1.3817.

• Outlook: Short-term momentum favors CAD as oil recovers and USD weakens; risk of a corrective bounce if US data surprises positively.

CHF/JPY – Hourly chart

• Price action: CHF/JPY hits a one-month low at 182.65, following a steep correction from recent highs. Price trades below both WMA and lower Bollinger band.

• Indicators: RSI deeply oversold (29), Stochastics still negative.

• Scenario: Swiss franc remains under pressure after recent SNB dovishness, while the yen recovers on global rate cut bets and a softer USD. Immediate support at 182.65, then 182.60 (127% Fibo), with deeper risk to 182.03 (200%). Resistance at 183.10 and 183.58.

• Outlook: Trend remains bearish, but oversold levels signal risk of near-term stabilization or short squeeze.

Macro calendar implications

Key data: Little top-tier data today outside US factory orders (expected -4.9% m/m, watch for downside risks), CB Employment Trends, and bill auctions. The market focus remains firmly on Fed communication and US labor market trajectory.

BoE preview: Sterling remains capped as markets anticipate Thursday’s Bank of England cut. Divergence with Fed pricing will be key for GBP/USD direction.

Broader context: With holidays in the UK and Canada, expect lighter liquidity and heightened sensitivity to US political headlines and secondary data surprises.

Actionable themes for traders

1. Dollar volatility and downside risk: Short-term bias remains negative for USD, especially against commodity and risk-sensitive currencies. Watch for tactical reversals on profit-taking.

2. Gold as a hedge: Ongoing Fed credibility questions, political interference, and weaker real rates favor continued gold inflows on dips.

3. Commodities rebound: Oil’s technical recovery may extend if sanctions risks escalate, but OPEC+ output hike limits upside for now.

4. CHF/JPY and haven pairs: Expect volatility as traders rebalance safe-haven exposures in the face of shifting central bank signals.

Conclusion

The market is at a crossroads where political drama, macro data disappointment, and policy uncertainty have converged to force a re-pricing of global rates and risk. As the dust settles from Friday’s jobs shock, traders must balance near-term oversold technicals with the potential for a deeper re-alignment of global capital flows. Maintain a nimble, data-driven approach as central bank signals and US political moves will drive cross-asset volatility in the days ahead.