Dollar and Gold Remain Fed- and Geopolitics-Sensitive Ahead of Key Data

Key Takeaways:

*DXY rebounded yesterday as a technical correction, but remains under pressure as markets price in an 84% probability of a Fed quarter-point rate cut. Softer U.S. macro data and low Treasury yields continue to weigh on the greenback.

*Gold traded softer amid improving risk sentiment and reduced geopolitical premiums. Tech-sector optimism and calmer macro conditions limited safe-haven demand, while technical factors encouraged profit-taking.

Market Summary:

The U.S. Dollar Index (DXY) remained largely on the defensive, though it rebounded slightly yesterday as a technical correction, as markets continue to price in an 84% probability of a quarter-point Federal Reserve rate cut this week, according to LSEG data. Softer U.S. macro readings, muted consumer momentum, and subdued Treasury yields reinforced expectations that the Fed’s tightening cycle has peaked. With policy markets increasingly convinced that easing will begin before year-end, the dollar’s near-term gains were limited, and it continues to struggle for strong footing.

Sentiment toward the greenback was further tempered by geopolitical developments and trade actions. Trump’s announcement of a potential 5% tariff on Mexico over water-treaty disputes introduced fresh uncertainty, while the U.S. administration unexpectedly approved Nvidia’s H200 AI chip exports to China under strict security conditions. This easing of U.S.–China tech tensions boosted global risk appetite and reduced safe-haven flows into the dollar. Comments that China may buy “even more soybeans than promised” added mild positive support to trade normalization expectations, further nudging sentiment away from the dollar.

Gold mirrored the dollar’s cautious tone, trading softer but remaining broadly stable. The easing of geopolitical fears, including tentative progress in Ukraine peace talks and U.S.–European diplomatic engagement, lowered bullion’s safe-haven premium. At the same time, improved global tech sentiment from Nvidia’s export approval and a calm macro environment limited demand for defensive assets. Gold’s consolidation was also influenced by technical factors, such as potential double-top patterns, prompting some profit-taking.

Despite the downward pressure from improved risk appetite, gold retains structural support from expectations of Fed rate cuts. Softening yields and looser financial conditions continue to provide a floor for bullion, with traders reluctant to aggressively short ahead of pivotal U.S. inflation data. Overall, both the dollar and gold remain highly sensitive to the Fed’s messaging, geopolitical developments, and risk sentiment, with the near-term trajectory for each hinging on upcoming policy cues and global market stability.

Technical Analysis 

DXY, H4: 

The DXY on the chart is showing early signs of a potential short-term rebound, but the overall structure still leans bearish unless a key resistance level is reclaimed. Price recently broke below the ascending trendline and has been trading under the 99.70 resistance level, showing that previous bullish momentum has weakened. After forming a short-term base around 99.05–98.65, DXY is attempting to push upward, but it has not yet shown a decisive breakout. 

The RSI is recovering from near-oversold levels and currently sits in the mid-50s, signalling improving momentum but not yet strong bullish pressure. Meanwhile, the MACD shows a mild bullish crossover, with the histogram turning positive showing an early signal but not a strong confirmation of trend reversal. Overall, the index is in a neutral-to-slightly-bearish structure, with a fragile rebound developing but still dependent on key resistance validation.

Resistance Levels: 99.70, 100.25
Support Levels: 99.00, 98.70

GOLD, H4: 

Gold is displaying a potential lower-high pattern, and the chart shows a visible M-shape (double top-style) decline forming on the right side of the chart. Price has been rejected from 4,260 multiple times, showing strong selling pressure. It is now sliding down toward the support zone around 4,180.

The RSI is currently around 51, drifting downward toward the midline, showing weakening bullish strength. Meanwhile, MACD is turning bearish, with the histogram dipping negative and the signal lines rolling over indicating momentum is shifting toward the sellers. If price breaks below 4,180, gold may retrace toward 4,140 and potentially deeper toward 4,115, while upside moves remain capped unless gold can break and hold above 4,260 again.

Resistance Levels: 4210.00, 4260.00
Support Levels: 4180.00, 4140.00