Dollar Fails to Hold Post-NFP Gains: AUD/USD and USD/CAD Test Key Levels

[FXOpen]

The US dollar failed to hold its gains following a significantly stronger-than-expected US employment report. The economy added 162,000 jobs versus the forecast of 56,000, while the unemployment rate remained at 4.1% and previous employment figures were revised higher. The data initially triggered a sharp rise in the dollar, but the US currency subsequently gave back most of its gains. One factor limiting the impact of the strong report was a slowdown in annual wage growth, which somewhat reduced its overall effect. The market reaction suggests that even strong employment data have not yet led to a sustained repricing of expectations for the Federal Reserve’s future policy.

Market attention is now shifting towards US inflation data. A strong labour market reduces the need for rapid Fed easing, but the future path of interest rates will depend to a large extent on developments in price pressures. As a result, the upcoming inflation figures could become the next key driver for the dollar.

AUD/USD​

The Australian dollar benefited from the subsequent weakening of the US currency, with AUD/USD reaching fresh recent highs near 0.7200. The AUD is also receiving support from expectations that the Reserve Bank of Australia will maintain a relatively hawkish stance, limiting the downside potential for the Australian currency.

Technical analysis of AUD/USD points to the possibility of further gains towards the 0.7260–0.7280 area, provided the price holds above 0.7200. A return below 0.7200, followed by a sustained move below this level, would weaken the bullish scenario and increase the likelihood of a corrective decline.

USD/CAD​

USD/CAD continues to decline and has approached the August lows around 1.3730. In addition to the weaker US dollar, the Canadian dollar is being supported by oil prices, which remain sensitive to geopolitical tensions surrounding Iran.

A sustained move below 1.3730, followed by this level becoming resistance, could open the way for a further decline towards the 1.3520–1.3570 area.

Key events for USD/CAD and AUD/USD:

• today at 14:00 (GMT+3): US Mortgage Market Index;
• today at 15:15 (GMT+3): weekly change in US employment according to ADP;
• today at 23:30 (GMT+3): weekly US crude oil inventories according to the American Petroleum Institute (API).

Overall, following the strong NFP report, the dollar failed to hold its initial gains, allowing the commodity-linked currencies to return to important technical levels. AUD/USD is testing the area of recent highs, while USD/CAD is approaching its August lows. With a relatively quiet economic calendar, further moves will depend on how expectations for Fed policy are repriced and on positioning ahead of the next US inflation data.

 

[Liam Walker]

I think everyone's reading this completely backwards. A massive NFP beat like that doesn't just vanish because of some minor wage data. To me, the dollar's "failure" to hold gains is just the market hunting for liquidity before a much bigger move up. I'm shorting AUD/USD right here at 0.7200. Everyone is way too bullish on the Aussie lately.

Also, calling for USD/CAD to hit 1.35 seems like wishful thinking. That 1.3730 level has held for a reason, and I'll bet it holds again. The crowd is always wrong when they start getting this comfortable with a "weak dollar" narrative.

 

[JulianCraft]

Spot on. Everyone's acting like inflation is dead and buried just because of one slightly softer wage print, but sticky prices are going to bite us sooner or later. The Fed isn't pivoting as fast as people hope, and when that CPI print drops hot, a whole lot of these long-Aussie traders are going to get trapped.

 

[ArthurByte]

Man, you guys are looking at the candles but missing the real footprint. That rejection off the NFP spike was a textbook liquidity sweep to grab all the retail stops before the bigger move. AUD/USD is sitting right at a monthly OB, and if you look at the 4H, there's a massive FVG that needs to be filled to the downside. I'm waiting for the sweep of those highs to clear out the late longs, then it's straight down. Don't fall for the trap.

 

[Owen Carter 27]

Spot on with that monthly level. Anyone trying to long the Aussie right here is just asking to get chopped up. I'm watching how price reacts to that exact zone before doing anything, but the rejection wick on the 4H says it all.

 

[Noah Vance BR]

Man, it's funny watching everyone get emotional over the NFP print. I’ve been running the numbers on the historical post-NFP volatility, and honestly, the risk-to-reward on fading these spikes is usually decent if you wait for the session close. I’m staying out of the Aussie for now; the edge just isn't clear enough to justify the drawdowns I'm seeing in my backtests for this specific volatility regime. Let the market chop itself out before you try to catch a knife or chase a breakout.