Dollar Stages Broad Rally as Commodity Currencies Face Pressure

The U.S. dollar is staging a broad rally against commodity currencies following last Wednesday's Federal Reserve meeting, which initially saw a brief dollar fakeout before triggering widespread greenback strength. The move has accelerated following Powell's latest remarks yesterday, providing further support for the dollar as stocks pulled back overnight. This renewed dollar momentum is pressuring commodity-linked currencies across the board, though with notable divergences in magnitude.

U.S. Dollar / Canadian Dollar

USD/CAD is advancing toward key resistance just above 1.3900 today, rallying from its late-July range low near 1.3750. The pair now approaches the top of its established trading range, with the 200-day moving average at 1.3925 providing additional resistance just above. The Bank of Canada's recent rate cut to 2.5% in September, marking its first reduction since March, has weighed on the Canadian dollar as the central bank moves to stimulate a weakened economy amid trade tensions and rising unemployment at 7.1%. Effects of the 10% energy tariffs imposed by President Trump are already being felt by Canada as Crude oil trade volumes across the U.S.-Canada border have decreased in recent months.

New Zealand Dollar / U.S. Dollar

NZD/USD faces similar pressure, plunging through the week from 0.6000 to approach critical support at 0.5800, a level that sparked a strong rejection in August and marks the pair's low dating back to April. The Reserve Bank of New Zealand cut rates to 3% in August, with markets expecting further easing as the economy contracted in Q2 2025 and inflation remains within the 1-3% target band despite spare productive capacity.

Australian dollar / U.S. dollar

AUD/USD presents an interesting divergence from its commodity currency peers, showing relative resilience despite the broad dollar rally. While the pair has retreated from recent highs, it sits just under 0.6600 - merely a two-week low rather than the multi-month lows seen in NZD/USD and the range extremes being tested in USD/CAD. The Australian dollar is finding support from recent strength in Chinese equities, which have rallied on stimulus measures, providing a boost to Australia's commodity-linked economy. The Reserve Bank of Australia maintains a relatively less dovish stance compared to its peers, expecting moderate growth around 2.25% in 2025-2026 despite global trade uncertainties.

This divergence between the traditionally highly correlated commodity currencies suggests underlying fundamental differences are driving individual performance. While Canada and New Zealand grapple with more aggressive monetary easing cycles and direct economic pressures, Australia's China exposure and relatively stable central bank outlook appear to be providing support, even as the broader dollar rally continues.