Dollar’s Fragile Rebound Meets Gold’s Breakout

Key Takeaways:

*Fractured U.S. Data: Diverging PMI readings expose a split economy, leaving the Fed’s policy path harder to gauge.

*Fed Credibility at Risk: Trump’s push for cuts and legal battles over tariffs are eroding confidence in U.S. institutions.

*Gold Surges on De-Dollarization: Record bullion demand from central banks and safe-haven flows highlight the shift away from Treasuries.

Market Summary:

The U.S. Dollar managed a modest rebound as higher Treasury yields offered fleeting support, but its underlying fundamentals remain clouded by mixed economic signals and escalating policy uncertainty. On one hand, the S&P Global Manufacturing PMI surged to a three-year high at 53.0, fueled by tariff-related inventory building and output growth. On the other, the ISM Manufacturing PMI stayed in contraction for a sixth month at 48.7, with production and employment components still deeply negative. This divergence highlights a fractured economy that leaves investors struggling to assess the true health of U.S. industry.

Compounding the challenge is a growing threat to the Federal Reserve’s independence. President Trump’s demand for a “very serious rate cut” and his legal battle to oust Governor Lisa Cook have rattled markets, raising fears of political coercion in monetary policy. A federal appeals court ruling that the administration’s use of emergency powers for tariffs was unlawful has only deepened uncertainty around U.S. trade policy, casting a long shadow over the dollar’s reserve status.

In sharp contrast, gold has shattered records above $3,500/oz, powered by the conviction that the Fed will cut rates in September and by mounting safe-haven flows. A global bond rout has pushed yields higher in the UK and Europe, driving investors into bullion as confidence in sovereign debt erodes. At the same time, central banks—most notably China, India, and Poland—are accumulating gold at a historic pace, with aggregate reserves surpassing U.S. Treasuries for the first time since 1996. Coupled with robust ETF inflows and resilient Asian retail demand, the structural case for higher gold prices remains firmly intact, with targets extending toward $3,700–$4,000.

All eyes now turn to Friday’s Nonfarm Payrolls report. A soft print could cement expectations for a September rate cut and reignite the dollar’s downtrend while adding fuel to gold’s rally. Conversely, a stronger figure may stabilize yields in the near term, but is unlikely to resolve the broader schism between conflicting U.S. data, political interference in monetary policy, and the accelerating de-dollarization trend that continues to drive global capital into bullion.

Technical Analysis

DXY, H4

The DXY on the chart is trading around 98.30 after rebounding from the 97.65 support level. Price action shows that the index continues to fluctuate within a broader consolidation range, capped by strong resistance at 98.75 and overhead barriers at 99.60 and 100.25. On the downside, support is seen at 97.60 and further at 97.10, which are key levels to monitor if bearish pressure resumes.

Momentum indicators suggest a mild bullish recovery. The RSI is at 58, moving above the 50-neutral zone, reflecting strengthening momentum without entering overbought territory. The MACD has turned positive, with a bullish crossover and green histogram bars, indicating improving upward momentum.

Overall, DXY is showing signs of short-term recovery, but the broader structure remains range-bound, with traders awaiting a decisive breakout above 98.75 or below 97.65 to establish the next directional trend.

Resistance levels: 98.75, 99.60
Support levels: 98.10, 97.65

XAUUSD, H4

Gold (XAU/USD) has broken out of its consolidation channel, surging to a multi-week high near $3,550 after clearing resistance at $3,495. Price is now holding above the $3,527–$3,495 breakout zone, confirming a bullish continuation structure and putting the $3,615 barrier into view as the next upside target.

Momentum indicators, however, are signaling stretched conditions. The RSI stands at 76, firmly in overbought territory and highlighting the risk of near-term consolidation or profit-taking. The MACD remains deeply positive, with widening histogram bars confirming strong bullish momentum, though the slope is starting to flatten, hinting at possible cooling.

Overall, XAU/USD retains a strong bullish bias above $3,495, with scope to extend gains toward $3,615 if momentum persists. However, a corrective pullback cannot be ruled out, with initial support at $3,495 and deeper protection at $3,453 should buyers temporarily lose steam.

Resistance levels: 3550.00, 3615.00
Support levels: 3495.00, 3453.00