Dollar Retreats as Iran Hopes Lift Gold Before CPI

Key Takeaways:

*Dollar retreats as risk appetite improves: Easing U.S.–Iran tensions reduced safe-haven demand, pushing DXY down 0.47% to 101.75.

*Gold holds above $4,100: Dollar weakness and cheaper oil supported bullion, although spot gold eased to $4,128.48 early Tuesday ahead of CPI.

*Forecasts stood at 3.9% headline and 2.8% core inflation, with December hike odds near 85%. Hotter data could strengthen the dollar and pressure gold; softer figures could favour the reverse.

Market Summary:

The U.S. dollar weakened on Monday as easing concerns over further U.S. attacks on Iran encouraged investors to return to risk assets, reducing demand for the greenback. Reuters reported the Dollar Index at 101.75, down 0.47%, while EUR/USD rose to 1.1213, GBP/USD reached 1.3429 and USD/JPY declined to 157.89. Australian and New Zealand dollars also strengthened as sentiment improved. Heavy dollar positioning contributed to the pullback, with investors reassessing whether lower energy prices and uncertainty surrounding U.S. technology investment could moderate American growth and inflation.

Federal Reserve policy nevertheless continued to provide underlying support for the dollar. Richmond Fed President Tom Barkin said on Monday that businesses faced rising costs and intended to pass them on, identifying inflation as the greater policy risk. However, he urged a careful approach and declined to commit to a December decision. Barkin also highlighted risks surrounding artificial intelligence: disappointing returns could weaken investment, equity prices and consumer spending, while rapid adoption could displace workers. His remarks suggest that persistent inflation still favours restrictive policy, but a deterioration in growth could complicate further tightening. 

Gold benefited from the softer dollar and falling oil prices, which eased concerns about additional energy-driven inflation. Spot bullion gained more than 1% on Monday before slipping 0.3% to $4,128.48 per ounce at 00:24 GMT Tuesday. Official-sector demand provided another supportive development: figures released Saturday showed China increased its gold reserves for a 24th consecutive month, lifting October holdings to 78.30 million ounces from 77.47 million, equivalent to approximately 25.8 tonnes of purchases. Continued accumulation supports the longer-term demand outlook, although it does not eliminate gold’s sensitivity to U.S. interest rates. 

Attention now centres on U.S. October CPI, scheduled for November 10 at 13:30 GMT. Reuters’ poll projected headline inflation of 3.9% year over year and core inflation of 2.8%, while early-Tuesday reporting placed the probability of a December Fed hike near 85%. These remained expectations at the reporting cutoff. Stronger inflation could lift yields and revive dollar demand, placing gold under pressure. A softer reading could support bullion and extend the dollar’s retreat, particularly if cheaper oil begins to reduce expectations for subsequent tightening.

Technical Analysis

Dollar Index, H4

The US Dollar Index (DXY) is showing renewed bearish pressure within its broader trading range, following a rejection near resistance at 102.40. The index has pulled back to approximately 101.70, bringing support at 101.60 into focus. The latest decline suggests that buyers have struggled to sustain the recent rebound, although this support has yet to give way decisively. A sustained four-hour close below 101.60 would increase the possibility of a further decline toward 101.15.

Momentum indicators indicate weakening buying strength. The RSI stands at 45, below both the neutral 50 level and its moving average at 55, reflecting the deterioration in momentum following the recent rally. Meanwhile, the MACD line has crossed below the signal line, while the histogram has turned negative. This suggests growing downward momentum, although both lines remain slightly above zero, indicating that the bearish shift is still developing.The near-term outlook remains cautious while DXY trades below 102.40, with 101.60 acting as the immediate support to watch. 

Resistance Levels: 102.40, 102.95
Support Levels: 101.60, 101.15