Dollar Index Rebounds on Strong U.S. Data, but Fiscal Concerns Linger

Key Takeaways:

• U.S. Initial Jobless Claims and PMI data beat expectations, boosting dollar sentiment.

• Bond yields firm as investors reassess economic resilience.

• Market focus remains on Trump‘s tax bill and its long-term debt implications.

Fundamental Analysis

The Dollar Index edged higher on Thursday after a wave of stronger-than-expected U.S. economic data rekindled optimism over the health of the U.S. economy. Initial Jobless Claims came in at 227K, slightly below the 230K forecast, reinforcing the narrative of a robust labor market. Meanwhile, S&P Global’s Manufacturing and Services PMIs both printed at 52.3, well above consensus forecasts of 49.9 and 51.0, respectively—signaling expansion in both sectors.

These figures supported a risk-on shift in market sentiment, causing U.S. Treasury yields to firm and reducing demand for safe-haven assets. As a result, gold prices retreated, pressured by the stronger dollar and fading haven appeal.

Nevertheless, uncertainty remains high, with investor focus shifting to the Senate‘s ongoing debate over former President Donald Trump’s sweeping tax cut proposal. Analysts warn the bill could raise the national debt by up to $5 trillion, raising longer-term concerns over fiscal stability and inflation risks—factors that could reintroduce volatility into both the dollar and gold markets.

Technical Analysis – Dollar Index

DOLLAR_INDEX, 4-Hour Chart:

The Dollar Index is trading lower after a failed attempt to break above the 100.30 resistance level. The MACD is showing diminishing bullish momentum, while RSI sits at 39—below the neutral threshold—signaling potential for continued downside.

A sustained drop could see the index test key support at 99.25. However, if bearish momentum fades, a rebound toward 100.30 remains possible.

Resistance Levels: 100.30, 101.90

Support Levels: 99.25, 98.00

GOLD_, 4-Hour Chart:

Gold prices are moving lower after a minor retracement from the 3355.00 resistance level. MACD suggests rising bearish momentum, and RSI at 55 indicates room for a slight pullback in the short term.

Nonetheless, the long-term outlook remains positive. If gold breaks above 3355.00, further gains toward 3440.00 are likely. A failure to break resistance may lead to a retest of support at 3240.00

Resistance Levels: 3355.00, 3440.00

Support Levels: 3240.00, 3120.00