Dollar Softens, Gold Shines on Fed Dovish Tilt

Key Takeaways:

*Dovish Powell Weighs on Dollar: Markets price in over 84% odds of a September Fed cut, keeping the dollar under pressure despite brief technical rebounds.

*Gold Supported by Lower Yields: Softer yields, Fed independence concerns, and trade-related inflation risks sustain gold’s safe-haven demand.

*Geopolitics Add Volatility: Mixed signals on Russia-Ukraine talks fuel swings in risk sentiment, pressuring the dollar while reinforcing gold’s hedge appeal.

Market Summary:

The Dollar Index (DXY) softened further as Powell’s dovish Jackson Hole remarks reinforced expectations for a September rate cut, now priced at more than 84%. Softer labor market signals and cooling housing data have supported the case for easing, while political risks, most notably Trump’s threat to remove Fed Governor Lisa Cook have raised concerns over central bank independence. The dollar attempted a rebound yesterday, but the move was largely seen as a technical correction rather than a change in direction, with the broader outlook still tilted lower.

Gold gained on the back of this weaker dollar and lower yield appeal, with Powell’s dovish tilt reducing opportunity costs and keeping safe-haven demand supported. Although a firmer greenback and modestly higher Treasury yields prompted some profit-taking, gold’s resilience reflected its dual role as both a hedge against economic uncertainty and protection against potential inflation stemming from trade disruptions.

Geopolitical dynamics also shaped sentiment across both markets. Hopes of progress in Russia-Ukraine talks briefly dampened safe-haven demand, but Moscow’s firm rejection of an imminent summit quickly tempered optimism, restoring caution. For the dollar, these developments kept risk appetite tilted toward euro and commodity currencies, while for gold, they reinforced its status as a defensive asset in periods of geopolitical volatility.

Looking ahead, the interplay between Fed policy, politics, and global risks will remain decisive. If incoming U.S. data continues to soften, the dollar is likely to stay under pressure while gold finds further support. However, any upside surprises in inflation or labor could delay easing and spark short-term corrections in both assets—though gold’s longer-term appeal as a hedge against monetary and political fragility remains intact.

Technical Analysis 

DXY, H4

U.S. Dollar Index (DXY) is trading near 98.20 after pulling back from the 98.70 area, holding above its short-term ascending trendline support. Price is hovering just below the 20-period moving average, while the 50-period MA around 98.00 is serving as a near-term pivot point. Immediate resistance is seen at 99.05, followed by the higher barrier at 99.50, while support rests at 97.75.

Momentum indicators remain mixed. The Relative Strength Index (RSI) is sitting at 51, reflecting neutral momentum with no clear directional bias. The MACD is flat, hovering around the zero line, indicating a lack of conviction from either side. Lower trading volume during the recent pullback also highlights consolidation.

On the upside, a decisive close above 99.05 would open the path toward 99.50 and possibly 100.15 if buying strength accelerates. On the downside, a break below 97.75 would expose the 97.10 support zone.

Resistance levels: 98.30, 99.05
Support levels: 97.75, 97.10

XAUUSD, H4

Gold (XAU/USD) is trading near $3,375 after staging a solid rebound from the $3,320 support zone, breaking above its short-term descending trendline. The recovery has pushed price back above the 20-period moving average, with the 50-period MA now acting as a near-term pivot around $3,352. Immediate resistance is seen at $3,400, followed by the higher barrier at $3,435, while key support levels remain at $3,350 and $3,320.

Momentum indicators support the bullish bias. The Relative Strength Index (RSI) has climbed to 65, signaling strengthening upside momentum while approaching overbought territory. The MACD has crossed into positive territory, with widening histogram bars pointing to a shift in momentum toward buyers. 

On the upside, a decisive break above $3,400 would pave the way for a retest of $3,435, and potentially higher extensions if bullish momentum persists. On the downside, initial support rests at $3,350 followed by $3,320. A close below these levels would expose gold to a deeper pullback, potentially shifting sentiment back in favor of sellers.

Resistance levels: 3400.00, 3435.00
Support levels: 3350.00, 3320.00