Fed Jitters Slam Dollar, Lift Gold

Key Takeaways:

*Fed Cut Signals Pressure the Dollar – Waller’s support for a September cut kept the dollar under pressure despite firm U.S. data.

*Political Risks Boost Safe-Haven Demand – Trump’s move against Fed Governor Cook raised concerns over central bank independence.

*Gold Benefits from Policy and Geopolitical Uncertainty – Ongoing rate cut bets and political tensions supported bullion’s appeal.

Market Summary:

The U.S. Dollar Index (DXY) extended its slide this week as dovish remarks from Fed Governor Christopher Waller anchored expectations for a September rate cut, overshadowing firmer U.S. data. Waller endorsed a 25bps reduction and left the door open to further easing, arguing that core inflation is effectively near target once tariff effects are excluded. His comments blunted the impact of stronger Q2 GDP, revised up to 3.3%, and a small dip in jobless claims, leaving policy expectations firmly tilted dovish.

Political risk added to pressure on the greenback. President Trump’s move to oust Fed Governor Lisa Cook triggered a legal fight that raised doubts over central bank independence, fueling concern about the Fed’s credibility and long-term inflation control. Trade policy uncertainty higher tariffs on India alongside fresh Chinese exemptions has further underlined structural risks for the dollar.

Gold, meanwhile, climbed to a five-week high above $3,416, supported by dovish Fed bets, political turmoil, and safe-haven flows. Markets now price an 87% chance of a September cut, and falling real yields have lowered the cost of holding bullion. The independence dispute has amplified demand for gold as a hedge against institutional instability, while geopolitical tensions from renewed Russian strikes on Kyiv to the absence of diplomatic progress have reinforced defensive positioning.

Momentum and structural flows are reinforcing the rally. Gold’s breakout above resistance has spurred technical buying, with analysts eyeing a potential move toward $3,500. Longer-term, diversification trends including the SNB’s reserve shift from dollars into euros and steady central bank purchases provide a supportive backdrop.

Looking ahead, both assets hinge on Friday’s Core PCE release. A softer print would deepen dollar losses and fuel further gains in gold, while a hotter outcome could spark a hawkish repricing, lift yields, and trigger near-term profit-taking in bullion. Until then, markets remain fixated on the interplay of Fed policy expectations, political risk, and global tensions.

Technical Analysis

DXY, H4

The US Dollar Index (DXY) is trading near 98.00 after slipping below the 98.20 level, with price action holding just above the 97.65 support zone. The index has struggled to sustain momentum after repeated failures at the 98.75 resistance, leaving the near-term outlook tilted slightly bearish as sellers maintain pressure.

Momentum indicators lean cautious. The RSI is hovering around 45, showing mild bearish bias without being oversold. The MACD remains below the zero line, with bearish momentum still present though histogram bars are narrowing, suggesting selling pressure may be losing strength.

Overall, DXY remains in a consolidative to bearish phase below 98.10, with traders watching whether the 97.65 floor can hold. A breakdown could extend losses toward 97.10, while recovery above 98.75 would shift focus back toward the 99.60 level.

Resistance levels: 98.10, 98.75
Support levels: 97.65, 97.10

XAUUSD, H4

Gold (XAU/USD) is trading near $3,410 after breaking out above the $3,400 pivot, with price action holding comfortably above the 20-period moving average. The 50-period MA at $3,389 is providing secondary support, while resistance remains capped at $3,435, keeping the near-term bias cautiously bullish as buyers maintain control.

Momentum indicators lean supportive. The RSI is hovering near 65, reflecting firm upside momentum while edging closer to overbought territory. The MACD remains well in positive territory, with histogram bars firmly green, signaling sustained buying pressure though at risk of slowing if momentum fades.

Overall, XAU/USD holds in a constructive phase above $3,400, with traders watching whether price can clear the $3,435 ceiling. A breakout would open the path toward $3,460, while a slip back under $3,400 could trigger a pullback toward $3,375, where buyers may attempt to defend the broader uptrend.

Resistance levels: 3425.00, 3460.00
Support levels: 3400.00, 3375.00