Dollar Steady, Gold Pulls Back on Trade Optimism

Key Takeaways:

*Dollar steadies as traders await U.S. CPI for Fed rate clues.

*Gold retreats on U.S.–China tariff truce, easing safe-haven demand.

*Medium-term bullion support intact on Fed cuts, central bank buying, and geopolitical risks.

Market Summary:

The U.S. Dollar Index (DXY) traded largely flat against a basket of six major currencies as market participants stayed on the sidelines ahead of this week’s highly anticipated U.S. CPI release. Traders remain focused on whether inflation data will validate the market’s aggressive rate-cut expectations, which currently assign a 90% probability to a September cut and price in as many as three reductions by year-end. The cautious tone comes after July’s weak labor market report, which is the slowest three-month payroll growth reinforced the view that the Federal Reserve is shifting its emphasis from inflation control toward supporting employment. While consensus forecasts call for core CPI to rise 3.1% year-on-year, the highest since February, a stronger print could still shake up rate expectations, particularly if tariff-related price pressures emerge.

Gold prices retreated as optimism surrounding the U.S.–China trade truce encouraged a shift toward risk-sensitive assets. President Donald Trump announced a 90-day extension to the existing tariff freeze, averting a planned escalation that would have seen U.S. tariffs on Chinese goods rise to 145% and Chinese tariffs on U.S. imports jump to 125%. Current tariff rates remain at 30% on Chinese goods entering the U.S. and 10% on U.S. exports to China. The extension eased immediate trade tensions, reducing the urgency for safe-haven positioning and pulling gold back from last week’s record highs near $3,534/oz to around $3,360/oz.

Nonetheless, bullion retains a strong medium-term bid. Expectations of Fed easing, persistent central bank accumulation led by China for a ninth consecutive month and unresolved geopolitical risks, including potential secondary sanctions on Russian oil imports and the upcoming Trump–Putin summit, continue to provide support. In the near term, the CPI print will be the decisive catalyst: a softer reading could see gold test $3,400/oz, while a hotter number may accelerate profit-taking.

Technical Analysis 

DXY, H4: 

The US Dollar Index (DXY) is holding above the 98.50 mark, last seen trading near 98.60 after rebounding from the 97.75 support zone. The bounce followed a period of consolidation and comes as the index attempts to recover from recent losses. Price action is showing early signs of stabilization, with the index eyeing a potential push toward the 99.25 resistance area, which capped the late July rally. A decisive break above this level could open the door for a move toward the psychological 100.00 handle and the key 100.15 resistance.

Momentum indicators suggest an improving bias. The Relative Strength Index (RSI) has climbed to 54, indicating a recovery in bullish momentum without yet reaching overbought territory. The MACD has completed a bullish crossover, with the histogram turning positive, signaling a shift in favor of buyers.

Overall, the short-term outlook for DXY is cautiously bullish, with momentum indicators turning favorable and price holding above key support. A sustained move above the 100-SMA and 99.25 resistance would strengthen the bullish case, while a drop below 97.75 would undermine the recovery and expose deeper retracement risks.

Resistance Levels: 98.60, 99.25

Support Levels: 97.75, 97.10

XAUUSD, H4: 

Gold (XAU/USD) has slipped below the $3,362 support, last seen trading near $3,355 after failing to hold gains above the $3,377 level. The metal’s pullback follows a rejection from the $3,399 resistance zone, which aligns with the late July swing high. The breakdown from the recent consolidation range suggests waning bullish momentum, with the 200-period SMA near $3,356 now acting as a short-term pivot. Immediate focus is on whether buyers can defend the next key support at $3,320, a level that has held multiple times since mid-July. A sustained bounce from here could keep the broader uptrend intact and set the stage for another challenge of $3,377 and $3,399. 

Momentum indicators lean toward a corrective phase. The Relative Strength Index (RSI) has eased to 44, trending lower after failing to hold above the mid-50s, signaling a loss of bullish drive. The MACD has crossed into negative territory, with the histogram extending below zero shows a sign that sellers are starting to regain control.

Resistance Levels: 3362.25, 3400.00, 

Support Levels: 3320.00, 3280.00