Markets Eye Powell at Jackson Hole as Fed Division Fuels Dollar Volatility

Key Takeaways:

*Dollar Index struggled for clear direction after mixed FOMC meeting minutes.

*Fed members are divided on whether tariffs-driven inflation or weakening the jobs market is the bigger threat.

*Gold prices rose as safe-haven demand increased amid Fed uncertainty and geopolitical risks.

Market Summary:

The Dollar Index swung sharply in yesterday’s session as traders struggled to find direction amid conflicting signals from the Federal Reserve and rising geopolitical risks. Minutes from the latest FOMC meeting revealed deep divisions among policymakers over whether inflation or labor market weakness poses the greater threat to the U.S. economy. While several members flagged tariffs and supply disruptions as inflationary risks, others stressed that deteriorating employment conditions warranted more urgent attention. The split underscores the Fed’s challenge in calibrating policy, with markets still pricing in an 81% probability of a September rate cut, according to the CME FedWatch Tool.

Attention now shifts to the Jackson Hole symposium, where investors will parse Fed Chair Jerome Powell’s remarks for any guidance on the policy path. Markets remain wary that cutting rates too aggressively in the face of supply-driven inflation could reignite price pressures, compounding risks for global investors.

Gold extended gains as safe-haven demand grew on the back of inflation concerns and policy uncertainty. The dual threat of supply- and demand-driven price pressures has encouraged portfolio diversification into bullion ahead of Jackson Hole. Meanwhile, U.S. President Donald Trump reiterated optimism over a potential Russia-Ukraine ceasefire deal, though details remain sparse. Diplomatic developments, alongside central bank signals, will be key drivers of sentiment in the days ahead.

Technical Analysis

DOLLAR_INDX, H4:

The dollar index is consolidating near the 98.30 resistance level, with price action closely tracking the 30-day moving average (MA). Technicals lean positive: the MACD continues to print higher bullish momentum, while the RSI at 55 has rebounded from the midline, suggesting room for further upside. A decisive break above 98.30 would confirm a bullish continuation, opening the path toward the next resistance at 99.05. However, a failure to break higher could trigger a reversal, dragging the index back toward 97.75, with deeper retracement risk toward 97.10.

Beyond technicals, traders are weighing the dollar’s path against the backdrop of Fed policy expectations and global risk sentiment. With markets still debating the timing of potential Fed easing, a hawkish repricing could lend further support to the greenback. Conversely, softer U.S. data or signs of global growth slowdown could erode demand for the dollar.

Resistance Level: 98.30, 99.05

Support Levels: 97.75, 97.10

GOLD, H4:

Gold is trading near the 3350.00 resistance level, with price momentum underpinned by a constructive technical setup. The MACD is signaling upside strength, while the RSI at 53 remains above the midline, reinforcing a modest bullish bias. A sustained break above 3350.00 could pave the way toward 3400.00, a level that may act as the next ceiling for prices. On the downside, failure to hold above resistance may trigger a corrective pullback, with initial support seen at 3320.00, followed by stronger footing at 3280.00.

Market positioning remains highly sensitive to U.S. yields and dollar swings. While gold continues to attract flows as a hedge against uncertainty, a hawkish shift in the Fed’s communication, easing geopolitical concerns, or stronger U.S. economic surprises could cap upside momentum and drive selling pressure.

Resistance Levels: 3350.00, 3400.00

Support Levels: 3320.00, 3280.00