Key Takeaways
- The Dollar trades near key resistance levels after mixed labor data as the greenback gains on rates and geopolitical risk.
- The CAD is weaker today as the US dollar and yield spreads rise ahead of an expected Bank of Canada hold.
- A dovish tone from the Bank of Canada may push USD/CAD higher, while strong US hiring data this Friday might buoy the US Dollar.
- The MXN consolidates near the 17.00 level, backed by carry and stable macro backdrop.
USD: Dollar tests key resistance
The DXY opens Wednesday at 99.75, extending its recovery from the August 31 close. Rising global bond yields, renewed tensions around the Strait of Hormuz and expectations of tighter Fed policy have supported the move. However, weaker ADP payrolls pulled the index back from resistance near 99.85. The dollar is gaining on rates and geopolitical risk, even as US labour data lose momentum.
The latest labor figures point to slower hiring. Private payrolls rose by just 38,000 in August, while job openings and hiring also weakened in July. ISM manufacturing remained in expansion, supported by defence and AI spending, but growth cooled and input costs stayed high. The Atlanta Fed’s strong third-quarter estimate reinforces the split between resilient output and softer labour demand.
That tension leaves the Fed balancing weaker job creation against persistent inflation pressure. Tariffs, supply disruptions and higher energy costs could keep prices elevated, while the global bond selloff has lifted rate expectations and supported the dollar. However, New York Fed President John Williams has urged patience before the next decision. His cautious tone casts doubt on market pricing of a greater than 60% chance of a September hike.
DXY is now testing the 99.85 to 100 resistance area, where the rally stalled after the ADP release. Friday’s payrolls report could decide whether the index breaks higher or gives back its recent gains. A strong result would support the case for a September hike and open the way towards 100.5. Another weak reading could reduce the dollar’s yield support and pull DXY back towards 99.4/99.
CAD: Loonie braces for BoC guidance
USD/CAD opens Wednesday at 1.3924, near its highest level since August 13. The pair has risen steadily from the August 21 low of 1.3760 as renewed US dollar demand and trade tensions weigh on the loonie. A 137-basis-point US-Canada two-year yield gap is adding to the pressure.
Trade relations have deteriorated further ahead of Canada’s September 8 counter-tariffs. Washington has warned of additional measures, while Ottawa shows little appetite to back down. The dispute threatens Canadian growth and could raise costs at home, while weaker oil prices offer the loonie little support.
The Bank of Canada is widely expected to keep rates at 2.25% today. Attention will instead fall on whether its statement takes a softer view of the outlook. Strong domestic data give policymakers room to wait, but the escalating trade dispute makes their previous hawkish tone harder to maintain.
A dovish message could push USD/CAD above 1.3940 and towards 1.40. A more balanced statement may pull the pair back towards 1.3850, although trade uncertainty could limit the move. Friday’s US payrolls report and next week’s tariff deadline keep the risks tilted towards further volatility.
MXN: Peso hovers around 17 level
USD/MXN opens Wednesday near 17.00 after two days of modest peso gains. Mexican yields have risen faster than US yields, widening the two-year carry spread to around 345 basis points. With Banxico holding rates at 6.50%, that yield advantage continues to draw investors back to the peso.
Mexico’s domestic backdrop also remains supportive. The economy grew 1.4% in the second quarter, while Banxico raised its 2026 growth forecast to 1.5%. Inflation has eased to 3.12%, close to target, without forcing the central bank to resume rate cuts. The peso has therefore held firm even during weaker sessions for global risk assets.
The 17.00 level remains the near-term pivot for USD/MXN, with buyers emerging below it. A break lower would bring the August low near 16.92 into view. On the upside, 17.20 is the first clear resistance level, followed by the 17.50 to 17.68 range.
Friday’s US payrolls report is the main risk this week. Strong hiring data could revive expectations for a Fed hike and push USD/MXN towards 17.10 to 17.20. A softer report would support the carry trade and could send the pair back towards 16.95. Attention will then shift to US inflation and the September 16 Fed decision.
Market snapshot
Table: Currency trends, trading ranges & technical indicators
Key global risk events
Calendar: August 31 – September 04
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
