Fed Cut Fever Slams Dollar as Gold Powers Toward New Highs

Key Takeaways:

*Dollar under pressure as weak labor data cements Fed cut bets.

*Political interference and NATO fractures deepen dollar risks.

*Gold steadies above $3,640, buoyed by Fed easing and de-dollarization demand.

Market Summary:

The U.S. Dollar Index (DXY) stayed under heavy pressure this week as softening labor data cemented expectations for imminent Fed easing. Weekly Jobless Claims surged to 263K, the highest since 2021, while downward revisions erased 911K payrolls from earlier reports, underscoring growing fragility in the labor market. Even with CPI ticking up to 2.9% year-on-year, traders are fully priced for a 25-basis-point cut at the September FOMC, with a rising probability of a more aggressive 50-bp move. This dovish shift has dragged Treasury yields lower, eroding the greenback’s interest rate advantage.

Political developments have only added to the pressure. President Trump’s repeated criticism of the Fed for being “too slow” on policy, alongside his administration’s contested attempt to remove Governor Lisa Cook, has amplified concerns over central bank independence. At the same time, geopolitical fractures have diminished the dollar’s safe-haven appeal. Trump’s ultimatum to NATO allies that U.S. sanctions on Russia hinge on a complete halt to Russian oil purchases has created visible rifts within the alliance, particularly with Turkey, further complicating the dollar’s outlook.

Gold has been the clear beneficiary of this dollar weakness, consolidating above $3,640 and marking its fourth consecutive weekly advance. Lower yields and expectations of Fed easing have reduced the opportunity cost of holding bullion, while central bank demand remains robust. The People’s Bank of China continues to expand its reserves as part of a broader de-dollarization push, reinforcing the structural bid for gold.

Geopolitical risk has further strengthened the rally. Trump’s tariff threats on China and calls for expanded sanctions on Russia have fed the “debasement trade” narrative, as investors increasingly seek hard assets to hedge against political and monetary uncertainty. Technically, the breakout above $3,600 has cleared space toward $3,880, with any dips likely treated as buying opportunities. Unless the Fed delivers a surprisingly hawkish signal next week, the broader backdrop of policy easing, institutional demand, and geopolitical instability suggests gold’s resilience will remain intact.

Technical Analysis 

Dollar Index (DXY), H4:

The U.S. Dollar Index (DXY) remains range-bound, with price oscillating between the 97.55 support and 98.10 resistance. The latest candles show repeated rejections at the upper band, suggesting selling pressure is still capping rallies, while buyers are defending 97.55 as a short-term floor. A decisive break below 97.55 would expose the next supports at 97.00 and 96.50, whereas a close above 98.10 could pave the way for a move toward 98.75.

Momentum indicators underline the indecision. RSI is hovering at 49, reflecting neutral conditions and a lack of directional conviction. The MACD is flat near the zero line, showing minimal momentum with no clear divergence, in line with the sideways structure.

Overall, DXY is consolidating in a tight range, awaiting a breakout. Traders should watch 98.10 on the upside for bullish confirmation, while a drop through 97.55 would tilt the bias back in favor of sellers.

Resistance Levels: 98.10, 98.75

Support Levels: 97.55, 97.00

XAUUSD, H4

Gold (XAU/USD) is consolidating just below the $3,660 resistance, with recent candles showing hesitation after the strong rally from the $3,550 breakout zone. Price action suggests buyers are struggling to extend gains, while the $3,625 level is acting as an immediate support cushion. A decisive close above $3,660 would reassert bullish momentum, exposing $3,700, whereas a drop below $3,605 could trigger deeper retracement toward $3,550, the 78.6% Fibonacci level.

Momentum indicators reflect the cooling bias. RSI is hovering near 52 after pulling back from overbought levels, signaling waning bullish strength but not outright reversal. The MACD has turned lower, with its signal lines narrowing, highlighting weakening momentum and the possibility of consolidation in the near term.

Overall, XAU/USD remains elevated within a broader uptrend but is showing early signs of fatigue. Traders should watch $3,660 for confirmation of upside continuation, while a slip through $3,605 would hint at a corrective phase back toward $3,550.

Resistance Levels: 3660.00, 3700.00

Support Levels: 3625.00, 3550.00