Dollar Retreats as Fed Rate-Cut Bets Intensify, Gold Steadies

Key Takeaways:

*Soft ADP jobs, contracting ISM Manufacturing reinforce market expectations for early Fed rate cuts, keeping the DXY on a defensive trajectory.

*Weak dollar, lower yields, and geopolitical uncertainty continue to bolster gold as a safe-haven and portfolio hedge.

Market Summary:

The U.S. Dollar Index extended its decline as markets increasingly priced in a dovish Federal Reserve path, with recent economic releases reinforcing concerns about slowing U.S. growth. The latest ADP report showed a surprise 32,000 decline in private payrolls, sharply below expectations, signaling cooling labor-market conditions. Meanwhile, the ISM Manufacturing PMI fell to 48.2, marking continued contraction, while the ISM Services PMI rose modestly to 52.6, providing only limited reassurance that the broader economy remains resilient.

Soft labor data, contracting manufacturing, and uneven services performance have collectively strengthened expectations that the Fed may be compelled to ease policy as early as the second half of 2025. Treasury yields fell in response, deepening pressure on the dollar as rate-cut probability rose across the curve. Investors increasingly shifted capital toward higher-beta currencies and risk assets, further eroding safe-haven demand for the greenback. Political and policy uncertainty — including President Donald Trump’s recent comments on regulatory changes and ambiguity around the next Federal Reserve Chair added another layer of volatility, while global officials cautioned that an unpredictable U.S. geopolitical posture could weigh on the dollar’s long-term reserve-currency status.

Against this backdrop, gold has found strong support, trading near multi-week highs. Falling yields, softer U.S. data, and the dollar’s weakness have boosted bullion’s appeal as a defensive asset. The market’s anticipation of an accelerating Fed rate-cut cycle into early 2026 reduces the opportunity cost of holding non-yielding gold, while ongoing geopolitical uncertainty from Russia-Ukraine tensions to broader Middle East risks  continues to sustain safe-haven demand. Even as risk appetite improves following Trump’s policy signals and a rebound in global equities, gold’s downside remains cushioned by its sensitivity to real yields and structural support from central banks diversifying away from dollar-denominated assets.

Looking ahead, the near-term trajectory of both the dollar and gold will hinge on incoming U.S. economic releases, including labor-market data, inflation indicators, and the Fed’s official guidance. So long as macro conditions remain skewed toward slower growth, dovish policy expectations, and geopolitical uncertainty, the dollar is likely to stay on the defensive, while gold continues to benefit from its traditional safe-haven and portfolio-hedging roles.

Technical Analysis 

DXY, H4: 

The US Dollar Index has extended its bearish trajectory on the chart, breaking decisively below the ascending trendline that has supported price since early October. This violation of structural support marks a clear shift in momentum, and the subsequent decline toward the 99.00–98.80 region reflects growing downside pressure as sellers continue to dominate. The index failed to sustain above the 99.45 resistance level last week, forming a lower high near the 100.25 zone before rolling over sharply. With the trendline now acting as resistance and price pushing into the next support band around 98.50, the broader outlook tilts toward continued weakness unless buyers can stage a strong recovery.

Momentum readings reinforce this bearish bias. The RSI has fallen to the high-20s, indicating oversold conditions but also highlighting persistent downward pressure with no signs of reversal yet. Meanwhile, the MACD remains firmly in negative territory, with the signal lines widening lower and the histogram showing consistent red bars as clear evidence of sustained bearish momentum. Unless the RSI stabilizes and MACD flattens, DXY may struggle to generate meaningful upside in the near term.Overall, DXY maintains a bearish short-term tone with risks skewed toward further declines.

Resistance Levels: 99.00, 99.45
Support Levels: 98.50, 98.00

GOLD, H4: 

Gold continues to consolidate just above its ascending trendline on the chart, with price action showing signs of slowing momentum after the strong rebound from the $3,925 demand level in mid-November. The metal has struggled to extend gains beyond the $4,235 area, forming a series of small-bodied candles that reflect growing indecision near short-term resistance. Despite this, the broader bullish structure remains intact as long as price holds above the rising trendline, which has supported the uptrend since October.

Momentum indicators reveal a mild loss of bullish strength. The RSI has slipped toward the lower half of the neutral zone, currently hovering near 52, suggesting a cooling of momentum without indicating oversold conditions. At the same time, the MACD shows a weakening bullish signal, with the histogram contracting and the MACD line converging toward the signal line as evidence that upside momentum is fading. While not yet a full bearish crossover, the shift warns that buyers may be losing control unless fresh buying pressure emerges above the trendline.

For now, the outlook remains cautiously bullish, supported by the broader uptrend and the absence of major breakdowns. Until a breakout or breakdown occurs, gold is likely to remain range-bound with short-term bias hinging on the trendline’s integrity.

Resistance Levels: 4235.00, 4370.00
Support Levels: 4220.00, 4040.00