Gold extended its rally for the third straight day on Tuesday, surging to fresh all-time highs just below $3,700, driven by ongoing weakness in the US Dollar. Market expectations that the Federal Reserve may accelerate its easing cycle have put significant downward pressure on the greenback, offering strong support to gold prices.
Fed Rate Cut Hopes Hammer the US Dollar
The US Dollar Index (DXY) fell to its lowest level in two months, as traders increasingly bet on a dovish pivot by the Fed at its policy meeting this Wednesday. Recent US economic data has revealed a clear slowdown in the labor market, while inflation remains under control.
This has led to speculation that the Fed may be behind the curve on rate cuts, raising the odds of a 25 basis point reduction and possible signals of more cuts ahead. As the USD weakens further, gold is capitalizing on the opportunity, soaring toward $3,700.
🔍 Technical Analysis: Gold Bulls Eye $3,740 Before Potential Pullback
Gold (XAU/USD) has broken out of its consolidation phase, confirming the continuation of its broader bullish trend. Despite the Relative Strength Index (RSI) entering overbought territory, momentum remains strong due to persistent USD weakness. There’s currently no sign of a trend reversal.
- Immediate resistance is at the psychological $3,700 level, followed by the 161.8% Fibonacci extension of last week’s rally, around $3,740.
- A move into this zone could trigger short-term profit-taking or a technical correction.
On the downside:
- Initial support sits near the former resistance at $3,675 (September 9 high).
- A break below that could expose $3,615 (September 11 low), followed by further support near $3,580, which aligns with the highs and lows of early September.
đź’± US Dollar Heat Map: Greenback Remains Weak Across the Board
The US Dollar is trading lower against most major currencies, continuing its recent downward momentum. Here’s how the USD has fared today:
| Base / Quote | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|
| USD | -0.40% | -0.25% | -0.15% | -0.09% | 0.00% | 0.03% | -0.43% |
- The USD is weakest against the Swiss Franc (CHF) and Euro (EUR).
- It is slightly stronger against the New Zealand Dollar (NZD) and holding steady versus the Australian Dollar (AUD).
This broad USD weakness continues to fuel gold’s bullish breakout and may keep the momentum alive as long as rate cut expectations remain elevated.