The bond market responded with a sharp drop in yields, led by the rate-sensitive 2-year note, which fell 10.3 basis points to 3.489%—its lowest level since April. The benchmark 10-year yield declined to 4.076%, down nearly 10 basis points on the day, while the 30-year yield slipped to 4.785%. These moves reflect growing confidence among traders that the Federal Reserve will cut interest rates at its September 17 meeting.
According to the CME FedWatch Tool, market pricing now suggests a 100% probability of a 25 basis point cut, and a 12% chance of a larger, 50 basis point move. This marks a significant shift from just a day earlier, when the odds of a super-sized cut were effectively zero. Fed expectations have been recalibrated not only by Friday’s jobs miss but also by weak ADP private payrolls data, which showed a rise of just 54,000 jobs in August.
Technical Setup and Fed Bets Suggest Deeper Dollar Decline
Technically, the DXY has lost key support levels and now faces increasing bearish momentum. With traders pricing in a more dovish Fed and Treasury yields marking multi-month lows, the dollar lacks near-term catalysts for a recovery. Unless next week’s CPI or benchmark payroll revisions offer a surprise, the path of least resistance for the dollar remains to the downside.
Near-term support is now at 97.109, with further downside risk toward 96.377 if selling intensifies. Resistance stands at 97.859 and 98.317, both now hardened by recent technical breakdowns.
More Information in our Economic Calendar.
